Getting out of Debt: The Honda is Paid Off!

When you are trying to pay off close to $100,000 worth of student loan debt as quick as possible the last thing you want to do is have to take out another loan. But that's the situation we found ourselves in when we needed to buy another car to make room for Veronica.  

Brandon and I spent a lot of time debating whether we should buy a clunker car with cash or take out a loan to buy a more reliable vehicle.  Ultimately we decided to go with a car that we knew we had to make payments on rather than one that we'd always worry about what would break next.  In July we bought a 2004 Honda with a large down payment. We had a 42 month (3 1/2 year) loan with a monthly payment that we could afford.

I resigned myself to the fact that we'd be making those payments along with the student loan payments for the next 3 1/2 years.  Then, over Christmas, I decided that we should put most of our tax return money into paying off the Honda.  I didn't think we would get enough to fully pay it off, but I thought we could at least make a big dent in the loan.  I had plans to just save the refund until the size of the loan was small enough to just pay it off in one lump sum.  

And then I filed our taxes and found out we were getting A LOT of money back.  Somehow I'd never realized how military pay is set up tax wise.  The Basic Allowance for Housing (BAH) that pays for our home isn't taxable.  Furthermore, it doesn't count as income for the Earned Income Credit.  Based on the income that we do report on our tax return we look rather poor.  Factor in that we have four kids, and boom, we receive quite a bit of money from the Earned Income Credit and the Child Tax Credit.  

So much in fact that we could pay off the Honda and still have money left over.

I actually feel rather guilty that we receive so much.  But then I remember that my husband is in a foreign country for the next nine months.  Then I don't feel so guilty.  

Doing something responsible, like paying off a car loan, also helps me feel less guilty about the amount we received.  

Now that the Honda is paid off I hope to start funneling the amount we would have paid into extra payments on the smallest student loan.  By my calculations that one should be paid off around the time Brandon gets home.  

My only regret about paying off the car early is that I never made a debt pay off tracker for the car loan.  It would have been fun to rip off 36 squares all at once.  

Instead I took the kids out for ice cream cones at McDonalds.  Elder and Sister Coombs, our military relations missionaries, met us there to help with the kids.  

We enjoyed our ice cream cones and then the kids had a blast playing on the play ground.  I think we were there for over an hour.  I can't wait until we can come again to celebrate paying off the next loan, and the next, and the next.

PS I almost didn't write this post.  On one hand, I want to shout it from the roof-tops that our car is paid off three years early.  On the other hand, I don't want to seem like I'm bragging or acting like I'm better than anyone because we received so much money.  So please don't be offended. That isn't my intention.