25% of My Monthly Budget Goes to Interest?? | YNAB

25% of My Monthly Budget Goes to Interest??

On any given day my feelings about my debt range between “yeah, we’re chipping away at it, slowly but surely” and “I’d sell one of my kidneys to get rid of this blasted debt.”

Lately I’ve been in a kidney-selling state of mind. Maybe that’s why I pushed Mike to pay off his $38,204 of debt in the next 18 months (you can do it, Mike).

See, I think it takes a certain rage to get out of a big pile of debt. If you can’t dig down and find a real hatred for your debt – a recognition of how it’s ruining your life – it’s too easy to fall into the trap of “well, we’ll be out of debt someday, we hope.” And the problem with that way of thinking isn’t that it’s untrue – making your payments on time will eventually get you out of debt. It’s only a true hatred of debt that will accelerate your debt freedom timeline and cure you of the borrowing habit.

Many of you have already summoned the proper rage against your debt, using it to snowball your way to freedom.

If you’re still on cruise control, believing the lie that debt “isn’t such a big deal, after all, my interest rates are low”, here’s how to generate some real loathing:

Calculate how much interest you’re paying every month, then acknowledge what else you could be doing with that money.

Here’s my interest per month table:

Loan Payment Interest Rate Interest Last Month
1st Mortgage $1,109.49 3.99% $760.32
Deep Shame 2nd Mortgage* $437.90 8.625% $375.79
Residential Lot Loan $158.39 10% $106.65
Student Loan 1 $21.44 0.625% $3.02
Student Loan 2 $75.58 0.625% $10.65
Totals $1,802.8   $1,256.43

*I call it the Deep Shame 2nd Mortgage as a joke. I’ve told you before I don’t see shame as a productive emotion. I’ve forgiven myself for taking on this debt, and now I just want to be rid of it.

$1,256 is close to 25% of my monthly budget. If that didn’t make me furious, I don’t know what could.

Some might try to soothe my rage. “Mark, your only unsecured debt is your student loan, and you’re paying less than 1% interest on it. The rest of your loans are on real property, and property appreciates!”

Meh. My properties don’t feel much like investments (although I’m hoping to sell the residential lot in the next 18 months). All I see is the twelve-hundred-stinking-dollars-per-month I could use for:

“Anger is an unhealthy emotion!” some will shout. You’re right, it is. Fact is, you only need to get into an anti-debt rage for a few hours to completely transform your life.

It’s simple:

1. Summon the rage.
2. Use the rage to overcome your fear of seriously acclerating your debt elimination.
3. Set up automatic payments based on your accelerated plan.
4. Protect those payments at all (reasonable) cost.

Back in 2010 I used this method to pay off a huge pile of debt. Every 16th of the month $4,500 automatically left my checking account. Every 15th of the month I’d have some anxiety about whether we could or should be sending out those massive payments.

Thanks to my wife’s support, we managed to keep the snowball rolling long enough to pay off some large balances. We lost momentum when our business could no longer afford the huge payments, but we made real progress in the meantime.

So, if you haven’t already, get angry for just a few hours. Just long enough to set a new course toward debt freedom. Then stay on that course.

Updated to add: If you read through this post, you won’t find anywhere that I say I regret buying my home or going to college. I love my home, and I enjoyed college (although I’ve questioned the strict ROI of a college education). This post is simply about hating interest and motivating myself to pay off my debts as quickly as I’m reasonably able.