Looking at the numbers, it looks like we just barely missed the milestone of getting under $30,000 of debt remaining, but we actually hit an even bigger milestone this month, so we’ll save the under $30K for next month.
The big news is that we no longer owe any money to student loan service providers! Our beginning of the month payment took care of those. Hooray! We may have smiled at the image below multiple times this month.
The other $30 K
I haven’t talked about the other $30,000 loan, so I’ll do so now. About two and a half years ago, after hearing that we were tackling our student debt as fast as we could, a family member came forward telling us about $30,000 that she had set aside years ago. The money was just sitting in her savings account earning less than 1% interest. She wanted to loan us the money so we could pay off a chunk of our student loans and save interest on that portion of our debt.
Knowing that we would absolutely pay back the money (and with interest), we took the loan and paid $30,000 of student loans that were at 7.8% interest. Of course that amount was never counted as “paid” in my reports on the blog because it was still money that we owed, just a change in creditor. Instead of owing $30,000 to the student loan company, we owed $30,000 to a relative.
That family loan was the inspiration behind what I wrote about taking loans from family. The funny thing is, although I highly recommend putting a loan contract in writing, we didn’t. We weren’t worried about the contract because we knew that we would pay (and pay more than was required). She apparently wasn’t worried about a contract either. She always told us she wasn’t worried about it.
Every month when I calculate our remaining debt, I just add in the $30,000 without interest. Though she didn’t require us to pay any interest (she was making next to nothing from her savings account), we had planned to pay her interest all along, we just hadn’t decided how much or done any calculations. Since we hadn’t decided how much to pay in interest, I never added it into the total amount owed. Now that our only loan left is the personal loan to her, we calculated the interest and added it into our debt remaining total.
There was no scientific process determine what interest rate we would pay. In 2013, interest rates were dismally low for savers (and wonderfully low for borrowers). Last month, when we had to decide what the rate would be, we looked at the savings account rate (less than one percent) and knew we wanted to pay substantially more than that. We looked at the 10-year treasury note interest rate over the last four years, and saw it just barely reached 3% one day during that period. We knew our debt was as safe a bet as the conservative 10-year note, so decided 3% was as good a rate as any. Our thoughtful and generous relative earns more than three times what she would have earned leaving the $30,000 in her savings account, and we pay less than half what we would have paid without her re-financing that $30,000 for us. We all win.
So we kind of got below $30,000 according to our old calculations, but then we tacked another $2,225 of accrued interest onto the total we owe. We are still super excited to be down to our final loan!
Debt Repayment
In March we paid off $9,862 in debt! This is what was left from our February income after paying expenses and setting aside some tax money. Thanks to February’s unusually large income and keeping our expenses low, this is our biggest monthly payoff ever!
Income
Our total net income for March was $9,847. Since we live on last month’s income, this is income that we haven’t touched yet. We will budget and spend it in April.
Attorney Income (Day Job)– $5,140 Mr. SixFiguresUnder has been working full-time as an attorney for the state of California for just over six months now. His actual take-home pay is $3,762, but I add back in the cost of the benefits (insurance, dental, vision, parking, union dues and retirement) that are automatically taken out of his check so that I can show them to you in our budget below.
Attorney Income (Private Practice)– $2,473 On top of working full-time for the state, my husband has his own private law practice. It makes for super long days for him, but the income is really helping us work toward our goal, plus he’s really good at what he does and he enjoys helping people individually, which is very different from what he does at the state.
My Income (Blog)– $2,234 The income that I report is the income that I received this month minus all of my blogging expenses. I keep track of both what I earn and what I receive. If you’re interested in the details of my blogging income as well as other blogging tips and resources, you can sign up for my Behind-the-Scenes Blogging emails to get the scoop.
If you’re interested in starting a money-making blog, check out my complete step-by-step instructions for setting up a self-hosted blog and you can get yours started today.
Spending
Each month we budget down to zero using last month’s income. Our spending in March came from the income we earned in February. In addition to the debt payment above, here’s how we spent money in February:
Tithing– $1,690 We happily pay a 10% tithe on our total income from the previous month. You can read more about why we pay tithing even though we’re in debt.
Other Giving– $40 Other charitable donations this month.
Mortgage/Rent– $0 Living in my in-laws’ unfinished basement is a huge blessing. I don’t expect everyone to do what we do, but for us, it’s worth sacrificing some comforts and privacy to pay off our debt faster. If you are considering living with family, here are some things to consider.
Internet– $0 Thanks to some legal work that my husband did for our service provider, we will have free internet for a while. It’s nice to have a skill to barter with, though we will still be paying income tax on the fair market value of this service come tax time next year.
Republic Wireless Cell Phones– $28 We switched our Republic Wireless phones to the new Republic Refund plans. With our refund for the data we didn’t use the month before, I ended up paying just under $12 and my husband paid just under $16 for our phones. That includes taxes too! You can read about getting refunded for cell data you don’t use here.
Health Insurance– $739 We have our insurance through my husband’s employer. This is the portion of the insurance premium that his employer does not cover. It includes dental and vision insurance premiums too. This should go down once he has worked at the state for a year.
Car Insurance– $151 We are insuring three older vehicles. We’re looking forward to making that just two. We haven’t heard back from our second application for the vehicle retirement program yet. I really hope we will be rid of the red van this month (though I’m sure you’re sick of hearing me say that)!
Renters Insurance– $14 Our renters insurance (and car insurance) is through USAA. It doesn’t cost much and it’s really great to have when you need it.
Food– $314 We went over a little this month, but we had company in town for a couple of weeks this month. My parents came with their RV. They usually ate with us down in the basement. They thoughtfully provided some groceries, including some meat (bought from the store, for those of you who read my last post).
Gas– $328 I get excited every time I see how our gas budget has gone down. A year or two ago, we budgeted $500 per month. Right now the gas near us is just over $2.50/gallon.
Parking– $155– Working downtown means paying for parking. It is set up to come straight out of my husband’s paycheck, which means it is paid for with pre-tax dollars, a small consolation I suppose.
Fun– $42 We got fast food once when we had to be in town all evening. I think it was when we took my husband into town to pick up his car from the shop. Normally I am the one who buys holiday treats, but this year I had my husband pick up Easter goodies on his way home from work since I was never in town without the kids. We also went to see Zootopia in the theater. Going to the theater is a very rare for us, but I had 4 free tickets that were about to expire so we only had to pay for one. Finally, my husband took our oldest girl to her school’s Daddy-Daughter dance, where she tired him out on the dance floor. $42 is more than our usual fun budget, but that was a lot of fun.
Clothing– $0 We didn’t spend anything on clothes this month!
Household– $15 The only household expenses were some toiletries.
Car Repair– $980 My newsletter subscribers (you can subscribe here if you don’t already) will remember that earlier in the month, my husband’s car died on the freeway just as he was leaving work in rush hour traffic. He was towed to a nearby shop (thankfully our USAA auto insurance has free towing) and I drove into Sacramento to pick him up. It turns out it was the timing belt. So for around $600 the timing belt and water pump were replaced. I had put $1,000 in the car repair category at the beginning of the month, for which I was grateful. I was hoping that the remaining $400 would go toward debt, but later in the month, the starter went out on the van. Lovely. I’m glad we had put money in the car repair category, but I sure hope this doesn’t happen again next month. We know we’ll need to replace my husband’s car sometime soon, but we’re hoping it will at least outlast our debt.
Medical– $15 Our little one had a check-up to make sure her ear infection was gone. All is well.
Retirement– $484 With my husband’s state job we are forced to save for retirement. While we have some retirement savings from our before law school, it’s nice to finally be contributing again. This amount is taken out automatically.
College Savings– $100 We contribute $25 per month per child to 529 accounts. More on our decision to start saving for college in this post.
Self Employment Taxes– $3,000 Knowing that we have a tax bill coming up and that we’ll be paying estimated quarterlies for our self-employment income, we wanted to start setting aside money for that. Since February’s income was high, taking this money out wasn’t very noticeable. This should cover most of what we’ll be paying for our 2015 taxes. In April we will budget for (and pay) estimated quarterlies for the first quarter of 2016 based on the safe harbor, which actually shouldn’t be too bad.
There you have it. Our personal finances made public. It was an exciting month for us! It still sounds crazy to owe $30,000 and feel like we’re on the homestretch. It feels so close!
If you’re new here, don’t get discouraged. Our start was slow, but steady. Some months our payments weren’t very big at all, but little by little we picked up momentum and now I feel like we’re sprinting! They key is to stick with it. Don’t give up! You’ll get there too!
How About You?
- How did your budget turn out in March?
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I am so impressed with you guys!! We started last year with $75,000 in student loan debt and are slowly but surely paying it off. We hit our first milestone this month by paying off our biggest loan ($23,000). Thank you for your blog, I love looking at your review every month and it has helped me stay motivated during those times that I feel in a slump!
I am so excited for you guys! I have been following your blog for a very long time and I even get happy looking at your review each month 🙂 Will be happy when I make it there some day too, taking it one day at a time!!
That is wonderful to just have the private loan left! We didn’t make extra payments this month. My husband had 2 conferences, one last week and one this week, that we paid for in March. This month we will go back to hitting the student loans with all we’ve got. We are planning a move in June to a less expensive rental which will allow us to knock out the last $170,000 quicker and be debt free in 31 months.
That’s great! Moving is a sacrifice, I’m sure, but that time will go by fast! Great idea! 🙂
That’s amazing to knock almost $10K off your balance in once month. Not much longer, and it will be gone!
I know! We can’t expect to do that month, but I’ll take it when it happens!
Congratulations! You must be growing more and more excited as those numbers go down so noticeably!
Thanks Linda! Yes, we’re getting excited! It’s crazy to think that $30K left is the homestretch, but it feels like we’re finally sprinting!
I’m thinking that if you had eaten the squirrel stew and woodpecker en croute, that your incredibly high March food budget wouldn’t have kept you above $30K………ha, ha back at you!!
Congratulations!!! March’s income looks good to for making another sizeable payment. My guess is the April payment will be 10% of the outstanding debt!
I loved the story of the win-win with your relative lending money.
Ha ha! Yes! Then I could make some step-by-step tutorials to share the process with all of you! 🙂 April’s payment definitely won’t be as big, but I hope it’s at least 10%. It’s kind of fun to have people try to guess. And yes, we are so blessed with great family!
Awe, I’m so happy for you! I love watching you get closer and closer to your goals. Have you considered that the name Six Figures Under does not apply anymore? Great job!
Ha ha, yes! When we’re debt-free I’ll change the logo to say something similar to what I have on my Facebook page. My mom was asking me “so are you still going to write your blog after your loans are paid off?” I told her absolutely! We still want to encourage others and we will still be living frugally because we’ll be saving for a down payment and then buying a house. In fact, when we buy a house we’ll be six figures under again (only in a mortgage rather than student loan debt)! 🙂
So glad to hear you will still be blogging. Will be so fun to follow your journey!
Great job on your Debt Repayment progress. I “check-in” to see your progress each month and I am always encouraged. It helps me to know others are meeting their goals also. We have been making great progress on our mortgage. March was a great month for that since we got a tax refund this year and applied it to the mortgage principal. We hope to be mortgage free in 2017. The closer it gets the more motivated we are to get it finished. I imagine that its the same for you. Looking forward to your next report.
Awesome Maze! It will be great to be mortgage-free! Good job putting your tax return toward your goal!
Wow Stephanie!! You and your family can see the finish line and are moving rapidly towards debt freedom!!! Such thrilling and exciting news!!! Only a little more to go!!!
Go, Go, GO Team SixFiguresUnder!!!
Can’t wait until next month’s debt repayment progress report!!! Cheering you on!!!
Midori
Thanks for your encouragement as always Midori! I see your name and picture a cheerleader! 🙂
Great job on the debt repayment! Exciting that you are getting close to your goal! I have one quick question: Were you been on Income Based Repayment the whole time even when your income significantly increased? We looked at Income Based Repayment so we could tackle loans quickly without having to pay the standard “minimum payments” each month but we were told we don’t qualify since we make too much….we make about 1/2 of your income per month. Just wondering if you’ve run into that with the increase in pay.
Have loved reading about your journey the last few years!
Hi Erika! We have been on IBR the whole time. We have had to reapply each year though. Do you have children? That might be the difference since it’s based on both income and family size. We had a family of five when we started, then became a family of six a year ago. Another factor is that my husband’s income has only recently increased. He got his new job last Aug/Sept. For about three months before that job, he made commission at his old law firm. A year ago his pretax income was $39K. I don’t know if we would qualify if we were to apply again (based on our 2015 tax return). Hope that helps!
Thanks for the reply, Stephanie! We have 3 kids but I think we only had 2 when we first looked into it. I should give it a shot now since the extra person might make a difference! (Side note: Because you’ve made some amazing progress on your debt, I totally forgot that your husband’s income increase was only last fall! Wow!) Definitely looking into IBR because it would help so much! Thanks!
Our budget turned out okay despite the fact that we had a few unexpected home repair expenses. We dropped our overall debt balance by over $4,000 this month (thank you, tax return!) but it will be back to small steps forward next month. I’m glad you’re near the home stretch – I have a feeling you will hit that goal much sooner than the end of the year!
Way to go! That’s a great use for your tax return! Sorry about the unexpected expenses. Those are never fun!
I know this has been discussed at length here before and your feelings on the matter. BUT, when your debt payoff is done (and you will likely be saving for a down payment on a house) will you consider buying a new car (even if paying cash for something small) for your husband to drive back and forth to work. Then, everything is under warranty and NEW. You can get some nice small cars new for under $15K. It won’t work for transporting your family on a regular basis, but for commuting and running errands, to me, it makes more economical sense then to continuously play the find a good used car, costly repair, etc. game.
Once our debt is paid off, we will definitely consider evaluating our car “policy” whether that means newer, more reliable used cars or new cars, I’m not sure, but we we will definitely look into options. Honestly, we’re kind of tired of the cheap cars and costly repairs cycle too. We just don’t want to lose any traction on our big goal right now. That being said, we might very well have to get a new car for my husband before the debt is paid off. We’ll see how it goes!
Fingers crossed you get a few more months out of his car!
Wow- super impressed with your commitment and progress! This question might be a bit premature….but I still want to ask 🙂 Have you started to think about what your life will be like post debt? Are you planning on staying with your in-laws or moving closer to your husband’s job? You’ve gotten so good at being frugal that I’m curious to see what you will still do to keep costs down and what little splurges you intend on starting again. Basically, what have you learned in this journey will become permanent frugal stables of your lives and what have you done just as a temporary measure while you attack the debt? It’s hard not to think about the future when you’re so close to being finished!
We are thinking about the future too! These are great questions Claire! I’m planning to address them in an upcoming post. In short, we will stay living in the basement while we save a down payment for a house (we don’t want to move twice and we don’t want to slow our progress). We do have a “reward” purchase in mind for when the debt is paid off, which I’ll be sharing soon (I bet no one will guess it). 🙂
Congrats on another great month! I hated that the first fell on a weekend. I’m always looking forward to your posts. It must feel amazing that your student loans are actually paid off! Albeit, you still owe some money on them 😉
Thanks for the encouragement Tracie. I’m happy to hear that you get excited about my monthly updates! 🙂
I stumbled across your blog a few weeks ago and have been so inspired by your progress! We have been tightly budgeting for the past 6 months to pay off credit card and school debt in addition to saving for a down payment. After reading your posts and researching YNAB, I took the plunge and signed up and absolutely LOVE it 🙂 It has made such a difference! Congratulations and thank you for upping my motivation!
I’m glad you’re loving YNAB too! Keep up the good work!
You’re doing so well! It must be such a good feeling that the end of debt is in sight.
It would be really interesting for us outside the USA if you could maybe do a post on food prices? By UK prices I can’t see how you can feed a family of 6 for the UK equivalent of $300– and you feed everyone very healthily!
Just as an example of UK costs, car fuel costs approximately $6.50 per gallon. And we’re rejoicing that fuel prices have dropped.
Thanks Holly! Wow– that’s expensive! I’ll try to share some price details soon.
Holly, the last time we were in the UK (2010) we were shocked at how low your food prices were compared to us. (We live in Australia.) The last time we were in the US (2015) we couldn’t believe how expensive food was there. (Other than things like frozen meals, just about everything was more expensive.) But I know that the next time we go to the UK, your food will seem ridiculously expensive, and the next time we go to the US, food will seem crazy-cheap, because there seems to be this cycle with global food prices. It’s never the same across the board from one country to another, and I can never work out which countries lead the way in raising food prices, and which ones follow. The only sure thing is that dairy will always be prohibitively expensive in Asia.
I remember reading your blog just over a year ago when we started our journey to becoming debt free! It is so awesome to see you in the homestretch! Congratulations! I admire your frugality 🙂
Thank you for following along Erica! Best of luck on your journey too!