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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 6:25 am 

Joined: Wed Jan 23, 2013 6:42 am
Posts: 19
Thanks for the advice, folks. Based on what you said, I realize that I should take a look at the college savings and possibly redirect it into our e-fund. But I'm thinking that I must contribute at least $25 to the account (it's the Michigan Education Savings Program) as terms of the agreement.

Technically, the Home Savings and Car Savings are going into the same account as the e-fund and will only be spent when absolutely necessary. So those savings are a supplement to that account and I track the individual amounts for each category in a spreadsheet.

Yes, the debt makes me uncomfortable, but we're working on it.

We also just starting with the envelope system, so we are on a combination of debt reduction "diets."


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 9:45 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 855
I don't get the point of having all these various fund savings [sic]. It muddles what you are trying to do IMO. For one, say you have $20k cash that represents your e-fund, car fund, house sinking fund etc. And say your vehicle dies, you go out, and buy a vehicle for $10k, then you save up to get the fund back to where you need it be. What you're doing is, you're going to save $20k for another vehicle and then you spend $20k. Consider it all one, keep a balance which covers all your "emergencies" and then make decisions when you need to. In essence, the point of cash is flexibility. And you're making it more complicated than it needs to be.

At the end of the day, you need to get rid of the debt. If I had $5k which represented cash money that I could decide to use wherever I needed regardless of what you have earmarked it for, I would take a hatchet to the [consumer] debt and significantly reduce my savings rate. $5k isn't a lot, but it can get you out of a lot of binds. Reduce 401k to min to get match, all extra goes to debt, stop the college savings until you get the rest figured out. Rice and beans.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 10:05 am 

Joined: Mon Jan 28, 2013 9:06 am
Posts: 2
So the one thing that leaps out at me is your monthly mortgage payment. Unless you are being really aggressive with paying it off or your rate is out of sight, I can't make your stated numbers work. If it is a case of wanting to pay it down, you are doing that to the detriment of the rest of your finances right now. Do you have enough equity in the property to refinance at a better rate or a longer term?

As for your snowball amount, the student loans are relatively cheap (well the 2.75% one is) and tax deductible, so hold off on them for now. You need a bigger e-fund and to pay down the car and 401k loans. I don't know the interest rates on either, but I would lean towards knocking out the 401k loans first.

Lastly, I would question where do you see yourself in 5 years. You have a plan for reducing debt (yay!), but I don't get a feel that you have a plan for increasing your assets. Savings in your house sinking fund are just deferred consumption (see your list of projects). You will need to be ramping up your retirement savings/college savings.


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 11:12 am 

Joined: Wed Jan 23, 2013 6:42 am
Posts: 19
CES wrote:
So the one thing that leaps out at me is your monthly mortgage payment. Unless you are being really aggressive with paying it off or your rate is out of sight, I can't make your stated numbers work. If it is a case of wanting to pay it down, you are doing that to the detriment of the rest of your finances right now. Do you have enough equity in the property to refinance at a better rate or a longer term?


Our mortgage interest rate is 5.35% I believe. We currently pay PMI and our property taxes are included in that payment amount. We finalized this mortgage in early 2012 after blowing our credit to short sale our last house that was in the middle of a slum. We have zero equity because of the mess with the housing market.

CES wrote:
As for your snowball amount, the student loans are relatively cheap (well the 2.75% one is) and tax deductible, so hold off on them for now. You need a bigger e-fund and to pay down the car and 401k loans. I don't know the interest rates on either, but I would lean towards knocking out the 401k loans first.


401k loan is 3.25%. Car loan is 5.49%.

CES wrote:
Lastly, I would question where do you see yourself in 5 years. You have a plan for reducing debt (yay!), but I don't get a feel that you have a plan for increasing your assets. Savings in your house sinking fund are just deferred consumption (see your list of projects). You will need to be ramping up your retirement savings/college savings.


Well, I don't have a plan for increasing my assets besides continuing my existing contributions to our 401k plans because, at this point, I am focusing on debt reduction first. Yes, savings for the house sinking fund are definitely for things that I know we need right now but don't have the cash for or that will need in less than 10 years. So, I consider them mini hordes of cash to avoid digging further into debt. I figure that once the debts are paid, then we can ramp up the retirement savings. It seems so far away at this point that it's hard to estimate what that might look like. I know that we want to be able to travel with the kids, do some more extensive home improvements, retire comfortably, and help our children out with college costs. But how can I think about any of that while I also have $45K in consumer debt, plus a hefty mortgage payment and student loans on top of that?


Last edited by goodchap on Mon Jan 28, 2013 6:46 pm, edited 2 times in total.

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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 11:18 am 

Joined: Wed Jan 23, 2013 6:42 am
Posts: 19
Bichon Frise wrote:
I don't get the point of having all these various fund savings [sic].


To keep organized. To know how much I have available for things like replacing broken windows, buying trim to finish the floors, and picking up the random stuff we need to keep this place running, maybe buying a set of sheets or a picture every once in a while. Our home is pretty bare. It was built in 1974 and needs quite a bit of updating. When we moved in, we ripped up the disgusting wall-to-wall carpeting, including that which was in the kitchen and both bathrooms (ew), and installed clearance 12mm laminate wood flooring with the help of my step-dad. We're finally getting around to installing the baseboard, which needs to be done before we have a mobile infant who could get cut on the exposed metal mesh at the bottom of the plaster walls.

But yes, I understand what you're saying.


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 1:43 pm 

Joined: Mon Apr 25, 2011 7:37 am
Posts: 446
Gosh, if I could go back in time, I would have suggested that you rent until you could actually afford to buy. What I mean by that is not have to take a loan from the 401K for a downpayment, not have to pay 5+% in interest! from credit ratings, and avoid paying PMI because of lack of equity. It really does not put you in a very strong position. Ditto for car loan. So, there is less room for you to move in this situation, because of house and car situation.

If it is not possible to go back to renting, then again I would do what others suggest; stop college savings plans, just go to match for 401 (you need to pay that back!) stop specific funds for whatever but dedicate all spare funds to to paying down debts, starting with the ccs.


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 2:18 pm 

Joined: Wed May 30, 2012 11:56 am
Posts: 134
I think having different savings accounts is just fine, whether they're actually separate accounts or just tracked on a spreadsheet. I do the spreadsheet and the big thing for me is tracking my down payment fund (which shouldn't be touched) vs money for house projects, new laptop, etc.

One thing I'm wondering is, do you think it was a mistake to buy a house instead of renting? (oops, partygypsy posted while I was typing) I get that you had to move but was it worth taking out loans for the down payment and taking on extra projects and the related expenses to get the house up to snuff when you could have rented instead? Yes, it's done and there's no point getting beat up over it, but sometimes we get stuck in certain ways of thinking and the only way to break out of them is to recognize it, just like you acknowledged the car loan was dumb.

I also agree that the college savings should not be a priority. It's great when parents can help but not every kid goes to college (which isn't necessarily a bad thing) and many who have to pay their own way are extra proud of it when it's done.

I'd strongly recommend working at least 32 hours. Cutting back so that you no padding whatsoever... well, it'd scare me. So many expenses can go up - utilities, groceries - without a corresponding raise in pay. You don't have a lot in savings, if you had to dip into it for a car repair one month you wouldn't have time to rebuild it to cover the water heater breaking a few months later (or whatever emergency comes next). Both my parents worked full time for much of my childhood and we still had time to do family dinners, family hikes and bike rides on the weekends, my parents both coached some of our sport teams, if we wanted/needed help with homework they were there, all that sort of stuff, and there were 4 kids in my family. So I really don't think it's an either/or choice between working and having family time, you can choose both.

I'm not a DR fan and think it's perfectly acceptable to save while paying down debt. As you said, it helps you avoid getting back into further debt when emergencies pop up, ie the water heater explodes two months after a squirrel got into your engine causing an expensive car repair.


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Mon Jan 28, 2013 6:40 pm 

Joined: Wed Jan 23, 2013 6:42 am
Posts: 19
Yes, if I had to do it all over again...

I'd have gotten the hell out of my home state and moved to someplace warm all year 'round.

I'd have continued to rent and not have listened to my realtor who told me that buying a house would be a great investment and we'd be able to sell at a profit in 5 years. And then the market crashed and we lost money and our credit on a house that should have made $40k...

By the time we were able to sell that dump, we had better paying jobs (though i know not as supremely awesome as some of yours), and were feeling like we either needed to shit or get off the pot in terms of putting down roots here or getting out. Our entire family is here so it would have been pretty difficult to just up and leave. And the robberies and shootings were really a kick in the ass. So yeah...

I would have not been 6 months pregnant on my wedding day...

And on and on and on.

I imagine we all have regrets and those are some of mine. So yes, beating myself up about my current situation doesn't really do any good.

I think the college savings thing is my pretty weak initial attempt to save my daughters from the student loan debt I have. But perhaps they'd do just fine without the fund, since we'll be better able to educate them about options for their future and what it means to take out a student loan. My family had no idea how to help me. I was the first from my family to even think about going to a university. I was 16 when I enrolled. I missed out on scholarships as a result of opting out of my blow-off senior year, but frankly, I didn't even know what a scholarship was since I grew up in a pretty rural community. The home I grew up in sat on 5 acres and still only cost $25K and there were 24 people in my graduating class...

So moving on...

The good thing about switching to a 32-hr schedule is that I can change it at anytime or work more when I need to. The reduction in hours is optional and flexible. Writing all of this out has really helped me determine that this is the best option for us for the next few years. If I continued to work full-time, we could get all this done in less time, I realize that, but it's just not worth the stress to me right now.

Oh, and we do plan on being in this house for the rest of our lives. Not sure if that makes any difference.


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Tue Jan 29, 2013 8:12 am 

Joined: Mon Jan 28, 2013 9:06 am
Posts: 2
More quick thoughts on your monthly budget. I hope they are helpful-

-You are paying $100 a month for insurance on one car. When it's policy renewal time, you should look and see if you can get a better rate. Insurers tend to give the best quotes to new customers. Same with your home insurance.
-$165 for two cell phones? Are you really using that much data? Can you drop your tier to save some money? I'm not saying that you need a drastic cut here, but make sure that what you are paying for matches your actual usage.

I think you have a really good plan so far as getting the Visa paid off and even with cutting back to 32 hours, you should have a $500 snowball available from September on. What I think is bogging you down is planning on how to take care of the rest of the debt while saving for house needs. My short answer, $250 a month into the house/e-fund for when the furnace/roof/water heater goes and defer everything else that doesn't affect the habitability of your home. That's $90 from the $500 snowball added to the $160 you are already setting aside leaving $410 for debt service. Your car is your most expensive loan, so I would tackle it first. Doing that, I show it paid off in spring 2016, with the 401k loans following shortly there after. Only then would I begin working on the student loan at 5.75%.

As far as increasing your savings, if helping pay for college is something you value, I wouldn't stop the $50 unless that money is dollar for dollar going to debt paydown. You want to stay in the habit of saving. I would however counsel you to drop 401k contributions to only enough to get the match and use that money for increasing your snowball amount. Once your non-mortgage/student loan debt is gone, you will have ~$700 a month freed up to put towards college savings/retirement savings/home improvements.

All of this is doable and you're already on the right path. Good luck!


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Tue Jan 29, 2013 2:10 pm 

Joined: Wed Jan 23, 2013 6:42 am
Posts: 19
CES wrote:
You are paying $100 a month for insurance on one car. When it's policy renewal time, you should look and see if you can get a better rate. Insurers tend to give the best quotes to new customers. Same with your home insurance.
-$165 for two cell phones? Are you really using that much data? Can you drop your tier to save some money? I'm not saying that you need a drastic cut here, but make sure that what you are paying for matches your actual usage.


Yes, I will take a closer look at insurance rates. We made a claim on the home insurance in 2012 due to a massive freak toilet leak that destroyed our walk-out basement, and I think that somehow resulted in an auto insurance increase?

The cell phone bill will be reduced to about $140 next cycle. I had my mother on there, but she hardly used the data plan and gave me the phone back, so I dropped hers to just a basic talk/text line at $10/month, saving $25/month. My line expires with ATT in July, but I'm not sure what to do at that point. Drop my iPhone and use a basic talk/text phone for $10/month? I think our bill would be about $100 at that point. I wish I could convince my DH to do the same, or opt for a home phone and just use go-phones...any suggestions there would be appreciated.

CES wrote:
My short answer, $250 a month into the house/e-fund for when the furnace/roof/water heater goes and defer everything else that doesn't affect the habitability of your home.


I can go with that. Is it your advice to hold off on saving for any cosmetic home renovations until ALL the debt is paid?


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Tue Jan 29, 2013 3:06 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1977
What I do isn't a suggestion. I'm just illustrating what's possible.

My wife and I are on AT&T, shared family plan with 550 anytime minutes, unlimited M2M and weekend night minutes. We don't have a data plan.

Our bill last month was $56.59, all taxes and fees included. That includes a 25% discount from my company. You might want to send a note from your company e-mail address (or your husband's address) to see if you qualify for a discount. You can do this from https://www.wireless.att.com/business/authenticate/.

As of today, we have 7 days left in our billing cycle. We have 5,079 minutes available, including rollover minutes. As you can tell, we don't spend a whole lot of time on the phone.

My point in telling you all this is that lots of costs are a choice. Some of the things we think of as necessities didn't widely exist (like data plans) just a few years ago. They're conveniences, not necessities. You just have to decide where you most want your money to go. That's your call. But you need to see things in perspective to make the best choices.

BTW, why go back to a text/voice phone? You can still use the iPhone as one, and have data via WiFi when you have access to it.


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Tue Jan 29, 2013 4:03 pm 

Joined: Fri Jul 11, 2008 3:29 pm
Posts: 167
One thing about the iPhone is that I think ATT will require you to have a data plan. They won't let you use and iPhone with a basic talk plan. You could try tmobile if you are no longer under contract. They have much cheaper plans than ATT. Just a thought.


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Tue Jan 29, 2013 4:34 pm 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
You should check out the $10/month iPhone plan, as described by Mr Money Mustache:

http://www.mrmoneymustache.com/2012/10/11/our-new-10-00-per-month-iphone-plans/


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Tue Jan 29, 2013 5:55 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1977
emoore wrote:
One thing about the iPhone is that I think ATT will require you to have a data plan. They won't let you use and iPhone with a basic talk plan. You could try tmobile if you are no longer under contract. They have much cheaper plans than ATT. Just a thought.

I thought that was when you acquire one from them (and I freely admit that I might be wrong, since I don't have a smartphone myself). The OP already has one. It's hard for me to believe that they'd turn down a paying text/talk customer when alternative would be that they'd go somewhere else completely. Is that anywhere on their Web site?


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 Post subject: Re: Brand Spanking New! Goodchap's Fitness Journal
PostPosted: Tue Jan 29, 2013 7:28 pm 

Joined: Fri Jul 11, 2008 3:29 pm
Posts: 167
It's my understanding that they won't let you use a smartphone without a data plan even though you own it outright. This is based on a few friends experiences. You also can't use a Verizon iPhone on att even though they have the exact same hardware. Telecom companies make it as difficult as possible to leave.


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