Snowball Effect- Debt Reiief

My husband and I have been wanting to get out of debt, more so me than him because I sit close to $60,000 in student loan debt and am still taking graduate courses.  We have dabbled with the Dave Ramsey plan of getting out of debt.  The cash budget, is very hard for us.  This is a challenge in it of itself.  We now have two separate bank accounts and one account is our daily living money, and one is strictly just for bills.

Some piece of debt relief that we have done is the snowball effect.  For those of you who unfamiliar with the snowball effect it paying extra on one loan.  When that loan is paid off, you take the what you paid over and the payment from loan that you paid off and put it toward your next loan.

For example:

Loan 1:  $1000
     Minimum payment $50 +$50 over pay means you can have this paid off in 10 month opposed to 20 months.

Loan 2:  $2,000
      Minimum payment $50.  You start paying $50 for 10 months until Loan 1 is paid off.  Then on month 11 you will pay $50 + $100=$150. After 10 more months, this loan will be paid off. This loan should have taken 40 months to pay off, but instead using the snowball effect will take 20 months to pay off.

Loan 3: $3,000
      Minimum payment $50.  You start paying $50 for 20 months until Loan 1 and Loan is paid off.  Then on month 21 you will pay $50 +$150= $200.  After consolidating the payments, it will take 10 more months to pay off. This loan should have taken 60 months to pay off, but instead using the snowball effect will take  a total 30 months to pay off.

This $6,000 of debt should have taken 120 months by paying the minimum  every month to pay off got cut to 30 months.

My husbands student loans are now paid off, now onto focusing on mine!

Student Loan Debt

I don't know about you, but I made a lot of mistakes when I was a young adult.  That would include thinking that while I was in college, I needed to take out the maximum student loan every year.  I played college softball, so time did not allow for a part time job.  I am regretting taking out so many loans. After being a college for almost 10 years, and no I am not a doctor, I have accumulated close to $60,000 in student debt.  Some of you may think, that isn't that much, but when you are a teacher in the state of Iowa.  That is quite a bit.

Things I wish I would have done:

1. Took out the minimum amount of student loans to pay for classes, room, and board.
2. Found time to have a part-time job.  Though I played softball, a couple of hours a day would not have killed me.
3. Lived in the dorms for 5 years.
4. Completed college in 4 years instead of 5. I had one year left of eligibility to play softball and I wanted to use it.
5. Ate the cafeteria food.  Where I lived in the dorms or not, I still should have eaten the cafeteria food.  I was a lot cheaper, I didn't have to cook, and there were actual meals beside Spaghettios.
6. I wish I would have saved money to put toward my future.

Some mistakes we don't learn until we are paying them back.  I could have been close to paying them back if I would have done the things above.  But now, my husband and I are working on paying back close to $70,000 in credit card and student loan debt.

Tax Refund

What to do with our tax return money? My husband and I have a couple of options as to do with our tax return money.  Both options are and will be a good investment for our furture and both options will get done at some point it is just a matter of what order to do them in.

It's amazing how much more money 1 kid can bring in from our tax return.  Our tax refund doubled from last year.  Now,  Ryne and I have to decide what we are going to do with our money this year. We have two options that we could do.  We could use the money to insulate our basement or we could use the money to pay down Ryne's student loans.  We are stuck in a dilemma.

 If we decide to spray insulate our our basement, it will take a good chunk of our refund.  I have been doing some research and have decided to go with Foam It Green Home Energy Kit.  This would be a $1500 expense.  This will help keep our house cooler in the summer and warmer in the winter.  There is a lot of air leakage coming from our basement therefore this would be a wise investment and cut down our gas and energy costs. This kit is a DYI kit so I can do it when I want too. I am an impatient person and want to do it right now; however, after doing some research, if I get an energy audit, I  could get a 70% rebate. This option would mean I would have to be patient.

Our other option is to paying Ryne's Student Loans. With our full refund, we would be about $600 give or take a few hundred away from being able to but his loans in forbarance.  The last $5000 would be paid off through the Teacher Loan Forgiveness plan.  This would free up $232  and though the Dave Ramsey snowball effect, we could have one of our credit cards paid off in 4-6 months. In the long run, this would defiantly help pay our debt off quicker.

Ryne has taken on two additional coaching position so we will be able to do both. The question is which should we do first?  After talking with my husband, we are going to call the energy company and see when they can do an energy audit.  I think this will help determine which direction we should go in first.