What Percentage of Your Income Goes Toward Your Debt Snowball?
Our current debt snowball (the monthly payment we’re sending to our smallest debt) is $1,439.08. Once we’ve paid off our credit card, student loans and the second mortgage, we’ll be sending a monthly payment of $3,000.29 to the first mortgage.
Our monthly take-home income (after taxes, 401k contributions, insurance and FSA) is $5,422.22, assuming it’s a two pay-period month. So, our debt snowball is currently 27% of our monthly take-home income (or, 19% of our monthly gross income).
Now, this does not include payments toward other debts. If you include all our debts, 55% of our monthly take-home income goes toward debt payments (well, I guess some of it goes toward escrow). Plus, 100% of our bonus income (approx. $10,000 in 2007) goes toward our debt.
Wow, my brain hurts now.
If you’re paying off debt, what percentage of your monthly take-home income is going toward your debt snowball?
5 responses so far
i’m glad to have a low cost of living (rent/bills) right now, so my payments toward my student loans, credit card debt, and car loan total just about 50% of my take home pay right now. add to that another 5% toward my savings account, and i budget right at about $100/week in discretionary money (groceries, eating out, gas money, etc). it’s feeling a little tight, given gas prices, but i’m going to go another month on this budget (so that i’ve given it a solid four months) and then see if i need to reevaluate.
I’m in my 40’s with no debt other than mortgage, so mine is a “retirement snowball”. About 30% of our net pay goes there.
You don’t mention how much you owe on CC vs student loans, but I’d consider paying the highest rate items first, Dave’s advice notwithstanding. Paying off a 4% loan just because it has a lower balance than some high interest credit card doesn’t pass the common sense test to me.
Joe
Joetaxpayer - You’re right, it doesn’t make a lot of sense to pay the low interest loans first. My interest rates are 2.99% for the credit card, 3.13-3.5% for the student loans and 7.86% for the second mortgage. I paid off our larger car loan (6.05%) and other credit cards before attacking some of the smaller ones. You can read more about which parts of the baby steps I’m following and what I’m ignoring here: http://financegetspersonal.com/2008/02/16/my-dave-ramsey-hybrid-approach-to-paying-off-debt/.
What about you, Idub? What order are you paying off stuff, and what are the interest rates?
hmm, mine’s a little messy! my overpayment (snowball, whatever…) goes, at the moment, to my cc, which, though it has a fairly low interest rate, has a high balance and, frankly, just pisses me off! then will come my car loan (which will finish about a month after the credit card’s done), then my higher interest student loan, followed by my fed. loan. the higher interest student loan has the highest interest rate of all of them (at just under 8%), but the interest is still tax deductible, and so i’ve decided to tackle my consumer/bad debt with a vengeance, and a sincere hope that it’ll all be gone by new year’s eve. then the high interest student loan will take another couple of months, followed by the fed. should be debt free with a 3 months’ ER fund within about 17 months… just in time to turn 30! that’ll be a good birthday…
There’s this book called Debt Free by 30 that’s really good. I think I’ll be debt-free except the first mortgage by 30 - that will be awesome! 30 is such a “grown-up” age…