I just cut a check in the amount of $5,431 and dropped it in the mail yesterday. It’s my final payment to the IRS for 2008 income taxes.
With that burden off my back, I’ll be able to press forward with paying off my debt more aggressively. It seems I always make the most progress in late spring and summer because that’s when I feel I have no obligations to the IRS.
In fall, I’m holding back in preparation for paying taxes. In winter and early spring, I’m paying those taxes.
So with that in mind, here are my latest debt numbers…
Ryan's Debt Reduction Progress April 2009
Since November 2007, I’ve paid off $41,620, which represents 55% of the total amount of debt I owed.
I’m more than halfway there! Only 45% left to pay off and I’ll be debt free.
My plan is to pay off my Prosper loan in the next 30-60 days. That will leave me with only two loan balances left: my USAA credit card and my Honda minivan loan.
Part of me wonders which of these last two I should pay off first. The USAA card is a higher interest rate. But if I could knock out the van loan, that would free up nearly $600 a month in cash flow — about six times more cash flow ($100 a month vs. $600) for paying off twice as much ($10K vs. $20K).
Anyway, I’m still thinking about that. If you have any suggestions, please let me know.
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{ 8 comments }
Congrats, Ryan. Fantastic.
Maybe pay off the USSA loan. If peak oil happens sooner than later, then you’re car will be useless, anyways.
Thanks for stimulating the economy with real money… Ryan Healy for President!
Thanks, John! I appreciate your advice, and your vote of confidence. ;-)
Ryan
It primarily depends on your anticipated schedule for paying off both of the loans – USAA and the auto loan – coupled with exactly how much difference there is in the two interest rates.
In other words, if you will be paying off both loans in the next 6 months to a year and the rate difference isn’t more than 6% or so (I haven’t done a spreadsheet on this) it really doesn’t make a significant difference. Let’s say you pay off the minivan and have the USAA card left at $10,000. Further assume that you don’t pay it off for another year and it has a 6% higher rate. Ignoring the fact that the balance will probably be decreasing, you would only pay an additional $600 maximum in interest over the year. In return, you have the satisfaction of having paid off the larger loan and the flexibility of a significant reduction in your required payment. For some people, that might be a bad thing – they would simply take 10 years to pay off the remaining $10,000 at maybe 12% interest. However, you seem to be able to discipline yourself to use the extra cash flow to actually pay off your debt quickly! Bottom line? The financial impact isn’t a deciding factor. Pay off the minivan and give yourself some flexibility. It sounds like that’s what you would like to do anyway.
By the way, congratulations on your progress! That’s impressive.
Roger
Dad – Thanks for the input. I really appreciate it. I think that is ultimately what I will do — pay the minivan off first.
Ryan
I’m a lender on Prosper and just wanted to congratulate you on paying off your prosper loan and the overall debt reduction that you’ve had over the last year. Given the rate of late payments and defaults, its sad for me to see a good borrower go. But ultimately its good to have helped hit Citigroup and BofA where it hurts. Congratulations.
@Kyle – Thanks for supporting me this last year through Prosper. I really appreciate it. The Prosper loan was WAY better than dealing with Citi and BofA. I’ll continue to be a big fan of Prosper.
Again, thanks for your support and encouragement. :-)
Ryan
Hi, I was a lender on your Prosper loan too and noticed the payoff today. Congrats on paying off your loan and knocking a chunk of your debt off. Keep at it!
LC
@LC – Thanks for stopping by and offering your congratulations. It’s cool to hear from you.
Ryan
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