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It is currently Thu Aug 21, 2014 7:00 pm




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 Post subject: Rimu's Fiscal Accountability Journal
PostPosted: Sat May 03, 2014 4:57 am 

Joined: Sat May 03, 2014 4:45 am
Posts: 8
I've been reading through the Fiscal Fitness Journals on this site for a number of weeks, and finally decided that this would be a good idea to keep me "publically" accountable for our financial goals.

At the current moment, we make a very good salary and are financially comfortable. My husband is employed by our town, and I work for a law firm. If any of you know anything about the legal market these days, I can tell you...its not great! There is a lot of job insecurity. So while things are going well today, there is a good chance that that won't always be the case. While things are on the up, I figured we should double down on putting ourselves in as secure a position as possible.

A little background -- we have two kids under the age of 4 and therefore have to pay a significant amount towards childcare every month ($1,800+ / month). I also have significant student loans (just over $55,000.00 left to pay). Both of our cars are fully paid for (and have been so for a long time) -- unfortunately, one of the cars will need to be replaced soon because there are safety concerns about having the kids in that car for any significant period of time). Our only other debts is $600 left on a 0% interest CC ; $3,100 (0% interest) left on a new HVAC unit we had to purchase due to a CO2 leak, and $215,000 left on our mortgage (~ $1,500 / month payment). That is the debt side of the house.

Perhaps unsurprisingly, the Student Loans are what REALLY bother me, but I never know if I am focused on them to my detriment. In other words, would our money be better spent building up savings or reducing student loan debt? I still don't know the answer, so I've decided to try and work on both simultaneously so that I am knocking the debt down while still building up our savings / security. (looks like I ran out of room!)


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Sat May 03, 2014 5:07 am 

Joined: Sat May 03, 2014 4:45 am
Posts: 8
So here are our goals:

Pay off Student Loan # 1 -- $2,309 left tto pay
Build Son's College Fund up -- $2,000 added to his 529
Rebuild Short-Term EF -- build back up to $4,000 (at $1,000 currently)
Pay off Student Loan # 2 -- $5,467 (to be paid off by May 2015)

The thing that I cannot decide on is whether we should delay paying off the student loans while we save for a down payment on the new car, or whether we should knock out the student loans (because they can't be discharged in bankruptcy if everything falls apart) and just take out a lower interest auto loan. Thoughts? Regardless, this is the plan for now, we'll see how it goes!

Oh -- I don't want to give exact figures, but we already have an 8 month long-term emergency fund, we have a good amount in retirement accounts, and we've saved about $20,000 for our kids' college funds (that we can tap if I lose my job and can't find another one for a significant period of time).


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Mon May 05, 2014 9:43 am 

Joined: Tue Oct 29, 2013 2:14 pm
Posts: 133
Hey Rimu, welcome!

I'm currently working on paying off student loans as well, so I understand hating that dark cloud over your financial world. A few things I'd consider...

What are you interest rates on your student loans? If they're still fairly low, I'd consider holding off on putting everything towards them if you have other pressing matters.

I totally understand you wanting the safest and best possible car for your kids, but instead of going new, have you considered used? Find the make and model of a car you like and go back a few years. I'm not saying get a $1000 junker, but buying a used car in good condition is financially a much better move than getting a new one, and you don't necessarily have to sacrifice safety.

I'm not in the law field, so I'm not sure how secure you feel your job is. I'm assuming your 8 month EF would cover you and your family if you had 0 income, correct? If your husband's job is secure, I would say your EF is fine. Strictly my opinion though - you need to do what you feel comfortable with.

I personally have no experience with saving for a child's college fund, so I'm going to let the others handle that aspect.

It seems like you're already in great shape! Keep it up and continue posting!


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Wed May 07, 2014 5:55 am 
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Joined: Thu May 17, 2012 10:05 am
Posts: 995
Rimu121508 wrote:
The thing that I cannot decide on is whether we should delay paying off the student loans while we save for a down payment on the new car, or whether we should knock out the student loans (because they can't be discharged in bankruptcy if everything falls apart) and just take out a lower interest auto loan. Thoughts? Regardless, this is the plan for now, we'll see how it goes!


So here’s a summary of you situation.

You have 8 months in your long-term e-fund saved up. Your job is not stable.

Monthly expenses:
$1800 on childcare
$1500 mortgage payment

Debts:
215k Mortgage balance
55k Rimu Sudent Loan
3100 CC at 0% interest
600 CC at 0% interest

Expense in the near future:
New/used reliable vehicle


*Car Vs SL Dilemma
As far as the car goes it really depends on what your credit is like. Your credit seems to be decent.

Will you likely qualify for a no interest loan on a car?

What would be the price difference between paying cash for said vehicle or financing it (even at no interest there’s a premium on the cost I’d assume)?

Are your student loans primarily federal loans? What’s the interest on the accounts?

_________________
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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Sun May 11, 2014 6:39 pm 

Joined: Sat May 03, 2014 4:45 am
Posts: 8
Thanks for your replies and questions -- in the last week we've had some big developments, so I'll update that (while my stress levels are through the roof!)

We found a 2013 SUV that met all of our needs in terms of safety features and size (i.e. a third row). We wanted to go this route because we keep cars for a long time, and so we were forecasting our potential needs 10 years into the future (God willing). Its a brand new vehicle offered by a client of mine -- so we got a really good deal -- although the interest rate was not what I was hoping for 2.9% (based on DH's credit only (although both of us have very good credit scores)). The problem, of course, is the additional debt -- ~ $24,0000. OUCH! But now we don't need to use our truck to take the kids every where, the gas mileage will be better, and DH (and my entire extended family) no longer worries about the kids being in a really old Corrolla without airbags or anti-lock brakes! (Although it is probably an even trade for me because I have the increased stress relating to the debt!) The payment is about $450.00 a month (same as our last car payment, which we easily handled)

To get better advice, I thought maybe some more info may be in line. I will preface this by saying, that while I believe we have done a pretty good job in handling our finances, I absolutely know we can do better and that we waste WAY too much money. I'm hoping that writing things down will force me to do better -- and I also hope that there will be no more medical emergencies, which have eaten up more than $20,000 in funds over the last few years.

Income (after withholdings) -- ~ $8,600
(this takes into account the $1,000 plus we have to pay for health insurance; the $1,500+ we save for retirement through work, etc.)

Savings:
$40,200 (long-term EF)
$3,700 (Disney Vacation Fund -- for some undetermined point in the future)
$1,020 (short-term EF)
$5,000 (Daughter cash savings)
$1,000 (Son Cash savings)
$16,500 (Daughter 529)
$1,500 (Son 529)

Retirement accounts are in good shape (plus DH will get a $2,000 / month pension when he retires (assuming he serves the full 30 years))

Debt:

$55k total student loan. Of this $42,000 are Federal (interest rate at 5.25% I believe, payment is $383/ month, although I pay $450. These loans are prepaid 15 months in advance). The remaining $13,000 are private, with variable interest rate currently at 3.25%. Required payments are $50 X 3 separate loans ($150). I pay the minimum on two and pay $210 on the third (which has a remaining balance of $2,300).

$3,100 HVAC debt -- $100/ month 0% interest.

The car.... $450 / month payment at 2.9% interest. We plan on paying $500.00 a month. [Traditionally, I have always aimed to prepay my revolving accounts by 12 months. Not sure that is capable at this point....]

Now -- the issue that I am struggling with is where do we focus our energy. I feel like our cash savings could do with a boost, especially in light of the increased debt. So I have a couple of ideas.

Rebuild our Short Term EF by $1,000. Then focus on knocking out the lowest student loan, followed by the HVAC (even though it is 0% interest -- its a $100 a month required payment, so if the job is lost, its a payment we would no longer have to worry about). I'd ten focus on knocking out the remaining private loans, and leave hte car payment to just a hair over minimum payments.

Alternatively -- throw everything at the car.... Thoughts? I HATE debt, so the car is bothering me to a point, but I too feel MUCH better having out kids in a safer more reliable car (not to mention myself -- I drive a lot for work and always was worried about breaking down on a back country road. LOTS to think about!!!


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Mon May 12, 2014 10:27 am 

Joined: Tue Oct 29, 2013 2:14 pm
Posts: 133
Rimu121508 wrote:
Income (after withholdings) -- ~ $8,600
(this takes into account the $1,000 plus we have to pay for health insurance; the $1,500+ we save for retirement through work, etc.)

Savings:
$40,200 (long-term EF)
$3,700 (Disney Vacation Fund -- for some undetermined point in the future)
$1,020 (short-term EF)
$5,000 (Daughter cash savings)
$1,000 (Son Cash savings)
$16,500 (Daughter 529)
$1,500 (Son 529)

Retirement accounts are in good shape (plus DH will get a $2,000 / month pension when he retires (assuming he serves the full 30 years))

Debt:

$55k total student loan. Of this $42,000 are Federal (interest rate at 5.25% I believe, payment is $383/ month, although I pay $450. These loans are prepaid 15 months in advance). The remaining $13,000 are private, with variable interest rate currently at 3.25%. Required payments are $50 X 3 separate loans ($150). I pay the minimum on two and pay $210 on the third (which has a remaining balance of $2,300).

$3,100 HVAC debt -- $100/ month 0% interest.

The car.... $450 / month payment at 2.9% interest. We plan on paying $500.00 a month. [Traditionally, I have always aimed to prepay my revolving accounts by 12 months. Not sure that is capable at this point....]

Now -- the issue that I am struggling with is where do we focus our energy. I feel like our cash savings could do with a boost, especially in light of the increased debt. So I have a couple of ideas.

Rebuild our Short Term EF by $1,000. Then focus on knocking out the lowest student loan, followed by the HVAC (even though it is 0% interest -- its a $100 a month required payment, so if the job is lost, its a payment we would no longer have to worry about). I'd ten focus on knocking out the remaining private loans, and leave hte car payment to just a hair over minimum payments.

Alternatively -- throw everything at the car.... Thoughts? I HATE debt, so the car is bothering me to a point, but I too feel MUCH better having out kids in a safer more reliable car (not to mention myself -- I drive a lot for work and always was worried about breaking down on a back country road. LOTS to think about!!!


Lots of people like to push for the debt snowball method, which I agree with. I'm not saying you're in major debt, but you have many little loans here and there. The snowball method recommends that you pay the minimums on everything except for your highest debt, where you put all of your extra money. This happens to be your largest student loan.

That's the method that, financially, makes the most sense, and you'll save the most money in the long run. However, it can be a little disheartening when your highest interest debt is also your largest because it's difficult to see the progress. Dave Ramsey recommends a similar method: pay the minimum on all your debts and put all of your extra money towards the loan with the lowest principal. You will occur more interest over the long run, but psychologically it's much easier to see your progress, and people tend to slip up less.

My one caveat - I'm assuming your HVAC system's interest rate of 0% will expire at some point in the not-so-distant future (probably in a year or so?). That's a low balance - I would definitely make sure to pay that off before interest kicks in.

It's tempting to throw everything at the car right now because it's the newest debt: you've been living with your other debt for a while and have gotten used to it. I really recommend tackling your largest student loan first. The principal is larger and the interest rate is more. You'll occur more costs over your SL in the long ran than your car debt.

While you should always be saving some of your paycheck (I recommend at least 10%), it doesn't really make sense to increase your savings more when you just added more debt. Unless you found a savings account or any sort of investment that guarantees 7% interest. In which case, please share :)


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Mon May 12, 2014 11:02 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1718
Location: Ottawa, Canada
Lis wrote:
The snowball method recommends that you pay the minimums on everything except for your highest debt, where you put all of your extra money. This happens to be your largest student loan.


Minor correction: the Snowball Method recommends paying the minimums on everything but your smallest debt, not the biggest one. You have it exactly backwards. The idea being that the early successes motivate you to keep going.


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Mon May 12, 2014 2:39 pm 

Joined: Tue Oct 29, 2013 2:14 pm
Posts: 133
kombat wrote:
Minor correction: the Snowball Method recommends paying the minimums on everything but your smallest debt, not the biggest one. You have it exactly backwards. The idea being that the early successes motivate you to keep going.


Whoops, messing up what things are called. But my recommendation stays the same. What makes most financial sense is to put everything you have towards your SL with the highest interest and work your way down from there. However, if you're worried that you'll slip up, you might have more success paying off the loans with the lowest balance first.


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Mon May 12, 2014 5:48 pm 

Joined: Sat May 03, 2014 4:45 am
Posts: 8
Thanks for the comments.

Normally, I would agree that attaching the debt with the highest interest rate makes the most sense. However, in this case the highest debt is a Federally-backed student loan, which means that if everything goes bad, I can defer and/or pursue other options that will allow a more flexible approach to paying off the debt. The private student loans don't allow for that AND they have a variable interest rate. So if interest rates begin to rise, it will cost me more over time to pay it back.

My focus on the private student loans is also related to all the awful things you hear about private student loan providers. In the seven years that I have been paying on these loans, they have been transffered to three different providers. Not fun to keep up with, so I want them GONE.

The HVAC is actually $100 / month at 0% interest until it is paid off, so I don't need to worry about paying it off by a date certain or risk owing all of the interest.

One thing I should note is that while my job is not particularly secure, there is very high likelihood that I will be given a long notice period in which to find new employment. The last person at our firm who was asked to leave was provided with an entire year to find a new job. So that's comforting, but there is no guarantee that they will be so patient again.


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Tue May 13, 2014 12:06 pm 
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Joined: Thu May 17, 2012 10:05 am
Posts: 995
Rimu121508 wrote:
Thanks for your replies and questions -- in the last week we've had some big developments, so I'll update that (while my stress levels are through the roof!)

We found a 2013 SUV that met all of our needs in terms of safety features and size (i.e. a third row). We wanted to go this route because we keep cars for a long time, and so we were forecasting our potential needs 10 years into the future (God willing). Its a brand new vehicle offered by a client of mine -- so we got a really good deal -- although the interest rate was not what I was hoping for 2.9% (based on DH's credit only (although both of us have very good credit scores)). The problem, of course, is the additional debt -- ~ $24,0000. OUCH! But now we don't need to use our truck to take the kids every where, the gas mileage will be better, and DH (and my entire extended family) no longer worries about the kids being in a really old Corrolla without airbags or anti-lock brakes! (Although it is probably an even trade for me because I have the increased stress relating to the debt!) The payment is about $450.00 a month (same as our last car payment, which we easily handled)

To get better advice, I thought maybe some more info may be in line. I will preface this by saying, that while I believe we have done a pretty good job in handling our finances, I absolutely know we can do better and that we waste WAY too much money. I'm hoping that writing things down will force me to do better -- and I also hope that there will be no more medical emergencies, which have eaten up more than $20,000 in funds over the last few years.

Income (after withholdings) -- ~ $8,600
(this takes into account the $1,000 plus we have to pay for health insurance; the $1,500+ we save for retirement through work, etc.)

Savings:
$40,200 (long-term EF)
$3,700 (Disney Vacation Fund -- for some undetermined point in the future)
$1,020 (short-term EF)
$5,000 (Daughter cash savings)
$1,000 (Son Cash savings)
$16,500 (Daughter 529)
$1,500 (Son 529)

Retirement accounts are in good shape (plus DH will get a $2,000 / month pension when he retires (assuming he serves the full 30 years))

Debt:

$55k total student loan. Of this $42,000 are Federal (interest rate at 5.25% I believe, payment is $383/ month, although I pay $450. These loans are prepaid 15 months in advance). The remaining $13,000 are private, with variable interest rate currently at 3.25%. Required payments are $50 X 3 separate loans ($150). I pay the minimum on two and pay $210 on the third (which has a remaining balance of $2,300).

$3,100 HVAC debt -- $100/ month 0% interest.

The car.... $450 / month payment at 2.9% interest. We plan on paying $500.00 a month. [Traditionally, I have always aimed to prepay my revolving accounts by 12 months. Not sure that is capable at this point....]

Now -- the issue that I am struggling with is where do we focus our energy. I feel like our cash savings could do with a boost, especially in light of the increased debt. So I have a couple of ideas.

Rebuild our Short Term EF by $1,000. Then focus on knocking out the lowest student loan, followed by the HVAC (even though it is 0% interest -- its a $100 a month required payment, so if the job is lost, its a payment we would no longer have to worry about). I'd ten focus on knocking out the remaining private loans, and leave hte car payment to just a hair over minimum payments.

Alternatively -- throw everything at the car.... Thoughts? I HATE debt, so the car is bothering me to a point, but I too feel MUCH better having out kids in a safer more reliable car (not to mention myself -- I drive a lot for work and always was worried about breaking down on a back country road. LOTS to think about!!!


Yes, that does give us a clearer picture of where you're coming from.

So your take home income is 8.6k. What are your monthly expenses (with minimum payments towards the debts)? Seems like you would have a significant amount left over to tackle the debts...

42k in your long term e-fund seems like a good, solid amount. I'd tackle the private loans first and then the rest of the gov loans. Then after that I'd finish up with the car.

_________________
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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Sun Jun 08, 2014 3:50 am 

Joined: Sat May 03, 2014 4:45 am
Posts: 8
Wow -- so its been a month since I posted, perhaps that is why I can't seem to get going on my goals....hmmmm...

So after much thought, angst and worry my plan for the remaining 6 months of the year is as follows:

1. Pay off Student Loan # 1
2. Save an additional $1,000 in my emergency fund
3. Save an additional $1,000 for my son's 529 Account
4. Pay Down Student Loan # 2 to $3,000

I'm going to tackle the Debt Pay Off and Saving Goals at the same time by splitting any let-over funds from our budget 50-50 between the two goals. This will include payments I get from my Dependent Care Reimbursement Account, which pays us back $416 / month. At one point in time this was 100% dedicated to the kids college funds -- due to various events (mostly medical), that hasn't been the case for a couple of years. I'm hoping that in 2015 we can start redirecting that money to college savings....

Here's where we are for the first two goals:

Student Loan #1 has an outstanding balance of $2,099. Next week I will be making a payment of $350.00

Short Term Emergency Savings Account has $1,056. I'm not sure what I'll be able to put aside in the last two weeks of June (We're still re-jiggering our budget due to the new car payment).

I feel better having just two small goals to focus on, I've been feeling very overwhelmed lately since all of the finances in our house fall on me.... and to top things off I just found out that 4 attorneys in our firm are about to give their notice and move to another firm. Starting to feel like I'll be one of the last ones on board the Titanic when it goes down....all the more reason to buckle down on the finances in case that does, in fact happen. Sigh....


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Tue Jun 10, 2014 5:25 am 
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Joined: Thu May 17, 2012 10:05 am
Posts: 995
Rimu121508 wrote:
I feel better having just two small goals to focus on, I've been feeling very overwhelmed lately since all of the finances in our house fall on me.... and to top things off I just found out that 4 attorneys in our firm are about to give their notice and move to another firm. Starting to feel like I'll be one of the last ones on board the Titanic when it goes down....all the more reason to buckle down on the finances in case that does, in fact happen. Sigh....


Yes, I agree a few goals that you can focus in on are a good idea. We've recently done this ourselves to simplify our finances.

Given what you say above perhaps it's time to dust off the old resume and start looking for a new job?

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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Sun Jun 22, 2014 6:18 am 

Joined: Sat May 03, 2014 4:45 am
Posts: 8
Eagle:

I dusted off the resume over a year ago and have been looking to leave, but the legal market is not the best if you don't have a book of business to bring with you, which I do not have... I've got applications in for some in-house opportunities and was recruited for a government job, but that would have involved a 50% pay cut, so that was a no go.

I'm going to keep looking while working with my current firm to try and turn things around. Hopefully it will all work out in the end!


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 Post subject: Re: Rimu's Fiscal Accountability Journal
PostPosted: Sun Jun 22, 2014 6:25 am 

Joined: Sat May 03, 2014 4:45 am
Posts: 8
Progress has been slow, but I'm feeling really good about the direction we are moving in. We had some unexpected medical and HVAC repair expenses, but we were able to handle those without incurring more debt or dipping further into savings.

So to keep the focus on my two immediate goals:

Student Loan # 1 is down to $1848.00. I will make another payment next week of $150.00.

ST Savings Account is at $1,192.00 and I will also make a deposit of $150.00 into this account next week when I receive our Dependent Care Account reimbursement check.

Our net worth has gone up $15,000 in the last several weeks thanks to moves in the stock market, which makes me feel even better (even though it is subject to swings in the market--I'll take what I can get!).


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