Finances & Money

The MINI Cooper is totally ours. Next up…

Some of you may have noticed that the red bar for the MINI Cooper in our debt scale on the right sidebar is gone. That means that both the bank loan and the 0% credit card loan are all paid off! That also means that we paid off over $19,000 in just over 2 months!

So what’s next? Right now, our debts are thus:

  • Truck: 4.5%
  • Stacie Student Loan: 5.75%, but only 4 payments from a 0.5% rate drop to 5.25%!
  • Mike Student Loan: 6.25%

Well, the smart thing to do would be to pay off the truck, right? NO! I’m supposed to pay down the HIGHEST INTEREST RATE!

So, next up is paying off my student loans, with the current balance of $14,196. Right now, we have a payoff date of July 2008 for this debt, but we also have numerous home improvements we want completed this coming year. We’ll revise this date, if needed, when we make more plans for these improvements in the coming months.

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Clever Dude


  • Holy cow! Congratulations–$19k in 2 months is amazing.

    I agree with you about tackling the highest interest rate first.

    I just blogged about Dave Ramsey’s Total Money Makeover philosophy (which states that you should pay the smallest balance).


    Pay the highest interest rate and save money.

  • You pay off the lowest balance first in order to snowball the minimum payments.

    Kacie–Dave isn’t wrong.

    If you are such a math genius, why did you sign up for a credit card, auto loans, and the rest?

    It’s about behavior, not math. That’s why you pay off the lowest balance first.

  • Well, I like the pay off the highest interest rate method as well.

    However, since the two highest interest rate loans are student loans, I wouldn’t attack those first for a couple reasons.

    1. The interest paid is tax deductible (up to certain income restrictions)
    2. They can be deferred in times of hardship.

    Thus, you could pay off the truck first. Once that were paid off, if something were to happen that causes a financial hardship once the truck was paid off, you could defer the student loan payments.

    Just my 2 cents…

  • I would say pay off the truck first, particularly if there is any danger of being upside-down on it. If you got into an accident you might have to replace your vehicle, but you won’t have to replace your education.

  • Congratulations! That’s awesome.

    I also would pay off the truck first – because of the depreciation issue. Although I understand the premise for paying down your “knowledge mortgage.”

  • If student loan interest is deducible and you are in 25% bracket.. the effective rates of the student loans are

    I would pay off truck.


  • PD: Ahh, I see that you’re trying to draw me into saying how much we make. Well, with combined income, we’re in the phaseout range, and even without combining, I’m in that range as a single filer. We couldn’t deduct the interest last year either.

    All: I did discuss the merits of paying off the truck ahead of the other debts, but in reality, I don’t think I’ll need to defer my student loans anytime soon as I’m in a very high demand field, and if Stacie loses her job, we could still cover her loan payments.

    With the truck, I could always sell it. We owe less than it’s worth and we’re keeping up with the depreciation. However, the payment is the highest line item of our monthly expenses, except the mortgage, so it’s enticing to get rid of that large piece of debt.

    The last debt we paid off was credit cards, which was at 0%, which was dumb logically, but I agree with some of you that the mental effects of paying off non-high interest debt has merit. But in this case, it’s time for my student loans to go.

  • The speed at which you attack debts is astounding to me. And inspiring!

    No worries, if the peeps would like to stone you, they can stone me too. As soon as the credit card is done, we’ll be attacking my spouse’s student loan, not our car loan. Highest interest, baby. lol

  • I realized that many readers may not have seen my posts from the last few weeks to identify where we got the money. The bank loan was mostly paid off with money we got from selling our Chevy Malibu ($11500). The rest was savings and extra income.

  • You only need the psychological crutch of paying the smallest balance first if you are just starting out with getting debt-free.

    Congratulations on paying off the Mini Cooper and onwards and upwards to the next goal.

  • I think its a little more complicated than lowest balance vs highest interest. If you have 2 loans, one with a lower interest rate, but you can take care of it in 2 months if you concentrate on it, whereas normally it might take a year, and your loan with the higher interest rate is going to take you 5 years to pay off, and might be reduced to 4 1/2 with the combination of other bills payment, you might still come out ahead doing it in that order.

  • I’d sell the truck, b/c with depreciation you are looking at relatively the same rates; moreover, having the title gives you more flexibility and easier selling than not having the title. Get a few more dings or what not, and resale value could be less than what you owe. cars are just goofy things. seeing it is the highest monthly payment, getting rid of it would also give you more financial flexibility once paid off.

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