Strategy

A couple of weeks ago I wrote about our plummeting finances and both cars breaking down. While none of this is pleasant, and mostly I wanted to throw myself on my bed and be depressed, it has been a good lesson. There are many decisions we made that are still excellent ones. Primarily this: we did not take out all of the equity on our house, and used most of the money on actual repairs. We still have $50,000 in equity on the house and have paid down our primary mortgage by $8,000 in three years, mainly by putting just $35-50 extra a month on our payment.

Secondly, most of our debt is in student loans that we refinanced at the bottom of the interest drop with a non-adjustable rate for the life of the loan. Eighty percent of our student loans have an interest rate of 3.47%; we have one loan at 5% and one small loan at 6.7%. Our credit card debt is down to $5,000.

We rented out the guesthouse behind our house, finally, after a lot of repairs and sweat equity. In the spring, I can rent it out weekly during the Gem and Mineral Show in Tucson and make nearly $1000 a month for it.

I quit my job, which cut down our costs for food, transportation and daycare, and which allowed my husband to go back to school. The G.I. bill more than makes up for my salary.

While taking out $45,000 in equity on the house was hard, we were desperate to make repairs, and there were several big-ticket items that we simply had to address. I hate what it's done to our finances, but there it is.

Our strategy now: hunker down and pay it back. We are focusing on the home equity loan first, as it has the highest interest rate. We are continuing to pay down the credit card, but it was actually a loan with a fixed rate of 3.99%, so we decided to keep it rather than take out more equity on our house and pay it off. Once that is paid, we can focus on paying down the mortgage. During this time, I want to save $5,000 in an emergency fund as well.

Time to tighten the belt...