Creating a debt plan is the most fun part about getting out of debt in my opinion. I love exploring/learning different options. The somewhat boring part is implementing the plan especially if my goal is more than six months away. Right now I’m still the in the exciting stage of my get out of debt plan, but I’ve decided on a plan and I know in the next couple of months I’m going to get bored and want to back slide. So, maybe a good way of not getting bored with the current plan is too look to the future and fantasize about the debt I want pay down or try to get rid of all together. Here is my current fantasy:
I want to get rid of the PMI on my home mortgage. I pay around $45/ month or $540/year for PMI. Once I owe less than 80% of my home value then I can request that PMI payments stop. Unfortunately, my home value has decreased $7,000 in the past month due to the subprime mortgage debacle. So instead of being a couple thousand short of getting rid of PMI, I am much farther away. So, I want to start aggressively paying off my mortgage so that I can get rid of the PMI and put that $45 a month towards something worthwhile. I’m hoping that by the end of 2008, my home value would have rebounded, I would have paid more on the principle, and I should only be a couple of thousand (4 months) short of reaching that goal.
Then I would want to aggressively attack my student loan so that at least half of my required payment is applied towards the principle. This goal may be based on emotion. I don’t like the fact that I have pay so much towards interest and so little towards principle. I accept that this for the house, but not the student loan. But maybe I should do the math. The interest is tax deductible and maybe, just maybe, paying this off would put me into another tax bracket. I’m not at all familiar with tax brackets, so that is one thing I’ll have to research.
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