October 2010 Monthly Review

Student Loans:

I just wish these loans would go away.  I don’t want them anymore and I don’t want to deal with them anymore, so I’m trying to pay them off as quick as I can.

Nelnet Student Loan $ 0 ($1,750)  I posted about this friday, but I’m pretty excited to have this one all finished.  It has been named “Payoff Target” in Mint since the beginning of July.  It only took me 3.5 months to pay this off….Awesome.  At the right is a screenshot of what my loans look like in mint now.   I also renamed the loan, letting it know how I feel about it now.

Direct Loan  $6,189 ($256).  This one has been moving down about 250 per month for a while.  It’s nice to be able to set this one in my sights, and I think last months goal (End of December) may have been a little unrealistic, but what the hey.  I’ll try and probably fail, but you cant fault me for trying!

Great Lakes Loan $ 12,537 ($150)  Just sent my regular minimum payment to this loan.  However, mint is again having trouble with the amounts.  The amount shown at right is not correct.

Truck Debt:

This is for my vehicle.  I had already started trying to become debt free when I bought this, so I was quite torn as to wether or not to take on new debt while I was trying to eliminate other debt.  If you want to read more about it, check herehere and here.  Despite most of the advice I heard, I went ahead and took out a loan on this.   I made the right move.  It has been much easier to gear up on my other debt when I know exactly how much i’m going to spend to keep the car running every month.  The amount may be high, but that peace of mind is near priceless.

Ford Credit: $ 18,551 ($290): It’s interesting to watch the amount of money that gets applied to principal each month.  It seems to be very heavily dependent on what day I make my payment in the month.  It looks like I submitted my payment a little early on this one as well, as the principal went down $9 more than it did last month.  Mint has also been having problems updating this loan, and I dont know how long it’s been going on, but it’s been stuck at that number for months.  I don’t know how to fix it, and I’ve tried looking in their support forums for tips, to no avail.

Total Debt Level: $37,277 ($2383) WA-HOOOOOOO! I was able to reach my goal of getting my total debt level down below 37,500 by the end of the year.  I don’t think I’ll set a new number, but I’ll just keep going at it full bore and see where I end up.  I do have some things to think about though, mostly what to focus on after my direct loan.  The student loan balance is lower, but paying off the truck would do wonders for me with cash flow, because the monthly payment is more than double my student loan.  Add in the insurance savings i’d net from not having all coverage on the vehicle, and I’d be raking in almost 3x more cash.  It’s something i’ll need to think about.

This month has been very tedious.  I was working 80 hour weeks for most of the month, and things got quite crazy.  I was able to stay on top of things (for the most part) and even get in some quality time with friends and family.  The long workdays sucked, but the paycheck (when it comes) will be awesome, and will be my “stick of dynamite” for the Direct Loan.  There’s going to be a lot going on with the holidays working up, but hopefully I’ll be able to get a lot of work in (last year, January was my highest grossing month, by a long shot).  I’m looking for another repeat performance.

How are you doing towards paying off your debt?

How to Payoff your Nelnet Student Loan

Well, it’s time again to do one of my favorite things: Write up a post on making a final debt payment.  I did one for when I finally paid off my last credit card here and now I can do one for my Nelnet Student Loan.  (I’m talking strictly the steps needed to take to pay off the loan.  If you want to know How to Pay off debt, check out this post)

This loan and I have kind of had a rough history.  When I first had to start paying back my student loans, I thought I only had 2, and didn’t know about this one until I got a missed payment note in the mail.  Whoops! I remembered taking it out, but I had figured that it had been lumped in with my other loans.  Unfortunately it wasn’t, and that is one thing that really bothers me about student loans.  Many students have payee’s coming out their hind parts, and consolidation isnt always the right move.  It wasn’t for me because I was planning on paying them off in a few years, and once I did that, it wouldn’t matter.  I also had some very low interest rates on my student debt, and some were subsidized as well.  I would rather just pay 1 person, but that’s just me.

With this loan specifically, I’ve gotten questions on it before regarding the payoff schedule.  In short, a reader wanted to know what nelnet did if extra was paid on the loan.  Short answer: They moved your next due date forward to get their (interest) money.  He also asked me what happens when you pay off the loan.  Here’s what I did to to pay it off.  (I tried calling, but was told to go online)

First, you need to log in to your nelnet account.  You should already know how to do this if you’ve been making payments to your loan thus far.  Once you’re logged in, go to the My account tab, and you should see this:

Pay off nelnet

As you can see, after I made the big payment at the beginning of this month, it pushed my due date into 2014.   I don’t want this stupid little thing hanging over my head (and accruing interest) until then.  I want to pay it off.  Above the box, you’ll see I’ve circled the “click here” to obtain your 10 day payoff quote.  Once you do that, it will take you to another page that will tell you how much you  need to pay them in the next 10 days for them to consider the loan paid in full.  It takes into account interest that has accrued on the loan that is outstanding, estimated interest over the 10 day period (I’m assuming this was more relevant when people paid bills by paper check and snail mail) and the current principal balance on the loan.  Here’s what mine looks like:

Pay Nelnet

So, I can happily say that I submitted the online payment on 10.21, and it has cleared the bank.  Since this is the first student loan that I’ve ever paid off (but  not the last, rrrrgh) I was curious as to what would happen next.  Would I get a letter from the servicer saying that it has been paid off ?  (Not sure, but I don’t think so)  Would my credit report score improve? (not sure on that either) Would I have not sent the right amount and owe them something ridiculous like 32 cents?  (not at all).   After the payment clearing the account, here’s what my “My Account” section looks like:

Nelnet Loans

I now have a $0 amount outstanding – it’s awesome!  Here’s another shot of the group summary.  This is what you’ll want to see when you’ve sent them the final payment.  Notice on the “status” it says PIF by borrower, Paid In Full.  Not sure why it still shows me needing to make a 38 dollar payment, though.  Here’s the shot:

nelnet4

There is the process to pay off your student loans.  Make sure to keep your focus and you’ll be here in no time!  Good luck, and if you have any questions, contact me or leave them in the comments.  I’d be happy to answer them.

Where Would I be Without 2 jobs?

Unfortunately, this is all very difficult to predict due to the fact that I would have been making different decisions if I had less income, starting with the car, and who knows how far the reach would extend from there.  I’ve tried my best, though.

As I was driving into work the other morning, I was thinking about my jobs.  I’ve been working in the “real world” for over a year now, and have had 2 jobs for most of that time.  When I found a new job, my original job said it was ok for me to stay and work afternoons/nights and weekends for a while.  I wanted to get rid of my debt fast, so I figured that I may as well give it a swing.  I also realized that this was probably the best time for me to do so, as I don’t have children that need to be cared for.  It also works well because once I get out of debt, it will be easier for me to build savings (from increased cash flow) and stay out of debt.  I also figured that I may not always have as much energy as I do now to work as often as I do.

I began to wonder where I would be if I had only 1 job this entire time.  While my expenses would have gone down slightly, it wouldn’t have been much.  I’ll assume that my car would still need to be replaced and that every other major thing would hold constant.  These numbers will most likely turn out to be quite speculative, as my purchasing and behaviors would have changed if I had less available cash.

Going back to my monthly review in November 2009 on this, the first thing I noticed is that my budget is very, very different now.  I pay a lot more for car insurance (here are some car insurance quotes if you need them) and gas, to name 1 thing.  The other thing that I noticed is that I was still in my post graduation 6 month grace period for my student loans (It ended in December), so those did not even make the list!  There was $4,800+ worth of credit card debt left at that time.  I don’t remember what the minimum (combined) monthly payment was for these 3 cards, but I think it was around $200.

After this, my blogging gets fairly thin, but in my next update at the end of February had actually brought my credit cards up to 6,000 total after an adventure in vehicle sales tax.  I paid that off right after I charged it, and I was sitting with about 4,000 on credit cards still.  Unfortunately, I had taken on a lot more water than I had anticipated.  I now had 3 student loans to pay monthly (total: $300) and a car (plus more expensive insurance, total $500).  At this point, loans alone were running me about $815 per month.  It should be noted that if I only had 1 job at the time, my car purchase would have been much different than it actually was.

I think that I would have limited a car payment to 200/mo, bringing my total monthly debt to 700.  With that, there would have been about $400 worth of payments to start my debt snowball with.  The way my snowball has been working so far, there has only been 1 month (in 12) where I’ve applied less than 1,000 to my debt.  Its usually been closer to 1200 to whatever was the focus of my snowball.  Just by that rough estimation, the second job has helped me move 3 times faster than I would have been able to otherwise.  Given the hole I was digging out of, this is no small feat, and could mean freedom from debt years earlier.

I’ll be able to start saving more years earlier, and allow compound interest to work in my favor longer.

It’s been worth it to me.  Are you willing to sacrifice to slay your debt?

PS – I don’t even work as much as some of the other bloggers.  Jeff at Deliver Away Debt is killing it too, digging out of a much larger hole much quicker than I am.  Godspeed, brother.

What Would You Do With 10,000?

I recently saw this article on CNNmoney about what you should do with 10,000 right now.  They have this question for those of you that are loaded (What to do with 50k) and those of you that are itching to torch that emergency fund (what to do with 1k).  Some of the entries sounded a bit frivilous (at least for me) but I could see the value in a lot of them.  First, they mention that because of the tough economic times, people have a lot of cash squirreled away right now (I really don’t know if that’s accurate), but here is the list:

  1. Buy Museum Quality Art – Yes, the art market has taken a beating, and yes you’ll probably be able to get some good deals and could turn them into “investments”.  On the other hand, you’d have to take care of it and look at it all the time.  For me, I wouldn’t drop 10k here.
  2. Do Some Good – They suggest donating it to a charity as well.  I think if I had no debts and was stable in my financial situation, I’d definitely consider this.  For me personally, I’d like the money to stay in my community so I’d pick a local charity, but any charity that you identify with would be great.
  3. Invest in Stocks – They specifically  mention blue chips like Utilities and Telecom because they are necessities in this day and age.  I agree, and typically these stocks pay dividends and are reasonably priced (AT&T/Verizon are, anyway).
  4. Build a T-Bill Ladder – Also, a good idea to watch your money grow.  You simply buy 5 $2,000 dollar t-bills: one for 1 year, one for 2 years, one for 3 years, one for 4 years and one for 5 years.  Once each one matures, use your principal + interest to buy a 5 year note.  In 5 years, you’ll have a bill maturing every year.
  5. Buy a Target Date Retirement Fund – Great Idea.  Make sure to keep the fees low, and you’ll be set with cash when you’re ready to play bridge all day.
  6. Play a Hunch – This is essentially betting a portion of your portfolio (keep it small people, 5-7% max) on an area you believe will grow quickly.  Emerging foreign markets?  Basket weaving supplies?  Red (on the roulette wheel)(Just kidding).  Play the hunch with your 10k.  You could end up a winner!
  7. Pay off your kid – Also a great option.  Offer to get your kid set up in an apartment (preferably as far from you as possible) and pay the security deposit and some rent.  Slip the youngster the rest in c-notes and tell him not to spend it all in 1 place.  Use the remaining money to build a man cave.
  8. Grab some tax credits – Great Idea.  Lower your energy bills by replacing windows, adding more insulation, installing a programmable thermostat.  These will help  you use less energy, live greener and save some good money in the winter!
  9. Buy Growth Stocks – Good option.
  10. Put it in your IRA – If you’re married, you’ll have enough to max out your spouse’s IRA as well.

Unfortunately for me, I’d probably use the money to pay down debt.  I may take a bit out (500-1000) and use it to go on vacation, but I may not.  However, if I didn’t have to do that, I’d probably go for the energy tax credits first.  There’s always more you can to to conserve energy (or generate it) in your own home.

What’s the Best on this list?  The Worst?
What would you do with the money?

September 2010 Monthly Review

Student Loans:

I just wish these loans would go away.  I don’t want them anymore and I don’t want to deal with them anymore, so I’m trying to pay them down as quick as I can.

Nelnet Student Loan $ 397 ($1,350)  While I have not sent this yet, this is what I’m expecting to send in a few days.  Unfortunately I couldn’t squeeze an extra $400 out of last months budget (I should have worked an extra 30 hours), but I’ll be able to take care of this by the month’s end, and then it’s on to the next one!

Direct Loan  $6,439 ($253).  I’ve been paying my new payment ($77) to this, and my parents help me out with this as well.  I recently figured out that if you’re going to make 2 payments to a student loan, it’s best to do them one right after the other.  The reason for this is that they clear out the interest then apply the remaining to principal (I have a full post on the topic here).  If your next payment is a day or two away, you will be paying more of the money to principal than to interest.  I’ll start snowballing this next month, with a goal of having it gone by Christmas.

Great Lakes Loan $ 12,635 ($150)  When I originally checked on this in mint, it said I owed more than I did last month.  I didn’t think that could be true (and would be hugely demoralizing if it was) so I went to the borrowers website.   It had the true amount, but I’m beginning to notice mint does not always play nicely with debt.  That’s a good enough reason for me to get out of debt!

Truck Debt:

This is for my vehicle.  I had already started trying to become debt free when I bought this, so I was quite torn as to wether or not to take on new debt while I was trying to eliminate other debt.  If you want to read more about it, check herehere and here.  Despite most of the advice I heard, I went ahead and took out a loan on this.   I made the right move.

Ford Credit: $ 18,841 ($281): It’s interesting to watch the amount of money that gets applied to principal each month.  It seems to be very heavily dependent on what day I make my payment in the month.  It’s due on the 15th, and sometimes I pay it the first week of the month, sometimes the second.  I applied $7 more to principal last month than I did this month because of it.   Kind of a lot when you’re thinking about it.

Total Debt Level: $38,042 ($2,499) I was kind of shocked to see that I made this much progress, but I’m no where near out of the woods.   It does look like I’ll reach my goal of having my total debt level under 37,500! (actually, if I didnt make that by the end of the month, I’d consider myself a huge failure.

Last month I went on a small vacation at the beginning of the month, so I didn’t get to pay down as much as I would have liked to.  This month was nice because I got a lot of hours at my second job and I was fairly tight with my spending.  The month after this should be pretty good too as my second job has gotten rather busy and I’ll probably be spending more time there (read the entire weekends) for a bit until  a project wraps up.  On the upside, my snowball is gaining traction and will soon move on to a new target!

How are you doing towards paying off your debt?

Reader Question: Nelnet Student Loans

I just recieved this question from Tim who writes over at The Econ Man:

Hello. I just ran across your blog and in reading this post, thought that maybe you would be able to help with a question I had about paying off loans early, and specifically nelnet loans. With nelnet, I’ve never seen the option to apply extra payments “towards principle.” I contacted them and they told me if I wanted to apply the extra toward the principle, I would have to mail in a check with those special instructions. I’m just not sure what happens if I pay extra without specifically telling them to apply it toward the principle. Do you know? I see that you’re paying off a nelnet loan and you don’t owe payments until April 2012. What happens when you finish paying off your loan? Is the loan paid off immediately, or does the original loan amortization schedule still play out?Have you paid any other nelnet loans in full? this simple thing really confuses me and it’s prevented me from paying extra on any of my nelnet loans.

Thanks,

Tim

As Tim mentions in the article, I do have a student loan from nelnet, and it’s currently my debt repayment target, because it’s the next lowest balance.   (I paid off my credit cards first, even though some of them had higher balances than this loan).  I mentioned last time that I made my first snowball payment to them (the amount was around $1,000) and then noted that I don’t have a payment due until April of 2012.  That means that they have tentatively applied my extra payments as “prepayments” of the balance due, and not applied the extra payment to the principal.  They pitch this as something helpful, but in reality it’s not.  Sure, if I lost my jobs I wouldnt have to pay them until April 2012, but I’d lose so much progress that I’ve made.

Nelnet actually does apply your prepayments to the principal, as you can see in the table below.  Most of the student loans that I have work in the following way:  You’ll pay them some amount (be it your regular payment or otherwise) and they will take that amount and pay off the interest that is currently owed on the note and will apply the rest to principal.

To explain an example from the table, my  normal payment is $50.  On June 7, 2010, I paid them $50, and there was $18.31 worth of interest on the note at that time.  Subtract the $18.31 from my $50 payment, and you’re left with $31.69, which they then applied to principal.  Similarly with my snowball payment of $1,000 on August 2, there was 15.17 worth of interest on the loan, and once that was paid, they put the rest towards principal.

08/02/2010EDPay$1,000.00$0.00$15.17$984.83
07/06/2010EDPay$40.00$0.00$16.42$23.58
06/07/2010EDPay$50.00$0.00$18.31$31.69
05/06/2010EDPay$50.00$0.00$17.35$32.65
04/06/2010EDPay$60.00$0.00$15.83$44.17

The way they (can) make back the interest that they lost is by telling you that you don’t  need to make a payment until April, 2012.  If you do this, all the interest that you didn’t have to pay now will accrue back onto the note if you don’t make a payment.  However, if you kept making payments, you’d pay off the note early.

Once you get close to having the balance almost paid for, you can request what they call a payoff quote (to find this for nelnet, click on “My Account” and above the payment info should be a link).  A payoff quote is basically a quote that says the current principal balance, the interest accrued currently, and estimated interest for the period that the quote is good for.  For example, nelnet will give you a payoff quote that is good for 10 days.  If you send them the money in the next ten days, your loan is paid in full.  Mine looks like this:

Current PrincipalOutstanding Interest10 Days InterestTotal Payoff Through 9/13/2010
$2,033.40$12.11$3.79$2,049.30*

So if I paid Nelnet $2,049.30 before September 13, my loan would be paid off (unfortunately I don’t have the resources at this time to do that).  Once this is done, the amortization schedule does not continue to play out.  You’ve excised the company from your life (if you only have 1 loan through them, like me) and you don’t owe them another red cent.  You can safely completely forget they ever even existed and move on to your next debt.

As far as paying any Nelnet loans off previously, I have not.  I will soon though, and I’ll let you know exactly how it goes if you like.

In my opinion, handling prepayment needs extra discretion and a clever planning. You can dig up some useful information about payment schedules of different student loans at Loans-advisor.com

August 2010 Monthly Review

This was an interesting month for me budget wise.  I spent much more than I normally because of my recent vacation and I think this will cause me to have spent more than I took in this month for the first time since December, 2009.  I was able to trim back quite a few categories last month and this month to make up for it, but I still blew my budget on some of the categories, mostly because I was on vacation.  Hey, during restaurant week, you’ve got to take advantage of the deals, right?!  (I spent almost half of my entire monthly food budget and 150% of my dining out budget on 1 meal while on vacation.  It was TOTALLY worth it, the food was great and the company was fantastic!)  Other categories I went over budget in this month were:

Student Loans:

This is by far my largest liability at this point — It’s unsecured and it’s just lame run of the mill debt.  I’ve got 3 loans from 3 different banks (way to go, feds!).  These loans came from 6 years of school, so I got out pretty good.

Nelnet Student Loan $ 2,018 ($1023) This normal payment is $50, which I have been paying.  This is my next target, as you can see.  I just checked the website on this balance.  It says I don’t need to make a payment until April 2012.  Along with this, I got an offer to enroll in an auto debit for a .25% interest rate deduction.  I’ll be forgoing that in an effort to keep the pressure on to repay in 2 more months!

Direct Loan  $6,692 ($250).  The payment for this loan just got dropped to $77 per month.  Not sure why, but I’m not complaining.  This is next on the hit list.  On a side note the subtraction on this was extremely hard for some reason this month.  I had to google the answer

Great Lakes Loan $ 12,709 ($150) Just paid the standard payment of $150, but because of interest, the amount it went down was much less than that.  Seeing how much of my payment isnt applied to the loan balance really, really bothers me.  My snowball will soon roll up on this too!

Truck Debt:

This is for my vehicle.  I had already started trying to become debt free when I bought this, so I was quite torn as to wether or not to take on new debt while I was trying to eliminate other debt.  If you want to read more about it, check herehere and here.  Despite most of the advice I heard, I went ahead and took out a loan on this.   I made the right move.  Either way, here is the status.

Ford Credit: $ 19,122 ($288): I usually pay extra on this loan, but I’ve gotten so far ahead that I decided to make a smaller payment and put the extra cash to my small student loan so I can get rid of it!  Apparently, I’ve paid $255 so far this year to service this note.  It will be nice when all that cash is back in my bank account.

Total Debt Level: $ 40,541 ($688)

This isn’t quite as much as I have been paying down, but I was able to have some fun this month.  It looks like I could have paid off my student debt with the money I spent on vacation and the lost wages from time off work.  While debt freedom is something that’s at the top of my  list, it’s important to ease off the gas once in a while and enjoy what you’ve accomplished thus far and re-focus your scope, so to speak.

How much debt did you pay down (or money did you save) last month?