The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: lackofstache on February 26, 2014, 11:54:58 AM
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We've cut all of our spending; our groceries are down by $400 monthly, our insurance premiums are down over $100/mo, we eat out 1-2 times per month, spending at most $60/mo. We're getting to some of the lower return on investment type changes and I wanted to access the collective thoughts here;
We currently have the following debts:
Auto Loan: $5200 @ 8.95% (Payment is $224/mo, we're paying $8-1300/mo & $3100 next month)
Wife's Student Loan 1: $952 @ 7.25% (12/mo)
Wife's Student Loan 2: $1228.22 @ 7.25% ($16/mo)
Wife's Student Loan 3: $5748.56 @ 6.75 ($72/mo)
Mortgage to get out of PMI w/ refinance: $82000 @ 4.625% ($600/mo w/ PMI & escrow, only $130 towards principal)
If we can get this to $78K, I know the appraisal will come back well enough for us to refinance.
Small Business Loan from my brother (MISTAKE): $7500@ 4% ($234/mo)
My Student Loan: $2500 @ 2.35% ($63/mo)
My question is a bit more general, though. While you're paying interest on debts like the above, can you afford to save money by, say, switching phones to Republic?
We pay $100/mo for 2 phones w/ 8 & 15 months left on our contracts. If we switched to Republic, we'd sepnd $600 on phones (even though ours still work we can't get much for iphone 4 & 4S, can we?), $165 & $235 on early termination fees and $20/mo on phones thereafter. It would take right at 12 months to break even on that investment, meanwhile it would take $1000 of our capital that we wouldn't be able to use towards debt. I'm leaning towards waiting until November when my spouse's contract is up & switching that phone over and then doing the same w/ my phone the following June when my contract is up. While we're throwing money away every month, we're also able to pay down debt. Does this make sense or should I stall one month on the debt repayment and make the move?
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Consider it this way, the break even point is 12 months; at 24 months you will have saved ~$900 above and beyond your investment. That's a 100% return after 2 years. Which to me at least, seems to be worth more than the interest on the loans.