Paying Off Over $200,000 in Debt in First Four Months

hundred dollar billsI guess I should have put a spoiler alert in the title since you can easily see my progress without reading to the end.  But I figure it will still be interesting to know some details, so you should keep reading.

On October 1st, I created a spreadsheet of the debt that I most hated at the time and wanted to get paid off.  This is debt that is either crimping my monthly cash flow, has a high interest rate or both.  The main impetus was the fact that I had finally gotten to the point where I needed to cash out a retirement account to pay off a 6-figure tax liability that just couldn’t be stretched out and managed any longer.

Last fall, there was absolutely no room in the budget.  There was the constant risk of being cash flow negative from month to month.  It was time to do something drastic, because bankruptcy is not an option for me.  I feel morally obligated to pay everyone what I owe.  I borrow money knowing the risks and that it has to be paid back.

So I took the money from my retirement account, paid the taxes and penalties, and took the remaining funds to pay off my prior year tax debt eliminating the monthly payments that I had been making.  I also paid off some personal loans that I had taken to help string out prior tax deficiencies.

Of course, I also paid off some of the principal on the other debts by simply making payments over the past four months as well.

On October 1st, the total for the 20 debts that I have listed as my most hated debts was $434,738.74.

On February 1st, the total was $204,749.53 for a total reduction of $229,989.21!

Unfortunately, the majority of that comes from the retirement account that I no longer have.  Fortunately, I had been saving over the years and am in a position that I can effectively start over.  By getting rid of this big chunk of $435,000 over the next 35 months, I can save a ton of interest long term and end up being in a good position when it is time to retire despite having to use up that account in that fashion.

I still have some rental property that will be paid off when I am in my mid-60′s which can be used for cash flowing living expenses provided I get all my other debt eliminated.

The next target in my sights is a credit card that has a high interest rate.  I am really motivated to get it eliminated as soon as possible.

Do you have any debt stories to share?

Welcome to Shredding Debt!

welcomeWelcome to Shredding Debt.  This is my newest blog about finally getting sick and tired of being in debt and wanting to do something about it.  I have carried debt for a long time, but now that I am getting older am starting to realize that spending much of my hard earned cash paying someone else just isn’t fun.

I have a decent lifestyle so now is the time to prepare for retirement and the first step in that process is to get out of debt totally.  Unfortunately, it will take me several years as I have quite a bit of debt.  But I am working on a 10 year plan to see if I can become debt free in the next decade.  Then I can have the financial flexibility to decide exactly how to proceed.

The first step is going to involve paying off $435,000 in 40 months.  This is a lot of consumer type, unsecured, depreciating asset debt that eats up too much of the budget.  There was also some tax debt in this total at the beginning.  I started this step in October, so that means I am 4 months into this phase of getting out of debt.  You will be able to follow my progress right here on this blog.

With my first post, I will recap what I have done over the past 4 months to get to this point.  In the meantime, welcome to shredding debt.  Feel free to share your stories about getting out of debt.