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 Post subject: Savarel's Goals for 2010
PostPosted: Tue Mar 23, 2010 4:11 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
First post on these forums, but it will be nice to have a place to review my goals and reflect over time. Comments always welcome of course.

First, some past history. Reading other stories here, I dont feel nearly as bad as I used to. Nevertheless, I've made a few dumb mistakes and had some bad luck too. Graduating from college in 2001(a great year to graduate, btw), I had a terrible time finding a decent job. Ended up working part time jobs, or a full time and part time job making $10 if I was lucky. I have never been a spender, but times were tough and I racked up about $1800 of credit card debt in addition to my $20,000 of student loan debt. Then in 2005 I managed to land a semi-decent job making $30K a year. After living like a pauper for four years, this seemed like a ridiculous amount of money. I rejoice and immediately leased a brand new car(dumb mistake #1). This was dumb, but not the worst thing in the world. I could afford the car payment, if barely. However, shortly after that, during the summer, I got mixed up in a pretty bad situation, the details of which shall remain anonymous. Long story short, I racked up ~$5000 in debt in a matter of 3 months, burned completely through my savings, and was begging my parents for rent money. It was the mother of all meltdowns, financially and otherwise.

That was then.

Today:

$0 in credit card debt.
$7500 in student loan debt(1 year forebearance 2006-2007)
1 year left on my car lease(yes, a 5 yr lease and I winced typing that out) plus I am currently 13,000 mile over the limit at $0.25 a mile.
Just bought a house with my fiance, well within our means(thanks housing crisis!).
Fiance has some credit card debt, but nothing major. Has student loan debt as well.
She has virtually no savings other than some stock and a gov't pension plan.
Last year I had an AGI of almost $70,000, which was kind of a shock and kind of cool at the same time.

I have canceled and cut up all but one card, and it carried a $0 balance.
I have ~$5100 in an investment account. ~$5000 in a checking account. ~$1000 in my emergency fund.

I'd be doing even better, but my dad lost his job and ran into trouble with the IRS, and I had to help my parents out(I had to considering the help they gave me). So that ate up probably around $5000 in potential savings but it was worth it.

This took alot of work. I'm no stranger to hard work, learned from my hardships post-graduation. First thing I did was to find a better paying job. I also have done some freelance work as well. I sold a bunch of excess stuff. I canceled my cable TV altogether. I had no cell phone until very recently, and since getting the cell I canceled my home phone service. I only eat out twice a week(fri and sat nights), and have taken frugality to an extreme. At one point I was renting out a bedroom for $400/month and all utilities paid. When you are making over $50K a year, it was kind of ridiculous to rent out bedroom, but drastic times call for drastic measures.

Anyway, things are much better now.

Will be redoing the budget after getting married to accomodate my spouse's income and expenses, but for the next 4 and a half weeks I am putting $800/month into retirement, $200/month into the emergency fund, $280 a month extra in the checking account to cover monthly extras not in the budget but considered a need. I am also expecting an ~$8000 tax refund check sometime in the next month. $5000 will go into retirement, the rest I am still undecided on. If nothing changes, $4500 overage payment will be due when my car lease ends ~5/2011, plus I will be carless. My car lease is the last lingering sign of my financial irresponsibility. If I traded it in, I could probably get about $2000 less than currently owed on it, which seems like the logical thing to do. Use $3000 for a down payment on a used car, trade in this car, and walk away with ~$12,000 car loan that I could then pay off over the next three years. Or I could run out the lease, pay the $4500 and then buy a used car with a $7,000 car loan. Neither is a really appealing option, but unless someone knows of a hot tub time machine I could use, those are really the only two. Oh, or I could get a ~$9000 loan to buy my current car. Which might be the way to go but I dont really like it. Its a symbol of past mistakes. Like a beacon of my past stupidity.

Anyway, my goals for 2010:

1) Create a new joint budget.
2) Create a plan to solve looming car "crisis".
3) Get emergency fund up to ~$9,000.
4) Open and fully fund Roth IRA for 2010 @ $5,000.
5) Get investment account total to $10,000.
6) Get Student loan debt to $3,000 by Jan 1, 2010.


Hmm... that is all. Will report as things progress.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Wed Mar 24, 2010 6:13 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1721
Location: Ottawa, Canada
Congrats, it sounds like you've really turned things around. Do you have a plan for saving up for the upcoming wedding/honeymoon?

Savarel wrote:
Anyway, my goals for 2010:

[...]
6) Get Student loan debt to $3,000 by Jan 1, 2010.


Better get to work on that hot tub time machine you mentioned! ;)

Good luck, keep us posted.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Mon Mar 29, 2010 12:50 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
Wedding and honeymoon is already paid for. Fiance's parents paid for the wedding(I tried to pay for it myself, but they insisted on it. Which was cool. :D), I have paid for the rooms & tickets of the honeymoon, but will still need spending money.

And yeah, meant 2011. :lol:

Anyway, tax refund check coming soon. IRS says its being mailed April 2, so I'll be looking for it. Might have to spend some of the money on new fencing for my parents property since their old fence is not holding up. Still, $5,000 going into retirement for sure, and the rest, while not "play" money, is beyond normal budget so I dont think its a problem if I use for fencing.

Everything else still on track.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Mon Mar 29, 2010 1:14 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5358
It sounds like you are doing fairly well Savarel, definitely on the upswing! With your income and becoming a two-income household you and your spouse will be in great shape within a year.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Mon Mar 29, 2010 3:41 pm 

Joined: Mon Mar 29, 2010 3:33 pm
Posts: 26
Savarel, it looks like you have really turned things around. Good for you!

I have a suggestion though. Have you thought of using that $5K from you tax refund to pay down you student loan rather then using it for retirement savings? Don't get me wrong, I'm a huge fan of retirement savings and the younger the better. I was just thinking that by paying off your loan it would give you more flexability going forward. That way incase anything happens you will not be locked into a monthly payment.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Tue Mar 30, 2010 9:23 am 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
Well, my student loan has a subsidized interest rate which is like 2.3% right now. I'd really like to just pay off my entire student loan, but its not that big a burden on my budget, $230/month.

~$7,000 * 2% interest = ~$7325.71

So I'm paying $325.71 in interest, but I can deduct that interest on my taxes(every little bit helps).

If I put that $5,000 into retirement and get a 6% return = $5,618, so I make $618 in interest. So, I should make a net of almost $300 by putting the $5,000 into retirement over paying off the student loan, and still have the other $3,000 to use toward whatever.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Thu Apr 08, 2010 10:38 am 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
IRA is fully funded @ $5,000 for 2009(since it was funded < April 11th).

Set up automatic transfers @ $400/month into the IRA for 2010.

Wedding is in two weeks.

Very exciting! :D


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Fri Apr 16, 2010 2:32 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
Just a refund check from homeowners insurance company for $530. State tax refund will be about $730.

So another $1260 to put toward... something. At the moment it will go into savings.

Roth IRA is fully funded for 2009, on pace to max out contributions for 2010.
Have fully funded emergency fund.

Time to tackle the car problem. I will start putting savings money into an account to pay a big chunk of the cost of my next car since my current lease ends in almost exactly 1 year. Plan on trading in my lease to buy a used car/truck. Figure my lease will have about -$2000 in trade in value, so I'll need ~$4000 in a down payment. The upside is that if I can find a car/truck for about $11,000 I should lower my monthly car payment and then also lower my insurance payment. I could then use the extra money to pay off the car early, probably in 1 year or less.

So new goal:

Pay off as of yet unbought car by end of 2010.

Eliminating old goal regarding student loan. The interest rate is so low I dont think it matters that much. When the car is paid for, I can then tackle the student loan, and in two years I should be free of both payments while also chopping my car insurance payment at least in half. That would be like an extra $600 a month to stuff into my investment account.

Getting married in one week!!!


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Tue May 11, 2010 3:50 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
Emergency fund fully funded.
IRA contributions on schedule to be maxed out for 2010.
Separate taxable investment account funded @ ~$400 a month.
According to the investment calculator, assuming a 6% return(being pessimistic here), I should be well on schedule to retire early.

Student loan @ ~$6,000

Started looking around for a new car. Have the money saved up, hope to make a decision soon. Read fantastic article on MSN about the $5,000 used car. Made me regret even more this financial behemoth dragging me down.

Got married two weeks ago. Wedding and honeymoon went perfectly.

Made new long term goals:

1) Get masters degree I've been contemplating getting for the last 5 years.
2) Once I'm finished with my degree, look for a part-time teaching position(collegiate level).
3) Once I've found a good fit teaching part time, I want to quit my job and just teach part time and supplement my income with IT contract work(of which there is always plenty if you dont mind short term stuff).

This would give me much more flexibility in life and would be ideal to raise a family. Not to mention I've started the Boat Fund account(currently a modest $200) where I have begun stuffing any extra personal money(my "allowance" I give myself each month) I have left over. Amazing how just having a "Boat Fund" has caused me to scrimp, save, find coupons, etc...

Getting ahead of myself though. No one is working part time or sailing around if they still have car debt and student loan debt.

New short term goal:
Kill off all non-mortgage debt as soon as humanly possible, while maintaining retirement/savings rates.

Also: Waiting for wife's name change to go into effect before creating the master budget and combining finances.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Wed May 12, 2010 4:25 am 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
I meant to say congratulations to you after your previous post, but I guess it's better now that the deal is done. I'm glad your wedding was fantastic. I hope the marriage is even better.

Hopefully you can find someone to pay for your grad school so you don't have to go into debt to get your master's degree. Good luck.

Your plan sounds reasonable. Keep up the good work.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Mon May 24, 2010 1:12 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
Belated thanks!

Today is the one month anniversary since I got married. Still feels weird to say I'm married.

All name change stuff is completed, so time to make the new master budget.

I cut my personal "play" money in half recently to help with getting rid of car payments. Hasnt really affected my life much since I still do everything I used to, but I just scour the known world for coupons before hand. Amazing how many buy 1 get one free coupons exist.

Been procrastinating on the car shopping. At one time shopping for a car would have been fun and excited, but nowadays its just another expense.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Tue Jun 01, 2010 10:05 am 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
Made new consolidated budget. Was very happy with the results. We make way more than we spend, and thats without even counting the extra money we make(she tutors after school, I do occasional freelance work).

Emergency Fund = ~$9K right now. Funding $200 a month.
IRA still being funded, on track for max contributions by end of year. ~$400/month
Other investment account being funded @ $400/month
Boat Fund @ $200.01. No regular funding, but just excess personal spending money and extra money I make during the year.

Have ~$4K saved up for eventual car purchase. Still procrastinating on making a decision. Started thinking about buying the car outright from the leasing company again. If I did that and paid the $4K into the new loan, it would be about $3K left that I owed, which wouldnt take long to pay off. Could have the car paid off completely in by the end of the year, which is amazing.

Taking wife to Disneyland in July for her birthday.

We have about $500 in excess cash flow right now, that is not being allocated to anything. Leaving it as is for now until I make sure that our budget is accurate.


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Wed Jun 02, 2010 7:09 pm 

Joined: Sat May 29, 2010 7:38 am
Posts: 9
Just wanted to say awesome work dude! Keep it up 8)


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Thu Jun 03, 2010 4:27 am 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
Is your car really worth an additional 7k? Do you like it?

It just seems like a lot of extra money considering the $$ you already put into it by leasing it. Make sure it's a good deal, not just a convenient deal.

I'm glad your financials are working out. It's so nice having extra money, huh?


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 Post subject: Re: Savarel's Goals for 2010
PostPosted: Thu Jun 03, 2010 1:46 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
Its very nice! My wife was amazed at how much extra money I was saving every month. Honestly, I am still kind of amazed myself.

As for the car, the problem is that I am going to owe about $4K on it due to be over the allotted number of miles even if I dont keep it. I see your point, that I should consider the car a sunk cost and move on. Thats a valid point, but from a purely analytical point of view, I think it makes more sense to keep it. Sure it means I basically paid $22,000 on a $17,000 car, but you cannot change the past.

If I trade in my car for a different used car, I can get close to the payoff amount, but I'm still about $2K short between what someone will pay for it and the cost to pay it off completely.

If I buy my car from the leasing company, I dont have to worry about the overage costs on the miles, nor do I worry about negative equity on my car. The downside would be that I would be overpaying for a car.

So, from a purely analytical perspective, I can either lose $4,000, but be completely free of the car and then free to either be car free or purchase another car. I can lose $2,000 on my current car, plus pay dealer mark up of at least $500 by trading in my car and purchasing a different one. Or I can buy the current car and overpay for it by $1500 to $2000.

No matter what I chose, I lose. :)

Since I'm going to have to pay for part of the remaining cost of the car anyway, I might as well spend all of that $4K on my current car and be closer to being free of car debt. It is a very nice car, and has been reliable and I know its been well taken care of.


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