I have officially paid off my first major loan, the car loan for my wife’s Subaru Forester. What a fantastic feeling that is! Yet it opens up a new dilemma that I am still struggling to figure out.
The question is, what is next?
After some careful deliberation, I have narrowed it down to three possible options:
- Pay off one of my student loans (this one is a private loan with Sallie Mae). This loan has the smallest balance of either my wife or I”s loans and would probably take about a year to pay off if all goes right. It currently has the lowest interest rate (3.25%) of any of our loans, but it is also a variable interest rate that has gone as high as 8.5% in the past. Plus there is always the benefit of getting Sallie Mae out of my life.
- Pay off the other car loan for the new car (2009 Hyundai Elantra SE). This would probably take near 1.5 or 2 years to do, but has a higher interest rate (5.5%) and the loan is only 7 months old. This means right now I am paying a lot of interest on the loan and paying now could save significant money down the line. Plus the huge benefit of not having any car payments and this would net a significant boost to the next debt snowball.
- Take the money we would put towards payments and have it go to a savings account. Given the economy, it never hurts to have some money stashed away. If the account balance gets larger then one of the loan’s balances, I can always due one big payment and close out the loan. If an emergency comes up, then we have money readily available.
Tough choice. Still thinking it through.
With the new year and new decade, I would like to renew my focuses on my wife and I’s finances. We made significant progress for most of last year with my Subaru Forester car loan, but having to buy a new car in the summer also stopped my accelerated plan to repay the Subaru loan and stopped by debt snowball. This is how we are going to fix that this year.
Financial Goal #1 – Pay off Subaru Forester loan
With my next payment halfway through this month, the Subaru Forester loan will drop below $2,000. Being this close to paying it off, I really want to get this done. Thanks to some job related money coming in sometime in January and my tax return that usually comes in mid-February since I file my taxes as soon as I get the relevant paperwork, I think there is a very good chance I could have it paid off by March. Maybe even sooner.
With that, $225 a month becomes available and is a significant victory in my budget.
Financial Goal #2 – Look into credit unions
Within short walking distance of my work, there is a credit union branch that I am going to look into. Not only are credit unions well-known for their customer service and great rates, but this one also has an awesome feature of letting me scan checks and depositing them online. Combined with many ATM’s in gas stations and stores being free and it is very tempting to switch from Bank of America to them. I am also going to see if there is any chance of refinancing my new car loan with them.
Financial Goal #3 – Saving for a new house
With the Subaru Forester loan being paid off in the next 3-4 months, I plan on doing a debt snowball into a savings account with the idea of selling our condo towards the end of 2010 and moving into a house. We are ready to own a house. Given that houses will probably not be any cheaper than they are now, this is a good time to take advantage of the market.
Financial Goal #4 – Double the emergency fund
Even though the economy is slowly showing signs of turning around, it is clear that we need a better emergency fund as we now have a bare minimum $1000 tucked away. I would like to at least double my current emergency fund, just to give us a little more cushion to work from.