A Look Back at Our Debt Reduction Goals

Written on December 14, 2007 – 3:54 am | by PT | |

Two weeks ago I took a look back at our savings goals we’d made earlier in the year. Today I’ll do the same for our debt reduction goals. Remember, these goals were made in early 2007 and are basically be a listing of the debts we have and the order in which we want to pay them off, with the ultimate goal of being bad debt* free! This post will hopefully give you a feel for our debt tolerance.Our Debt Reduction Goals:

GOAL #1 - Aggressively pay off any auto loan with interest higher than 5%. NOT COMPLETE (cue failed game show contest music) Wow, we haven’t made much progress here. We’ve only made the minimum payments on our auto loans this year. Why? Because we were saving most of our extra cash for our house down payment. Since we closed on the home in September I’d hoped to have made a dent in our auto loans by this point in the year. However, with the home we needed to purchase a few extra things and so our ability to repay these aggressively was limited.

Another aspect of this is that want to buy a new vehicle and finance it at or near 0%. Right now we both have older used vehicles with relatively small loan amounts, but the interest is high. If we buy a new vehicle, we’d end up with one huge debt at low interest and one small debt at high interest that we could focus on paying down aggressively. Anyone have a strong opinion against moving toward this position?

GOAL #2 - Pay off any monthly credit card balances. COMPLETE We’ve been blessed to have had 100% success with this goal this past year. No credit card balance went unpaid past the grace period. The CC companies must be hating us.

GOAL #3 - Pay off 0% credit card balances on time. COMPLETE We were involved with only one of these types of debts this year. It was a card for some expensive medical needs which was locked at 0% for 12 months. We were able to pay this off within 8 months.

GOAL #4 - Pay off any student loan balances using the minimum payments. COMPLETE While I’m not sure we get to claim complete yet, for our student loans we never missed a scheduled payment this year. I’m happy for now to have them sitting there at interest rates well below 5% and paying the minimums.

* I define “bad debt” as any debt, other than a house mortgage or education loan, that has an interest rate above 5%, in which you are incurring interest charges (cannot pay off in a month).

Anybody disagree with this debt reduction strategy?