Did you guys see the new total of Parent PLUS #1?!?!?!
Parent PLUS debt down: $7,146.71
Mortgage lowered: -$3,210.88
Overall debt reduction: $3,935.83
I feel soooo much better this month than last month! There were some changes to my financial situation that have made an immediate impact as well as a long term impact.
September is the best month of the year because I are fortunate that my employer still pays an annual bonus. This year, based on rumors from those who pay attention to such terms as PBIT and ROAFE (not me), I was expecting my payout to be much less than in recent years. However, someone sprinkled some fairy dust and made our bonus checks gloriously large – almost 3x what I was expecting!
I’m quickly learning that whenever I receive a large sum of money, especially unexpected money, the only strategy that works for me is to get rid of it as soon a humanly possible so it feels like it never existed. As painful and boring as it was, I paid off a couple of credit cards that I had used in August to pay for car repairs and to float my son before he started receiving paychecks from his new job, and the rest went toward the Parent PLUS loan that I’m currently targeting.
(Just to keep transparency, I never carry a balance on any credit card. I have not paid interest in years. Usually I only use credit cards to pay a couple of bills so I don’t lose my points and for big purchases to earn points. Any card I use is paid in full every single month.)
Every year, I allow myself to purchase one fun thing with my bonus. In the past, it’s been running shoes, a new dining room table, a new garage door, a washing machine, airline tickets for a small vacation. The only fun thing I allowed myself from my bonus this year was tickets to the Kid Rock concert at the new Little Caesars Arena in Detroit. The tickets were a good price on StubHub, and my boyfriend paid for parking and everything else that night. We had a great time, and I don’t regret a minute of it!
The other big financial event that happened in September is that I refinanced my mortgage. I’m not entirely comfortable with this decision because I went from a 15-year mortgage to a 30-year mortgage, and also because it actually caused my mortgage balance to be higher by more than $3,000. There were several reasons why I decided to refinance:
- I was paying $62 a month for PMI, even though I have about 50 percent equity in my home. When I refinanced it after my first divorce in 2014, I needed 12 months of proof that I’d been paying the mortgage from my own account. I only had 10. Waiting another two months would have put me too close to the 90 day deadline I had to get my ex’s name off the mortgage. I was required to carry PMI for 11 years – not the typical 20% equity. So I wanted to get rid of that.
- I wanted to remove escrow from my mortgage payment, which was also required on my previous mortgage.
- I wanted to reduce my monthly mortgage payment. I absolutely HATE that I felt that I needed to do this. However, 6 months are about to pass since my son graduated from college, so my minimum payment on my Parent PLUS loans is about to increase by more than $800. With only my full-time job income I could barely afford the minimum total payments, and I’ll be damned if I’m going to kill myself by making only minimum payments for 10 years. Also, my interest rate on my mortgage is cheaper than my PLUS loans, so it makes sense to carry more of the debt at the lower rate, which I am able to write off on my taxes. And lastly, I was not comfortable with minimum mortgage and PLUS loans payments that would take up 75% of my net income. Just…no.
Based on these reasons, I decided the benefits outweighed the sting of switching to a 30-year mortgage.
Lucky for me, I have a very good friend who is a mortgage broker, and she was able to pull some favors to get her bank to cover many of the costs for my closing. Because of this, I walked away with $787 in my pocket, which I immediately threw at the PLUS loans.
And that, my friends, is how I was able to pay off over $7,100 in debt this month, for a net of almost $4,000.
On top of all of that, I made the October payment on my old mortgage without realizing that they had already requested the payoff amount, and that entire payment will be returned to me, which I will also throw at the PLUS loan when I receive it in October.
I am thrilled with my September results!
Another positive change I made this month was to set up more sinking funds. I’ll clue you in on what sinking funds are and what my strategy is for using them in a future post.
Other debt posts: