One debt down, three more to go

All right!! My wife and I have just finished paying off the loan on her Toyota. I'm so enthusiastic about this because the loan was financed at 14%. I know, that's a ridiculous rate, but she had lousy credit after a few years as an irresponsible college student. We were able to do this loan payoff because we took all of our supplemental income (which is non-employment income, as defined by my budgeting spreadsheet solution) and applied it to paying down the loan.

This brings me to what I consider to be the best way to pay off a debt: intensity and focus. You've got to hate that debt with a passion, and throw everything you've got at it. So, when I sold a textbook on half.com for $70.55, I took the entire amount that was deposited into my bank account and immediately scheduled an electronic payment to Toyota. I didn't get my hands on the money, so I didn't miss it. The same thing for when I got reimbursed by my employer for dental expenses paid out of pocket. It amounted to nearly $1,000. I hated that car loan, so I used the whole amount to deliver the final blow that put it out of its misery.

I wouldn't call this the "snowball" approach to debt reduction, since we've only been paying down the one loan so far, but it is certainly an effective method of debt reduction.

So now we only have my student loans, approximately $5,250, my wife's debt of $6,200 to her family's educational trust fund, and my wife's debt of $2,500 to her dad for a nice trip to Thailand and Cambodia. Total debt left to kill: $13,950. Gosh, I didn't realize it was that much. Luckily, none of this debt is currently in "repayment"; that is, we aren't obligated to repay it yet. So, I will begin depositing payments for these debts in an interest-bearing account such as ING Direct. Then, a year or so down the road when we have to start paying these loans back, we'll have a little extra to throw at them.