I 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?