Tuesday, August 21, 2012

Financial Update

It has been EXACTLY three months since I told you all about my relatively ambitious plan to focus my financial efforts on paying off my undergrad, grad, and law school loans as quickly as possible (here). This seems like as good a time as any to update you guys on my progress.

Yesterday, almost as if in honor of my three-month anniversary on this project, I finally paid off my first loan (from way back in December 2003, i.e., second semester freshman year).

(For those reading closely and wondering about n.5, I called customer service about this as well and apparently they do NOT prorate custom payments across all loans in the group...just all the loans you see above...namely, one.  So, in other words, it's a terrible footnote.)

As you can see, I was heartbreakingly close to paying this guy off last month, as I only had $53.68 left to pay this month. I easily cleared that hurdle with my snowball payment this month. I actually initially thought I'd be able to pay off my SECOND smallest loan this month, too...

(The number you see highlighted next to "calculator" represents the amount of money available to pay off loans)

But then I realized that I had TOO much money in my checking account because of a work-related reimbursement that I had not yet sent to my credit card company. But I have less than $1,000 left on this second loan and I am optimistic that I will knock this one out next month!

Here's a brief description of the way I've been organizing my payments, for those who are interested in the mechanics:

  • I get two paychecks each month. The last paycheck of the month covers rent and my credit card.

    • Note that I am barely charging anything to my credit card anymore; I use it for work-related reimburseable expenses and then periodically out of convenience, but I have almost entirely switched to a cash-budget.

    • When I do make a credit card purchase for personal reasons, ideally I set aside that amount of cash to ensure I stick to my $100/week budget.

  • After my mid-month paycheck clears, I make my loan payments.

    • I organized all of my loan providers into a spreadsheet containing the original loan amount, payoff balances, interest rates, website to make payments, user names, and passwords. I go down the list making minimum payments, saving my smallest loan for last.

    • As I go, I subtract these payments from my current bank balance (I also subtract two weeks' of allowance and my rent from this balance. You may notice that I accoun for rent twice --- just to be safe and to provide a small amount of cushion for error once a month).

    • By the time I get to my smallest loan into which I'm dumping all my leftover money, I have a figure that tells me exactly how much leftover money I have to spend this month. That's the amount I put towards my smallest loan.
So far, I've been pretty good about sticking to my budget, although admittedly this month I have not been keeping very good track of things. I haven't been shopping since May and I can't recall the last time I bought an item of clothing for myself (probably around May as well). I keep reminding myself that I truly do have more than enough clothes at my disposal and it has gotten much easier to resist that initial temptation to click "submit" when shopping online. The fact that I haven't bought anything for a while has made it easier to resist impulse buys. I did buy an iPad keyboard last week that I did not properly budget for, but this is still a huge improvement over my prior spending habits.

Finally paying off my first loan has given me a nice little boost of motivation, though; my desire to stick to my weekly budget feels renewed!

FWIW, I'm very surprised at how long it took me to finally pay off this loan (which was less than $3,000 to start). I am sure I've spent only slightly smaller sums some months between shopping and going out, so I did not think it would be essentially three months before I could knock out my first loan. This has definitely opened my eyes to how important it is to keep an eye on your money and, as Dave Ramsey says, to TELL it where to go...otherwise it has a way of just...leaving.

Next stop, loan number two! Watch your back, Firstmark, because I am COMING for you, and it will NOT take me another three months.

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