Matt Jabs over at Debt Free Adventure has a thought-provoking post today — “How Much Interest Am I Paying? Hint… It’s Less.” That inspired me to total up the monthly interest payments on our debt.
1. Mortgage — This is the biggie. $1200/month to interest alone!
2. Credit Card #1 — $10.91 this month
3. Credit Card #2 — $14.25 this month
4. Auto loan — 0% financing means no interest. But it’s still a debt.
Thanks to a low-interest balance transfer, we’re have a 1.99% interest rate on credit card #1. We’re focusing most of our efforts on credit card #2 due to its 10.9% variable interest rate, but I plan to have that paid off by January.
Besides the interest payments, think of what we could do with the extra $700 or so we throw at credit card debt per month! That would be a nice chunk to add to our monthly savings.
Apparently, I unintentionally subscribe to the Suze Orman school of thought when it comes to saving for an emergency fund and paying off CC debt. I like to do both, because our EF is a bit anemic, in my opinion, thanks to the home purchase (we put 20% down to avoid private mortgage insurance and to get a better mortgage rate). So I’m not putting as much toward the credit cards as I could each month, because I’m also funding our emergency savings. I’d rather have some money set aside for a rainy day than have the credit cards paid off and nothing to fall back on, leading us into the trap of using credit again. I think we have a nice balance right now, and although it will take us a bit longer to pay off the credit cards, it’s the way to go in our situation.
