The Debt Reduction Magic Number: 3.16%

thQEMS1WUKExactly ten years ago, I figured out a way to pay off a mortgage in less than three years. The gist of it is this: pay 3.16% of the balance, on top of the usual “minimum” payment, as the new debt-reducing monthly payment.

Now, even though I was married-with-no-kid back in 2006, neither my then-husband nor I actually applied that magic 3.16% in paying down our joint mortgage because we had other debts to pay. (And what with a baby in 2007 and then a divorce in 2011, that mortgage debt only finally went away in early 2015.)

HOWEVER — now that the only official debt left is my monster student loan, I revisited that 3.16% formula in figuring out a feasible “pay-off-this-sucker-before 2020” payment schedule. While I had originally thought I would be done by the middle of 2020, I couldn’t help but think, “Man, I don’t want to start the year 2020 with THIS still around my damn neck.” So, after applying the 3.16%  monthly  payment formula to my current balance, I discovered that I could pay off the last of my official past debt by Christmas 2019.

If it weren’t for the fact that random big expenses seem to pop up in the summer (for which I have to prepare in savings), I’d actually be able to pay my student loan off even EARLIER.

Of course, Christmas 2019 is just my personal deadline, and crap could happen that I’ll end up blowing past that date. But the idea that I could make that date is so psychologically motivating for me that I don’t mind living like a cash-strapped grad student for the next three years, if that means my assets vs. liabilities financial balance will actually be in the black.

Here’s hoping for a Merry-Frickin’-Christmas 2019!

 

 

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