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Join The Debt Movement for a chance to win $money$ toward debt

by retirebyforty on January 2, 2013 · 13 comments

in debt, mortgage

Happy New Year! Today, I want to tell you about The Debt Movement started by Jeff Rose @ Good Financial Cents in partnership with ReadyForZero. They are trying to help people pay off $10 million of debt in 90 days! Wow, that’s a huge amount of money and I hope they can do it. To get everyone rolling, the Debt Movement is offering The Debt Scholarship – that’s $10,000 toward debt for the winners. I’m sure many of us made a New Year’s resolution to pay down debt, so this could be a great jump start to your debt payoff.

Debt Movement

Don’t we all feel like this sometime?

 

I hate debt

Fortunately, we don’t have any consumer debt in our names. We have always paid off our credit card bills every month and avoided spending money that we didn’t have. We also managed to avoid a car loan when we purchased our Mazda5 a few years ago. However, we do have a mortgage. Our small condo is in downtown Portland and it’s not a cheap location. We purchased near the height of the real estate bubble and we still owe quite a bit on the mortgage debt – $258,639 to be precise. Yowza! That’s a lot of money to owe the bank, but at least we’re not underwater.

Have a plan to reduce debt

It’s important to have a plan to reduce your debt. You can’t just pay the minimum payment and hope the credit card balance will go away. The high interest rate will take a big bite out of your payments. If you have multiple credit cards with various rates, then it might be better to consolidate the debt into the card with the lowest rate. Another option is to check with Prosper.com to see if you can get a lower rate from peer to peer lending. Lowering the payment is the first step to making more payment toward the principal of the debt.

Mortgage debt

Mortgage debt is a bit different because the mortgage rate is quite low at the moment. If you haven’t refinanced in the last 2 years, then you should talk to your bank to see if it’s possible to reduce your monthly payment. We refinanced a few times and lowered our monthly payment by nearly $500. I still hate having that big mortgage though, so we are paying $700 extra every month toward the principal. With the extra payments, the mortgage is scheduled to be paid off by April 2027. Man, that’s a long time. In 15 years, Baby RB40 should be going off to college and Mrs. RB40 will probably be ready to retire by then. 2027 will be the perfect time for the mortgage to go away. Well, it would be even nicer if we could get rid of it earlier, but we have other bills to pay, too. Perhaps if we make more money in few years, we can increase our prepayment. On the other hand, if the interest rate goes up, we could invest in CDs or bonds instead and generate a better return. We’ll see what happens.

Did you make any New Year’s resolutions to pay off debt? If you need help, check out The Debt Movement. I’m curious to see if they can really pay down $10 million of debt in 90 days.

{ 13 comments… read them below or add one }

Glen @ Monster Piggy Bank January 2, 2013 at 4:43 am

This year I want to continue to pay off as much debt a possible with our single income. It will be a challenge, but I think we can still do it.

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retirebyforty January 2, 2013 at 1:48 pm

Good luck with paying off debt!

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Moon January 2, 2013 at 9:24 am

I think the debt schlorship is a good incentive for people! Our country is in such a huge debt in general and wish folks understand the importance of paying down their debts! Like you, my husband and I don’t have any consumer debts since we pay off our credit card every month, no car loan either only have $7000 of student loan left and will be scheduled to pay off this year. We do, however have a pretty decent mortgage ($236,433 to be exact). We just refinanced in Oct and got a super low interest rate 2.875%, so we decided to shorten the terms from a 30 year to a 15 year. (So I joke that now I can retire at 47 when the mortgage is paid off!) That of course, means a higher payment per month but also a lot more money goes to the principal than interest since we are only about 3 years into our new house. We are not underwater either but to me ‘underwater or not’ doesn’t really mean much until you have to sell your house. I hate owing people money period. I know these days different finanical analysts will tell you it’s okay to carry a mortgage into retirement as long as it’s affordable, I just don’t like the idea of that.

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retirebyforty January 2, 2013 at 1:51 pm

Wow, that’s a great rate. I need to check with my bank to see if I can get something like that.
We’ll stick with the 30 FMR for now because we like the flexibility. Now that I’m not making much money, we want the option to not pay extra if we need the cash. Thanks for sharing.

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Jason January 2, 2013 at 12:42 pm

Hi RB40, you’ve got a great blog and your early retirement success has been really inspiring.

As for debt: I’m all in favor of keeping the credit card monster in check and being able to pay it off each month. I’ve heard so many horror stories about credit cards eating people’s lives, it’s really sad. But, I don’t think that being totally debt-free makes financial sense if you’re reasonably disciplined. Here’s a couple of real-life examples:

We recently got a car loan for 0% interest but had the cash to buy it outright. Why a loan? That money will be going toward getting more rental properties this year, which will be giving us a return of about 20%. When the car is paid off, we’ll not only have a car, but also some RE equity, a nice monthly cashflow, some extra tax writeoffs, and any property appreciation.

Same thing goes with primary residence mortgage: Right now, with rates so low, it’s relatively easy to put your money somewhere else and get a return more than what your mortgage rate is. I recently did a quick calculation and it was very interesting. I added up all of the investments I did since buying my primary residence and calculated what my mortgage payment would be if I instead put all of that money into the mortgage. The investing activity gives me an extra $1000 / month over the potential mortgage savings I would have had.

I think you’re spot-on with the refi thoughts, though. We managed to shave about $600 / month off our mortgage payment by “chasing the rate” down. And, if you do extra payments on your mortgage, the refis are even more effective, since both your balance and interest rates are lower.

Just thought I’d give another (not-often-heard) perspective.

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Brick by Brick Investing January 2, 2013 at 12:52 pm

We were able to get a rate of 3.25% on our mortgage and we are fairly confident that we will be able to sell our home for significantly more than we paid for it. However, like you I hate debt. I hate knowing that the bank owns my home and if an unfortunate event happened within a year my back would be against a wall in order to make payments on the mortgage.

At this current time we are investing in the stock market while stocks are cheap. There will be a day when we are fully positioned and the majority of stocks are severely overpriced, like back in 1999-2000. That is when we will dedicate every free dollar we have to paying down our mortgage as much as we can.

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My Multiple Incomes January 2, 2013 at 10:06 pm

Interesting post! I hope that it will reach those who will benefit from the Debt Movement. Really curious to know how it will turn out!

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Cherleen @ My Personal Finance Journey January 3, 2013 at 4:42 pm

Who would not hate debt? I also do! When we realized that most of our paycheck goes to debta and loans, we decided that we have to take a move to stop it. We lived frugally and started out paying off our credit card debt, student loans, and other loans on the last quarter of 2011. After six months, two of our credit cards were paid off. At present, we have already paid off almost 80% of the debt we incurred. Our goal is to pay off the rest of our debts within the first quarter of this year. And we are positive about it!

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retirebyforty January 4, 2013 at 10:03 am

Wow, great job so far. Good luck with the rest of your debt. I’m sure you’ll be done soon.

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Jane Savers January 3, 2013 at 8:36 pm

I have a firm budget set to pay down $6000 of debt this year. I have a HELOC. I did not qualify for a traditional mortgage when I bought my home and have been happy with the HELOC but I am worried that interest rates will rise. I have considered switching to a traditional mortgage to lock in the low rates.

Some months I can only make a small HELOC payment because of things that break in my life (windshields, furnaces, shingles that wave hello) and I am fearful of stepping in to a traditional mortgage and not being able to make the monthly payments.

I wonder how much time I have to come to a decision before interest rates rise?

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retirebyforty January 4, 2013 at 10:05 am

Good luck! I think the rate will stay low for a couple of years. Hopefully you can lock in the rate before it goes up much.

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Kin January 5, 2013 at 12:08 am

With the rebound of the real estate market and low rate, it is great opportunity for refinancing now, which I did.

The other thing I did is taking the plunge to pay off the student loan debt that’s been sitting around… even though it’s at a low rate. Less payment to make each month, less things to keep track of, less worry, less chance for mistakes.

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Melissa February 13, 2013 at 11:42 am

My husband and I have also avoided having any credit card debt, but my student loans take a significant chunk out of our budget each month. We’ve been working on reducing them and have done a pretty good job. The two loans combined are now down to around 35K (they started at about 60) so I guess we’re doing pretty good. I just wish they’d go away faster!

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