Author Topic: Growing my first mustache  (Read 1958 times)

sansapprobation

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Growing my first mustache
« on: May 28, 2016, 05:44:51 AM »
Hi all!

I'm new to the blog and love what I'm reading, but am looking for advice on how to move towards financial independence in my specific circumstances, and I would really appreciate any help or advice that the community is willing to put my way. I'm 32 (single, no kids) and have not been very financially responsible until now (as you'll see with my finances), but want to buckle down and make financial responsibility and independence a reality.

First, I'd like to offer up my financials. I have about $10,000 in credit card debt, and I know that this is the first thing that I need to get rid of. $3000 of it is on a regular card at 17% interest. This will be paid off by the end of June. The other $7000 is on a card that is earning 0% interest until June of next year. In addition to the credit card debt, I have three student loans that still need to paid off: $4,500 @ 6%, $13,000 4.5% and $13,000 at 4%. After the credit card debt is paid off, my plan is to pay off my student loans. I am working hard at it and believe I should have these paid off by the end of this year.

Next, I have a 2014 Toyota Prius that I purchased new (like a sucker) that I still owe $22,000 with a 0% loan (thankfully I have good credit). This is my next target after my student loans are paid off, and I think that I can have it paid off in full by the end of next year, which would be two years earlier than the normal five year payoff plan.

My last debt is for my condo, which is a fairly recent purchase (finalized in December 2015) for $145,000 with a 4%, 30 year fixed loan. The home is in a good location and appraises for slightly higher than I owe on it right now, and it's in an area that is gentrifying pretty rapidly and I think the value will continue to go up over the next few years. I feel comfortable with this place, and the loan is through the VA, so I'm kind of locked in for about 5 years anyways. My ultimate plan with this is to pay off the mortgage as quickly as I can after eliminating my other debt and doing more investing, and eventually turn this into a high end rental unit.

I don't have a whole lot in savings right now, only about $2k right now, but trying to save $500 per month until I get to my safety cushion goal of $10k.

I don't have much in the way of investments, but I do have a really great employer retirement plan that puts an additional 25% of my salary into a 401k. So, my annual salary is $60k, and on top of that they put $15k per year in a deferred retirement account, for a total compensation package of $75k. I read the MMM article on Betterment and have started putting $100 per month in that, because that's about all I have left over after my other debt and savings plans.

Right now, I'm deployed with the US army, so my income is a little higher than normal and my expenses are way lower than would be typical. That's what is allowing me to throw so much money at debt and pay off my student loans by the end of the year. The monthly savings from that will be snowballed into car payments after that to allow me to pay off the car by the end of next year.

So, that's my overall plan and current financial picture. Now, these are my questions.

1. Does this look like a good and realistic plan? Based on the reading I've been doing, I feel like it is, but I'm honestly not entirely sure and would love some advice.

2. Should I stick with the plan of paying off my student loans first, or should I try to invest my extra money? I've had several people tell me I should just continue to pay my student loans and invest the extra funds instead, since with an account like Betterment, I'm likely to be able to earn a higher interest rate than what I'm paying on my loans.

3. Is it a good idea to keep my current car? A couple of things to keep in mind here. First, I can't sell it any time in the near future because of my deployment. It would be at least 8 months from now, and by that point the amount owed would drop by $4400 due to my regular payments. Second, if I sold it right now, I would still owe $4000 on it because the blue book value is a good bit less than what is owed. To me, it seems like a better option to just pay it off by the end of next year and then have a fully paid off, pretty new and well maintained vehicle that I can use for a long time to come, rather than selling it, taking a loss and then buying a $5k replacement vehicle that isn't likely to last as long. That's my current feeling on it, but I don't really know how to do all the math to determine which is a better long term value. 

4. Once I have my debt paid off, should I try to put the majority of my extra money towards paying off my home, or should I start to invest aggressively? This is where I am really torn and have no idea what the better option would be. I really want to start building up my passive income so that I can reach financial independence earlier, but once the other, non-home debts are paid off, I don't know what to do from there.

5. Does anyone know of any legitimate ways I could earn extra income while I'm deployed? It would have to be online, but I tend to have a lot of down time in the evenings and weekends because this is not a combat deployment. I'd love to try to find something I can do that would allow me to bring home a little extra that I could use to invest or pay off debt, but everything I've looked at so far looks like a scam. I don't have any kind of webmaster or programming skills, so that's out, and I can't receive mail where I am located, so that makes it harder to get a job like a transcriptionist that would require me to get some extra stuff to operate. Any ideas for what I could do?

That does it for now, but I'm sure I will have other questions if anyone gets back to me. Thanks!

Rezdent

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Re: Growing my first mustache
« Reply #1 on: May 28, 2016, 08:48:24 AM »
Sounds like you are heading the right direction, congrats and welcome aboard!

Yes, get out of 17% CC debt asap.  The 0% needs to be gone before interest kicks in.

Paying down the student loans:  4% is the point where I would pay before investing - so certainly get the 6% loan paid off asap, then I would also knock out the other two - but others might have different thoughts.

I would sell that car.  Yes, you'll probably have to pay to get out of it.  But that's a sunk cost now anyway, and it is an anchor around your neck.  If a car is needed (gut-check here, sounds like you are not even using it?), then get an older car.  You could buy four 5k cars for 20k.

Condo: again, 4% is where I usually pay down before investing, so it's right on that line for me.  Research turning it into a rental before making a decision to keep it.  Does the HOA even allow rentals?  Will it meet criteria for renting (read about the 1% rule and the 50% rule on the real estate thread).  If you aren't planning to live there and the numbers don't support renting then sell it.  If you are selling it anyway, then don't bother paying it down - invest instead.

Why do you need a 10k buffer?  Might make sense if you have higher risks or unknowns - but assess this need.  Most single people at your age don't need this much.  Do experience long stretches without pay?  Are you hedging to assist parents if they have an emergency?