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Finally Frugal

The bumpy road to financial independence. . . .


Wednesday, February 13, 2013

I did it!!

'Tis done.  The student loan has finally been paid off - in full! 

I sold $20,000 of stock in December (having worked out the capital gains tax hit beforehand) and sent my last payment to the U.S. Department of Education this week!  As you will see below, my balance is currently at ZERO! 

Though 1/3 of the balance was paid with a gift of stock from a family member, fully 2/3 of the balance was paid by ME, from my hard work, sacrifice, and dedication.  I'm pretty proud of that - I paid off $42,000 in debt in less than two and a half years (I started sending payments in earnest in September of 2010, when my balance was just over $62,000).

I'm still working four jobs, and though one position has been reduced (meaning a decrease of about $10,000 this year) I'm going to start working on paying off my second mortgage next.  I am ALSO going to try to relax more, socialize more, and in general enjoy life more than I have in the past few years. 

I'm not sure how often I'll be back here to provide updates, but I wanted to at least share this news with those of you who have followed along (and encouraged me) for all these years.  Thanks for all the kind words, the advice, and the optimism!

To those of you with outstanding student loan, credit card, or other debt:  You Can Do It!

Monday, September 10, 2012

Update and dilemma. . . .

Hey there folks!

Long time no blog!  This summer has flown by - I'm still working like a dawg, but I can sense that the end is nigh!

I now owe $29,318 on my student loans!!  Here's a more organized update (and then I'll explain my dilemma):

Here's where things stand now, in early-mid September 2012:

Second Mortgage Debt: $31,400::::$25,176

Student Loan Debt: $61,762::::$29,318

Primary Mortgage Debt: $167,500::::$154,209

Here's what it looked like in late May 2012:

Second Mortgage Debt: $31,400::::$25,442

Student Loan Debt: $61,762::::$39,070

Primary Mortgage Debt: $167,500::::$155,191

That second mortgage really needs to DIE, by the way.  The balance never goes down!

So here's the dilemma:  I find that with the current stock market (which is doing pretty well, all things considered) I could sell ALL of my stock and pay off ALL of my remaining student loan balance.  As in, TODAY (or, end of the week, assuming that kind of thing takes a few days).

I was intending to pay down my loans to $20,000 by January 2013 (totally doable) and then use $20K of the stock to pay the rest of it, thereby retaining about $8K for future use (or if I needed it to pay taxes).  Assuming, of course, that the stock market doesn't tank between now and January.

Psychologically, having a bit of stock left over makes me feel all warm and fuzzy inside, though logically I know that the stock is NOT going to gain 8.25% a month as my student loans do.  Or 8.9% a month as my second mortgage does. So the smart thing to do is pay the student loan off now, and take the tax hit this year  Since it's considered capital gains (I think), it would be 15% on the 'gain' regardless of how much other income I bring in this year (and I'm closing in on $100K this year so my income taxes will be high).  (BUT WAIT:  I just had a thought.  Since my student loan rate is 8.25% and the taxes are 15%, won't I pay more in taxes than I will in interest if I sell up now? ARGH!  Why didn't I major in Accounting or Finance?).

So essentially my logical self is battling with my emotional self about this.  I know what Dave Ramsey would say:  Sell now and get out of debt - then start on the second mortgage.  My new-to-saving self wants a little nest egg, though.

Also, and I don't think I've mentioned this, but I also picked up an auto loan in the last year.  My 15 year old beater finally bit the dust - I'm not worried about the car loan (2.9% interest) mostly because I bought a used, reliable, low-mileage, in-demand car that will keep its value for years should I choose to sell it.  And with my current extra income I can pay off that car loan in about 4 months.  No worries there. 

Anyhoo, here are my options as I see them:

  • Sell ~ $28,000 in stock now and pay off all (or almost all) of student loan debt; would then need to spend the rest of the year saving for taxes;
  • Sell ~ $20,000 in stock now and pay off almost all of student loan debt, using the rest of the year to pay the rest of it off.  Downside:  have to pay capital gains tax for 2012 when I'm already having to save for extra federal and state taxes;
  • Pay down the student loan debt to $20,000 by January 2013 and then sell $20K in stock and pay the capital gains in 2013 when I may be making less money (and therefore won't have to save as much for my 'regular' taxes).
What would you do?

Thursday, May 31, 2012

Interested in interest. . . .

Oh!  I forgot to mention one thing yesterday:  it has been very, very gratifying to see that a greater percentage of my student loan payments are applied to principle as opposed to interest.

For example, you'll see in the table below that in late 2010, when I started making payments, only 67% went to principle payment while a whopping 33% went to interest!  Now that my overall balance is shrinking, 93% is going to principle on average, while only 7% goes to interest.  Hallelujah!

Total Paid   Principle Interest
        %P              %I
2012  $11,125.00    $10,371.82    $753.18    
93% 7%
2011  $ 12,482.00  $ 10,289.33

82% 18%
2010  $   2,410.00  $   1,615.01  $   794.99
67% 33%

$ 26,017.00

 $ 22,276.16

 $ 3,740.74

86% 14%

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