When I think of people getting bonuses at work, I always think of that scene in Christmas Vacation where Chevy Chase day dreams about the pool he’s going to put in with his Christmas bonus check. While Tom and I will probably never get a bonus check large enough to pay for a pool, we day dream just like Chevy Chase. It’s bonus time in our house which means we get to make some serious money decisions.
We like serious money decisions!
It’s been a little over 3 years since we paid off over $150,000 worth of student loans. It took us seven years to accomplish it. It was difficult, but it’s been one of the best decisions we’ve ever made. You can read more about it here.
Paying off $150,000 in seven years was hard work. It required us to not only live within our means, but to live beneath our means. Once we reached our goal, we had a lot of fun spending money in order to enjoy life a little more. We haven’t gone crazy and bought fancy cars or gone on lavish vacations, but we have lived a more comfortable lifestyle than we’ve ever lived. It’s been pretty great!
Time to get serious about debt again
The only issue is that we aren’t paying off debt as fast as we’d like. Having danced this debt dance before, we know that living an uncomfortable lifestyle now in order to life the live we want to live later is totally worth it.
That’s why I’m so happy to report that when Tom gets his bonus this year, we’ve decided to put that money towards debt instead of buying stuff that would make us more comfortable.
A quick look at our debt
Since paying off Tom’s law school loans, we’ve become complacent with our debt. Part of the reason is that the debt we do have is low interest. We still have 2 car loans, our mortgage, and my student loans.
Our car loans are at 1.5% interest since we financed through a credit union. We still owe roughly $8K on one car and $20K on the other.
Psst… want to see how we finagle low interest car loans? Read this post.
Our mortgage interest rate is 4%- which is pretty good. Our biggest downfall was not having a large enough down payment for the house. Because of that we pay PMI (private mortgage insurance) each month- an added insurance cost of roughly $170 a month. We can’t get rid of our PMI until we have paid off 20% of the house. We don’t fret about this much because our monthly mortgage payment is still less than what we would be paying each month if we rented a house of similar size in Naples.
My Student Loans:
I still own about $30K at 3.5% interest. I’m holding onto this debt instead of attacking it because I may be able to get it forgiven if I go back to teaching once the kids are all in school.
No new bed or refrigerator
As bonus time began to draw near, Tom and I couldn’t stop talking about how we would spend the money. We just knew we’d finally be able to replace something old. There are two things that we really want to replace right now: our bed and our fridge.
For years we’ve wanted a king size bed. Our queen bed is perfect for the two of us, but when all three kids climb in it gets a little crowded. While we don’t have a habit of co-sleeping, we do enjoy cozying up together for movie nights and lazy Saturday mornings.
We also want to replace our fridge. The ice maker broke and so did one of our produce drawers. The thing still works just fine. We use ice trays and use the produce drawer anyway. We may look a little trashy, but that’s okay. Our food still stays cold and we still have ice.
Our joy comes from saving money, not buying new stuff
Lucky for us, we get joy from financial stability. Buying a new bed or fridge wouldn’t actually bring me that much joy. It would be nice. It would make me a little more comfortable, but it’s not something that would bring me as much joy as working towards a debt free lifestyle.
Taking care of my mom has made me realize even more how important it is to be prepared financially. I want to make we have money in savings in case we experience a medical crisis or other emergency. I hate to be a dooms dayer over here, but I know first hand that life can be rough. I want to be prepared for when, not if, we need to rely on savings. Getting out of debt will make it easier for us to save and live the lifestyle we want.
We haven’t decided which debt to knock out first, the PMI or the car payments. We need to do a little analysis to figure out which one will have the biggest impact. On one hand, I love the idea of snowballing the $8K car loan to really attack the PMI later, but on the other hand, I really would love to get rid of PMI. It’s wasted money on literally nothing. It’s not like my loans where I have a degree or our car that we get to drive. It’s just money to pay for the fact that we didn’t have enough money to buy our house in the first place. Sigh. So much wasted money.