So, I’ve decided to pay off my car loan early. In an effort to keep myself accountable, I’ve decided to make regular posts about my car loan paydown. I’m very excited to get rid of this particular debt.
Right now, the debts I have include a mortgage, student loans and my car loan. I don’t have any other debts. Let’s dig a deeper into my financial circumstance and explore how I plan on getting rid of my car loan.
Financial Snapshot
As previously mentioned, I have a mortgage, student loans and a car loan. Although I have a mortgage, I plan on buying a house in the next 2-3 months and so I will have two mortgages. I am paying off my current mortgage early with the goal of paying it off in about 13 years – to coincide with my retirement from work.
For the next house I buy, I hope to get a reasonable mortgage (less than $300,000). I hope to pay that off also in about 15 years. That’s going to be tough and I may not be able to start paying it off early until about 2-3 years from now. We will see.
At the time of this writing, my student loan balance is $6,663.52 with an interest rate of 2.625% and a minimum monthly payment of $19.59! Let’s just say that I’m not really in a hurry to payoff my student loans. Not only is the interest rate low, but the minimum monthly payment is so low that it doesn’t really affect me that much.
At the time of this writing, my car loan is $16,949.58 The interest rate is 4.00% with a minimum payment of $356 per month. Ouch! Using the Debt Avalanche method, I should tackle the car loan first. Using the Debt Snowball method, I should tackle the student loans first. I’ve decided to tackle the car loan first.
Car Loan Payoff Date
Michelangelo once said that “The greater danger for most of us lies not in setting our aim too high and falling short; but setting our aim too low and achieving our mark.” To that extent, I’ve chosen to payoff my car in one year. So, I hope to get done by May 2022.
So, how am I going to do this? Well, it’s going to be tough. Without accounting for interest, (which gets calculated daily), $16,949.58 dividend by 12 is $1,412.465. So, that means I need to make at least $1,412.465 car payment every month for the next twelve months. That’s tough.
Clearly, if I didn’t contribute to my dividend portfolio, or pay extra on my mortgage then I could afford to make $1,413 payment to my car every month. But, in my effort to try to payoff my car, I want to keep the status quo. That is, I want to maintain the minimum contribution to my dividend portfolio AND maintain paying extra on my mortgage. So, ya, it’s going to be tough.
I want to keep the status quo.
But, the date has been set and as the saying goes, “where there’s a will, there’s a way.”
The Plan
Paying off the car is going to come from several sources. Although cutting expenses is always an option and something that I should continually assess, it’s clear that I need to make more money. So, let’s see where the money is going to come from.
A. Tax Refund
I am expecting a refund this year. My refund amount should be at least $2000. If that’s the case, I plan to take $2000 from my refund and put it on he car loan. By my math, that should bring the total amount down to $14,949.58.
My refund might be closer to $2500, but that extra $500 will be used to help pay down my credit card balance back down to zero.
B. Sister Owes Me Money
My sister owes me $1500, and the deadline has since passed for when she was supposed to pay me back. No worries though because she’s always late paying me back, but always do when I ask her for my money. So, whenever I’m ready, I’ll ask for that money back and use that $1500 to bring the car loan balance down.
Although I could start off with this, I want to ensure I get back the refund that I’m expecting. So, I’ll wait. But, if I use the refund to pay down the car loan, that’s definitely proof to myself that I am really committed to paying down that debt. The psychological boost from that will give me all the motivation see this thing through.
So, now, that would bring the balance down to $13,449.58. That’s still high. I really want to see this number under $10,000 as fast as possible! I think going under the $10,000 threshold will be an indication that the end is in sight.
In any case, using the $13,449.58 as the new benchmark, that would mean that the monthly payment that I need to come up with is approximately $1120.80.
C. Rideshare
Thank goodness for Uber and Lyft. I plan on driving more. One of the cool things about both companies is that they have weekly bonuses and sometimes monthly bonuses. So, for example, Uber had one where if you drive 3 times, you earn an extra $100. Lyft had another that says if you pick up 10 passengers, then you earn an extra $75 as a bonus. The bonus incentive helps me drive more. That’s because I don’t get very excited making $5 at a time (give or take).
Both apps allow you to set a weekly goal. So, let’s say I wanted to make $100 per week, I could set that as a goal and the app would let me know how close I am to meet that goal. So, ultimately, I’m going to have to try to make around $800 extra with Uber and Lyft every month. That’s definitely doable if I were doing it full time, but it’s much harder since I have a full time job. But, as a reminder, where there’s a will, there’s a way! And right now, I have the will!
Conclusion
I’m determined to get rid of my car loan. So, to help keep me accountable, I will be making monthly posts on my progress. Because the first of the month is reserved for the dividend income reports, I’ll be reserving the 15th of the month for my debt payoff series.
What about you? Do you have any debts you’re trying to get rid of? How do you keep yourself accountable? Let me know your thoughts by commenting below.
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