Stress Free Debt Reduction

by James & Miel on April 9, 2008 · 0 comments

Hi All,

As frequent readers of this blog will know, we are currently in the midst of paying off our second mortgage. Well, I am happy to report that we’ve got the debt down to $11,400 from $17,700 at the start of this year.

So far, we’ve done two major things to chip away at the number:

1) Reprioritized. We’ve routed all our secondary cash flows to the debt. This includes money from our prosper.com account, available bucks from stock dividends, the profits from our investment apartment, and chunks of whatever found money comes our way.

2) Credit Card Arbitrage. We transferred as much as we felt comfortable onto a zero balance credit card. Miel shopped hard and found a card that had a zero interest 12 month transfer offer. We ended up moving 9 grand from the second mortgage onto this card. Now, I’m not really such a fan of credit cards, but no interest on $9,000 is much better than 9% on $9,000. Also my wife Miel has a pretty good handle on paying these things off, so we should be able to avoid some of the major pitfalls associated with having this kind of consumer debt.

Whats interesting about the process is that although Miel’s budget has been pressured at times, we haven’t experienced undue stress in discharging the obligation. For example, we’ve still been able to meet each other in Switzerland, we’ve maintained an active social life in both DC and Kabul and I’ve been able to sneak in the occasional savings bond purchase. The main reason is that when we set the goal, we purposely built in some wiggle room. I think this shows that some planning and a little pro-active management its possible to have your cake and eat it too.

Thanks,

James

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