My Journey Out of the Rat Race Continues

As we are all gearing up for our New Year’s resolutions, I can’t help but be super excited for March to get here this year! March will be the month that my annual company bonus comes in and we’ll be able to pay off some major debt. That is the first step of freeing up around $1100/month THIS year.

First step – free up $611.32/month in March in this venture:

Five years ago, we were already on this journey and decided to accept a loan to consolidate our credit card debts from Discover Loans. I was skeptical at first because it looked like one of those debt consolidation type loans that could harm your credit. But after thorough research, we found that it was legit and much like a car loan where you pay for the interest the entire time; at the end of the term, you’ve paid everything off. Yes you will pay more than you would have if you paid it off all at once, but this is a much better option than paying that debt as credit card interest. And we desperately needed an approach like that. So, in March, we’ll have about $3000 balance left on this loan and can pay it off with the bonus as long as a catastrophe doesn’t hit the supermarket industry between now and the end of January. (I think we’ll be okay).

Step 2: Free up another $165/month

So, what are we going to do with that extra monthly cash? That’s when the REAL plan goes in motion. Have you heard of Dave Ramsey’s Snowball method? (Here’s a quick reference of this method from one of his videos:  . Ever since we took that Discover Loan out, we opted to not use our credit cards any longer and pay only in cash for things.  For the most part, we held true to this approach and did really well. We had a couple of emergencies pop up that we had to tap into the credit card. So we’ll take that $611.32 and ROLL it into the budgeted monthly $165 payment we make on the credit card for a total of $776 towards the credit card. Right now the balance is $3586.86 with 7.79% interest and $776 payment will pay it off in 5 months verses 24 months!  Now, there is a possibility that we can pay this credit card off at bonus time as well, but we are waiting to see what is leftover first in order to take a needed vacation. So we’ll have to see what the bonus turn out is and how much is left after taxes.

Regardless of when we pay the credit card off, paying off those both debts combined will free up a total of $776/month. Where’s the rest of that $1100?

Step 3 – MOVE! = SAVE another $345/month (totaling $1121).

We have a bid on a short sale property for approximately $141,000. That property is worth around $165,000, so we’ll gain some equity right off the bat IF the banks approve our offer. At interest rates in July (<4%), we were looking at a monthly payment including insurance and escrow around $850/month. We currently pay $1195/month for rent and that does not include any utilities. So, we should be able to shave off $345/month and I anticipate a little more since the house is significantly smaller square footage to heat and cool. Now keep in mind, there is NOTHING short about a short sale. As I said, we have a bid on that property, but our original offer date was July 3rd, 2014. Here we are on December 31st, and we are at least another month away from getting approved from the seller’s mortgage holders.  We’ve heard some people have gone up to 18 months waiting on a short sale to go through. I am sure we won’t wait that long, but hopefully we will have an answer in early 2015 and make that $345/month change quickly.  It’s time.

Obviously freeing up all this money gives us a chance to save for things we need in our future. We have a few other things that we need to focus on next:

  1. We borrowed against our 401K to pay the banks for a house we sold that was upside down
  2. Pay back Josh’s life insurance policy, so that it is fully vested. (We took a loan against it to invest in part of our retirement/hobby business: Brass Hammer Designs)
  3. Start investing and maxing 401K as soon as possible.
  4. Make sure that we get significant money saved up for a vehicle or two because both of ours are racking up significant mileage.

Anyway – you can see we have a very well thought out plan and SERIOUSLY I CANNOT WAIT UNTIL MARCH!

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