Author Topic: Debt Situation - What to pay off first?  (Read 3687 times)

kwarden13

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Debt Situation - What to pay off first?
« on: May 31, 2017, 06:38:16 AM »
I am posting this again since I am now including my fiance's debt.

So here's the situation. I am selling a property and will walk away with roughly $60k at closing. I have the following debt/situations:

1) Current house (bought Jan 2017) - only put 3% down on a $362k house so I pay PMI. The PMI is $192 a month and my interest rate is 3.5% for 20 years. There is no length of time I need to keep PMI. However, the bank states I would need a new appraisal (cost $450). It could appraise for more than we paid, however, I am skeptical of the bank dropping PMI.

2) Student loans - I owe $45k in student loans and my interest rate is variable at 4%. I currently pay $472 for 10 years. I could get a fixed rate at 5%. My fiance has $1900 student loans at 4%.

3) Car loan - I have a car loan originally of $36k with $25k left. I pay $475 a month and the interest rate is 2.24%. This is a Subaru Outback w/ crash detection w/ 28k miles. I thought of selling it, however, could just pay it off and keep it 10 more years. The car I would replace it with would be a Subaru Legacy and these are about $15k out the door (taxes, fees, etc.). I could try to go down to $10-12k but significantly older/more miles. Basically, through my research, Subaru's are expensive but reliable and long lasting.

4) I have $20k on zero percent credit cards not due till August 2018. I am confident I could just pay this off monthly. Also, may be getting a small bonus ($5-6k in August).

5) My fiance has a car loan of $9000 at 2.9%. She is not willing to sell her car. It is a 2015 Mazda 3 w/ 30k miles.

6) Found out my fiance has a pension and 401k. She only contributes to the pension so has no money in her 401k (she is 32). I could put $18k in her 401k. I am set to max out my 401k this year.

Background - I am 28 years old and make $125k annually. My fiance is 32 and makes $90k annually. We have been living together and engaged for about a year. Prior to this year, we both made significantly less money. Also, we were long distance for about a year so the costs to see each other were quite high as well as dining out, etc.. I paid about $20k off in student loans last year. Coming out of school we both had a lot of debt so it's been difficult to get savings/investments going. I agree we both should not have new cars, however, we already bought them. So that is a sunk cost. The $20k on credit was our deck and fence purchase when we bought the house. We could have tacked it onto the mortgage, but decided we could just pay it monthly. Stupid but again already happened - at least it is 0% interest until next August. We don't really join finances fully - we both try to just keep things equal.

Thoughts?
« Last Edit: May 31, 2017, 07:42:06 AM by kwarden13 »

Heroes821

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Re: Debt Situation - What to pay off first?
« Reply #1 on: May 31, 2017, 06:43:11 AM »
I think this might benefit from a full case study, see the case study section.

We need things like income and savings rate, how long till you are married? Are you both fully joining finances then or now? Is the house together or solely yours?

All of your interest rates are low so checking the MDM investment order thread could help answer this question.  More importantly WHY do you have so much debt! Holy crap 2 cars, 20k on credit cards, a ton on a house plus student loans.  I think you need to read some MMM posts and face punch a few times. 

kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #2 on: May 31, 2017, 07:45:55 AM »
I think this might benefit from a full case study, see the case study section.

We need things like income and savings rate, how long till you are married? Are you both fully joining finances then or now? Is the house together or solely yours?

All of your interest rates are low so checking the MDM investment order thread could help answer this question.  More importantly WHY do you have so much debt! Holy crap 2 cars, 20k on credit cards, a ton on a house plus student loans.  I think you need to read some MMM posts and face punch a few times.
I edited the post above to include more background. I agree it is a ton of debt and my fiance just doesn't see it as being that bad. I am very worried at this point, especially when I put everything into the Personal Capital App.

Heroes821

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Re: Debt Situation - What to pay off first?
« Reply #3 on: May 31, 2017, 08:47:46 AM »
Well here's my take.  If you are wanting to become a Badass Frugality Early Retired Mustacian and your Fiancée says we make good money, I see nothing wrong with having 3 TIMES your combined annual salaries in Debt...well you might need to have some very long and detailed discussions about how you two are envisioning your future together.  The path to FI can be done alone, but it can't be done as 1 half.

Hopefully she can see the freedom of MMM mentality as a boon and not depravity.


Since your finances are not merged, take away all the debt that is hers for right now and focus on getting your personal ducks in a row.

House 3.5% $362,000
Loans Variable 4% $45,000
Car 2.24% $25,000
Credit Cards $20,000 (0% probably 30% next August)
$452,000

$125,000 minus $18,000 401k (good job) Minus Taxes So what Maybe 80,000 left a year?

Do you have an HSA? If you're healthy you should get one through your employer.

After that fund an IRA that you qualify for.

After that lets look at these loans. With so much debt why do you have such an expensive car? The car is more per month than your Student loans and they have higher interest and twice as much debt.  Full coverage is needed because you have a loan, so that $475 a month is actually more like $600 a month or $7200 a year.

Sell that car, hope you get enough to pay off the loan and either buy an old reliable fuel efficient car, car pool with the fiancée, or ride a bike.

If you absolutely need a car you can use $5000 - $10,000 of your $60,000 to get it and pay probably less than $200 a year in liability insurance.

Personally once your 401k and  HSA are done, I'd work on the PMI. Then the Credit Cards and the Student Loans.

Don't plan for a bonus or extra cash those surprises should be going toward debt pay off and eventually a taxable investment account.


Please check out the sticky for Investment Order, post number 2.

Lady SA

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Re: Debt Situation - What to pay off first?
« Reply #4 on: May 31, 2017, 09:00:47 AM »
Hey kwarden, it's still not super clear what you are looking for. Just a starting point?

Otherwise, a full case study like heros mentioned would give us something more tangible to help with. We can help trim down your budget if we spot anything to increase freed money to go toward debts, and help determine the most accurate/efficient "order" to pay off debts.

With the information provided, its a bit difficult to give comprehensive advice, but if you are only looking for payoff order advice, the general advice is to pay off the highest interest debt first, and aggressively pay off anything that is 5% interest and above using the avalanche method. Anything less than that is generally ok to keep around (still paying at least the minimums of course) because you'll get a better return investing instead. Under 4-5%, its mostly psychological benefits that you get from paying off debt, and that is a personal question you have to answer--are you ok with having debt over your head even knowing that the math puts you ahead, or is having debt at all completely uncomfortable for you? That tells you how aggressively you need to focus on the low interest debts. The advice around here is going to be math-oriented.

I'd focus on the student loans first since they are variable and can go up unexpectedly, and with that balance with variable interest you can't pay it off quickly if it does rise. I personally have a variable interest student loan, but is only 10k and if it rose, I could pay it off within 2 months max so the damage would be minimal. Have you looked into refinancing with Earnest or sofi? With your high income you can probably lock in a good rate. If you are referred, with Earnest you can knock off $200 from your balance to boot. DH and I are very happy with Earnest, but we were never interested in the protections/benefits of federal loans so refinancing with them was a nobrainer.
Then knock out the CCs as soon as possible because once interest becomes due those will be sky high.
Then the other debts (cars, house) sounds like you want to hang onto those, but with relatively low interest rates I'd focus on investing. Your FI especially at 32 should be putting away money in her 401k!
Regarding PMI, that sounds like a weird situation and I can't give good advice. Generally the more PMI you have, the better return you get for paying it off asap. Sounds like you have a ways to go to reach removing PMI, so I'd also prioritize that along with the CCs, but again, not enough info on this to give more accurate advice.

Good luck!
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talltexan

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Re: Debt Situation - What to pay off first?
« Reply #5 on: May 31, 2017, 09:45:04 AM »
There was some discussion of PMI a while ago, and--with numbers fairly similar to yours--it seemed as though an effective risk-free return of 7%-9% could be achieved by directing money toward paying down the mortgage balance enough to eliminating PMI. That looks like it's higher than any of your other interest rates.

kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #6 on: May 31, 2017, 09:53:24 AM »
There was some discussion of PMI a while ago, and--with numbers fairly similar to yours--it seemed as though an effective risk-free return of 7%-9% could be achieved by directing money toward paying down the mortgage balance enough to eliminating PMI. That looks like it's higher than any of your other interest rates.

I agree, the PMI would probably have the most savings of interest over a period of time. However, I am not able to really save much a month (besides 401k). So I am wondering if paying down the house makes sense even if it does not really get rid of any monthly payments freeing up cash flow. My student loans are already refinanced with SoFi so don't think I could get a lesser loan.

boarder42

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Re: Debt Situation - What to pay off first?
« Reply #7 on: May 31, 2017, 09:58:17 AM »
There was some discussion of PMI a while ago, and--with numbers fairly similar to yours--it seemed as though an effective risk-free return of 7%-9% could be achieved by directing money toward paying down the mortgage balance enough to eliminating PMI. That looks like it's higher than any of your other interest rates.

this is an incorrrect statement as it only analyzes the money being paid off for PMI the whole loan value must be taken into account and only when you're with in thousands of not having PMI does the return reach those levels.
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boarder42

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Re: Debt Situation - What to pay off first?
« Reply #8 on: May 31, 2017, 10:02:21 AM »
just add the 192 to your payment and it makes your interest rate around 4% on money being pumped in there a long long ways of from the 7-9% quoted above.
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Catbert

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Re: Debt Situation - What to pay off first?
« Reply #9 on: May 31, 2017, 10:05:04 AM »
I'd do the math on how much a month it will take to pay off the credit cards a couple of months before the 0% interest if up.  Then if you have more money to put toward debt reduction, I'd work on the variable student loans. 

bestname

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Re: Debt Situation - What to pay off first?
« Reply #10 on: May 31, 2017, 10:13:32 AM »
I would pay off the car first because if it's financed I know you're carrying collision on it. The balance towards the student loans. Then from that point forward whatever monthly you were contributing towards those three things (car note; collision insurance and student loan) would go to investments - 401K, IRA if it maxes out. I would not put my money towards a fiancee's debt. That's just moi.

Laura33

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Re: Debt Situation - What to pay off first?
« Reply #11 on: May 31, 2017, 10:25:02 AM »
I am not able to really save much a month (besides 401k).

This is why you need a case study.  You alone make $125K plus bonuses; together with your fiancée you are well over $200K, and you have no dependents to support.  That is *plenty* of income to max out a 401(k) and put aside a lot more besides -- IF that is your priority.

This is the "real" cost of your own personal $450K in debt:  the interest rates may be low, but the total of all of those minimum payments takes a hefty bite out of your income, so you don't feel like you have any money to save.  This is the way most people live, but it is not a path to FIRE.  Up to you to decide whether you want to change your lifestyle now to buy more freedom later.
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Jaayse

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Re: Debt Situation - What to pay off first?
« Reply #12 on: May 31, 2017, 11:49:50 AM »
Quote
My thoughts are as follows:

    a)  Your PMI is the following yearly rate on $61,540 (or 362000*.17 assuming you need 20% equity):   192*12 = 2304 or 3.74%

    b)  Your Student loan is the following yearly rate on $45,000:  45000*.04 = 1800 or 4%

    c)  Your car loan is the following yearly rate on $27,000:  27000*.019 = 513 or 1.9%

    d)  Your credit card is the following yearly rate on $10,000:  10000*.00 = 0 or 0%

If you want to get the most use out of your money you should do the following:

1)  Sell your expensive car and buy a new used car in cash.  You admitted that you work from home and although you need a car of some sort, you don't really need the car you have.  This is not a license to go buy a luxury vehicle when there are plenty of nice and functional options out there.

2)  Pay off your student loan.  Although the yearly rate seems less than that of your student loan, it is on a smaller amount of money.  You can pay it off entirely and immediately stop paying interest.

3)  Either put the remaining amount into your home loan to increase equity or invest it. 
              -Putting the money immediately into your house equity protects it from the variability of the market in the event of a downturn in the short term.  However, my understanding is that your PMI will not be reduced even with the greater equity, so it will not provide immediate returns.
              -Investing the money is more risky, but has the possibility of greater returns in the long term.  This is the better option and will grow your money unless you are not comfortable with the risk or feel like having it available will tempt you to spend it.

4)  Ensure you pay off that $10,000 0% credit before it begins to accrue interest!!!

If you follow these steps, you will see the immediate effect of reducing your interest payments by 1800+513 = $2,313.  Also you will either have an additional 15,000 + whatever is left over from your new car choice invested or put into your home loan.  The 15,000 alone could potentially earn you an additional $1,050 per year using 7% returns.

Edited to add Link:  http://www.investopedia.com/articles/personal-finance/062014/how-get-rid-private-mortgage-insurance.asp

The above was my response to your first post, it looks like your credit card has increased by 10k, is that from your fiance's portion of the deck?

If so it looks like your fiance's portion of everything is only 20,900.

Anyways, good news, last year you and your fiance lived apart and made less money, this year you live together and make significantly more money, if you don't let lifestyle creep occur, you are set up to save a ton of money. https://www.moneyunder30.com/lifestyle-creep

However, in my previous advice I did not take into account that the PMI was on top of the 3.5% on your morgage, effectively making the rate on your house until the PMI disappears to be 7.24%.  Additionally, with a variable interest rate on your student loans, and interest rates rising, the sooner you can pay that off the better. 

My advice taking into account the new information (and what I missed previously), is to pay off your PMI ASAP.  Think about it as if you have multiple rates on your mortgage, for 61,540 you pay 7.24% and then the other 300,460 is at 3.5%.  This means you should pay off your PMI first.  Don't be skeptical about your bank not canceling your PMI, in accordance with the Homeowner's Protection Act in the article I previously attached:

Quote
Borrower-requested cancelation.
Under the law, borrowers with a good payment history can request that PMI be canceled when their equity in the property reaches 20% of the purchase price or the appraised value. You have a "good payment history" if you have:

-not made a payment that was 60 days or more past due within the first 12 months of the last two years prior to the cancelation date (or the date that you request the cancelation, whichever is later); or
-not made a payment that was 30 days or more past due within the 12 months prior to the cancelation date (or the date that you request the cancelation, whichever is later).

By law, lenders are required to inform you of your right to cancel PMI. Not surprisingly, before the law was enacted, lenders could (and often did) continue to require monthly PMI payments long after borrowers had built substantial equity in their homes and the lender was no longer at risk of loss from the borrower's default. That is now illegal.

To request cancelation, you must:

Submit a written cancelation request;
Have a good payment history;
Be current on your mortgage payments;
Satisfy lender requirements for evidence that the property's value has not fallen below the original value (such as an appraisal); and
Provide certification that your equity in the property is not subject to a subordinate lien (such as a second mortgage).

Once PMI has been canceled, the lender can't require further PMI payments more than 30 days after the date your written request was received, or the date that you satisfied the evidence and certification requirements, whichever is later.

It does take some effort on your part to cancel it, but otherwise they have the right to continue to charge you PMI until you reach the date you are scheduled according to your amortization chart that you reach 22% equity, not when you actually reach 22% equity.  If you know the laws you can protect yourself. 

I noticed you tend to post multiple times for advice, please don't fall into the trap of waiting for someone to tell you something is ok rather than taking action.
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kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #13 on: May 31, 2017, 12:07:57 PM »
Quote
My thoughts are as follows:

    a)  Your PMI is the following yearly rate on $61,540 (or 362000*.17 assuming you need 20% equity):   192*12 = 2304 or 3.74%

    b)  Your Student loan is the following yearly rate on $45,000:  45000*.04 = 1800 or 4%

    c)  Your car loan is the following yearly rate on $27,000:  27000*.019 = 513 or 1.9%

    d)  Your credit card is the following yearly rate on $10,000:  10000*.00 = 0 or 0%

If you want to get the most use out of your money you should do the following:

1)  Sell your expensive car and buy a new used car in cash.  You admitted that you work from home and although you need a car of some sort, you don't really need the car you have.  This is not a license to go buy a luxury vehicle when there are plenty of nice and functional options out there.

2)  Pay off your student loan.  Although the yearly rate seems less than that of your student loan, it is on a smaller amount of money.  You can pay it off entirely and immediately stop paying interest.

3)  Either put the remaining amount into your home loan to increase equity or invest it. 
              -Putting the money immediately into your house equity protects it from the variability of the market in the event of a downturn in the short term.  However, my understanding is that your PMI will not be reduced even with the greater equity, so it will not provide immediate returns.
              -Investing the money is more risky, but has the possibility of greater returns in the long term.  This is the better option and will grow your money unless you are not comfortable with the risk or feel like having it available will tempt you to spend it.

4)  Ensure you pay off that $10,000 0% credit before it begins to accrue interest!!!

If you follow these steps, you will see the immediate effect of reducing your interest payments by 1800+513 = $2,313.  Also you will either have an additional 15,000 + whatever is left over from your new car choice invested or put into your home loan.  The 15,000 alone could potentially earn you an additional $1,050 per year using 7% returns.

Edited to add Link:  http://www.investopedia.com/articles/personal-finance/062014/how-get-rid-private-mortgage-insurance.asp

The above was my response to your first post, it looks like your credit card has increased by 10k, is that from your fiance's portion of the deck?

If so it looks like your fiance's portion of everything is only 20,900.

Anyways, good news, last year you and your fiance lived apart and made less money, this year you live together and make significantly more money, if you don't let lifestyle creep occur, you are set up to save a ton of money. https://www.moneyunder30.com/lifestyle-creep

However, in my previous advice I did not take into account that the PMI was on top of the 3.5% on your morgage, effectively making the rate on your house until the PMI disappears to be 7.24%.  Additionally, with a variable interest rate on your student loans, and interest rates rising, the sooner you can pay that off the better. 

My advice taking into account the new information (and what I missed previously), is to pay off your PMI ASAP.  Think about it as if you have multiple rates on your mortgage, for 61,540 you pay 7.24% and then the other 300,460 is at 3.5%.  This means you should pay off your PMI first.  Don't be skeptical about your bank not canceling your PMI, in accordance with the Homeowner's Protection Act in the article I previously attached:

Quote
Borrower-requested cancelation.
Under the law, borrowers with a good payment history can request that PMI be canceled when their equity in the property reaches 20% of the purchase price or the appraised value. You have a "good payment history" if you have:

-not made a payment that was 60 days or more past due within the first 12 months of the last two years prior to the cancelation date (or the date that you request the cancelation, whichever is later); or
-not made a payment that was 30 days or more past due within the 12 months prior to the cancelation date (or the date that you request the cancelation, whichever is later).

By law, lenders are required to inform you of your right to cancel PMI. Not surprisingly, before the law was enacted, lenders could (and often did) continue to require monthly PMI payments long after borrowers had built substantial equity in their homes and the lender was no longer at risk of loss from the borrower's default. That is now illegal.

To request cancelation, you must:

Submit a written cancelation request;
Have a good payment history;
Be current on your mortgage payments;
Satisfy lender requirements for evidence that the property's value has not fallen below the original value (such as an appraisal); and
Provide certification that your equity in the property is not subject to a subordinate lien (such as a second mortgage).

Once PMI has been canceled, the lender can't require further PMI payments more than 30 days after the date your written request was received, or the date that you satisfied the evidence and certification requirements, whichever is later.

It does take some effort on your part to cancel it, but otherwise, they have the right to continue to charge you PMI until you reach the date you are scheduled according to your amortization chart that you reach 22% equity, not when you actually reach 22% equity.  If you know the laws you can protect yourself. 

I noticed you tend to post multiple times for advice, please don't fall into the trap of waiting for someone to tell you something is ok rather than taking action.

Thank you for this information! I posted again so I could consolidate the posts mainly and update the financials. And I am trying right now really hard not to spend any more money unnecessarily. My fiance is in the instant gratification camp so its been difficult to curb her spending which is mainly on food. I am hoping once I do, she will follow. And yes the other $10k of debt of hers was her half of the fence/deck we added to the house. We both knew we shouldn't have spent on it. I just started reading this blog about 2 weeks ago and am determined to get my finances on track.

boarder42

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Re: Debt Situation - What to pay off first?
« Reply #14 on: May 31, 2017, 02:34:10 PM »
STOP INCORRECTLY DOING PMI MATH!!!!!


we need a sticky on how to calculate the effect of your PMI it is NOT 7.24% on this loan it is around 4% right now. the total loan must be included as the PMI can be used as added interest to the total loan.  IT CANNOT and SHOULD NOT be calculated based just on the difference between when the PMI runs out at 20% LTV.

see this post

https://forum.mrmoneymustache.com/ask-a-mustachian/getting-rid-of-pmi-what-'return'-would-i-get-for-paying-down-my-mortgage/msg1561643/#msg1561643

and this post

https://forum.mrmoneymustache.com/ask-a-mustachian/getting-rid-of-pmi-what-'return'-would-i-get-for-paying-down-my-mortgage/msg1561921/#msg1561921

for 2 different ways to properly calculate and arrive at the correct answer to the PMI question

also you should account for the tax deduction if you itemize as that lowers the effective rate of your mortgage as well.
« Last Edit: May 31, 2017, 02:37:09 PM by boarder42 »
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Jaayse

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Re: Debt Situation - What to pay off first?
« Reply #15 on: June 01, 2017, 12:22:06 AM »
Quote
its 9% on 57650 but you have to add in the rest of the loan to see your interest rate really on that dollar since its going towards the big pool.  so you should be weighting each portion to find your true rate.

so 57650 is at 9% <-- this number will increase as you get closer to paying off PMI. 

I believe, sir, that you yourself say the exact same thing in this article, you just extrapolate it out to also account for the entirety of the loan... which is accurate, but the way I'm looking at it is not exactly wrong and yelling at me or insulting people for "creative math" isn't the best way to educate people.

I prefer this explanation as the most accurate:
Quote
Another way to look at it:

Without PMI, the monthly payment on a 30 year $337750 loan at 4% is $1612.47.  In the first month, the interest charge is $337750 * 4% /12 = $1125.83.  Treating the PMI as interest, the effective rate for the first month is ($1125.83 + $240) / $337750 * 12 = 4.853%, the same (to ~3 sig. figs.) as boarder42's number.

By the 13th payment, as the remaining balance and thus the non-PMI interest amounts change, a similar calculation gives ($1106.01 + $240) / $331802.09 * 12 = 4.868%.  The percentage increases slowly over the years....

The annualized ROI for ridding oneself of PMI is $240 * 12 / (current balance - $280000).  At the start of the loan, that is $240 * 12 / ($337750 - $280000) = 4.99%.

By the 13th payment, a similar calculation gives $240 * 12 / ($331802.09 - $280000) = 5.56%.  This percentage will also increase as the remaining balance gets closer to the PMI cutoff.
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Re: Debt Situation - What to pay off first?
« Reply #16 on: June 01, 2017, 12:46:52 AM »
I prefer this explanation as the most accurate:
Quote
Another way to look at it:

Without PMI, the monthly payment on a 30 year $337750 loan at 4% is $1612.47.  In the first month, the interest charge is $337750 * 4% /12 = $1125.83.  Treating the PMI as interest, the effective rate for the first month is ($1125.83 + $240) / $337750 * 12 = 4.853%, the same (to ~3 sig. figs.) as boarder42's number.

By the 13th payment, as the remaining balance and thus the non-PMI interest amounts change, a similar calculation gives ($1106.01 + $240) / $331802.09 * 12 = 4.868%.  The percentage increases slowly over the years....

The annualized ROI for ridding oneself of PMI is $240 * 12 / (current balance - $280000).  At the start of the loan, that is $240 * 12 / ($337750 - $280000) = 4.99%.

By the 13th payment, a similar calculation gives $240 * 12 / ($331802.09 - $280000) = 5.56%.  This percentage will also increase as the remaining balance gets closer to the PMI cutoff.

"The annualized ROI for ridding oneself of PMI" is good as far as it goes, but thinking about this more it seems (for the purpose of comparing investment options for some lump sum) one ought to include the ROI for paying down the loan itself as well.  Don't know if that is strictly additive, but do know that it's too late to think more about it tonight. :)

human

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Re: Debt Situation - What to pay off first?
« Reply #17 on: June 01, 2017, 04:35:34 AM »
Just sell the damn house already, pay the bank, pay debts and get a real down payment to avoid this nonesense. Why are people so blind and crazy when it comes to houses?

dess1313

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Re: Debt Situation - What to pay off first?
« Reply #18 on: June 01, 2017, 05:10:41 AM »
You're bleeding from a 1000 papercuts.  its not just one thing that is causing problems, its all of it

Both you and the fiance need to get on the same page.  you also need to see where else you're bleeding money from and not aware of it.  I'd try YNAB.  You Need A Budget.  I have a free month promo code if you want.  But you need to dig down and see where the money is going.  Having all that debt, cars and THEN jumping into a 3% down house has left you cash strapped and house poor likely

Just because you make a good income doesn't mean you can afford all this debt.  You need to see exactly where your leaks are by having a much more accurate budgeting system and tracking every dollar.  houses are expensive.
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boarder42

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Re: Debt Situation - What to pay off first?
« Reply #19 on: June 01, 2017, 05:39:40 AM »
Quote
its 9% on 57650 but you have to add in the rest of the loan to see your interest rate really on that dollar since its going towards the big pool.  so you should be weighting each portion to find your true rate.

so 57650 is at 9% <-- this number will increase as you get closer to paying off PMI. 

I believe, sir, that you yourself say the exact same thing in this article, you just extrapolate it out to also account for the entirety of the loan... which is accurate, but the way I'm looking at it is not exactly wrong and yelling at me or insulting people for "creative math" isn't the best way to educate people.

I prefer this explanation as the most accurate:
Quote
Another way to look at it:

Without PMI, the monthly payment on a 30 year $337750 loan at 4% is $1612.47.  In the first month, the interest charge is $337750 * 4% /12 = $1125.83.  Treating the PMI as interest, the effective rate for the first month is ($1125.83 + $240) / $337750 * 12 = 4.853%, the same (to ~3 sig. figs.) as boarder42's number.

By the 13th payment, as the remaining balance and thus the non-PMI interest amounts change, a similar calculation gives ($1106.01 + $240) / $331802.09 * 12 = 4.868%.  The percentage increases slowly over the years....

The annualized ROI for ridding oneself of PMI is $240 * 12 / (current balance - $280000).  At the start of the loan, that is $240 * 12 / ($337750 - $280000) = 4.99%.

By the 13th payment, a similar calculation gives $240 * 12 / ($331802.09 - $280000) = 5.56%.  This percentage will also increase as the remaining balance gets closer to the PMI cutoff.

yes when you cherry pick one part of my post to prove your point with out the rest of the analysis.  but yours is flat out incorrect. and the way most people think about it is the way you posted which is wrong and leads people to make the incorrect decision with regards to PMI.  so how bout we quit post things that arent correct and we can all be happy.
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kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #20 on: June 01, 2017, 06:03:46 AM »
Just sell the damn house already, pay the bank, pay debts and get a real down payment to avoid this nonesense. Why are people so blind and crazy when it comes to houses?

We weren't blind when buying a house. We ended up buying the cheapest house in an okay area we could find. Also, rent was about $2,000 a month here for a 2/2 in a decent area. I work from home so a 1 bedroom is not really possible. We figured we should buy a house and eventually have equity rather than renting. It was sooner than we wanted to buy, however, we were spending that much renting either way. Selling a home we bought in January 2017 is probably not the smartest idea as we would lose money. Transaction costs are expensive and so moving. In addition, we would have to go back to renting.

kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #21 on: June 01, 2017, 06:06:08 AM »
You're bleeding from a 1000 papercuts.  its not just one thing that is causing problems, its all of it

Both you and the fiance need to get on the same page.  you also need to see where else you're bleeding money from and not aware of it.  I'd try YNAB.  You Need A Budget.  I have a free month promo code if you want.  But you need to dig down and see where the money is going.  Having all that debt, cars and THEN jumping into a 3% down house has left you cash strapped and house poor likely

Just because you make a good income doesn't mean you can afford all this debt.  You need to see exactly where your leaks are by having a much more accurate budgeting system and tracking every dollar.  houses are expensive.

I am using Personal Capital right now to track everything. Hopefully once I pay off the student loan and than the credit card debt w/ $60k, we will be in better shape. The $60k is coming from a rental property I am selling. I made $60k in 4 years so I at least did one thing right.

Heroes821

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Re: Debt Situation - What to pay off first?
« Reply #22 on: June 01, 2017, 06:10:24 AM »
You're bleeding from a 1000 papercuts.  its not just one thing that is causing problems, its all of it

Both you and the fiance need to get on the same page.  you also need to see where else you're bleeding money from and not aware of it.  I'd try YNAB.  You Need A Budget.  I have a free month promo code if you want.  But you need to dig down and see where the money is going.  Having all that debt, cars and THEN jumping into a 3% down house has left you cash strapped and house poor likely

Just because you make a good income doesn't mean you can afford all this debt.  You need to see exactly where your leaks are by having a much more accurate budgeting system and tracking every dollar.  houses are expensive.

I am using Personal Capital right now to track everything. Hopefully once I pay off the student loan and than the credit card debt w/ $60k, we will be in better shape. The $60k is coming from a rental property I am selling. I made $60k in 4 years so I at least did one thing right.

You have over a year before those cards start making interest, I'd lower the priority on those. You definitely need to lock down your budget though all of this debt doesn't just appear. With 200k a year you need to be very careful you don't inflate spending, at a minimum until the debts are gone.

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Re: Debt Situation - What to pay off first?
« Reply #23 on: June 01, 2017, 06:20:58 AM »
As I said in your thread about the car, the most important issue is not creating any new debt.  Tracking everything through Personal Capital should be very helpful.  Nothing like staring at the numbers every day to remind you of your situation.  In your shoes, I would pay off the student loans and the credit card debt to start.  Worry about the PMI later, when you are absolutely sure you can get rid of it. 

human

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Re: Debt Situation - What to pay off first?
« Reply #24 on: June 01, 2017, 11:12:47 AM »
Just sell the damn house already, pay the bank, pay debts and get a real down payment to avoid this nonesense. Why are people so blind and crazy when it comes to houses?

We weren't blind when buying a house. We ended up buying the cheapest house in an okay area we could find. Also, rent was about $2,000 a month here for a 2/2 in a decent area. I work from home so a 1 bedroom is not really possible. We figured we should buy a house and eventually have equity rather than renting. It was sooner than we wanted to buy, however, we were spending that much renting either way. Selling a home we bought in January 2017 is probably not the smartest idea as we would lose money. Transaction costs are expensive and so moving. In addition, we would have to go back to renting.
3% down payment? If you weren't blind, then I would politely say you weren't smart either . . . your stuck paying interest. But not to a be a total db, maybe split your debt repayments between the cards that will get jacked soon and all that useless interest on the house.

kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #25 on: June 01, 2017, 11:22:01 AM »
Just sell the damn house already, pay the bank, pay debts and get a real down payment to avoid this nonesense. Why are people so blind and crazy when it comes to houses?

We weren't blind when buying a house. We ended up buying the cheapest house in an okay area we could find. Also, rent was about $2,000 a month here for a 2/2 in a decent area. I work from home so a 1 bedroom is not really possible. We figured we should buy a house and eventually have equity rather than renting. It was sooner than we wanted to buy, however, we were spending that much renting either way. Selling a home we bought in January 2017 is probably not the smartest idea as we would lose money. Transaction costs are expensive and so moving. In addition, we would have to go back to renting.
3% down payment? If you weren't blind, then I would politely say you weren't smart either . . . your stuck paying interest. But not to a be a total db, maybe split your debt repayments between the cards that will get jacked soon and all that useless interest on the house.

We could have put more on the house and waited to buy. I am glad we didn't as other houses in the area are now over $400k. Our house was a steal at $362k. Sometimes it does not pay to wait and I would have used the house money as a downpayment. We can recast our mortgage with the $60k so the situation is not much different and initially I was going to put all $60k towards the house. But, after finding this blog, I figured maybe there is something better to do with the money.

ysette9

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Re: Debt Situation - What to pay off first?
« Reply #26 on: June 01, 2017, 12:04:37 PM »
Good luck. As others have said, a full case study would be helpful because I expect you have a spending propel which got you into this debt situation.

More importantly in my mind though is getting on the same page with your fiancée. I realize this probably comes as a shock to her given you just discovered the site recently, so cut her some slack there. Read the stickies on changing your significant in other in 50 easy steps. Focus on changing your own behavior and modeling good habits. I'd also encourage you to put the wedding on pause if you feel you are not making headway coming to common goals and values with money.
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boarder42

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Re: Debt Situation - What to pay off first?
« Reply #27 on: June 01, 2017, 01:03:46 PM »
Just sell the damn house already, pay the bank, pay debts and get a real down payment to avoid this nonesense. Why are people so blind and crazy when it comes to houses?

We weren't blind when buying a house. We ended up buying the cheapest house in an okay area we could find. Also, rent was about $2,000 a month here for a 2/2 in a decent area. I work from home so a 1 bedroom is not really possible. We figured we should buy a house and eventually have equity rather than renting. It was sooner than we wanted to buy, however, we were spending that much renting either way. Selling a home we bought in January 2017 is probably not the smartest idea as we would lose money. Transaction costs are expensive and so moving. In addition, we would have to go back to renting.
3% down payment? If you weren't blind, then I would politely say you weren't smart either . . . your stuck paying interest. But not to a be a total db, maybe split your debt repayments between the cards that will get jacked soon and all that useless interest on the house.

We could have put more on the house and waited to buy. I am glad we didn't as other houses in the area are now over $400k. Our house was a steal at $362k. Sometimes it does not pay to wait and I would have used the house money as a downpayment. We can recast our mortgage with the $60k so the situation is not much different and initially I was going to put all $60k towards the house. But, after finding this blog, I figured maybe there is something better to do with the money.

absolutely nothing wrong with what you did.  your avg. current rate with PMI is better than a perfect credit home buyer can get on a 30 year loan today.  you bought a house at the right time no reason to recast.  many better ways to get rid of your debt.  dont let people who read half your story call you insult your intelligence. 

GUESS WHAT LOW FIXED RATE INTEREST IS GOOD!!!  congrats on seizing the oportunity to lock in a 3.5% rate for 30 years and have a slightly higher rate near 4% b/c we may never see 3.5% fixed 30 year mortgages again.
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JLee

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Re: Debt Situation - What to pay off first?
« Reply #28 on: June 01, 2017, 01:35:26 PM »
Just sell the damn house already, pay the bank, pay debts and get a real down payment to avoid this nonesense. Why are people so blind and crazy when it comes to houses?

We weren't blind when buying a house. We ended up buying the cheapest house in an okay area we could find. Also, rent was about $2,000 a month here for a 2/2 in a decent area. I work from home so a 1 bedroom is not really possible. We figured we should buy a house and eventually have equity rather than renting. It was sooner than we wanted to buy, however, we were spending that much renting either way. Selling a home we bought in January 2017 is probably not the smartest idea as we would lose money. Transaction costs are expensive and so moving. In addition, we would have to go back to renting.
3% down payment? If you weren't blind, then I would politely say you weren't smart either . . . your stuck paying interest. But not to a be a total db, maybe split your debt repayments between the cards that will get jacked soon and all that useless interest on the house.

I put 5% down on my house.  4 years later its value has gone up by nearly 50% and I'm out of PMI with a 3.75% mortgage rate locked for another 26 years.

It's easy to talk shit, but...sometimes PMI is worth it.

boarder42

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Re: Debt Situation - What to pay off first?
« Reply #29 on: June 01, 2017, 02:05:14 PM »
Just sell the damn house already, pay the bank, pay debts and get a real down payment to avoid this nonesense. Why are people so blind and crazy when it comes to houses?

We weren't blind when buying a house. We ended up buying the cheapest house in an okay area we could find. Also, rent was about $2,000 a month here for a 2/2 in a decent area. I work from home so a 1 bedroom is not really possible. We figured we should buy a house and eventually have equity rather than renting. It was sooner than we wanted to buy, however, we were spending that much renting either way. Selling a home we bought in January 2017 is probably not the smartest idea as we would lose money. Transaction costs are expensive and so moving. In addition, we would have to go back to renting.
3% down payment? If you weren't blind, then I would politely say you weren't smart either . . . your stuck paying interest. But not to a be a total db, maybe split your debt repayments between the cards that will get jacked soon and all that useless interest on the house.

I put 5% down on my house.  4 years later its value has gone up by nearly 50% and I'm out of PMI with a 3.75% mortgage rate locked for another 26 years.

It's easy to talk shit, but...sometimes PMI is worth it.

i put 3% down on my first house 1 week out of school.  got the 8k the govt was giving away in 2010 and got a foreclosure that i sold for a 20% profit 6 years later.  but the ROI on my total investment was quite insane at over 100% in 5 years.  a low fixed interest mortgage is rarely a bad move if you've weighed your rent vs buy appropriately.
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dess1313

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Re: Debt Situation - What to pay off first?
« Reply #30 on: June 01, 2017, 03:38:20 PM »
You're bleeding from a 1000 papercuts.  its not just one thing that is causing problems, its all of it

Both you and the fiance need to get on the same page.  you also need to see where else you're bleeding money from and not aware of it.  I'd try YNAB.  You Need A Budget.  I have a free month promo code if you want.  But you need to dig down and see where the money is going.  Having all that debt, cars and THEN jumping into a 3% down house has left you cash strapped and house poor likely

Just because you make a good income doesn't mean you can afford all this debt.  You need to see exactly where your leaks are by having a much more accurate budgeting system and tracking every dollar.  houses are expensive.

I am using Personal Capital right now to track everything. Hopefully once I pay off the student loan and than the credit card debt w/ $60k, we will be in better shape. The $60k is coming from a rental property I am selling. I made $60k in 4 years so I at least did one thing right.

I would probably use the money to pay off your student loan that is costing you $472 a month.  by paying that off, you can now snowball your payments towards anything else.  I'd pay monthly just enough to pay down your card by the due date mentioned.   I would probably snowball towards the car loan, just to get it off your back and free up more cash flow.  Yes its only 2.24%, but it would be done by the end of the year likely with the remaining cash from the rental sale..  This allows you to make a lot of headway on your mortgage as needed to get to the 20% payoff point to remove PMI.  Then you can choose to either continue making extra on the mortgage or invest as your risk tolerances prefer.

And make sure you track everything with the financial softward.  its easy to let things fall through cracks, and you bleed out $100 or $300 a month in stupid crap
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boarder42

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Re: Debt Situation - What to pay off first?
« Reply #31 on: June 01, 2017, 05:12:41 PM »
You're bleeding from a 1000 papercuts.  its not just one thing that is causing problems, its all of it

Both you and the fiance need to get on the same page.  you also need to see where else you're bleeding money from and not aware of it.  I'd try YNAB.  You Need A Budget.  I have a free month promo code if you want.  But you need to dig down and see where the money is going.  Having all that debt, cars and THEN jumping into a 3% down house has left you cash strapped and house poor likely

Just because you make a good income doesn't mean you can afford all this debt.  You need to see exactly where your leaks are by having a much more accurate budgeting system and tracking every dollar.  houses are expensive.

I am using Personal Capital right now to track everything. Hopefully once I pay off the student loan and than the credit card debt w/ $60k, we will be in better shape. The $60k is coming from a rental property I am selling. I made $60k in 4 years so I at least did one thing right.

I would probably use the money to pay off your student loan that is costing you $472 a month.  by paying that off, you can now snowball your payments towards anything else.  I'd pay monthly just enough to pay down your card by the due date mentioned.   I would probably snowball towards the car loan, just to get it off your back and free up more cash flow.  Yes its only 2.24%, but it would be done by the end of the year likely with the remaining cash from the rental sale..  This allows you to make a lot of headway on your mortgage as needed to get to the 20% payoff point to remove PMI.  Then you can choose to either continue making extra on the mortgage or invest as your risk tolerances prefer.

And make sure you track everything with the financial softward.  its easy to let things fall through cracks, and you bleed out $100 or $300 a month in stupid crap

Poor pay down advice.
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MDM

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Re: Debt Situation - What to pay off first?
« Reply #32 on: June 01, 2017, 05:20:29 PM »
If you haven't already, see Debt Reduction Calculator for Excel, OpenOffice, and Google Sheets and compare payoff options, should you choose to pay any more than the minimums required.

Be sure to use your after-tax interest rates.  E.g., if all your student loan interest is deductible and your marginal rate is 25%, the after-tax interest rate on a 4% SL is 4% * (1 - 25%) = 3%.

boarder42

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Re: Debt Situation - What to pay off first?
« Reply #33 on: June 01, 2017, 05:30:52 PM »
If you haven't already, see Debt Reduction Calculator for Excel, OpenOffice, and Google Sheets and compare payoff options, should you choose to pay any more than the minimums required.

Be sure to use your after-tax interest rates.  E.g., if all your student loan interest is deductible and your marginal rate is 25%, the after-tax interest rate on a 4% SL is 4% * (1 - 25%) = 3%.

You should add or invest with option for if it will go to tax advantaged accounts as well as taxable
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Re: Debt Situation - What to pay off first?
« Reply #34 on: June 01, 2017, 05:39:05 PM »
Sometimes cash flow and behavioral considerations trump interest rate considerations.  In the OP's shoes, I would pay off all the student loans and consumer debt and exercise the necessary discipline not to create any more debt for awhile.  Once I had developed the mindset of avoiding consumer debt and had extra cash that I controlled, I would focus on getting rid of the PMI as quickly as possible.

doublethinkmoney

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Re: Debt Situation - What to pay off first?
« Reply #35 on: June 02, 2017, 06:02:18 AM »
There is NO excuse for not maxing out a 401k and Roth IRA. You may think you don't have the money but your income is slightly more than myself and my husband's and we have a kid with $1100 in day care per month! My husband puts $1200/m in his 401k and I put 25% ($1200 including my match).

You seem to incline to having debt. New cars and you wanted the deck bad enough to put it on no interest credit cards. So you need to be honest with yourself and realize there will ALWAYS be some debt at least for the next 10-15 years. You will LOOSE SO MUCH MONEY by not investing NOW. Time is your friend only if you start NOW. The longer you wait the more it hurts you. Don't kid yourself and invest in your future.

I would take that money and fill your 401k for the year and Roth (totaling 23,500 over the year). Use the rest of the money to pay off debt and maybe set aside a little emergency cash. If you can throw it all on your mortgage and know you can get the PMI off I would do that or clean out that variable rate student loan.

Since you and your fiancé aren't married yet I would focus on your finances first.


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boarder42

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Re: Debt Situation - What to pay off first?
« Reply #36 on: June 02, 2017, 06:21:05 AM »
Sometimes cash flow and behavioral considerations trump interest rate considerations.  In the OP's shoes, I would pay off all the student loans and consumer debt and exercise the necessary discipline not to create any more debt for awhile.  Once I had developed the mindset of avoiding consumer debt and had extra cash that I controlled, I would focus on getting rid of the PMI as quickly as possible.

this isnt a dave ramsey forum its MMM ...

As doublethink said above you need to max tax advantaged accounts before paying down any of these debts.  its stupid not to and you cant go back and get that tax savings back in the future once the tax year is over its over.
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kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #37 on: June 02, 2017, 06:27:19 AM »
There is NO excuse for not maxing out a 401k and Roth IRA. You may think you don't have the money but your income is slightly more than myself and my husband's and we have a kid with $1100 in day care per month! My husband puts $1200/m in his 401k and I put 25% ($1200 including my match).

You seem to incline to having debt. New cars and you wanted the deck bad enough to put it on no interest credit cards. So you need to be honest with yourself and realize there will ALWAYS be some debt at least for the next 10-15 years. You will LOOSE SO MUCH MONEY by not investing NOW. Time is your friend only if you start NOW. The longer you wait the more it hurts you. Don't kid yourself and invest in your future.

I would take that money and fill your 401k for the year and Roth (totaling 23,500 over the year). Use the rest of the money to pay off debt and maybe set aside a little emergency cash. If you can throw it all on your mortgage and know you can get the PMI off I would do that or clean out that variable rate student loan.

Since you and your fiancé aren't married yet I would focus on your finances first.


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I am already maxing out my 401k at work. I will open a Roth. The question is whether I should max out my fiance's (we are not married yet). She has no money in her 401k since the company does not match and she pays 7% into a state pension. I will certainly open a Roth for sure.

doublethinkmoney

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Re: Debt Situation - What to pay off first?
« Reply #38 on: June 02, 2017, 06:36:43 AM »
There is NO excuse for not maxing out a 401k and Roth IRA. You may think you don't have the money but your income is slightly more than myself and my husband's and we have a kid with $1100 in day care per month! My husband puts $1200/m in his 401k and I put 25% ($1200 including my match).

You seem to incline to having debt. New cars and you wanted the deck bad enough to put it on no interest credit cards. So you need to be honest with yourself and realize there will ALWAYS be some debt at least for the next 10-15 years. You will LOOSE SO MUCH MONEY by not investing NOW. Time is your friend only if you start NOW. The longer you wait the more it hurts you. Don't kid yourself and invest in your future.

I would take that money and fill your 401k for the year and Roth (totaling 23,500 over the year). Use the rest of the money to pay off debt and maybe set aside a little emergency cash. If you can throw it all on your mortgage and know you can get the PMI off I would do that or clean out that variable rate student loan.

Since you and your fiancé aren't married yet I would focus on your finances first.


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I am already maxing out my 401k at work. I will open a Roth. The question is whether I should max out my fiance's (we are not married yet). She has no money in her 401k since the company does not match and she pays 7% into a state pension. I will certainly open a Roth for sure.
Awesome, glad you are already maxing out!

I wouldn't put money into her account until you are married. Period. Keep it clean cut and dry till your are officially married, it simply keeps it fair for both of you and you should both respect each other enough that it's not an issue. I would encourage her to put her own money in her 401k (assuming it's a decent one) or a Roth . Same speech for her about how important it is to start now.


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boarder42

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Re: Debt Situation - What to pay off first?
« Reply #39 on: June 02, 2017, 06:58:11 AM »
get her to max her account why cant she?
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kwarden13

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Re: Debt Situation - What to pay off first?
« Reply #40 on: June 02, 2017, 07:11:41 AM »
get her to max her account why cant she?

She is strapped cash wise as it is. Her checks come to $4k a month so there is no way she could save another $3,000 a month til end of year. But I will try to get her to put in at least $500 a month.

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Re: Debt Situation - What to pay off first?
« Reply #41 on: June 02, 2017, 07:35:40 AM »
Well, are you combining finances, or not?

Leaving aside how one individual can be cash strapped on $4k a month...

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Re: Debt Situation - What to pay off first?
« Reply #42 on: June 02, 2017, 07:52:34 AM »
Sometimes cash flow and behavioral considerations trump interest rate considerations.  In the OP's shoes, I would pay off all the student loans and consumer debt and exercise the necessary discipline not to create any more debt for awhile.  Once I had developed the mindset of avoiding consumer debt and had extra cash that I controlled, I would focus on getting rid of the PMI as quickly as possible.

this isnt a dave ramsey forum its MMM ...

As doublethink said above you need to max tax advantaged accounts before paying down any of these debts.  its stupid not to and you cant go back and get that tax savings back in the future once the tax year is over its over.

Apparently you have forgotten that debt is a "hair on fire emergency" here.

http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/

One thing Ramsey, MMM, and the other PF folks have in common is debt and the related consumption of things undermines not only the ability to save but also the mindset needed to achieve FI.  While it's great for you that you can optimize everything in your life, being inflexibly dogmatic about how everyone else should optimize their lives does not always achieve the desired result.

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Re: Debt Situation - What to pay off first?
« Reply #43 on: June 02, 2017, 08:36:24 AM »
Apparently you have forgotten that debt is a "hair on fire emergency" here.

http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/
To be fair, not all debt is an emergency.  As that MMM blog opines, it's "If you borrow even one dollar for anything other than your primary house or a profitable investment..." (highlighting added) that falls in the emergency category.  That leaves much room for things such as "mortgage vs. investment" threads, which forum members endeavor to fill on a regular basis. :)

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Re: Debt Situation - What to pay off first?
« Reply #44 on: June 02, 2017, 08:51:21 AM »
Apparently you have forgotten that debt is a "hair on fire emergency" here.

http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/
To be fair, not all debt is an emergency.  As that MMM blog opines, it's "If you borrow even one dollar for anything other than your primary house or a profitable investment..." (highlighting added) that falls in the emergency category.  That leaves much room for things such as "mortgage vs. investment" threads, which forum members endeavor to fill on a regular basis. :)

Most of the debt here is comprised of student loan and consumer loans for stuff, including a car loan.  None of this debt qualifies as good debt.  In the OP's shoes, I would be all about getting rid of the student loans and the car loan.  With $60k, he will still have $10k on the car loan.  He also has a significant amount of 0 percent debt for consumption where the 0 percent interest rate expires in 14 months.  If he sucks it up, he can have most or all of these debts paid off by then.  Over that time, he can work with his fiancee to get her debt paid off or at least on a quick payoff schedule, and more important, on the same page about finances.

Going forward, they can work together to eliminate the PMI and maximize their savings and investing.  At this point, in my view, the debt is a "hair on fire" emergency.

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Re: Debt Situation - What to pay off first?
« Reply #45 on: June 02, 2017, 09:18:14 AM »
Most of the debt here is comprised of student loan and consumer loans for stuff, including a car loan.  None of this debt qualifies as good debt.
I'd agree that taking out loans for "stuff" is generally not desirable.  Loans for major items, such as a house or a car for a just-graduated-starting-new-job-need-reliable-transportation-currently-have-no-money person, are worthwhile things.

Quote
In the OP's shoes, I would be all about getting rid of the student loans and the car loan.  With $60k, he will still have $10k on the car loan.  He also has a significant amount of 0 percent debt for consumption where the 0 percent interest rate expires in 14 months.  If he sucks it up, he can have most or all of these debts paid off by then.  Over that time, he can work with his fiancee to get her debt paid off or at least on a quick payoff schedule, and more important, on the same page about finances.

Going forward, they can work together to eliminate the PMI and maximize their savings and investing.  At this point, in my view, the debt is a "hair on fire" emergency.
In any case, given that the loans exist, the only thing that makes them good or bad is the interest rate.  Here we can go back to the MMM blog exception "...or a profitable investment" and have a discussion on generic debt payment vs. investing - in particular, tax-advantaged investing such as 401ks and IRAs.  For relatively low interest rates, what one might see as hair on fire another might reasonably see as attractive highlights glinting in the sun.

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Re: Debt Situation - What to pay off first?
« Reply #46 on: June 02, 2017, 10:24:01 AM »
Most of the debt here is comprised of student loan and consumer loans for stuff, including a car loan.  None of this debt qualifies as good debt.
I'd agree that taking out loans for "stuff" is generally not desirable.  Loans for major items, such as a house or a car for a just-graduated-starting-new-job-need-reliable-transportation-currently-have-no-money person, are worthwhile things.

Quote
In the OP's shoes, I would be all about getting rid of the student loans and the car loan.  With $60k, he will still have $10k on the car loan.  He also has a significant amount of 0 percent debt for consumption where the 0 percent interest rate expires in 14 months.  If he sucks it up, he can have most or all of these debts paid off by then.  Over that time, he can work with his fiancee to get her debt paid off or at least on a quick payoff schedule, and more important, on the same page about finances.

Going forward, they can work together to eliminate the PMI and maximize their savings and investing.  At this point, in my view, the debt is a "hair on fire" emergency.
In any case, given that the loans exist, the only thing that makes them good or bad is the interest rate.  Here we can go back to the MMM blog exception "...or a profitable investment" and have a discussion on generic debt payment vs. investing - in particular, tax-advantaged investing such as 401ks and IRAs.  For relatively low interest rates, what one might see as hair on fire another might reasonably see as attractive highlights glinting in the sun.

From a purely rational numbers perspective, you are correct.  From a behavioral perspective, I disagree.  Working your way through a lot of debt you incurred for stuff you did not need, at least not immediately, is  a very good way of convincing yourself not to do that again.  In the OP's case, it gets rid of those nasty, non dischargeable student loans plus the fancy car loan and the credit card loan for the extras for the house.  Lesson (hopefully) learned.  OP has seen the light, now the fiancee needs to see it as well.  A downshift in lifestyle while the debt is worked off might help her to do that.

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Re: Debt Situation - What to pay off first?
« Reply #47 on: June 02, 2017, 10:40:27 AM »
From a purely rational numbers perspective, you are correct.  From a behavioral perspective, I disagree.
Fair enough.  For some one approach will be better, for others a different one will win.  Vive la diversite!

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Re: Debt Situation - What to pay off first?
« Reply #48 on: June 02, 2017, 11:00:12 AM »
So steps I will take:

1) Make sure 401k pre tax is maxed out.
2) Open Roth IRA outside of work and contribute max
3) Pay off Student Loans - YAY!
4) Pay towards Credit Cards
5) Up my monthly payment on the car
6) Worry about the house once 1 thru 5 are done. We have a 20 year loan at 3.5% so PMI will be gone in 4.5 years regardless. Shooting for 3 years though since 1-5 can be done in 18-24 months.

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Re: Debt Situation - What to pay off first?
« Reply #49 on: June 02, 2017, 11:05:07 AM »
IMO, that's a reasonable balance of saving and paying off the debt.  I would be more aggressive with the debt, but that's me.  If this is what works for you, go for it!