Have you ever broken down your debt payments to see how much goes to your principal and how much goes to interest?
I challenge you to take a look. Look at your mortgage, your credit cards and your student loans. You will see your debts in a whole new way.
I did this exercise and realized 36% of the monthly payment we pay to my husband’s student loan every month goes to interest. 36%! THAT SUCKS!
Go. Do it. Maybe it’ll tick you off enough to finally take a sledgehammer to that debt. Let us know in the comments how you make out.
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I’m right there with you! It is painful to look at that, but necessary. One of our big motivators for getting out of debt. Thanks for the encouragement!
I always thought mortgage was a good debt. Was wondering your thoughts on paying off debt versus using the extra to invest in other instruments.
Courtney – Thanks for the comments.
bj – I personally don’t think that any debt is good, but that is just my opinion. Your question is one that causes great debate in the personal finance community. I’ll tell you what we are doing. Our debt consists of our mortgage and my husband’s student loan. We both max out our retirement and we have an emergency savings account, so our next goal is to pay off our debt in 5 years. If we had credit card debt we would be paying that off first before the mortgage. I do feel it is necessary to have an emergency fund in place to avoid credit spending. We do feel that paying off our mortgage early will help set us up for a better retirement and future. Thanks for your comments.
I agree with you on the mortgage. I would just add that you should look at your own needs are. I want to move forward creating less and less overhead for myself. For my husband and I it equal more freedom to move around and not be so dependent on a particular income.
When we were living on credit cards I would figure out the interest it was costing us. It still didn’t stop me from cutting my expenses. I felt pretty helpless though. I thought it would magically stop one day. It did, once I stopped spending so much! I’m happy to see the credit card bills are having to post the interest fees so prominently on the front now.
Molly – I like that phrase ‘creating less overhead’. It puts a new spin on our goal of being debt free. Thanks for the comments.