It’s been awhile since I did a debt update here, and things are progressing nicely so I updated my spreadsheet and thought I’d share here.
I’ve decided to include the balance of my car loan (around 4.5% APR on the loan), along with the amount I still owe my mother, and my student loans. The $11,000 is the balance I owe the IRS and then I will be completely done with that debt. I plan to pay off that balance this month.
Personal Debt
Mom Trading Debt: $125,274 (APR: 0%)
Student Loans: $33,425 (average APR: 6.5%)
IRS Balance: $11,000
Car Loan: $7,567 (APR: 4.5%)
Total Personal Liabilities: $177,266
Personal Assets
Checking Account: $6,500
Savings Accounts: $59,130
Total Cash: $65,630
Debt Repayment Schedule
I’ve been repaying my Mother at a higher rate the last few months, averaging almost $2,000 a month. I intend to keep that rate going for the foreseeable future. As I mentioned above, I plan to payoff my IRS balance this month.
Why not repay my mother faster? I’ve been thinking about that alot lately. And there are 3 main reasons. 1. My mother needs a monthly income stream. The $1-2K I send each month helps her budget and save a little now. 2. I can utilize cash better than her. 3. I will be taking care of my mother for the rest of her life most likely.
If I was able to repay my mother the entire 125K or so remaining, she would still have to pull out of that a good chunk each month to meet her own expenses. I’ve mentioned here before that my mother has health issues and is unable to work full time.
So I think it is better to plan on repaying my mother quickly, but not too quickly. At a 2K/month rate, I can continue to pay off my other debts, and build my own savings. It also allows me to work on expanding my software business so I can continue to increase my earnings.
I don’t plan to payoff my student loans at an increased rate until I have at least a 100K savings cushion.
The future is looking up
As you can see, things are going really well this year financially. My software business has really taken off, and I’m planning to continue to expand that and hopefully earnings will continue to increase.
Looking at some of the goals I set for 2009, I’ve already hit a few including:
- Max out $12,000 in payback to Mom (Complete)
- Large emergency fund – $20,000 (Complete)
- Hire part-time employee to full time (Complete)
One of my goals was to save $70,000 for a down payment. I’ve decided to give that one up and just change it to a goal of having a 100K savings account. I don’t have the desire I once did to own real estate.
Looking at rental prices in Seattle and Portland, you just get so much more bang for your buck renting right now. Plus, I would have difficulty obtaining a mortgage due to my past credit history (though, my FICO is above 640 now!).
So, that’s my personal debt update. I’m looking forward to spending the holidays this year not as stressed about my debt as I can see the light at the end of the tunnel!
Also: what do you think of the new “DK” logo? I really like it…
{ 13 comments… read them below or add one }
You are doing awesome. Good for you.
Thanks Pat! I’m trying!
That’s great DK! Congrats on all the progress and I like the new logo a lot.
Oh no, why did it give me an angry face? I want a happier avatar!
Ha! Just upload a picture to gravatar.com and then you’ll have your own avatar!
DK – GREAT JOB. You really are doing great – you have the right attitude, work ethic and follow through. So inspiring.
Just wondering – is the $100k savings meant to tide you over for a certain number of months if the business does not do so well, or is it just an amount you picked out? Agree 100% on paying off the IRS ASAP. Unless there is a tax advantage with studen loans these days, it seems to make sense to lower your savings goal to $50k and pay off the student loan at 6.5%. I understand not hurrying to pay off 4.5%. Is the state tax paid off? What about all the credit cards you used to list? I seem to recall some were personal and some business; even if you don’t want to post the specifics, it would help understand the big picture you could update a general status on those.
I used to wonder about your Mom’s opportunity cost in not having her money invested during the payback period of your 0% loan, but it sounds like you plan to more than pay her back. You are an honorable man.
Thanks for the kind words!!
I like the new logo a lot too! It looks like it’s “fast” (for lack of a better term) like the smooth lines in a sports car. Good choice.
I’m curious about your method of debt repayment–I think I’ve missed this ealrier. Are you going highest-interest first, or lowest balance first? Also, why are you maintaining so much in savings when you could be paying down debt? I’m only curious–not criticizing.
Thanks Jessica. My software business has a pretty long lead time. IE, we may build something that takes 4 months or more to see any revenue. So that cash cushion is important in case I ever needed to put money into the business. I shouldn’t have too, but cutting things close cash flow wise isn’t appealing to me! I’d rather be safe, and payback the debt a little slower.
nice work i like you have your site put together again also
Wow man, this is an amazing blog. I’ve got so much from reading your story. Orginally came across this link in relation to Caseys story, though you two couldn’t be further apart….
DK – Way to claw yourself out of debt! I’m glad you are so focused on paying back your mom and taking care of her. Family is most important!
Best to you.
Hi
Nice site and nice job.
A question how did you manage to go from a debt of over 300k in January to 177k in September ??