the debt/savings game...

I have spent a good deal of the morning going through my finances and debt...and looking at where I am at in terms of paying off some educational debt (it's really the only debt I have left). I have ONE monsterous loan...and a smaller Perkins loan which is slowly being paid off.

The Perkins loan is a smidge over 3K...and I have been paying a whopping $200 a month on it. Right now, it is scheduled to get paid off in the middle of 2008. I think that's pretty good since the initial loan was scheduled to be paid off sometime in 2012. It would be paying the loan off 4 years early.

Seems good, right? Well...yes...until I really thought about it. I started thinking about the loans I have and the money I have in savings. I have a student loan which is about 3K...and I have about 4500 in my savings account. I am paying 5% interest on my student loan...and making 4.5% interest on the money in my savings account. Just looking at interest alone, that's showing that I am losing 0.5% interest each month by leaving the savings where it is and only paying the $200 on the loan.

So, why haven't I paid it in full yet??? Well...part of it is fear. I like the security blanket of having all that money in a savings account just in case...the worst happens. I like having it there just in case my car does a horrible, evil death. I like having it there just in case I get fired 10 minutes from now. I like having it in case I get sickly...and need to be out of work for an extended period of time.

So...I am keeping the money there for the "just in case" situations. And the likelihood of any of those things happening is not much....and that means, after some consultation with one of my friends at work...we decided that it really is in my best interest to pay off that loan.

It's still flippin' terrifying, but...well, it's the right thing to do. Now, after I pay off the loan, I am going to put the $200/month that I used to pay for that loan back into my savings account to build back up my savings. After 1 year, I am going to roll that $200 over into what I am paying every single month on that honking other student loan I have. And I have to remind myself that even though that loan is HONKING huge, I am still on course to pay that off sometime in 2010...which is 22 years before I am scheduled to have it paid off. Not too shabby, not too shabby.

So there ya go...my next action on my plan to rid myself of debt...well until I decide to buy a house and pile myself with debt all over again!