In 2014, I set quite a few goals.
It doesn’t matter what they were, what matters is that I set, like 10 goals, and laid out steps to reach them. Over the course of the year, I completed several goals check-ins to make sure that I was on track to reach them.
This year, in 2015, I took a little different tack. Instead of setting many goals, and outlining steps to achieve each, I decided to set 1 big goal: Pay of $30,000 of debt. I still outlined steps to reach that goal, but they were pretty simple:
- Make our regular debt payments
- Earn enough to make up the difference between our regularly debt payments and $2,500 a month (about $1,500)
Pretty simple, right?
And up until June, it was going great. We got a little bit behind, but had paid off more than $12,000 in the first 6 months of 2015 – and that’s crazy respectable, considering our take-home pay had been roughly $25,000.
In June, however, our perspective started to change. If you’ve seen any of our net worth updates, you know that we were severely underwater on the car payment we had left, and the interest rate was at nearly 8%. And even though we had a great 3.75% interest rate on our mortgage, we were paying PMI every month, and were required to pay it for 5 years, regardless of whether or not our Loan to value ratio was above 80%.
It was frustrating, because we did not have the money to pay down our car enough to refinance it, and because our mortgage was under $40,000 and at such a great rate, not many banks were even willing to refinance it with no closing costs or origination fees – at least with a rate that came close to our current one.
We also had accumulated some credit card debt, which made us really mad at ourselves, and even though that debt was at 0%, interest would kick in come October.
So in June, we started shopping for a smaller credit union that would do a whole bunch of things for us:
- Refinance our mortgage with close to the same rate, and with no PMI
- Use some of the equity in our home to absorb the credit card debt, and some of the overage on our car loan
- Refinance our car loan at a much lower interest rate.
It was kind of a tall order, but we did it!
Previously, over the lives of the loans we refinanced, interest/PMI would have cost us
- $26,689 in mortgage interest
- $2,400 in PMI
$5,616 in credit card interest
- $26,464 in auto loan interest
For a total of $61,169 in interest.
We bought our house for $26,204 in 2013, and in June is appraised for $87,000, which allowed us to refinance our mortgage, some extra from the auto loan, and the credit card debt at a 4.38% interest rate with no closing costs, no PMI, and for only 15 years rather than the normal 30 year term.
With some of the overage on our auto loan absorbed, we were then able to refinance our vehicle from a 7.8% interest rate down to a 2.49% rate and take 2 years off of our term – amazing!
All told, we’ll pay $20,678 in interest on the home equity loan – plus 30 year we won’t be paying on it – and we’ll pay $2,991 in auto loan interest, for a total of $23,669
When it’s all paid off, assuming we don’t pay any off early, we’ll save ourselves $37,500 in interest and PMI.
It was such a relief when we closed on both loans, but even after a celebratory dinner, I started to stress again.
After all, I have very publicly talked about our goal of paying off $30,000 in 2015, and have been tracking it here on the blog as well. Even though that goal was an amazing one, my priorities had started to shift.
Our returns in Betterment since 2013 have averaged 16%, which left me very NOT-THRILLED about paying off low-interest debt – and the hubs felt the same way. Open a Betterment account now to start investing the smart way.
More and more, we’ve been really wanting to boost our emergency fund, start investing, and creating not only a safety net for ourselves, but start the retirement savings portion of our plan. I had hoped to be living completely on the hubs’ salary before we started saving aggressively, but with the refinance we now only need $350 of my income to pay all of our bills for the month rather than $1,000.
Still, I am a focused person. I like to set big goals and achieve them. I like to exceed everyone’s expectations, which is why I hestated writing this post.
We’re still doing the #30k2015 challenge, but #30k2015 means something different.
Instead of focusing strictly on paying off debt, our goal now is to raise our net worth by $30,000 by the end of 2015.
I have an update coming soon so you can see the breakdown of where our net worth started at the beginning of the year, the effect of the debt we paid off, as well as the effect of the money we’ve currently saved, but until then, I want to leave you with this thought;
It’s okay to change you goals.
9 months ago our lives, and probably yours, were much different. 9 months ago I was working in an office, and now I’m working for myself. 9 months ago my husband was a stay at home dad, and now he’s working outside the home full time.
9 months ago we had loads of high-interest debt that was suffocating us, but that’s just not the case now.
What I’m getting at is that it’s ok to change your goals if you’ve thought the change through, if it’s for a good reason, and if the new goal still pushes you.
As long as you’re making awesome things happen, go ahead and change your goals!
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