Time for the student loans to die
I hate to think about the fact that I amassed all of my student loan balance in one year, but have something like a 3-year plan to pay it off.
To be fair, thanks to the student loans, I could put some income into mutual funds at the very bottom of the recession, and I think this will pay off in the future. However, this has been a big part of why I haven't been paying my loans off faster now - I'm scared I'll miss out on big market gains if I don't keep up with my dollar-cost-averaging method as the economy continues to struggle.
But I've decided I'm tired of having this debt. I make payments of $525 each month towards my loan now. I put $300 into a Roth IRA and $200 into an individual investment account each month. (Plus about $330 into a 401(k) including my employer match.)
Starting in December, I am going to make a payment of $1,000/month to my student loans. They should be GONE by the end of November 2012. I have reduced my monthly retirement contributions to only $100/month to my Roth, and I am keeping the $330/month to the 401(k).
Essentially I'm lowering my investments by $400 and increasing my student loan payment by $475. So I'll have to find an extra $75/month for payments. I think this will help tighten up my budget and help motivate my not-spending, as well as motivate me to blog more, since it's a potential source of income.
For November: I accidentally made my usual extra payment for November last month. This month, I am making a $940 payment. On December 1st, my loan balance should be about $11,300. So if I pay off $1,000/month, I should make my next payment next November.
As for my "extra" cash each month that I've been saving up - what do you think I should do with it? I've saved about $970 since I started counting this in July, which brings my total cash balance/emergency fund to $2,440. Should I keep adding to this, or is this enough for now, and I should direct any "extra" to paying that much more of my student loan each moneht?
Related posts:
- Student Loan Goal
- October in Review
- July Budget Review and August Goals
- Tracking time
- Taxes and other unexpected bills
Enjoy this article?
Follow Us!
Sponsored
Payroll Services
Sponsored
Personal Finance Blogs
- Cash Flow Mantra
- First Gen American
- KrantCents
- Little House in the Valley
- MoneyCone
- My Journey to Millions
- Retire by 40
- Thousandaire
November 7th, 2011 - 15:28
November 2012 is so soon! It sounds like a good plan to me, when they’re paid off you’ll have that much more money to play with each month (unless the interest you’d earn from your investments is more than your loan interest).
I’d say the amount in your emergency fund is good for now, unless you feel you want more for peace of mind. I’d throw the extra money at the debt too. You could always start contributing to your savings again if/when you ever dip into it.
November 7th, 2011 - 16:33
I think $3,000 is probably a good amount of emergency fund at your stage. Good luck with the student loan. It would be nice to get that out of the way.
retirebyforty recently posted..How to save on heating bill AND stay warm!
November 8th, 2011 - 14:29
That’s a great idea – pay it off, the faster the better. If you’re not too risk averse, consider having a no-fee line of credit for an emergency and just slamming all the cash at the loan faster. If you don’t have an emergency during that period, the loan’s gone without additional costs, plus interest saved.
Also worth remembering, to reinforce that goal, is that you’re getting a guaranteed ‘return on investment’ by paying off the loan, though I’m sure you must’ve thought of that too.
Krupo recently posted..What not to do in your job interview for that exciting Big Four job opening
November 9th, 2011 - 22:13
They’re all good choices! You can’t go wrong with any of those options.
Nicoleandmaggie recently posted..What should we call our regular readers?