TMMO June 2008 Update: So long, student loan…

It is time to rejoice, for my dear husband’s student loan is vanquished at last!

I never even set eyes on our $1200 stimulus check because Chris snagged it from the mailbox while I was at work and deposited it to our shared checking account before I got home. When the check posted the next day, it was immediately sent right back out of the account along with an additional $200 to pay off the last of his student loan.

Easy come, easy go, but I do wish I could have held the check for a minute or two while dancing happily around the house mumbling, “My precccccccccciooooooooooooooouuuuuuuuus!” to myself.

Well, thanks much, GDub. I know that as tax-paying American citizens we will wind up paying for your profligate ways and extravagant borrowing from other nations in the future, but for now I am glad to use your handouts to reduce our debt tally. Someone else will have to stimulate the economy, though. 😛

We are almost six full months into 2008, and we are now about halfway through our Debt Snowball with $24,196 paid off and just our second mortgage left before we are debt-free except for our primary mortgage. At this point a strict Ramsey-ite would continue to work on the snowball and immediately tackle the second mortgage, but we are going to stick with our strategy of putting that off until we complete Baby Steps 3 (fully fund emergency savings) and 4 (save 15% of gross income for retirement).

After doing the math, I’m just not willing to be out of the stock market with our Roth IRAs from January 2008-June 2009, the amount of time it would take us to complete our full Debt Snowball the traditional way. In fact, I’m not even willing to wait until early 2009 to make catch up contributions to our 2008 Roths since we would be missing out on some of the cheapest mutual fund prices in the past few years.

Ramsey claims that women have a so-called security gland that makes them want to have a huge heap of money sitting in plain old savings for emergencies while men want their money to be active and doing something to earn them more money. Apparently I have a combination security/action gland, because I want a huge heap of money in my retirement account actively earning me money via mutual funds. Honestly, stopping my Roth contributions for five months gave me more indigestion and anxiety than any other part of the Total Money Makeover plan.

We are also getting some of our friends on the Dave Ramsey bandwagon. We signed up for a local Financial Peace University session starting next month and running through the end of September, and paid for some friends who could use a no-nonsense, comprehensive personal finance primer to go with us: a newlywed couple who will be house hunting and starting a family soon and a friend whose preventable history of serious financial missteps has been completely maddening to watch for a logic-oriented INTJ like me.

My only concern is that the course coordinators will be annoyingly pushy about the Bible references in the materials or feel compelled to try to convert the irreverent Asian chick with no religious preference on her dog tags and her spiritual-but-not-religious husband. (I have a semi-regular Jehovah’s Witness who swings by on Saturday mornings every month to hand me pamphlets and attempt to talk me into submission. I am tempted to join the Unitarian church in Orlando as a Taoist/Buddhist just to say I have an affiliation.) Ramsey is very open about his Christianity in his radio show and in his books, but he limits himself to specific quotes from the Bible that support his common-sense approach to personal finance without getting preachy or implying that one needs to be a baptized holy roller in order to win with money.

1. $1000 to start emergency fund
a combination of wedding gift money, personal savings, and bonus
commissions to a shared savings account earning 2.75% APY
2. Pay off all debt (except the home) using a Debt Snowball
Debt Snowball

Debt Snowball
  • Maggie Visa
two $300 payments to clear the balance, then retired card to safe.
  • Discover (Leftover wedding expenses)
balance in full in January 2008; card still actively used for gasoline
ONLY. Balance paid in full each month going forward.
  • Chris Visa
balance in full in January 2008. Card retired to safe.
  • Amex (travel, Ikea couches…)
statement balance in full in January 2008. Card still actively used for
recurring utility bills, but will be paid in full each month going
  • HELOC (new A/C in 6/07)
and I both cut off federal income tax withholding from 9/07 – 12/07
after calculating that we were both overpaying. The excess money in our
paychecks was used to make aggressive $1000 payments on the HELOC every
  • Maggie Car Loan
extra $1500 from 2007 tax refund and $500 from personal checking
account on 4/17/08. Paid final $559 in May 2008. I already made a large
extra payment of $1500 on the car soon after the initial purchase.
  • Chris Student Loan
another $1200 to the monthly payment from the economic stimulus check
on 6/17/08. Chris paid the remaining balance out of his own checking
account. Chris was able to contribute an additional $2100 on top of his
originally-budgeted payments these past few months.
  • 2nd Mortgage
amount: $25310

Putting this one on hold until after the $10,000 emergency savings
account and 2008 Roth IRAs are fully funded. Regular minimum payments
of $205 through 12/2008, then payments of $1941 from 1/2009 until

3. Three to six months of expenses in savings
deposits of $1607/month and one deposit of $458
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
15% of
gross income
retroactively fund both household Roth IRAs for 2008 at $5000/each from
6/08-12/08. Reinstate monthly Roth IRA contributions for 2009 going
forward @ $416.67/month each from 1/2009. Increase 401(k) contribution
to 5% (currently at 4%).
5. College funding for children
kids yet. Need to see if an education savings account can be started
without actual offspring.
6. Pay off home early
refinance into 15 year fixed rate mortgage and/or set up extra
principal only payments of $1400/month to pay off home within 6 years.
7. Build wealth by investing

6 thoughts on “TMMO June 2008 Update: So long, student loan…

  1. I’m in a lucky situation – no debt except my primary mortgage. The “security gland” part of me really wants to pay off the mortgage early, and I do send some extra cash that way every month. However, I could definitely send more, but I hate to take money out of investments that are earning some nice dividends to sit and go nowhere in real estate. I see the extra cash going to the mortgage as putting it in a safe 4.8% savings account, and it’s kinda nice to have a little less of that high mortgage debt over my head. But I’m not thrilled with the idea of putting some major major cash toward that goal. I see you all plan to pay off the mortgage early – if I may ask, what are your thoughts about this Ramsey step?

  2. Bisous – I’m not really sure about step 6 at this point, especially since we may not stay in this home in the long run. Once we do settle on the perma-house, I’ll probably be very tempted to pay it off as fast as possible though.

    I’ve actually read several articles that argue that NOT owning a home could bring you more wealth in the long run as long as you are disciplined enough to systematically invest the money you save while renting and not paying for those unexpected hidden costs of home ownership.

  3. You guys really tackled your finances with the Ramsey debt-snowball plan. Way to go! Not long after you posted your first chart, I bought the book. The hubby and I started implementing a plan, then he lost his job! He luckily had a small part-time business that has covered the gaps. We have managed to come through 3 months on one salary with $2K still in our emergency fund.

    He has been re-hired at that previous job, so we are excited in getting back on track with our debt snowball – especially since we just got our annual mortgage statement – I hate seeing that so little of our payments goes toward the principal!

  4. Thanks, now I realize that along with hypothyroidism, I also have a blocke security gland. Will get that looked at. On a side note, if you tell the Jehovahs’ Witness, or any other religious group for that matter, that you are Latter Day Saint, they will leave you alone. No one messes with LDS. Of course, it will be a lie, and that is a sin, but you can become Catholic and ask for forgiveness…

  5. My husband and I just finished FPU in late May. Although we did it through our church, it was not overly preachy or religious. Dave does reference some bible quotes throughout the course, but they are the same ones in the book so you won’t be caught off-guard (our FPU coordinator is a financial advisor by career so it worked out well because it hooked us up with a contact in the industry for help with insurance and investing). You will also find that since you’re 5 months into TMMO, you are leaps and bounds ahead of everyone else there (my husband and I started Oct 2007 but didnt start FPU until March and we already had our $1k EF by then, which nobody else in the class had). I think you will be a valuable resource for your friends and for others in the class though, and you will get a lot out of it. I enjoyed the week that talked about buying big ticket items with cash. Btw I have seen you on the TMMO board but haven’t outed you since you never officially mention your website (the posts I noticed were related to blogging). Nice to see a familiar face over there though (my name is cynthials). :em69:

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