Friday, April 30, 2010

Tackling Our Debt

On our 5 Steps to Acquiring the Dream, number 3 was getting out of credit card debt. To that, I would like to add an auto loan and a second mortgage. We also have our first mortgage, but getting that one done soon does not seem realistic, and I would like to hit the others before the mortgage. Actually, the 2 mortgages provide some tax savings versus the others, so I am going after the bad ones first.

I am going to list our debt in the order that I would like to attack them.
  1. Credit Card One: $7000 @ 4.99%.
  2. Credit Card Two: $7200 @ 1.99%
  3. Auto Loan: $21000 @ 5.49% for 6 years
  4. Second Mortgage $66,000 @ 6.25% with 13 years left
  5. First Mortgage $134100 @ 5.75% with 24 years left
That bring our debt total to $235,300, give or take a few dollars since I rounded everything up. I am going to hit that first credit card as hard as I can. Every bit of leftover cash we have at the end of the month will be going towards that one. My goal is to have it paid off in 15 months. That puts us at August of 2011. In the meantime, I plan on paying the minimum the second one. At about 2.5% as the minimum, that would leave around $4700 left there.

The next step would be to roll the payments from the first credit card, into #2. I see myself finishing that card off in 12 months. So, by August of 2012, all the credit card debt would be gone. Then it would be down to the auto loan, which at that time would be down to about $13000. Agian, rolling the old payments from the credit cards into the auto loan would finish that one off in another 19 months. This would put us out to about March of 2014.

That means in 4 years, we will have knocked off $35000 in bad debt. Our second mortgage will be down to about a $51,000 balance with 9 years remaining. Throwing the payments from the old credits cards and auto loan into this one would have us done with it in less than 4 years, putting us at Jan of 2018. At this point, we can tackle the last piece which is the first mortgage.

By 2018, the first mortgage will have $108,000 in balance remaining, with 15 years left on the loan. Now, will all that extra money from the old debts being thrown into this one, the house will be totally ours by 2020. That would mean we would be totally debt free have over $2000 a month going towards savings. I see us being able to put some money into a NYC property by then.

Of course, there will be setbacks from now until then, but there will also be bright spots, so I hope they will even out. If my wife can go back to work full time as well, then we can accelerate the payoffs. It is good to dream you know!!!

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