A Four Year Debt-rospective

I use July as the benchmark for looking at the progress on our overall debt.  This practice started in 2007.  Why July 2007?  Simple.  Because that was the time that our debt was at its absolute highest.


July 2007 

Why was our debt highest in this particular month?  Because that’s the month we assumed the 30-year mortgage on our house.  Happy to say it’s been all downhill from there.

At this point in time we had:

  1. Mortgage – 100% of our mortgage balance remained since we hadn’t paid anything yet
  2. Auto Loan – We had about 30 months left on a 48 month car loan
  3. Student Loan 1 – This loan had the higher balance and the higher interest rate and higher monthly payment
  4. Student Loan 2 – This was the other loan we had.  Both loans were 15 year notes starting in 2005.

July 2008

During the first twelve months of living in our house, we did pretty good.  We paid off 5.5% of our debt balance, leaving 94.5% of the original debt amount.  My wife and I were both working so we were able to pay a good chunk extra each month.

All loans were paid with their regular amount except for the auto loan, which we reduced by 97%!

July 2009

My wife had quit working in March in anticipation of being a stay-at-home mom.  As such, we knew that the days of applying a lot of extra money each month to debt would be reduced.  This was sad, but on the upside, we eased into the budget so that the last few months she was working, all of her income went to debt, which allowed us to reduce the balances plus have worries about being able to pay the monthly bills once her paycheck went away.

The tiny bit on the auto loan went away, leaving just the two student loans.  All extra went toward the higher balance student loan.

In this twelve month period, we paid another 5.4% of our debt, reducing our original debt amount by 10.9%

July 2010

With my wife not working and raises on my end being scarce (read: non-existant), the only extra payments we were able to make were by applying a portion of our tax refund, as well as a portion of a small inheritance received from my grandmother who passed in late 2009.  All extra amount again went toward the higher interest rate student loan, but the good news was that we had paid off over 90% of the original balance on that loan!

In this twelve month period, we paid 3.9% of our original.  This was a drop-off but we’d actually anticipated it to be a higher drop-off before applying part of the inheritance, which raised it a few fractions of a percentage point.  All told, we had paid off 14.8% of our original debt balance.

July 2011 (Today)

With another year of no raises, we were able to pay off 3.4% of our original balance.  Again, this is another drop-off, but because the previous years had been helped by an extra income and later supplemented by a one-time influx from the inheritance, this was really along the lines of what we’d been expecting in 2010 and 2011.  The good news is that we paid the first student loan balance in full.  The monthly amount that had been going toward the student loan was added to our mortgage payment, meaning we never even saw the money once the loan was paid.  As of now, we’ve paid off 18.2% of our original debt and we’ve paid off two of the original four loans we started with.  Slow but steady progress.

Looking Forward

I’m hoping that raises finally kick in and that we can apply a little extra from there (we’ll see toward the end of the calendar year).  In addition, I’ve started making a little money from the blog, a portion of which gets applied to either the mortgage or the remaining student loan balance.  Plus, every month we make payments without taking new debt, the amount paid to principle increases steadily.  I think we can start trending the line back upward in terms of what we pay off for the year starting a year from now.

Do you track your debt over a long term period?  Does it encourage you or discourage you?

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11 thoughts on “A Four Year Debt-rospective

  1. I track debt progress from when I started Financial Peace University in May 2009. It's nice to look back and see there is progress even with its bumps along the way.

    Is there a reason you don't focus all extra payment towards the remaining student loan? I would think you would focus on getting that paid off before paying extra towards the mortgage.

  2. Congrats on all the progress you've made!

    I think a year over year look at your finances is a really valuable tool for seeing how far you've come. I typically use June as my reference month since that's the month I started working full time after college in.

  3. I absolutely track our debt over the long term. Like you, we started tracking in 2007 and to look back to where we were and how far we've come is inspiring. On top of that, we've completely changed our money habits to ensure we're never in that place again!

  4. You are better off prepaying the secured mortgage rather than the unsecured student loan. They can't repossess your education, but they can repossess collateral (like your home). Also, federal student loans are forgiven in the event of death or disability of the borrower, which your mortgage does not have. (Don't know any details about your student loan.) Contra Bucksome, I you are doing the smart thing here.

  5. I do not track debt long term, but I think it would be inspiring to do so. Just within the last year, I have been able to start making payments that are more than the minimum requirements on credit card and student loans and I would like to see the progress I am making over time rather than just dwelling on the large sum that is still owed. I think this way I could start planning more efficiently for the future as well rather than just living paycheck to paycheck. Congrats with keeping up on your finances over the last four years, and best of luck in the months to come. Be sure to let us know how it turns out!

  6. Keep at it. It's a long haul but you're knocking it out.

    If your student loan balance is lower than your mortgage, why not knock that one out? That would free up that payment to building up an emergency fund or throwing at the mortgage, no?

  7. Thanks to all for the great comments. I think the question as to why we don't apply everything extra to the student loan is worthy of its own follow up post, so I'll get something together next week!

  8. I like reading your progress! When my husband (then boyfriend) and I moved in together in 2008, we had a combined $25,000 of debt. All of the sudden it just felt like a huge weight on me! He proposed to me in June 2009, and we decided that in the next year we would pay off all debt, pay cash for our wedding and honeymoon, and put a downpayment on a home. We succeeded in each of these–hurrah! By September 1, 2010 we were non-mortgage debt-free, and in November 2010 we went on a beautiful honeymoon to Austria (thanks also in large part to our aunt and uncle who gifted us the airfare for our wedding gift).

    Keep going–it is great to be debt-free!

  9. You're making great progress! I don't track my debt payments, but I should. I know that my car loan is going down steadily and will be paid off in about 16 months. But until I'm finished with school (in December -whoo hoo!) I can't apply much to my student loans, just enough to cover the interest and sometimes a little extra. But, at least that's all I'll be paying; my student loans and car loan until paid in full next November. I guess I really should track my debt.

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