- DH = Dear Husband
- DD2 = Dear Second Daughter
The “big expense” we took on 2 years ago
Two years ago over at Prudence Debtfree, I wrote a post explaining the significant new expense that DH and I had decided to take on. We would support our second daughter in moving out of our house so that she could live downtown – close to her university and closer to where she trains for track.
It was a tough decision to make. It so obviously went against our focus on paying off all debt. But it has worked out very well in every way, and we’re glad we made the choice we did. For the last two years, we’ve given DD2 enough per month to cover rent and food. This expense was softened by a few factors:
- We had reached a milestone in our debt repayment: All $102,000 of our non-mortgage debt was gone (as well as $27,000 of our mortgage).
- We had passed the half-way mark in our debt reduction. Our $257,000 grand total was now down to a $128,000 mortgage.
- We would save some money in our own household expenses because of the food, utilities, car insurance and gas that DD2 would no longer be needing.
- With our decreased debt, we had decreased interest payments. By June of 2015, we were paying half the interest we’d started out with June of 2012.
All of these factors meant that we were at a new stage of financial health and that we were in a position to support DD2’s move.
No more “big expense”
We have made the last of our payments to DD2. We agreed from the beginning that our support would last for two years, and that time has passed. DD2 is going to finish off her last couple of courses to graduate, and she has big decisions to make about work, study, and track. She’s in a good place to be choosing her future path.
For us, the end of this expense has the potential to make a big difference. A few factors add to its significance:
- We have reached a new milestone in our debt repayment. Our mortgage is now less than the largest of our non-mortgage debts was when we started our journey out of debt in June of 2012. The business debt that we had at that time was $80,800. Now, our mortgage is $77,200.
- We will continue to save money in our own household expenses because DD2 will continue to live on her own.
- Our interest payments have continued to decrease. We are at about half of our monthly interest payments from June of 2015 – one quarter of what we were paying in June of 2012.
So what are we going to do?
Here is our plan: We will first of all use the money to ensure that we max out on our monthly mortgage payments. We are allowed to double our regular payment without penalty, and while we have been able to do this most months even with our support of DD2, for some months – like April and May – we haven’t.
The second part involves the yearly lump sum payment we’re also allowed to make against our mortgage without penalty. Hopefully this year, we’ll be in a position to make one.
Of course, things could go wrong … but they could go right!
I think the best antidote to the temptations of lifestyle inflation, when disposable income goes up, is to be proactive and have a plan for paying off debt or increasing savings. I’m a bit reluctant to make bold statements about our plans – because things can always go wrong. There are no guarantees about DH’s business. We have an 18-year-old van that could die at any time. The unexpected happens, and something I can’t even think of now could well change our scenario completely. So I don’t hold tightly to our plans, but there they are. I’m hopeful that our debt-reduction rate will increase from here to our finish line.
Have you ever had an increase in disposable income – either through a raise, a windfall, or the end of a regular expense? Did use it to decrease your debt or increase your savings? Or did it get absorbed into lifestyle inflation? Your comments are welcome.