Author Topic: Reader Case Study : Paid off all the CC's - still need mustachian fire fighters  (Read 2919 times)

GreatNateVIII

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Current 27 year old who has made strides to douse my flaming hair. I am in a new position which I love, it's all about trimming my expenses now. Thanks in advance for all comments and/or advice. I will take the face punches till I am bloody, I deserve them.

Income:
-   Net:  3,025/month
-   Rental Income (net of expenses besides mortgage):  1,625/month

Total = 4,650/month

Current expenses:
-   Mortgage on Rental (Including Ins. & tax) = 925/month
-   Rent (1br 1ba) = 615/month
-   Car Lease (23 months of 39 remaining) = 352/month
-   Car Payment = 292/month
-   Electric = 55/month
-   Cell = 60/month
-   Netflix = 15/month
-   Grocery = 175/month
-   Dining out = 100/month
-   Gas = 135/month
-   Entertainment = 120/month
-   Cable Internet = 65/month
-   Student Loan = 145/month
-   Car Insurance = 192/month
-   Misc = 125/month

Total = 3,371/month

Assets:
-   IRA = 14,500
-   House = 175,000 (50k Equity)
-   Car (Volvo C30) = 13,000 (5k upside down)
-   Savings = 5,000

Total = 207,500

Liabilities:
-   House =  126,000 4.75%
-   Student Loan = 12,100  - 4.2%
-   Car Volvo Loan = 18,200 - 3.9%

Total = 156,300

Net Worth = 51,200


Notes:
-   My rental house is currently 3 hours away from where I work, therefore moving in there isn't an option.
-   Worked as a contractor in telecom for 2 years. Made good money but the hours were awful and the expenses started to add up. This is the reason for my car lease. It was a good tax write off and my unmustachian brain didn't think things through. I've listed it on both lease trading websites. Cost to turn lease in is approximately $6,000.
-   As you can see above, I'm upside down on my OTHER car by about $5,000. The car costs are destroying my budget.
-   I currently love my apartment but have been offered a room (all expenses included) for $500 that I will be moving into February 1st.

Specific Question(s):
Once I move and cut some more fat off my budget the obvious target are the two cars. I've thought about taking the rest of my reserve money to pay off one and taking out a small loan to pay off the other. I need these gone! I feel once I get rid of them my budget will actually start looking somewhat mustachian. Does anyone have any creative ideas to shore up these two auto albatrosses?




surfhb

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Everything looks great except your vehicles.     Do whatever is humanly possible to rid yourself of them ASAP

TheMoneyBadger

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The cars are, as you know, the big problem here.  Does your lease allow transfer to another party?  That's a fairly pricey car that you're locked into for almost the next two years.  Selling the lease to someone else is sometimes possible and you could turn around and buy a much cheaper used car.

nereo

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I'll echo that most things look good except for the car, which isn't that absurd.
Since you are trying to maximize everything, I'll suggest cutting your restaurant budget in half and applying that to either savings (my preference) or the student loans.

Ok - the next step as I see it is to increase your income.  Get ready for your next employee evaluation and make a case (both with words and with your actions) about how you bring value to the company.  If you don't have formal evaluations than request a sit-down with management to discuss your performance.  Make a few soft inquiries to other jobs just to make sure you aren't being grossly underpaid.  Figure out what steps you need to take (training, etc) to boost your pay by 25-50% over the next few years. FYI your current income is well below the national median average (and that's ok, mine is too right now, - but you should know why and how to change that)

Future Lazy

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I honestly don't think a loan is the right direction for paying off that car. That's just selling your soul to a different devil, if you're not careful about it.

Current expenses:
-   Mortgage on Rental (Including Ins. & tax) = 925/month
-   Rent (1br 1ba) = 615/month  Cutting by $115/mo  - Yay!
-   Car Lease (23 months of 39 remaining) = 352/month
-   Car Payment = 292/month
-   Electric = 55/month Going away when you move? Savings $55/mo
-   Cell = 60/month Look into Republic Wireless or Ting, this can easily be cut by $30/mo
-   Netflix = 15/month Do you need this while you're trying to put out your fires? Savings $15/mo
-   Grocery = 175/month
-   Dining out = 100/month Once again, do you need this while putting out fires? Savings $100/mo
-   Gas = 135/month Jeez - is the room you're renting closer to work? Can this be cut down? I have a long commute, but DH and I only spent $80/mo on gas all summer, sans special trips.
-   Entertainment = 120/month Do you need this while putting out fires? Savings $120/mo
-   Cable Internet = 65/month Going away when you move? Savings $65/mo
-   Student Loan = 145/month
-   Car Insurance = 192/month
-   Misc = 125/month

Total = 3,371/month

Monthly Savings:
$115 - Rent
$55  - Electric
$30 - Cell Phone
$15 - Netflix
$100 - Dining out
$120 - Entertainment
$65 - Cable/Internet
$500 per month total possible savings

Where gas costs and misc costs may also be able to be reduced.

That being said, it would only take 2 months of saving that $500 to get your liquid assets up to $6000 and get the heck out of that lease without taking out a loan.

Edit: The current $352 times 23 months remaining comes to $8096, making the 6k get out of jail (not) free card the better choice.

Then, that $500/mo more to save becomes $852/mo, plus the $1,279/mo surplus you already have comes out to $2131/mo in excess. That's just three months to saving up and paying off the Honda Volvo (lol sorry) to a point where it's not underwater anymore.

Five months, careful planning and no loans needed. Don't go diving back into debt on the pretense that you're getting out of it.
« Last Edit: December 16, 2014, 01:42:37 PM by KaylaEM »

geek101

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Once you get the car situation sorted out you should start throwing that cash flow into investments. Do you have a 401k available, or any other tax advantaged opportunities besides IRA?

If you look at your 'usable' net worth you are not in a very good spot. Your rental property is a good investment so I'll count that equity as usable, however your non-mortgage debt vs. IRA and savings leaves you with a negative NW. Your positive NW comes from the equity only, that needs to change.

I would not consider your budget to be very Mustachian yet. You are doing ok but still lots of areas that can be improved. Adding to what others have said:

Good job finding cheaper rent. Will you be with room mates? this can save on utilities.

-   Grocery = 175/month

Can be reduced easily. I also live alone and I spend $100/mo on groceries. Most of that comes from shopping at Aldi and (trying) to use a meal plan so I don't buy junk I don't need. Many good resources on the forum to reduce this spending.

-   Dining out = 100/month

I'll give you this if you agree to cut other areas. I eat out a lot with friends but my total food spending is never above 200/mo. You should be able to do the same easily. Cut out fast food entirely.

-   Entertainment = 120/month

Find free activities, this is very high in my opinion. Try 50/mo.

-   Cable Internet = 65/month

high, even if you're in an area with only one provider, call and negotiate.

-   Misc = 125/month

What's this? Household supplies, shopping? Also can be easily reduced. Try 50/mo.

After some easy fat trimming and sorting out your car situation you should have great cash flow. Sock it away in equities and watch it grow.