How to Pay Off $125,000

One of our friends who follows the blog asked us a question today:

I divided the amount of debt you have by 40 months, and figure you have to retire about $3100 each month if you were to do it evenly. You're almost two months into your project, so I thought you'd have almost $6000 gone by now, but you have a different approach. How exactly is your plan working, like I wonder if you're going to be getting rid of huge chunks of debt in a couple of months?

Excellent question.  I'll do the best I can to answer, and hope it will satisfy.

First, let me address the questions a little bit.  First, we're not quite two months into our little (large) "experiment" -- we're actually 47 days, so if, as you say, we ought to be paying off $3100 each month to do it evenly, we should only have about $4900 paid off.  Granted, we're still behind by that reckoning, but not as bad as we could be. 

Second, the past couple of weeks have been a low time for our income.  Most of the extra money we're putting toward the mortgage comes from my income -- private lessons, hours working in the school library, and being music director at church.  For the weeks before and after Christmas, I taught no lessons, so there was no money coming in.  Ditto my hours at school. 

Third (actually part of "second", but I'll put it separately), our income is not consistent, and therefore, we won't be paying off the loans "evenly".  Parts of our income are very consistent -- my wife's paycheck from school, my paycheck from church.  Those monies primarily take care of our regular monthly expenses.  It's the inconsistent monies -- my private lessons, hours at school, royalty checks from my compositions, and other random monies which always seem to just appear when we least expect them -- which will be doing the lion's share of paying off the debt.  The timing of these monies determines when and how much gets paid off.  For example, I'm expecting a royalty check before the end of the month, which will (hopefully) let us take another thousand or so off the loans. 

Fourth, as we pay down more of the principal on both loans, more of the regular monthly payment will go toward paying off even more principal instead of paying more interest.  That means that as we near the finish line, the principal should be decreasing ever faster.

Fifth -- and this is the biggie -- a large part of this is going on faith.  The numbers all look good in my spreadsheets, but spreadsheets aren't real life.  I can attempt to account for any unforeseen expenses which might arrive, but life has a way of throwing a wrench into things.  By the same token, I can't account for any unforeseen income which may appear out of nowhere.  I wouldn't put much faith in such things if I hadn't seen them happen to us over and over.  The very nice income I get for being music director at church appeared completely out of nowhere just over a year ago.  New piano students come on board all the time.  My royalty checks for my composing usually manage to exceed my expectations.  In short -- while the spreadsheets say it will all happen, that's no guarantee, so we're still going on faith that it all will work out.

Now, I'm always looking for ways to improve my plan, so if you see any gaping holes or potential problems -- or even things you agree with wholeheartedly -- please let me know in the comments section.