Car loans, student loans, where to start?
A lot of people have suggested that we should use any extra money we have to pay off my students loans and car loan.
How much is the debt, you ask? At this point—student loans are about $24,000 and my car loan is at $8,000, with a scheduled pay-off date of August 2012 and a 4.9% interest rate. Combined, the payments make up 13% of our budget, resulting in several hundred dollars we could have in our pockets if they simply disappeared.
I agree that just using extra money for “spending” money is not working out for us. January’s over spending is a great indicator of that. I must allocate every penny—or else it goes toward “stuff.” February’s budget should reflect a change…
However, I’m more inclined to contribute extra money toward savings right now rather than paying off loans that come with bills that we can comfortably afford.
The reason being—Eric will be taking a leave of absence from work from August to December to attend the fire academy. That’s five months on my salary alone. We will manage, but I know we will need to dip into savings at times, especially with Christmas at the end.
It’s also not guaranteed that his job will be waiting for him when he gets back. His company could decide on a whim to hire someone else.
There’s also the possibility that Eric may decide to go to paramedic school after the academy. Paramedic school would result in another several months of unemployment and come with a $10,000 bill attached to it.
Obviously, with all this uncertainty, I’d feel more comfortable upping our savings.
HOWEVER—and this is the important part—I do plan on being extremely budget conscious the five months Eric is in the academy. So that when he finishes—and we figure out what we’re going to do next—I can take out a chunk from our savings account, and pay off the car loan.
I may even decide to pay off the car loan before Eric goes to the fire academy, depending on how much money we have in savings. SO for February, my goal is to up our savings contributions. If I can pay off our car loan a whole year early, that would give us an extra boost in income to work with.
So I’ve updated our New Year’s resolutions…and now hope to save $10,000 by August 1st. We’re already 17% there!
What do you think of our plan? How aggressive are you about paying off all your loans?
psssttt…I’m having an awesome giveaway coming up, make sure to check back Monday!