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 Post subject: Righting the Ship
PostPosted: Mon Mar 28, 2011 8:53 am 

Joined: Mon Mar 28, 2011 8:24 am
Posts: 12
Almost two years ago my wife and I split - we were 30 at the time, and were high school sweethearts. I was the saver, but with her as a spender I exited the divorce roughly $15K in debt and with sole responsibility of mortgage on an underwater house. The only real asset I had to my name was my 401(k).

I've gone through multiple phases of learning to live on a single income:
1. Simply taking stock of what's coming and going out. We always had plenty of money, so I honestly never paid much attention; something was due, it got paid. This phase was frustrating, because every time I thought I had a handle on it something else cropped up.
2. Aggressively cutting spending. There was a ton of fat ready to be cut, with very little changes in the way of lifestyle. This phase was extremely rewarding. It helped immensely that my friends were doing the same. "Keeping up with the Joneses" meant cutting cable, making repairs that lowered bills, and anything else to minimize spending.
3. Saving and paying down debt. This is where I am now. By my 34th birthday later this year I should have everything but my car, HELOC, and mortgage paid for and $10K in my emergency fund. A year after that the car should be paid off, a year after that the HELOC.

I've also learned to roll with the punches. Last year I (unexpectedly) had to spend roughly $10K on my home; the roof needed to be replaced and the A/C needed significant repair. I had to tap the HELOC to pay for it all, but I've already paid back half of it.

My goal here is to get into a position where I'm not underwater on the home anymore and otherwise debt free. Paying off the HELOC should get me there, so we're looking at a roughly two and a half years to get there. It feels so far away, and frankly I get discouraged frequently. I have to tell myself to keep my head down, and to give myself credit for what I've done already; paying down debt, finally having an emergency fund, continuing to contribute to my 401(k) through all of this.


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 Post subject: Re: Righting the Ship
PostPosted: Mon Mar 28, 2011 10:29 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1094
Quote:
I was the saver, but with her as a spender I exited the divorce roughly $15K in debt and with sole responsibility of mortgage on an underwater house.


Out of curiosity, were these debts solely yours, hers, or joint?

It sounds like you are on the right track to debt freedom & making a better life for yourself. Hang in there & don't get discouraged.


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 Post subject: Re: Righting the Ship
PostPosted: Mon Mar 28, 2011 10:59 am 

Joined: Mon Mar 28, 2011 8:24 am
Posts: 12
They were essentially debts accrued in the process of splitting up.

Lawyer was expensive for an uncontested divorce with no children. I make quite a bit more than she does but in her job she had access to some pretty powerful people. I got the best lawyer I could find.

Then there was money that I gave her to just go away. We had substantial equity in the house at the peak of the market, and in her mind she was entitled to half of it. She was completely unable to process that something that used to be a significant asset had become a liability. In her mind I was stealing money by taking the house, not letting her out of her share of a liability.

I took heat from my lawyer for writing my ex a check to walk away, but frankly my ex felt like she had nothing to lose, and keeping it out of court was better for my mental well-being, and likely my wallet as well.

That's really all behind me know though. I've accepted my present life, feel blessed by it, and I know that past life won't come back to haunt me (confirmed by a credit report and an inquiry at the county clerk of courts haha).


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 Post subject: Re: Righting the Ship
PostPosted: Mon Mar 28, 2011 11:07 am 

Joined: Mon Mar 28, 2011 8:24 am
Posts: 12
As far as getting discouraged, it just feels like every month I tell myself that next month will be better, but every month is just as tough as the one before it.

I'm hitting my savings and debt repayment goals every month, but man is the money in my checking account tight. It's primarily because I'm being very aggressive, and I should pat myself on the back for hitting my goals month after month, but it'd be nice to relax a bit.

Then I remember that I have personal reasons for trying to get the house / mortgage back in the black ASAP, and I keep my foot down.


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 Post subject: Re: Righting the Ship
PostPosted: Mon Mar 28, 2011 1:01 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
I know what you are going through! BUT You cannot beat yourself up any longer about anything.

Set your goals, if life happens and it doesn't work out how you planned it; then be fluid about it and get a new plan of action.

Being hard on yourself, serves no purpose. Easier said than done, but take it from a stranger who's very hard on herself; and just do it!

Your doing great!

_________________
Be what you want to attract.


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 Post subject: Re: Righting the Ship
PostPosted: Tue Mar 29, 2011 6:28 am 

Joined: Mon Mar 28, 2011 8:24 am
Posts: 12
Thanks for the encouragement!

Here's what I've been working with:

Monthly income (after health care & 8% 401k deferral):
Salary - $4120

Monthly expenses:
Mortgage - $1590
Power - $120 (usually much less, but I budget worst case for summer in FL)
Water - $60
Internet - $50
Mobile - $70

Debt repayment:
Auto - $390
HELOC - $300 ($40 minimum, extra to principal)
Student loan - $200 ($125 minimum, extra to principal)

Savings:
Emergency fund - $500
Irregular bills - $125 (auto insurance, registration renewal, gifts)

I spend about $200 / month on gas and another $200 on groceries. That leaves me a little bit of money to have some kind of social life.

Right now my emergency fund sits at $8K. I'm taking that $500 / mo and paying off a 401k loan that's lowering my net income, but after that's paid off I need to adjust my witholding; the net result is that my take home pay will stay roughly the same.

With that done in May I'm moving that $500 / mo to paying off my student loan. It'll only take until August to do that. In August I'll get one of my two yearly "unbudgeted" checks; I budget for two checks a month, but get 26 checks a year. That money will go directly into my emergency fund and let me hit my target of $10K.

I've planned beyond that but I'll stick to short term goals for now.

I know there are some things I'm doing sub-optimally. That's typically for my mental health.
- Paying off my student loan early; it's a small balance now (~$2000), and it's one less bill to worry about when it's done.
- Paying extra principal towards the HELOC while paying off other debt; mentally I have to see that balance creeping down, even slowly.


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 Post subject: Re: Righting the Ship
PostPosted: Tue Mar 29, 2011 2:48 pm 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1140
Location: Maryland
I agree with the others. Considering all that has happened, you are on the right track and moving forward with great success. Thanks for writing, and I hope to hear more.


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 Post subject: Re: Righting the Ship
PostPosted: Fri Apr 01, 2011 5:51 pm 

Joined: Sat Feb 12, 2011 5:47 pm
Posts: 87
Location: Ontario, Canada
Yep, sounds like you've got a good plan. It's hard, but keep at it. It will feel great once that student loan is paid off.

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Kate


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 Post subject: Re: Righting the Ship
PostPosted: Tue Apr 05, 2011 10:29 am 

Joined: Mon Mar 28, 2011 8:24 am
Posts: 12
Got a small raise yesterday - I was expecting it, and was hoping to simply up my retirement savings by the same amount but I could really use a little more spending money. I'm really cutting it close on my checking balance - it got down to $1 the day before my last payday. Too stressful.

Not expecting anything to change on the financial front for about six weeks, when I'll pay off my 401k loan (early). Really looking forward to that!


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 Post subject: Re: Righting the Ship
PostPosted: Tue Apr 05, 2011 10:53 am 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
Can you split the raise between 401k allocation and spending? If so I recommend that. When it was announced that social security tax would decrease by 2% this year,I made sure to amp up my deferred comp. savings amount instead of spending that extra cash.

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 Post subject: Re: Righting the Ship
PostPosted: Tue Apr 05, 2011 11:09 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1094
WheresTheLight wrote:
Got a small raise yesterday - I was expecting it, and was hoping to simply up my retirement savings by the same amount but I could really use a little more spending money. I'm really cutting it close on my checking balance - it got down to $1 the day before my last payday. Too stressful.

Not expecting anything to change on the financial front for about six weeks, when I'll pay off my 401k loan (early). Really looking forward to that!


Yay. Good for you. Raises & bonuses are good no matter how small.


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 Post subject: Re: Righting the Ship
PostPosted: Tue May 17, 2011 6:00 am 

Joined: Mon Mar 28, 2011 8:24 am
Posts: 12
Well, one thing I'm sure I'll get positive feedback on is that I paid off my 401(k) loan yesterday. I won't see an increase in take-home pay this year because I need to adjust my withholding now, but at the start of next year this should mean an extra $100 / month.

One thing I'll probably catch some flak for... I bought a motorcycle. I've wanted one since I was in college (10+ years ago), and I actually had some money set aside to purchase one next February. What drove me to purchase it early was that the prices on used beginner motorcycles are going up, as beginner bikes typically get great gas mileage as well. I bought used, I paid for it with cash, it's fully insured, and I haven't bought into the false economy of "I'll save so much money on fuel". My reserach told me that the fuel savings will be offset with insurance and maintenance. I'm also protecting myself as well, since getting injured would be bad for the pocketbook; I completed a motorcycle safety course, and only ride in head to toe safety gear.

So the next step is paying off my student loans early; that should be done on August 5th. My emergency fund will be back to being fully funded in February, and after learning that we're trying to hire 50+ people and we're booked on orders into 2015 my job situation doesn't seem as frightening as it has in the past few years.


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 Post subject: Re: Righting the Ship
PostPosted: Tue Aug 09, 2011 6:24 am 

Joined: Mon Mar 28, 2011 8:24 am
Posts: 12
Just submitted the last payment towards my student loans. Took an extra couple of days because CitiBank decided to transfer my loan to Sallie Mae the day after I had the last payment scheduled.

Next month I'll start making $1000 / month car payments to pay my five year note off three years early. I've got an idea that would have my HELOC paid off in the same time, but I've got a year to sit on that one. For the next year the focus will be on getting the car paid off.


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 Post subject: Re: Righting the Ship
PostPosted: Sat Aug 20, 2011 6:09 pm 

Joined: Sat Feb 12, 2011 5:47 pm
Posts: 87
Location: Ontario, Canada
Sounds like you are still on track and the motorcycle purchase was done as responsibly as you could. I'm having similar "issues" with balancing paying off debt and saving with also living enjoyably now.

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Kate


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 Post subject: Re: Righting the Ship
PostPosted: Mon Aug 22, 2011 5:45 am 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
What about fun? Where's the budget for that?

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