Big Audacious Debt Payoff Plan Part 2


Last November, we created a plan to pay off all our credit card debt and Home Equity Line of Credit (HELOC). At the time, we had $1,800 on a 0% credit card that we were paying $300 per month. Our total credit card balance for the month was $7,267.07. We paid the statement balances, but we always had a balance remaining. Even though we increased our Emergency Savings each month, we appeared to be getting farther behind on our credit cards. We also owed $24,500 on our HELOC.

We needed to get out of this cycle of increasing debt. I wrote my first post Big Audacious Debt Payoff Plan Part 1 discussing our plan. In this second post, we update you on our progress, provide some history of how we managed to accumulate all this debt, and share lessons we learned along the way.

Helping Our Kids

We originally obtained the HELOC with a 3.5% APR to remodel the house. In March of 2016, our oldest daughter, Ms. H, needed a car. We borrowed $6,000 from the HELOC because the interest rate was less than the 8% used car loan. We agreed that she would pay us $260 per month to cover her insurance, mobile phone, and car payment. This would pay off the loan in 3 years, instead of the 5-year car loan the bank offered.

She made 10 payments and then stopped paying. We finally told her that she needed to obtain her own auto insurance and mobile phone plan. This kept her loan to us from increasing each month. By August of 2017 she was off our phone bill and insurance. This same month her car battery died and she did not have any money for a new battery. We bought a new battery for her for $166.84.

In January 2018 she still owed us $5,809.55, but we discovered she had even more debt. We paid off three credit cards for her totaling $1,453.41. She agreed to meet with us every other week to review her finances. This started our Swimming from the Depths of Debt series. Our plan was to help her help herself get out of debt by providing advice.

Ultimately, we believed by helping her figure out her finances that these amounts would eventually be repaid. Unfortunately, she did not like my honesty about her finances. She decided it was easier to avoid me than suffer my wise advice. Around this time, our oldest son had to have his car towed, needed repairs, an oil change, past due insurance paid, and new tires for his car. The total for all this was $1,476.96. We provided this money from our HELOC and the balance increased again.

Cryptocurrency Speculation

In December of 2017, I jumped into the beginning of the Cryptocurrency frenzy by purchasing 3 Ethereum (ETH) for $1,337 in cash. In January of 2018, I purchased another 11.5 ETH with $10,000 that I borrowed from the HELOC. Then in February 2018, I purchased another 0.5 ETH for $458.70 in cash.

At the time, caught up in the FOMO (Fear of Missing Out), I believed I was making an investment. This was not an investment it was gambling. This $11,795.70 investment is now worth $2,032.57. My advice to you is this. Do not speculate with borrowed money. Not only are we down 83% on this speculative bet, we are also on the line for the money and interest since that time.

The Result

As you can see, helping kids with expenses, speculating instead of investing, and adding expenses of our own quickly spiraled out of control. By February of 2018, we amassed a debt of $33,900 in our HELOC. Dr. SoS was only beginning her second year in private practice and nearly all our income went to pay for our living expenses. We were making a minimum payment on this debt, but the interest rate increased to 6.5% and the interest charged turned into over a hundred dollars per month.

Our Credit Cards

When our HELOC was at the highest point, we only owed $2,250 on a 0% credit card we used to purchase some furniture. We paid $250 per month on the balance and paid this card off in October 2018. In July of 2018 we obtained a new credit card to pay $2,700 to have our house insulated at 0% interest. This card will finally be paid off next month.

Last year, I was so focused on increasing our Emergency Fund that I was letting the balances on our everyday credit cards build up. I mentioned in our November 2018 that I looked forward to getting back to paying off our total credit card balances instead of just the statement balance. In December 2018, I took money from our Emergency Fund and paid all the credit cards to $0 with the exception of the one we had at 0% with a $1,500 balance.

Since that time, we pay all our total credit card balances to $0 each Friday. I mentioned to Dr. SoS the other day that we only have one more $300 payment on the 0% credit card to finally pay off the house insulation. Next month will be the first month that we have ever had all of our credit cards with a $0 balance. That will be worth celebrating!

HELOC Payoff Plan Revisited

We have been extremely diligent at paying off this loan. We have a set budget and dedicate $2,000 each month toward the paying off the HELOC. We made a serious dent in it already. We are down to a $16,000 balance from the $33,900 a year ago and $24,000 from last December.

Our original debt payoff plan was to pay off the debt by December of 2019. I hoped we would receive a huge tax refund and have the ability to make a large payment, but due to the tax law changes we owe money this year.

Last week, I began calculating how we could pay off the HELOC even faster. Here is what I discovered. We currently have $7,432.98 in our Emergency Fund. Each month, we add about $700 plus interest to our account. We earn 4% APY on the first $4,500 and 2.25% on any amount over that. Next month, after making the final $300 payment on the credit card, we will be able to add that to the Emergency Fund increasing the monthly deposit to $1,000 per month.

This means that by the end of June we will have approximately $10,242 in our Emergency fund and will only owe $10,000 on our HELOC. Our plan is to pay off the HELOC at that point. Although this temporarily drains our Emergency Fund, we should be able to quickly reimburse ourselves using the payment we were making on the HELOC plus the savings each month totaling $3,000 per month.

Lessons Learned

We made so many financial mistakes regarding credit cards and our HELOC over the past few years, but we are now turning it all around. Our first step was to pay off the total balance of our credit cards instead of the statement balance. Starting this year, we began paying our credit cards off every Friday. This stopped our rolling a balance that seemed to keep increasing and put us in better control of our money. It will be awesome next month when we finally see a $0 balance on every credit card for the first time since we began dating in 2011.

Perhaps our first mistake was taking out the HELOC. More available credit only created a greater opportunity for debt. Our second mistake was thinking that loaning money to family was a good idea. Our relationship with each of the kids was strained while we expected them to pay. We hope our kids eventually manage their finances where they can reimburse us, but these loans really turned out to be gifts. Our advice is do not loan money to family or friends. If someone needs money and you choose to help, make it a gift. That way there is no expectation of repayment and your relationships will not suffer.

Do not borrow money for gambling, speculation, or even investment. Had I heeded this advice before borrowing the money we would owe $10,000 less than we do now. Investing is great when you use your own money. Gambling is fine if you realize that you will probably lose the money you gamble. The same goes for speculation. If you speculate with money you are willing to lose, you are less likely to be disappointed and will stay out of debt if you lose the money.

The Good Stuff

It was not all bad. We learned that by budgeting and watching our expenses we are able to pay off our credit cards each week. We now know that we can set a goal and work toward that goal. Barring some catastrophe, we should have our HELOC paid by the end of June 2019. This is six months faster than our original plan.

The best part of this plan is that once this loan is paid, we will then have our $2,000 monthly payment plus interest added to our monthly $1,000 savings. This will all go toward filling up our Emergency Fund and eventually savings for remodeling the house. All this time we had this loan available and all it did was put us further into debt. It is crazy that it took us this long to figure out we could just save the money. Here is to getting even further out of debt and to saving cash to finally remodel the house.

What about you? Do you have debts you need to pay? What mistakes have you made? Do you have an Emergency Fund? Do you continually add to it or do you already have a balance that makes you feel comfortable? What is your ideal Emergency Fund balance? Please feel free to comment, ask questions, or share your own experiences with us.

Thanks for reading!

Mr. SoS


  1. Mr. SoS – are you saying that once you get your emergency fund in order, you want to use it to pay off debt?

    1. Mr. PYS:

      Thank you for your comment. Here is my plan. We have had a $4,500 emergency fund for several years now. We have only needed money from it a couple times. I plan to keep at least $1,000 in our Emergency Fund, while using the rest of it to pay off the remaining debt at 6.5%. Once this debt is paid, we can quickly refill the Emergency Fund because paying off this debt will free up $3,000 per month. By the end of the year we should have roughly $15,000 in our emergency fund. Do you think it would be better to pay the interest just to maintain a larger Emergency Fund that we most likely will not need?

      Kindest Regards,

      Mr. SoS

      P.S. I know who you are, but the PYS has me stumped. Is it “Pay Your Shit?” or is the P and S in reference to your and your wife’s first names? If so, what’s the Y?

      1. PYS is mostly meaningless and related to work and Patching Your ….

        Glad to hear it’s not going to be depleted to $0. $1,000 seems low considering the amount of risk we take on at our age. For example, what’s the max out if pocket you would have to pay if someone in the family had a serious accident ? My thought it should be more than 1k but less than everything that could go wrong. Perhaps 3 months living experience is a good compromise. #PYS

        1. Mr. PYS, got it! Makes sense knowing what you do.

          We will see how it goes once we get to that point where we have enough saved to pay off the whole loan. We are still on track to pay the loan off by November 2019 with our original plan. Considering only 39% of Americans have $1,000 saved for an emergency, I figure that even with $1,000 we are doing better than at least 61% of the country. Additionally, we are still on Step 2 of Dave Ramsey’s Baby Steps and still paying off debt, so we have this last debt to pay off before saving 3 to 6 months of expenses. Thanks for your comments. #PYS

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