Debt Status, as of 12/20/09

STUDENT LOANS ($49,742):

#1 - $ 0

#2 - $ 995

#3 - $ 24,160

#4 - $ 24,587

AUTO LOANS ($14,003):

#1 - $ 4,334

#2 - $ 9,669

CREDIT CARDS ($20,270):

#1 - $ 0 (I pay this card in full each month)

#2 - $ 755 (Planning to pay $150 at end of month)

#2b - $1021

#3 - $ 5,000 (Planning to pay $2500 at end of month)

#4 - $ 13,494

Loan Strategy

My first priority is paying off our credit card debt. It's the biggest monthly burden, drags down our credit scores, is viewed negatively by insurance companies and lenders, and causes the most angst (especially when the credit card companies change the repayment terms by adjusting interest rates and hiking minimum payments!).

But when the credit cards are gone, we'll have to decide what to tackle next. Aside from car loans, the major debts would be student loans and the mortgages. We have two student loans, each with about $25k owed, our second mortgage at around $27k, and our first mortgage at approximately $138k. I'm not going to even think twice about the primary mortgage, but the other three are all on my list of things to pay off quickly and ahead of schedule.

The student loans are on a 20-year repayment plan, with nearly 16 years left. The interest rates are pretty low, around 3.5% (fixed). They're through the federal government, and Hubby & I each have our own. If we are tight on money, we can easily put either or both into hardship deferral without any negative consequences. Student loan interest is tax-deductible for both state and federal income taxes. And if one of us dies, that person's loan is forgiven - I wouldn't be stuck paying off his, or vice versa. The down side is that if we were ever to declare bankruptcy, the student loans cannot be discharged.

The second mortgage is a 15-year balloon at just under 10% (fixed). We have 11.5 years left of payments, at which point we'd either have to pay a lump-sum (I think of approximately $20k), or we'd have to refinance and roll in the remainder. The mortgage interest we pay is tax deductible for federal income tax, but only if we itemize (which is highly likely for at least the next 5 years, and quite possibly longer). We would be able to eliminate this debt if we declare bankruptcy or gave the house back to the bank, and could get away paying pennies on the dollar if we did a short-sale.

Although this is one of those situations where Dave Ramsey recommends paying the student loans first, because the outstanding balance on each loan is smaller, I really can't convince myself of the wisdom in that. Pretty much every way I see it, paying off the second mortgage before the student loans makes infinitely more sense.

Great News from Work

Not only was my bonus slightly larger than I'd hoped for ($1200 after taxes), but I also received a 1.9% raise. In this economy, I thought that was pretty darn good!

My boss also just told me that I will be able to get at least partially reimbursed for a review course that I'll be taking in the spring. It's something I wanted to take, it's entirely optional, and most of the other people at our company who have taken it have paid for it out of pocket, so I was not expecting to get any reimbursement for it. But I figured I didn't have anything to lose by asking, and I ended up being pleasantly surprised!

The course is $600 for non-members, or $525 for members (including the first year's membership fee).

I signed up for the latter, figuring it was worth it to save $75 and then I just won't renew my membership after it expires. Because of company policy, I won't be able to get the $55 membership fee reimbursed, but I will likely get either half or all of the $470 balance back.

Christmas Gifts

We are buying gifts for a short list of immediate family members only - six people in all.  My original goal was to spend less than $100 on Christmas gifts this year. Hubby & I hadn't planned to buy anything for each other. 

I decided to splurge on something that I know he's been wanting, and spent $300. I think he'll be pleasantly surprised, but it is rather pricey. 

We'd purchased a gift for Hubby's father a few months ago, but his sister suggested going in on a gift for his parents. We can use the gift we purchased for another occasion, perhaps Father's Day, but it'll mean more money right now. We're still waiting on the final dollar amount, but it'll be somewhere in the $30-50 range. 

I found several items for my mom and sister, and was able to match up some coupons with sales. I ended up buying a few extra things (some of which I'll put away for a later date), but it cost $60. 

I still need to find something for my dad and for my brother-in-law. I can get something fairly inexpensive for BIL, but it'll be a bit harder for my dad. I want to get something that he'll enjoy, and it'll mean spending more than budgeted (but would at least be consistent with what we've spent on other family). 

Raises & Bonuses

We recently had a staff meeting where it was announced that end-of-year raises and bonuses will be given out within the next few weeks. 

Raises will be small, most being around 1%, and with a maximum of 2% being awarded to "exceptional" employees. But with most of my friends and family (including my husband) receiving pay cuts or a pay freeze, even a slight increase is quite welcome! 

And the best news is that the company has decided to still give out bonuses. Optimistically, I'm hoping for $1000 in after-tax money, which would be more than I've received in years past... but hey, I'll take whatever I can get :) 

A new credit card

Hubby recently went on vacation, charging $750 to his credit card. He covered someone else's expenses for part of the trip, and bought a few things beforehand that he didn't end up using, so the total cost will come out to about $500 after returns & reimbursements. 

And since he was spending money, I decided that I should too. I went shopping at Kohl's and picked out some new clothes for myself. The in-store radio kept playing ads trying to convince people to take out a store charge card to save 10%... and I normally don't cave. In fact, until then, I had never taken out or even applied for a store card.

But Kohl's sends out monthly discount coupons to its cardholders, good on full-price AND sale items, and I want some. The card doesn't have any monthly fees, and I plan to pay in full every month anyway, so it's sort of a win-win for me. I also don't anticipate taking out any new credit lines anytime even remotely soon, and I only have one card with a balance (and that'll be paid off in the next 4 months), so I should be able to handle any minor credit score ding caused by opening a new card.

They gave me a 15% discount, and a $1000 credit limit. Woohoo! 

Health Insurance Costs

Both of us are fortunate enough to be able to get group health insurance through our employers, and we've been able to pick from a variety of options each year. 

We just found out that, for the upcoming year, the cost will be increasing yet again while benefits will decrease. If we want to stay with the same carrier, we will need to pay $750/year more for the two of us, and $1000/year more if we need to upgrade to a "family" plan. 

We can switch insurance companies and our out-of-pocket cost won't change, but I'm hesitant to chance because the new company is one that I've never really heard of. I looked online and it appears to be a national company, and a pretty big one, but it's not that commonplace in this area. 

We have a HMO plan, where we have to see our primary care physician and get referrals for everything, and it seems to work well enough for us. Both of our doctors can get us in for appointments in a reasonable amount of time, and they accept several different insurances.