Living Debt Free

I am toying with the idea of paying off my car with my 2008 federal tax refund. I have done some initial calculations and figured that I will be getting a refund of about $3,500 for my federal taxes and $1,200 for my state taxes. I have lowered my withholding amounts to be able to put more in my savings and 401k so my federal refund will be smaller next year. Still $3,500 is nothing to sneeze at.

If I pay off my car next Feb/March then I can put an additional $500 on my student loan every month and that would mean that my student loan would be paid off in June 2010. I consolidated my loans back in 2001 (before the interest rates dropped so much, unfortunately) and they are on a 15 year repayment plan. My income is too high to deduct any of the interest so it is definitely in my best interest to go ahead and pay them off as soon as possible.

I am looking forward to the day when the only debt I have is a mortgage.