Debt Free Journey – Part IV – 2022 Q1 Update

We’re back! After a long hiatus, I’ll give it another go in trying this blog thing. In 2021, goal was to bring our non-mortgage debt down to 0. Sad to say, we didn’t achieve this goal and we’re already almost a quarter of the way through 2022 as we’re jumping back into things. ::sigh:: In our 2021 Q3 Update, we were at $82,377. So where are we at today? TL;DR > Our Total Non-Mortgage Debt is…


Debt Composition

That remaining $52k-ish can be broken down into the following:

  • Personal Loans
  • Student Loans
  • Car Loans
  • Balance Transfers
  • HELOC & 401k loan – not going to be covered moving forward

Personal Loans

Amount: $34,744 $0

Interest Rate: 6.890%

Monthly Payment: $543 $0

Around July last year, we started looking into refinancing the Hammond property to pull out cash for debt paydown. Long story short, the property appreciated ~65% since we purchased it in 2016 (thank you crazy RE market) so we refinanced at 80% LTV and paid off most of the personal loan; the rest we combined into a balance transfer. In the process of refinancing, we did eat into our cashflow because the PITI increased from $653 to $826 but I thought it was ok to reduce some of the reserves since we have had the same tenant in place since day 1 so the reserve balances are fairly healthy. I think the lower interest rates last year were instrumental to minimizing the additional monthly cost of the refi. The overall net is still very positive considering 1) we eliminated a $543 monthly payment and 2) the increase mortgage is still covered by rental income.

Student Loans

Amount: $5,205

Interest Rate: 5.500%

Monthly Payment: $100

This one is still just moving along slow & steady. May give some thought in combining this with the next round of balance transfers but we’ll see.

Car Loans

Amount: $4,025 $0

Interest Rate: 0.000%

Monthly Payment: $575 $0

The last payment for Moose was made in January so that freed up another $575/mo but we need to plan out where this should be re-allocated. We were thinking of putting maybe $200-$300 towards a car down payment fund since we will eventually need to get a new car.

Balance Transfers

Amount: $47,184

Interest Rate: 0.000% (but typical transfer fees are 3-4%)

Monthly Payment: $636 but we’re trying to figure out how much more we can throw at this to pay it off ASAP.

As I mentioned above, we paid the balance of the personal loan with funds from a balance transfer and also paid off the HELOC balance. As it stands today, the debt is spread across 3 different credit cards with the soonest expiring promo set for later this year in December so now is the time to pay that sucker down. This will definitely be the main focus of extra funds. Mathematically, it probably makes more sense to pay these down slowly over time since the interest is so low BUT they’re a bit of a burden on the credit side of things so I think we’re finally coming to the conclusion that, for our situation, we should just pay them down.

HELOC & 401k Loan

I’m not going to cover the amounts we have on these areas but we did tap into both to purchase two properties last year. The main reason I’m not tallying them onto here, for now, is because the numbers for the properties work with the payments for the HELOC & 401k loan included. So similar to how the cashout refinance on the Hammond property is covered by rental income, so are the HELOC and 401k loan. One thing that is on my mind, however, is the HELOC is on an adjustable rate so with the inevitability of rising interest rates, I think our hand is going to be forced sooner than later to take care of the HELOC debt.

In summary

It’s a bit rough trying to catch up on where we were at with debt paydown after slacking on it for months. We certainly didn’t prioritize it at the end of last year & even the first quarter of this one. I think my next step needs to be prepping our expenses for our review for two reasons: 1) to determine our FI target number and 2) to understand how much we can afford to allocate to debt paydown in accelerated fashion. Keep an eye out for those details on my next post.

P.S. – It’s our namesake’s birthday today so don’t forget to wish her a happy birthday!