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It is currently Mon Dec 22, 2014 5:50 pm




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 Post subject: Path to freedom
PostPosted: Wed Feb 26, 2014 10:30 am 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
Well figured I'd use this as a way to track my path to debt freedom, early retirement, and a general overall happy life.

Starting Point:
Mortgage: $302,175.90
Car Loan: $12,011.14

CC #1: $6,400 - 0% APR until April 2015
CC #2: $1,000 - 12.99% APR
CC #3: $500 - 0% APR until June 2015
CC #4: $4,950 - 0% APR until Feb 2018
Total CC Debt: $12,850

Emergency Fund: $2,500 (weak sauce, I know)
Ring Fund: $1,600
401k: $4,700 (currently contributing 6% w/ match)

2014 Goals:
Max out 401k contirbutions (unless it makes sense to focus on getting debt free first?)
Max out IRA contributions (same)
Pay off CC 1,2,3
EF - $10,500
Ring Fund: $7500

27 (soon to be 28) to give you an idea on where I am in my retirement and where I need to go. Just accepted a new offer with a sizable bump in pay and my lady might be moving in which would yield additional income due to split bills.

Any thoughts on all this would be greatly appreciated.

Key Questions:

Should I focus on maxing out retirement accounts or clear off more debt?
When should I start making additional payments on the mortgage?
I should be getting $4k for unused vacation when leaving my current company - 2k will be used for taxes, and I have an additional ~2k to use - would this be best for EF or for paying off 0% debt (should have CC with 12.99% APR paid off by next month anyways).


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 Post subject: Re: Path to freedom
PostPosted: Wed Feb 26, 2014 2:21 pm 
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Joined: Thu May 17, 2012 10:05 am
Posts: 1150
LiquidMercury wrote:
Well figured I'd use this as a way to track my path to debt freedom, early retirement, and a general overall happy life.

....

Any thoughts on all this would be greatly appreciated.

Key Questions:

Should I focus on maxing out retirement accounts or clear off more debt?
When should I start making additional payments on the mortgage?
I should be getting $4k for unused vacation when leaving my current company - 2k will be used for taxes, and I have an additional ~2k to use - would this be best for EF or for paying off 0% debt (should have CC with 12.99% APR paid off by next month anyways).


Welcome to the forums! :hai:

Questions:
1. What is your monthly net income after taxes, health insurance, et.? (Or what will it be with the new position?)
2. What are your total monthly expenses?
3. What % does your company match in your 401k?
4. What is the interest rate on your mortgage and your car loan?
5. What is your fiancé’s monthly net income after taxes, health insurance, et.??
6. What does your fiancé’s debt(s) and asset(s) situation look like?
7. Why so much CC debt? Did you buy a bunch of items for your home with 0% interest?
8. What is your goal as far as the ring fund goes?

As far as the 2k from the unused vacation… Personally 2.5k in a your e-fund sounds really low.

Welcome again to the forums! You’ve come to the right place. :cool:

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~ Eagle


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 Post subject: Re: Path to freedom
PostPosted: Wed Feb 26, 2014 3:13 pm 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
Eagle wrote:
Welcome to the forums! :hai:

Questions:
1. What is your monthly net income after taxes, health insurance, et.? (Or what will it be with the new position?)
2. What are your total monthly expenses?
3. What % does your company match in your 401k?
4. What is the interest rate on your mortgage and your car loan?
5. What is your fiancé’s monthly net income after taxes, health insurance, et.??
6. What does your fiancé’s debt(s) and asset(s) situation look like?
7. Why so much CC debt? Did you buy a bunch of items for your home with 0% interest?
8. What is your goal as far as the ring fund goes?

As far as the 2k from the unused vacation… Personally 2.5k in a your e-fund sounds really low.

Welcome again to the forums! You’ve come to the right place. :cool:


Thanks for the welcome and the answers!

1. Depends, I'm currently contributing 6%, but was thinking of bumping that to 12% to max out 401k. If I bump to 12% my take home would be $6,200. If I leave it at 6% then my take home is $6,700
2. Right now, minimal, I travel 5-6 days a week on expense account. The new position won't be as much travel. For the purpose of my emergency fund I'm estimating zero travel/expense account and assuming $3500 a month.
3. 6% match
4. Mortgage: 4.25%, Car: 5.5% (car was older than 5 years but low mileage so unfortunately higher rate)
5. Currently doing the distant relationship (she's not fiance yet). Not sure what she'll be making when she moves here but with 13 years management experience chances are it'll be in the range of 60-100k. Her health care would be covered by me (my company pays 100% health care for me/SO/family).
6. No debt, $5000 in savings (cash). Not sure what her retirement looks like but it's been funded for the last 5 years or so.
7. Correct. I went from a 1 bedroom to a 5 bedroom (3300 sqft) and felt like I really needed a fridge, a fence (for my dog/privacy), and a living room (probably could have gotten away from this but it was 0% for 3 years so I went for it so I had at least 1 room done instead of 8 empty rooms). Wisest financial decision? No, but due to the 0% interest at least it's not "costing" me anything...or at least that's my justification (again probably wrong).
8. $7500 is the goal, though if I had excess lying around and found the perfect ring or something I'd consider going up to $10k (most likely not).

My e-fund was significantly higher but I tapped into it for a downpayment. Somewhat impulsive but I was confident in my earning capability and ability to bounce back so I wanted to take advantage of the market while rates were low.

Also to note, with the new company I'll have profit sharing so that could potentially supplement my base salary another 50-200% or so if things go well (already established company exceeding profit targets year over year the last few years).

I'll take your advice and go with the 2k into my EFund with the remaining vacation fund.


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 6:51 am 
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Joined: Thu May 17, 2012 10:05 am
Posts: 1150
1. Looks like you have a good income. Your company matches half a % for every % you invest? So basically if you invest 12% they will invest an additional 6%?
2. I’d probably build up my e-fund to 3-6 months worth of expenses before tackling the 0% interest loans.
3. See number 1 above.
4. So your car loan has the largest interest rate besides the CC#2 with 12.99% APR which you are planning on paying off next month.
As I understand it you really have two options when paying off debt:
A) tackle the smallest debts and “snowball” your debts
OR
B) tackle the debts first with the highest interest and “avalanche” your debts

5. Sounds like she has a good potential income.
6. That sounds good. So her car is paid off then? No student loans?
7. I hear you on putting things in your knew house. No judgment here re: wisest financial decision. In fact we bought a significant amount of furniture at 0% interest for 60 months this past October 2013. So long as you have a decent emergency fund as a safety net this is probably not a bad idea in my opinion. Others may disagree… :^)
8. That’s going to be a nice ring. 8)

That make sense re: taping into your e-fund for a down payment. Yes, we got 4.625% interest on our home purchase. Now is definitely the time to buy as it is still a buyer’s market in my opinion. And the potential for profit sharing sounds fantastic. :rock:

Probably a good idea to beef up that e-fund. :clap:

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~ Eagle


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 8:23 am 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
Correct my company will match me 6% if I pay 12%. 12% = $17,500/year which is why I went with that number.

I still need to dedicate 500/month to that 0% card to avoid interest before that term expires but anything in excess of that I'll start pumping towards my EF. The lady moving in is the big game changer in that I'd have an additional 1250 or so coming in a month that I could dedicate to clearing debt much quicker.

New gameplan based on the advice given -

Once the 12.99% APR card is paid off, go with $500/month to the 0% card with April 2015 terms. 2k to EF from vacation payout, additional 500/month to EF, 500/month to ring (ring fund can serve as a secondary EF if something were to truly happen). Once the April card is paid off start going to town on the car payment and bumping the EF contribution to 1k/month (if the lady moves in/gets income coming in) to hopefully pay that off by EOY. Continue to pay 50/month to my smallest CC debt

All said and done should leave me 7900 less in CC debt, possibly with the car paid off and with 8500 in EF + 5600 in ring fund. Definitely in a better position for end of year, now I just need to stick to it. The hardest one to stick to will be the accelerated car payments (at least to that level).

As far as the SO goes, she has no student loans, no CC debt, and about 10k loan on her car which assuming she gets a job relatively quick which I don't imagine being too much of an issue she'd be able to really push that down if she wanted to (she isn't as gung ho about paying off a car loan early and is simply fine with having a car payment).


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 11:33 am 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
Also do you think I should go ahead and bump my contribution with the new company from 6% to 12%, or possibly post pone that until 2015 and use the additional 500/month to pay off debt and/or build EF?


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 11:39 am 

Joined: Tue Jun 12, 2012 4:34 pm
Posts: 557
LiquidMercury wrote:
Also do you think I should go ahead and bump my contribution with the new company from 6% to 12%, or possibly post pone that until 2015 and use the additional 500/month to pay off debt and/or build EF?


If I understand your previous posts correctly, you need to contribute 12% to get the full company match of 6%, correct? It seems a shame to leave free money on the table. Also, you have a fairly high income, so reducing your tax liability is also a plus.

Welcome to the forums!


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 11:57 am 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
alohabear wrote:
LiquidMercury wrote:
Also do you think I should go ahead and bump my contribution with the new company from 6% to 12%, or possibly post pone that until 2015 and use the additional 500/month to pay off debt and/or build EF?


If I understand your previous posts correctly, you need to contribute 12% to get the full company match of 6%, correct? It seems a shame to leave free money on the table. Also, you have a fairly high income, so reducing your tax liability is also a plus.

Welcome to the forums!


Thanks for the welcome!

I was going to contribute 12% because it will have me max out 401k @ 17,500. I'm need to figure out what the actual cap is on matching that my company is going to be doing (or if there is a cap - I assume there is). I hate leaving free money on the table as well and as you mentioned need to decrease my tax liability due to my income bracket. My only thought was that I should focus on the EF/reducing debt full steam for the rest of 2014 possibly. I suppose once I found out what the matching component is for sure I'll be able to better make that decision.

Previously I've always been "okay" with 0% APR cards and never considered it as having debt since it was free and I'd always pay it off before I ever had to pay interest. Granted I had never really been over $1500 with 0% so I think the larger balance has me nervous as of late, that in conjunction with my lack of substantial EF. I'm just wondering if it's worth the piece of mind to be CC debt free + decent EF by end of year to forsake a bit of "free" money from 401k.


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 12:48 pm 
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Joined: Thu May 17, 2012 10:05 am
Posts: 1150
alohabear wrote:
LiquidMercury wrote:
Also do you think I should go ahead and bump my contribution with the new company from 6% to 12%, or possibly post pone that until 2015 and use the additional 500/month to pay off debt and/or build EF?


If I understand your previous posts correctly, you need to contribute 12% to get the full company match of 6%, correct? It seems a shame to leave free money on the table. Also, you have a fairly high income, so reducing your tax liability is also a plus.

Welcome to the forums!


I agree with Alohabear. Get the match by contributing 12%. It's free money 8)

_________________
~ Eagle


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 12:58 pm 
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Joined: Thu May 17, 2012 10:05 am
Posts: 1150
LiquidMercury wrote:
Correct my company will match me 6% if I pay 12%. 12% = $17,500/year which is why I went with that number.

I still need to dedicate 500/month to that 0% card to avoid interest before that term expires but anything in excess of that I'll start pumping towards my EF. The lady moving in is the big game changer in that I'd have an additional 1250 or so coming in a month that I could dedicate to clearing debt much quicker.

New gameplan based on the advice given -

Once the 12.99% APR card is paid off, go with $500/month to the 0% card with April 2015 terms. 2k to EF from vacation payout, additional 500/month to EF, 500/month to ring (ring fund can serve as a secondary EF if something were to truly happen). Once the April card is paid off start going to town on the car payment and bumping the EF contribution to 1k/month (if the lady moves in/gets income coming in) to hopefully pay that off by EOY. Continue to pay 50/month to my smallest CC debt

All said and done should leave me 7900 less in CC debt, possibly with the car paid off and with 8500 in EF + 5600 in ring fund. Definitely in a better position for end of year, now I just need to stick to it. The hardest one to stick to will be the accelerated car payments (at least to that level).

As far as the SO goes, she has no student loans, no CC debt, and about 10k loan on her car which assuming she gets a job relatively quick which I don't imagine being too much of an issue she'd be able to really push that down if she wanted to (she isn't as gung ho about paying off a car loan early and is simply fine with having a car payment).


Yes, contribute 12% to 401k. Free money like has been stated.

Looks like you have a plan regarding debt and savings.

I can see if her only debt is her car and she makes good money paying it off isn't a big deal. However, as someone who has paid off a car and bought a car outright cash I can say I love not having car payments. :wasntme:

_________________
~ Eagle


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 Post subject: Re: Path to freedom
PostPosted: Thu Feb 27, 2014 8:26 pm 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
My next car will be paid for in cash (or at least last that's the goal).

Side note, may be getting an extra 8k/month in income. Came to an agreement with my old company where they'll have me work as 1099 for 20 hours/week for the next few months. This could drastically accelerate my financial freedom plan, just have to clear it with the new company. In my industry our non-competes are pretty strict so hopefully it'll be okay!


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 Post subject: Re: Path to freedom
PostPosted: Mon Mar 03, 2014 9:20 am 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
Anyone have suggestions on a high yield savings account? I'd like to dump my EF into one.

I've decided that I want two EF's - "Sh!t has hit the fan" and "Sh!t happens".

The first is only if I were to lose employment (6 months expenses), the later would be for emergencies such as car breaking down or other things that I might normally use a CC for (3 months expenses)


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 Post subject: Re: Path to freedom
PostPosted: Fri Mar 21, 2014 7:51 am 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
Update Time:

Mortgage: $301,788 (god I hate how little of my payment goes to principal)
Car: $11,611.14

CC #1: $6,300 - 0% APR until April 2015
CC #2: $0- 12.99% APR - Paid it off!
CC #3: $700 - 0% APR until November 2015
CC #4: $4,850 - 0% APR until Feb 2018
Total CC Debt: $11,850 (down $1000)

Emergency Fund: $3,250
Ring Fund: $2,000
401k: $5,000 (currently contributing 6% w/ match)

Total saving: $10,250 (up $1450)

Also closed the contract with my old company that will have me bringing in an additional 8-10k per month (1099 income, it'll improve my cash flow though). It's net 45 and billed monthly though so won't be coming in for a good bit.

Started the new job this week and absolutely love it! Still have to pay $2k in taxes or so this year which I have saved for already and working on getting my EF/RingFund and CC#1 to $5k each in the next 2 months.


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 Post subject: Re: Path to freedom
PostPosted: Sun May 11, 2014 2:18 pm 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
Mortgage: $300,843
Car: $10,921

CC #1: $5,500- 0% APR until April 2015
CC #3: $600- 0% APR until November 2015
CC #4: $4,464- 0% APR until Feb 2018
Total CC Debt: $10,564 (down $1286)

Emergency Fund: $4500 (Goal $24k)
Ring Fund: $3000 (Goal $10k)
401k #1: $5,000
401k #2: $0, have to wait for a bit to get this set up but I'll be maxing it out this year.
Total saving: $12,500 (up $2250)

Things are going in the right direction.

I also got a bonus with work for being highest performing leader, not sure what it will amount to but I'm hoping around $1k in which case I may go and buy a new mattress. I get my first check for sub-contracting as well in a few days so I'll be paying off CC #1.

I'm about to have a good bit of money coming in from additional sub contracting work (approximately 20k) and I need to determine what to do with it. I need to find a balance between fiscally responsible and buying things I "need" such as a bedroom suite, a dining room table, things like that since the majority of my house is completely unfurnished. Also considering buying a truck due to the impracticality of my current car but I loathe taking on another loan.

Also checked my Credit Rating, and it's down some (not surprised after the whole mortgage process). However, I did find a ding on there that shouldn't be. How do I go about getting it removed? Also I've noticed that my avg. length of credit is pretty bad (rated D on credit Karma). I imagine some of this is due in large part to the credit card swap that I've done in the past year or two to take advantage of great offers. Credit Karma said my score would only go up 20 points if I clear off all CC debt, and my score was 744 pre-mortgage with the ding that is erroneous. Looks like my score will remain low until my avg age gets high and the hard inquiries go off as I have 100% payment on time and low utilization. Any suggestions on how to get it in that 760+ range?


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 Post subject: Re: Path to freedom
PostPosted: Tue May 13, 2014 7:25 am 

Joined: Wed Feb 26, 2014 10:23 am
Posts: 57
This forum does me good. Just reading through posts of financial responsibility gets me more motivated to tackle debt instead of doing things I'd really like to (furnish the house/buy truck).

New plan (and help me stay accountable!) is to use the additional money coming in to do the following (writing this down so I can check it off later and call myself out).

Pay off CC #1
Buy Master Bedroom Suite/Bed (I've had the same stuff since I was 4 and my sleep has progressively gotten worse).
Bump EF to 7500
Bump Ring Fund to 5000
Pay off car to $5000

This will effectively happen as a big chunk due to the subcontracting payments I'll receive in June/July/August (found out it's net 60 now from invoice which is irritating)

Once I've done this, I'm going to bump my overall car payment up to $1000/month and knock that out by end of year and work on saving for a downpayment for a truck as well as go back to furnishing a bit of the house.


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