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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: January ThyPeace Update Date:  1/8/2013  1:34 AM
Author:  aj485 Number:  306654 of 312185

This doesn’t really seem like a good way to show it, as I’m now in more debt than when I started, but I have in fact paid down $108k of debt. I hope it makes sense!

I find, for me, a better way to look at it is to look at your net worth, rather than just your debt. When I recently bought my more expensive house, my debt went up significantly, but my net worth didn't really change, because there is also more equity in this house than there was in the old house. (And actually since the market has gone up in the last few months, plus I've invested more, my net worth has grown.)

Presumably, although you have taken on an extra $70k or so in debt, your home's value with the updates/addition will improve as the project progresses and until you start actually paying for the project, you have the extra money sitting in a savings account, which offsets the debt.

That said, you may not want to post your total net worth, so another option could be that you post the current value of the home and the amount of money that is put aside for the renovations in addition to the debt. Then at the end of the project, post the new value of the home in addition to the debt. Hopefully the project will have increased the value of the home as much as the investment that you made, but even if it doesn't, as you point out, you will be buying some personal value in the updates.

Or, you could just start over with a countdown of your new goal (pay off mortgage in 15 years) and track your progress toward that goal, noting that you've paid off $67k in non-mortgage debt, too.

And, especially if savings rates go back up, with 3% +/- rate, and a minimum payment that won't decrease even if you pay the balance down faster, I would suggest saving up money to pay off the mortgage in a lump sum, rather than paying extra on it now. But I think we've had that discussion before, and you need to do what's comfortable for you.

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