So I finally took stock of all of my debt.
In all, I stand to pay out $91,600 at 8% per annum. I am absolutely dumbfounded when I try to internalize the fact that I pay about $7500 in interest every year. $7500 a year could serve very well if invested every year into a retirement fund.
Here are my loans
1. $54000 with a payment of $480
2. $14500 with a payment of $182
3. $15900 with a payment of $192
4. $6900 with a payment of $80
In addition, I also have a credit card debt of $2000.
So as I look at my total loan payments, it is about $934 per month or about $11,200 per year. In effect, my student loans only go down by about $4000 every year. That is outright ridiculous. I can’t be paying out as much to the banks just because I chose to get an education.
My goal is to now take a debt snowball approach. I really did think about the avalanche approach but I know I lack the discipline to fight it out. I need some small wins here and there to keep me motivated. Though the snowball approach is not the best financial option, it still offers the encouragement I need.
For those un-initiated, the debt snowball is when you pick the smallest loan and put all your effort in paying it out while paying minimums on the other loans. Once the smaller loan is paid off, you repeat the process with the next smallest debt and so on. The avalanche is a different approach where you focus on the debt with the highest interest rate first.
So as I was saying, My goal is to tackle the smallest debt i have, one by one. My first goal is to save $2000 in the 30 days and pay my credit card debt. That is roughly $65 a day. To start off I need a daily goal so I can stay focused and achieve it.
My next post will be one that I will update daily with my progress toward $2000.