I'm new here... I've been reading for a while, and love the info I've seen. Here's my story and goals. Let me know what you all think.

***I removed some of the less important info, as well as some changed goals... all updates are toward the bottom of the thread***

A quick question -

1 - What sorts of short- and long-term financial goals do you have set?
2 - You're making an extra 6K from secondary income each month? Not bad.

Our debts are as follows:

Mortgage: 212000 (we are in year 2 of a 30 year mortgage, at 6.125%
Car 1: 15000 (at 7.5%)
Car 2: 20500 (at 7.3%)
HELOC: 12500 (at 5.7%)
Student Loans: 45500 (at 3.75%, consolidated over 30 years about a year ago. All of these loans were to pay for my wife's master's degree)


A comment about our retirement savings:

Since my wife and I are both in public education, we contribute into a pension with each paycheck. This retirement set up will pay us roughly 75% of our incomes that we make at the time we retire (early 60's, still a LONG time away). Neither of us are currently setting any extra money aside for our retirement, but we intend to begin doing so as soon as we knock down more of our debts (specifically the 2 car payments and the HELOC).

Dave... not an extra 6000 monthly, that's an annual 6000 extra (so I guess 500 extra monthly)

Refi that mortage ASAP, if possible. You can lower your payment considerably. Given when you bought your house, the HELOC indicates you financed close to %100, and it's likely your LTV prevents a refi.

I wouldn't make extra payments on your mortgage principle while I was paying more interest on those cars. And even then, I'd focus on getting that variable rate HELOC paid off before I worried about the principle on the mortgage. Get those three things paid off (snowball them) and THEN start paying off your mortgage. You can make bigger payments at that time, and catch up to where you would have been in short order. Run the numbers on that scenario.

Don't pay extra on more than one debt at a time. Focus your extra capital on paying off one debt, until its paid off. THEN move on to the next. This is the strategy most of us have followed (and I'm 5 months from being down to just my mortgage using this strategy).

http://www.getrichslowly.org/forum/viewtopic.php?t=2434 (my journal)

I agree. Why pay down your mortgage when it's a lower interest rate than your car loans? And your mortgage interest is deductible if you qualify. Attack the car loans first.

Another consideration on the mortgage is mortgage insurance. If you are paying it, it might be reasonably cost effective to pay the mortgage principal ahead until you can get rid of it, and then tackle the other debts. It depends on how much it is, how close it is to going away, and so on.

That said, I'd probably still pay the HELOC first, because variable rate loans scare me. Interest rates don't have anywhere to go but up right now.

Thanks for the comments and suggestions guys... here are a few explanations, and my updated goals and corrected balances:

Corrected Balances: (I just went with estimates last time, I was a little off on a couple, and about a thousand high on Car 1 and a thousand low on the HELOC)

Mortgage: 212,137
HELOC: 13, 736
Car 1: 13,576
Car 2: 20,207
Student Loans: 45,509

Total Debt: 305,165


A few people asked why I was paying on the mortgage first. My only explanation on that is because when we took out the mortgage, we did not have either car payments, as we have replaced both vehicles in the last 10 months. Before getting the two cars, I had decided to pay down the mortage asap, and just hadn't changed this mindset. I was also worried about my ability to stick to the snowballing of payments once something gets paid off (but I feel good about my ability to stick to this now).

Also, we are not paying PMI, however refinancing our house (another reason I was working on paying down the mortgage) is not possible at this point, as the bank has said that we would end up having to pay the PMI due to the value of our house dropping over the last year or so (like almost everyone's has). I fully intend to try and refinance for a lower rate as soon as we can do so without adding in any new fees.

With this being said, I have changed my goals around. Here they are:

1. Pay off Car 1 by June 2011. I intend to pay an extra 265 to principal every month, and also pay extra with anything left over from groceries/entertainment each month, as well as some money from side work. (If I really push it, I may be able to move this goal up a few months as well, but June 11 is my starting point). If I paid the car off on time, the last payment would be due in Dec. 2014.

2. Pay off HELOC by the end of 2012. This will involve using the 265 extra, as well as the 295 car payment (total 560 extra monthly). I've decided to go with the Car before the HELOC because the payment for the HELOC is so much lower, so if something happens and I can't make the extra amount each month, there is less that I am absolutely locked into.

3. Pay off Car 2 by the end of 2013. I will use the money used for goals 1 and 2, meaning I'll pay about 640 extra monthly towards this vehicle loan. If I paid for it on time this car would be paid off during the summer of 2015.

4. Use most of this extra money (not all, probably about 700 monthly, with the other roughly 300 going to savings) to pay extra on mortgage, and hopefully have that paid off by the end of 2025 (instead of the original end date of April 2038).

5. While paying off debt, I'd like to increase my emergency fund to 10,000.

Here's an update on how things have progressed... including a slight change in goals, and use of emergency funds

Total Debts:

Mortgage: 211,628
Car 1: 10,292
Car 2: 19,874
HELOC: 13,709
Student Loans: 45, 298

Total: 300,801


Currently in savings: 8000

Of this $8000, our emergency fund is $2500. The rest is earmarked for heat ($2500, which is enough for all of this upcoming winter, with hopefully an extra $1000 all set for the following year, auto expenses ($700, which will go primarily towards buying new snow tires for my car), insurance ($1500, which will cover both vehicles for all of the 2010 calendar year) and gifts ($800 already set aside, mostly for Christmas, but also for a few weddings we will be attending)

I decided to drop our emergency fund down from nearly $5000 to $2500 in order to pay off some debt a little quicker. I've really gotten excited about knocking out the first car payment, and then going from there.

Here are our updated short and long term goals:

1. Pay off Car 1 by July of 2010. My original goal was for June of 2011, but I've moved this up, due to a little extra money coming our way recently, and putting a little more monthly into this debt. (Actual payment is $295, and I have been paying $660 a month)

2. Pay off HELOC by February 2012. Once the first car is paid off, all of that money will go towards getting rid of the HELOC. This will hopefully also allow us to refinance our home a little easier as well.

3. Pay off Car 2 by April 2013. During that last year of payments on this car, I hope to be paying about $1100 monthly towards the car (payments are currently $345).

4. Take the $1100 monthly I would have been paying towards the car, and put this in savings for a full year, or a little over a year. This will hopefully get us to somewhere in the 15-20 thousand range for savings, depending on how much other money I am able to funnel in this direction.

5. Once I build up a sizable savings, put an extra $700 monthly towards the mortgage, with the intent of the mortage being paid off entirely by the end of 2025. During this time, the other money I had been using to pay off the debts will continue to go towards savings.

Good plan, Bigmike.

I'd find out if your interest payments would be reduced if you paid down principle ahead of schedule. If so, how often? If it rebalances every year or something, instead of every month, just save up and make a big payment ahead of that date. You could earn a few bucks in interest via a savings account.

Your EF should cover 3-6 months of expenses. Factor into that what COBRA payments would be if you were laid off.

Here goes with an update, first one in a while...

1. One of our cars is paid off. Last July the balance on it was $13650, and I wrote the last check to finish it off last week. My original hope was to have it done in early 2011, then I upped it to July of 2010, but was very glad to get that done with now.

2. Starting next month, all of the money that was going towards the car will now go to pay off the HELOC. Hopefully I can now have that paid off by October of 2011. We'll see how that works out.

Current Balances:

Mortgage: 210,332
Heloc: 13, 648
Student Loans: 44, 641
Car 1: 0
Car 2: 18, 845

Total: 287, 466

Good job at getting rid of that car debt.

Wow! You rock! Congratulations on knocking off that car loan!