5 Years to Debt Freedom
In all the work I’ve done the past few months getting our finances in order, it’s become apparent to me that we are on a 5 year plan to get out of debt. However I look at it the numbers all lead to the same conclusion.
With our currently budgeted amount of monthly payments on debt, we will get everything paid off in about 4.5 years, except the car. We just bought the car and financed it for 5 years. So, that last half a year we can probably pay the car off a few months early as well, but the total time will still be about 5 years.
I would LOVE to move that date in closer. I just hope we can start seeing some good results soon. This month is looking to be pretty good so far (despite the car purchase) and next month should be one of our best of the entire year thanks to a third paycheck.
I do have a few things that will hopefully help accelerate the pay-off over the next few years. Here’s what I’m hoping to use to speed things up:
- Raises - I’ll be due for a raise this coming July. I’m a contractor, so I don’t get bonuses, but I am eligible for pay increases on an annual basis. I haven’t budgeted a raise into my numbers for the year, so anything extra can go right to the debt payments.
- More Teaching - I put in my budget teaching for about 8 months of the year. If I can keep on top of things I could easily get that to 9-10 months. At about a $1000 per month, those extra months can add a nice kick to any debt reduction.
- Other Side Work - I’m continuing to attempt marketing myself as a data analysis consultant. Any side work I can pick up will be some unplanned income that can go straight to debt.
- Savings - I’m planning on building up our savings throughout this year using our new E*Trade account. I’m hoping to get $5,000 or more in there by year end. I’m also planning on taking half of whatever we save this year and making an extra debt payment next December. Then, start with the savings all over again (with a higher goal) and do the same thing the following year. While I might be better off paying extra each month rather than saving, having more of a cushion is necessary at this point, and the psychological gains of making a big payment like that will help spur me on to be ready for the next year!
If all goes well, that could hopefully get us down to 4 years (maybe less). In reality, because we are planning on moving in a few years (I’ll post more later), we might actually be able to make this in 3 years by using the funds from selling our house to pay off the rest of the debt rather than saving for the next down payment. The feeling of moving to another state with $0 in debt would definitely be worth it to me.
See some more advice here:
Jump-Start Your Debt Reduction Using Christmas Gifts And Year-End Bonuses
