Sunday, January 22, 2012
Debt Repayment Part 2: Loan expenses
Now that I have established how we live on my current salary, let's talk about what our repayment plan is currently. In short - use all of Hubby JD's salary to pay things off.
Hubby JD salary $4700 in January
Hubby JD mandatory loan payment $650 (started October 2011)
Jane MD mandatory loan payment $1050 (starts January 2012)
Emergency fund/condo fund $1300
Extra loan payment $1700
Repayments already complete as of January 2012
Starting loan total $260K
-$12K on 8.5% loan from emergency fund in October
-$8K of extra savings from Jane MD's job (includes October mandatory payment)
- $1.3K total for November and December mandatory payment
Total loan remaining at start of January 2012 $238.5K
Wait! Where did you get a 12K emergency fund?
We had been building an emergency fund in case we needed to cover a 20% down payment on our out-of-state condo, which would be in the 20-30K range. Our condo monthly payment is mostly covered by a renter, but our first time homebuyer loan is not for rental/income properties and gets reassessed for renewal yearly. While Hubby JD took care of Child#1 before his job started, Jane MD's extra salary and all extra student loan money went into the emergency fund - pulling it from $11K to $22K over 5 months.
Fortunately, we got the extension,and then had to decide what to do with $22K. Investing was not a short term solution; CDs have lower interest rates than our student loans. Voluntarily paying off 20% on the condo was not worth while with the much higher student loan interest rates. We went ahead and paid off the highest interest loan ASAP in October and then made extra loan payments to hit the other higher interest loans.
That worked fine, and our emergency fund is down to around 10K again - which would be around 3 months of money if both of us lost our jobs. As we will get reassessed again next year, we need to build back up to the previous emergency fund level. If we get another extension, we'll put another lump sum into the highest remaining loan. We've signed up for one of the autosaving plans from our bank where they move an extra dollar per transaction into a savings account - now up to $1.5K. We also will continue to put that extra $500-1000 per month to the student loan with the left-overs from JaneMD's salary.
Accoring to the debt repayment calculator at "http://www.youcandealwithit.com/borrowers/calculators-and-resources/calculators/debt-repayment-calculator.shtml" we can expect to pay off our loans in about 6 years.
Next up: Breastfeeding Economics: Part 1