How We Are Paying Off Debt

by James & Miel on January 29, 2008 · 1 comment

Hi All,

So now that my exams are over, I find I’m focusing more on our financial goals. The main goal that we DINKs are working on is paying off our second mortgage. Its currently at $17,329.48 and we’re hoping to have it paid off by this September. It might be challenging to get there, but we’re optimistic.

Consider this, when you pay off debt, its the rough equivalent of investing your money. – You become richer because you have fewer liabilities. So for example, if you have a credit card at 20%, paying it off is the rough equivalent of getting a 20% return on your investment. In our case we owe 9% on our second mortgage. This suggests that when we pay off the loan, we get a return of 9%, so its a good deal.

In case you don’t see how we can dump 17 grand in 9 months, here is a sense of where the cash is coming from:

1) Miel’s Salary – $1,000 /month
2) Our Investment property – $50/month
3) Transfer from Prosper.com – $50/month
4) Stock Dividends – $513 /month
5) Blog income – $10 /month
6) 1 time payment of $1,000 from legal settlement

This suggests that on a monthly basis we’ll be able to raise $1,623. Which is a bit less than what we’ll need to eliminate the debt.

Now, whats the takeway for you? Here are some points to consider:

1) Consider shifting your income streams around. If you have income from a side business, consider focusing in on paying off your debt or acheiving other goals.

2) Work together. You are far more likely to achieve your goals if you work cooperatively with your spouse or partner. Two people working together can achieve much more than one person working alone.

3) Apply windfalls. Supposedly congress is planning an incentive package which might put several hundred dollars in the pockets of taxpayers. Consider putting these types of windfalls towards your goals instead of spending them on luxuries.

Hope some of this help! Good luck with your goals!

Best,

James

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