FEBRUARY TASK: LIST YOUR DEBTS
Our task was gathering our debt information. Unlike our assets, I am well aware of all the debt, especially with the monthly automatic payments. What I was not as familiar with was the structure of the debt.
Like many young families we carry two main debts: our mortgage and multiple student loans. When it comes to our taxes we are able to deduct the interest paid in our tax returns for both our mortgage and student loans. We were very aware of timelines, rates and payments for our main debts but it was not as clear for our other debts. We took the extra step to not only file this information in a binder but all created an excel file to help us in organizing and prioritizing our debts.
My favorite part is the excel file that contained all the information in one place. This was extremely helpful when we were able to sort, filter and move items based on the length of time for certain payments as well as opportunities to pay off higher interest rates sooner.
Why I liked this task? After we created the master file which organized our logins, debt information and both sat down and talked about the numbers. We started adding total debts (WOW, it was a lot higher when you added it all together then I thought), then we broke it down for our milestones of when certain items would be paid off. Instead of looking at our total debt we are now focusing on smaller milestones along the way. Although the total debt is the same – we are approaching it differently – we are starting to build a plan that makes sense for us and that will help us save money.
We both agree our priority is to focus on paying down the high interest rate credit cards first.
Our excel file had the following headings: Type of Debt, Balance, URL, Start Date, End Date, # of Payments Remaining, Interest Rate, Monthly Payment Minimum, Credit Limit, Options for Reducing Interest Rate, Penalties (if applicable), and a Notes Tab
- Mortgage (2 loans, varying rates)
- Student Loans (7 separate loans, varying rates)
- Car Payment (3 months remaining)
- Credit Cards (8 credit cards, varying rates, most higher interest)
Planning for the Following:
- College Fund (child/ren)
- Advanced Degree (parents)
- Eventual New Car
Side Bar: This month’s exercise really made me realize how much debt we actually have especially planning for future debt with our son’s education. Gosh forbid something happen to my husband or I we would be leaving a mess of debt for only one income. We took the opportunity this month to confirm our life insurance policy is enough to cover our debts, arrangements and a future fund for our child(ren). Thankfully we are set for the amount but we had term life insurance. Now need to planning
to convert to permanent which is an additional expense.
Courtney’s Tip: Click the total button on the excel file- see the total debt. Then try to break it down by highest interest rate and/or the ones that are the closest to paid off.