We paid off our consumer debt last month! Woo-hoo!
Oh, wait. Did I mention that already? 
But we still have a boat-load of mortgage debt. Here’s the skinny.
- Second Mortgage: $31,552.49
- Primary Mortgage: $170,820.61
- Rental Mortgage: $109,150.33
Total Mortgage Debt: $311,523.43
*gulp*
We are taking a brief hiatus on the debt snowball to build up some savings (beyond the $1000 emergency fund).
WWDRD?
What would Dave Ramsey Do?
“Generally speaking, if your second mortgage is more than 50 percent of your gross annual income, you should not put it in the Debt Snowball.” – The Total Money Makeover, pg. 130.
Our second mortgage balance is not more than 50 percent of our annual income. Following Dave’s guidelines, we should include our second mortgage in our current debt snowball and tackle it immediately with gazelle intensity.
We Are Not “Generally Speaking”
However.
We’re scheduled to move the Summer of 2011. Historically, moves have been the financial hiccups that kept getting us behind — or at least, not ahead. The motivation behind this blog is not only to become debt-free, but to live credit-free as well. And the only way to do that is to prepare for financial hurdles — like a move — so that when the extra expenses arise we’re drawing from a savings account and not reaching for a credit card.
So it makes sense to bulk up our savings a bit before tackling that second mortgage. God-willing, we will also eradicate that second mortgage once we successfully sell the house next year… Obviously, we can’t count on that. (We just bought the house in 2007.)
The regular payment for our Second Mortgage is $283.90. The majority of that goes to interest. For instance, here’s the breakdown for the March payment:
- $201.03 = Interest
- $ 82.87 = Principle
Kind of hurts to see that in black and white, doesn’t it? (Have you ever looked at the breakdown of your payments?) (For anything?)
We Attacked Our Consumer Debt Pretty Intensely
All told, we paid off almost $20,000 in ten months. We will continue to snowball debt… However, in addition to bulking up more savings, we will also start setting money aside in the budget to save up for larger purchases that we would like to have: a keyboard; a new bed; a new camera; a family vacation…
I would call those items above wants. But I want them really badly. (Except for the new bed. My back would argue that as a need.)
I would be remiss if I didn’t mention that The Hubs is also anxious to start a car fund.
We will actually plan for these purchases and set a priority for each. We have yet to discuss how much should be designated each month toward saving for these future purchases. It will need to be a workable balance between tackling the debt and being realistic with how much we are willing to sacrifice while working toward our ultimate goal of being completely debt-free.
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{ 3 comments… read them below or add one }
Well done chronicling and attacking your debt! That’s awesome you guys are so focused. Very motivating!
What are your interest rates on your mortgages may I ask?
Rgds,
Sam
[Reply]
jolyn Reply:
April 11th, 2010 at 8:54 am
Thanks! And of course you can ask! That’s what this blog is all about! But that doesn’t mean I’ll answer… Oh, I jest!
Primary Mortgage: 6.5%
Second: 8.34%
[Reply]
What a great job you have done! One way to start on the second mortgage in a slow manner would be to pay, say, $50 extra toward the principal each month. It wouldn’t be that great an amount, but it’s amazing what a little extra toward the principal each month does.
[Reply]
Way to go on “melting” that snowball!! I am truly amazed—
[Reply]