Author Topic: Reader Case Study: Starting over and digging out really deep  (Read 7492 times)

payitoff

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Reader Case Study: Starting over and digging out really deep
« on: December 06, 2013, 12:42:23 PM »
Need to grow some mustache and need all your advice.

Finally husband is done with school, after years of only 1 income, we can now got back to normal. however, i dont know where to start.

here's my stats, please help me where to get started:

monthly bills:
rent - 1400
preschool - 600 (twins)
car insurance - 93
life insurance - 69
health insurance - 133
ymca family plan - 74
ROTH IRA - 100
power - 100 - averaged out -- some months lower, some higher
gas - 25
cable/internet/phone - 165 (mom stays home, she helps us taking care of the twins, and she loves watching TV, thus the cable expense)
cellphone - 80 - 3 lines (me, husband, mom)
food - 600 (family of 5)
gas - 200
truck - 430
car - 400 (car lease + insurance impounded) - took over a friend's lease, will be up in July 2014
misc - 400 (laundry, household, personal stuff - haircut, twins expenses, 100/week)

total: 4969


monthly debt:
old credit card in collection - 82 (paying monthly)
IRS - 226
state tax - 70
student loan 1 - 300
student loan 2 - 273
student loan 3 - 97
personal loan - 550


total monthly: 1598

total monthly net income: 8000

extra monthly: $1433 - i wanted to use this towards paying down debt.

total debts:
old cc in collection: 1650 interest rate unknown - payment plan to be done by dec 2014
(old)student loan 1 - 25,000 - 11% will go in to zero % by Mar 2014 and have a settlement offer of $13,000 by then
student loan 2 - 40,000 - new loan, consolidated at 6.5%
student loan 3 - 2900 - in school loan, will be done by May 2014 per payment plan
IRS - 18,000 - 7%, 8% ? i dont know, plus penalties, original amount was only $8000 >.<
state tax - 3100 - same thing as above
personal loan - 4750 (had to loan money from a family member) - no interest
truck - 14,000 - 12%!!!
car - lease - returning it in July 2014 and will buy a used car in cash

total debt: $109,400

Assets:
just started 401K and ROTH IRA this year:

401K - 1650
ROTH IRA - 300
Lending club - 280

Age: 35 and 36 years old

Goal: pay all debt off in 3 or 4 years

so which one should i knock off first? im thinking to pay off the truck, and when we return the leased car to get a used car in cash, that will free up about $800 of monthly expense?


thanks in advance. hope to hear a lot of responses!


« Last Edit: December 06, 2013, 01:20:07 PM by payitoff »

Mrs.FamilyFinances

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #1 on: December 06, 2013, 01:44:28 PM »
I don't think I'm qualified to help much, but you might want to brace yourself for some face punches!

My plan, if I were you, would be to; cut the YMCA. I know health is important and all that, but its a fast karate chop of $888 a year. Then my next step would be to scrounge up an extra $143 this month ( 1433 extra +74 saved from YMCA) and pay off the old credit card in collection. This adds an additional $82 to your debt repayment budget.

Next I'd get rid of the both the car and the truck through whatever means necessary. Some other folks will hopefully post soon with ways to do that, even with a lease, I've seen it mentioned on the forum several times. $830 a month in car expenses is insane!!!

In theory, this now gives you $2,419 towards debt ( extra+74+82+830). I'm not sure if I would pay the state tax bill or student loan #3 off next. Probably the tax bill, it sounds more scary! Either way, they could both be paid off within 2 months of each other.

This is basically just a debt snowball, which isn't without flaw, but it does make a solid, meaningful impact on your monthly budget almost instantly. I think you could pay off nearly half you debt this year alone with some diligence and careful spending.

Where is the 13k for the student loan settlement coming from? I may have misunderstood, are you saying they will drop your balance down to 13k or that you will be settling the debt for 13k vs.  25k?

payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #2 on: December 06, 2013, 02:10:50 PM »
yes, its an old Student Loan, that have gone into collections, we have not been able to make payments with just one income before, so now we are making payments directly with the collection agency at $300/month, the offer they made is as long as we make this payment for a year, after a year, the rate will change to 0% and have a settlement offer of $13,000 instead of paying off the whole $25,000 (principal and compounding interest ).

that was my first plan, to get rid of the car payments for sure, its $830 more per month for us, i am working towards making an extra $2000 payment per month towards the truck since the car is a lease, and i will just return the car by the time the lease is over, and well buy a used car in cash. i would just have to keep the truck for a while until we are ready to buy another smaller vehicle in cash though.

my husband works about 7 miles from home, im the only one that commutes, my drive is about 25 miles each way, my work is flexible so i work from home sometimes.  moving wont be an option for us since im the only one that will benefit it, the kids school is about 5 miles from home too.


Rebecca Stapler

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #3 on: December 06, 2013, 02:40:34 PM »
If your question is "what should I pay off first?" I think it's important to know what your actual interest rates are. Not only to help you prioritize, but also to get your feet to the fire and motivated to pay it off.

As for the truck loan, I say get rid of the truck and get a car you can afford. If you have any equity in it, sell it and use the proceeds towards a car of that value. Why do you have a truck? Does someone need it for work? Or use it more than once a month as a truck?

payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #4 on: December 06, 2013, 02:45:51 PM »
we needed a 3rd row seat before when we go to places on family weekends, since my mom and my husband's mom dont drive., plus when we had the twins, we haul a big stroller everytime, but now we dont need it anymore..

TrMama

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #5 on: December 06, 2013, 02:47:14 PM »
Brace yourself. Huge facepunches coming.

You have an enormous amount of debt. You owe money to the IRS and that amount has more than doubled due to fees and interest. You cannot afford preschool, investing, double phone lines (landline and cell), double car payments, or the gym.

1. Cancel preschool. Your kids will be fine. Find some free activities (library, mom and me things offered by the state, etc) for your mom to take the kids to. $600 saved.

2. YMCA. $74 saved

3. Truck. Sell it ASAP. Get your DH a bike. $430 saved + $75 in gas

4. Cable/internet/phone. Cut down to the slowest internet speed and smallest cable package offered. Possibly $50 saved.

5. Cells. Cut any data plans. Cut back to the smallest # of minutes you can get away with. Possibly $20 saved.

6. IRA. I'm on the fence about this for you. If you're unwilling to do any of the above, cut this instead. $100 saved.

So that's $1349/mo in savings, with relatively little affect on your lives. Use this money to pay off the cc in collections first (done in month 2), then the state tax, then the IRS, then the student loans. However, if the IRS will add additional penalties, then I'd attack that one first.

Does your mom have any income at all? If so, she can pay for the cable and a portion of her food.

Rebecca Stapler

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #6 on: December 06, 2013, 03:00:16 PM »
we needed a 3rd row seat before when we go to places on family weekends, since my mom and my husband's mom dont drive., plus when we had the twins, we haul a big stroller everytime, but now we dont need it anymore..

So, you'd be traveling with 6 people? or one mom at a time? How old are the twins now? Could you fit 2 carseats in a sedan and still have room for a third person back there? How frequently do you travel with 5 people at a time?

CommonCents

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #7 on: December 06, 2013, 03:03:07 PM »
I don't think you can afford to save retirement while you're racking up penalties and interest to the IRS.  Cut that out and put the extra to your debt for now.

Cut the Y

Why is gas listed twice?  Reeeallly need to limit your driving and cut down on excess trips.

Sell the truck and trade it for a cheaper car with better gas mileage.  Get rid of leased car asap.  (Look into cost of walking away.)  You need to be a one car family.

Try to cut back on the pwoer bill - many threads here on how to do it.

I'd pay to the state debt first, to get it done and start to snowball efforts.  But please list exact rates so we can help prioritize.

Re mom paying for cable and food for herself - she's doing them a huge service with taking care of the twins.  I have friends with twins and it can be super hard.  So I balance it out and think of it as part of the "costs" of free babysitting.  Now, it might be possible to show mom the budget and ask if she can cut back channels.  In any event, call cable and ask for different plans.  Refuse at LEAST the first two offers, then they will get better.  If you don't get offered anything good, threaten to quit (and mean it) and you will likely get a good offer then and shave off at least $50/month.

Mrs.FamilyFinances

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #8 on: December 06, 2013, 03:11:36 PM »
I don't think you can afford to save retirement while you're racking up penalties and interest to the IRS.  Cut that out and put the extra to your debt for now.

Cut the Y

Why is gas listed twice?  Reeeallly need to limit your driving and cut down on excess trips.

Sell the truck and trade it for a cheaper car with better gas mileage.  Get rid of leased car asap.  (Look into cost of walking away.)  You need to be a one car family.

Try to cut back on the pwoer bill - many threads here on how to do it.

I'd pay to the state debt first, to get it done and start to snowball efforts.  But please list exact rates so we can help prioritize.

Re mom paying for cable and food for herself - she's doing them a huge service with taking care of the twins.  I have friends with twins and it can be super hard.  So I balance it out and think of it as part of the "costs" of free babysitting.  Now, it might be possible to show mom the budget and ask if she can cut back channels.  In any event, call cable and ask for different plans.  Refuse at LEAST the first two offers, then they will get better.  If you don't get offered anything good, threaten to quit (and mean it) and you will likely get a good offer then and shave off at least $50/month.

I think she means a natural gas bill for the home, and a gasoline bill to fuel their clown car/truck

CommonCents

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #9 on: December 06, 2013, 03:13:46 PM »
Why is gas listed twice?  Reeeallly need to limit your driving and cut down on excess trips.

I think she means a natural gas bill for the home, and a gasoline bill to fuel their clown car/truck

Ahh, that makes more sense, thanks!

Mrs.FamilyFinances

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #10 on: December 06, 2013, 03:13:55 PM »
yes, its an old Student Loan, that have gone into collections, we have not been able to make payments with just one income before, so now we are making payments directly with the collection agency at $300/month, the offer they made is as long as we make this payment for a year, after a year, the rate will change to 0% and have a settlement offer of $13,000 instead of paying off the whole $25,000 (principal and compounding interest ).

that was my first plan, to get rid of the car payments for sure, its $830 more per month for us, i am working towards making an extra $2000 payment per month towards the truck since the car is a lease, and i will just return the car by the time the lease is over, and well buy a used car in cash. i would just have to keep the truck for a while until we are ready to buy another smaller vehicle in cash though.

my husband works about 7 miles from home, im the only one that commutes, my drive is about 25 miles each way, my work is flexible so i work from home sometimes.  moving wont be an option for us since im the only one that will benefit it, the kids school is about 5 miles from home too.

You can't afford to keep the car till then. Sorry. Also, if your mom is living with you, she can conduct free preschool during the daytime for the twins.

gimp

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #11 on: December 06, 2013, 03:19:07 PM »
You can do better on food. $120/person isn't terrible but if I live on $30, you should be able to at least do $75/person, saving $225/month.

Here's how. No, you're not going to dive into malnutrition doing so:

- Buy shelf stable items in bulk. 50 pound bags of rice might be found for $20. 50 pound bags of beans. Huge boxes of pasta. Big containers of flour. These things last for years and years, and give you all the calories (not necessarily nutrients but we'll get to that) a meal needs for around 10-35 cents per meal.
- Buy whatever fresh fruits and vegetables are in season. You can often find fresh stuff for well under a dollar a pound.
- Buy meat in bulk and freeze it. (Also, know anyone who hunts or fishes?) You might do well buying a freezer (craigslist, under $100) because it'll save you so much money.
- Bake bread. Maybe make pasta. And so on; just try to make everything from scratch.
- Properly salting food elevates its flavor. If you're ever tempted to take the easy way out and buy pre-made or pre-cooked, channel that energy into improving your cooking. I see tons of people give up on making everything from scratch for this reason.

And now comes the part you knew was coming.

- Cut out convenience packaging entirely. Without knowing it, you are most likely spending money on little packages of pre-sliced whatever. Buy big packages of whole blocks of whatever; you will usually get the same food for 75% of the price or less doing so. Hell, for some things, you'd pay more like 20% of the price.
- Fast food? Kill it. You can't afford it.
- Restaurants? Kill it (with very rare exceptions, perhaps). You can't afford it.
- Coffee or donuts from a shop? Kill it with extreme prejudice.
- Junk food from the grocery store? Kill it.
- Booze? Kill that too, for the most part.

Oh, and misc kitchen stuff:

Learn to cook with a small set of versatile tools. I know a lot of people who have every possible knicknack in their kitchen and never use any of them. Waste of money. Then when their knife set goes dull after two years (because knife sets are terrible) they buy another set, even though they only use two of the knives.

Similarly, make sure those tools are of high quality. Doesn't have to mean expensive. If you find yourself replacing teflon pans every year, remember that a cast iron pan will outlive your grandchildren.

Furthermore, take care of your stuff.

Following these instructions will reduce your non-food kitchen expenses considerably, in addition to reducing food expenses as mentioned above.

payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #12 on: December 06, 2013, 03:24:10 PM »
thank you so much for all these brainstorming!!

yes, we used to be 6 people going to church on weekends, his mom passed on last year, now were down to 5, and yes we now fit into a sedan with 2 carseats since the twins are now toddlers.  so we are ready for a smaller better gas mileage car. the only problem though is we owe more than how much the truck is worth right now.  the leased car we cant do anything until the lease is up

no, mom doesnt work, she's retired, and helps us with groceries and some fun stuff for the kids, she wants to do this for them, id wish shell give to us to pay for some debt which dont think she will.

gas for the transportations and gas for heating sorry

 


payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #13 on: December 06, 2013, 03:32:04 PM »
if i may add, the preschool kinda helps unloading some pressure off my mom too since they are now more active and she's is 73 years old, she is getting overwhelmed with them asking for constant attention and play (they're both boys by the way)  so we opted for this, part time preschool to give her some quiet time at home.

i love the idea of bulk buying, i might have to consider buying meat in bulk too.. my mom and i get together on Friday night to do menu planning for the week, then we buy groceries on a weekly basis at $100 budget. so far this is working well, since we only focus the stuff we need for the week. but youre right, meat and other small packing might end up costing more. the other $200 extra for food i use for the growing twins food, and sometimes our lunch out on weekends, which is about $40-50 on average.

gimp

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #14 on: December 06, 2013, 03:52:30 PM »
If you want to figure out exactly where your money is going, next time you buy groceries, make a spreadsheet of every item you bought (keep that receipt!) and calculate price/weight.

One common mistake is buying 12oz packages instead of 16oz packages. They're usually about 5-10% cheaper but are 25% smaller. Obviously if you stop and think about it you know it's not a pound, but if you're in a hurry and your hand grabs that one...

Another common mistake is bone-in meat. Now, bone-in meat is great; the bones add flavor, keep things a little bit more moist, and make great stock. But if you're buying beef ribs for $2.50/lb, probably half that weight goes to bones. On the other hand, you can often buy two skinless chicken breasts, or a whole chicken, for the same price; the whole chicken has bones, sure, but it also has breasts around the same size and a lot more besides.

Another common mistake is food that you think is cheap, but is actually not. Great example: spam. Spam used to be cheap meat. Spam was given for free to WWII soldiers, so when they came back home, they remembered that they were able to eat real meat and knew they could buy it cheap. But if you look at spam in a grocery store today, it's not exactly cheap; I've seen it at over $3/lb! Similarly, I see hotdogs for $1/lb, and I see hotdogs for $3/lb right next to them. People figure hotdogs are cheap but don't notice that they're charging more for processed bits and ends than they are for boneless pork chops.

Another common mistake is not making the most of your food; in other words, waste. Bones should make stock before they're thrown out. Stale bread can be toasted, or thrown in the oven, or crumbled into dishes. Old bananas go into banana bread, not the garbage. It sounds obvious but there are a lot of little things that add up. Once you get good at this, you get creative - for example, when I make pulled pork, the pork fat / water gets used to make rice and it's the best damned rice ever. Also spoilage is in this category; it's good to stock up on things, but not if they're going to spoil; freeze it, eat it, cook it, whatever. Some things are fine to cook just to give them a couple more days in the fridge (grocery stores do it all the time - chicken that's about to expire, but is perfectly fine, gets spit roasted.) On the other hand, there are plenty of things that look spoiled but aren't; hard cheeses grow mold spots sometimes, but you just cut it off and carry on, because that's how cheese works.

Anyways, once you make the speadsheet, you don't even have to come back here to figure out the next step. You'll say "wait, what, we bought that? Damn, that's off the menu."

Heart of Tin

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #15 on: December 06, 2013, 04:20:43 PM »
Even if you keep your spending/debt levels exactly as they are right now you should be able to pay off all of your debt by early 2016. I've attached a copy of the amortization/payment schedule I used to come that conclusion. Feel free to change any of the grey highlighted cells.

payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #16 on: December 06, 2013, 04:50:51 PM »
thank you so much Heart of Tin!! this is very useful, yes i am aiming to pay everything off in 4 years and this spreadsheet is showing even better! 2.5 years!

i feel more at ease now knowing what to pay off first, that was my main dilemma.

again thank you so much, this is very helpful

mm1970

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #17 on: December 06, 2013, 08:30:41 PM »
if i may add, the preschool kinda helps unloading some pressure off my mom too since they are now more active and she's is 73 years old, she is getting overwhelmed with them asking for constant attention and play (they're both boys by the way)  so we opted for this, part time preschool to give her some quiet time at home.

i love the idea of bulk buying, i might have to consider buying meat in bulk too.. my mom and i get together on Friday night to do menu planning for the week, then we buy groceries on a weekly basis at $100 budget. so far this is working well, since we only focus the stuff we need for the week. but youre right, meat and other small packing might end up costing more. the other $200 extra for food i use for the growing twins food, and sometimes our lunch out on weekends, which is about $40-50 on average.

Hmm...I would definitely not nix the preschool in this case.  Not sure how old your boys are, but I have two boys (7 and 17 months) and they tire ME out and I'm only 43!  But you may want to look at other, cheaper options.

You should sell the truck, even if you are upside down.  Do the math but it may be cheaper in the long run (out of pocket cash + cheap used car may be less than paying off the truck).

Skip the lunch out on the weekends.  You cannot afford it.  If there is some kind of food you like as a "treat", figure out a way to get it for cheaper.  Example: I have a FT job and 2 boys and not a lot of time right now.  So instead of getting takeout, we buy 4-packs of frozen pizza at Costco for $13 ($3.25 per pizza).  Depending on how hungry we are, this ends up being one meal or one and a half (not including the veggie side).  Not as cheap as making our own but a good compromise between making everything from scratch and eating out.  We eat a pizza for dinner once every week.  If I cook two big pots of something on the weekend (rice and beans, chili, pasta), then I only need two more "quick" meals mid-week.

Can you cut back on cable?  Our cable was costing us $125  month and we cut back to internet only and now live with Netflix, hulu, and Amazon prime. 

Heart of Tin

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #18 on: December 06, 2013, 08:38:26 PM »
thank you so much Heart of Tin!! this is very useful, yes i am aiming to pay everything off in 4 years and this spreadsheet is showing even better! 2.5 years!

i feel more at ease now knowing what to pay off first, that was my main dilemma.

again thank you so much, this is very helpful

I'm glad it helped! Just so you know, the spreadsheet probably won't exactly match the real world since your actual payments will fluctuate a bit and you couldn't give us exact APRs on all of the loans, but it is intended to help you get your head around the payment schedule. Let me know if you have any questions.

minnie1928

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #19 on: December 06, 2013, 09:11:56 PM »
Following the reduce your waste theme, look at your trash. Stop buying one time use items like Ziploc bags, paper plates, paper towels. You can make your own cleaners for much less than what the stores charge and reuse the original containers.

Rebecca Stapler

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #20 on: December 07, 2013, 04:32:17 AM »
My 70-year-old mom helps us out one night a week with our preschooler and there's no way I would have her care for twins full time! I give your mom major credit for caring for twins even part time! I wouldn't take preschool out of the mix. $600 for twins, IMO, is really low. We pay twice that for 1 full-time preschool.

How much are you upside down on the truck? I would knuckle down and pay off the difference, then sell it in a private sale to maximize the price you'll get. Think about all the costs associated with this truck: 12% interest (am I remembering that right? that's nuts!), insurance, and higher gas mileage. I know it sucks to get rid of what is probably a nice car, but it really is sucking away your cash needlessly. Depending on the interest rates of that credit card, I would prioritize the truck. Go after it with serious determination to get that loan down. 

payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #21 on: December 07, 2013, 01:13:05 PM »
My 70-year-old mom helps us out one night a week with our preschooler and there's no way I would have her care for twins full time! I give your mom major credit for caring for twins even part time! I wouldn't take preschool out of the mix. $600 for twins, IMO, is really low. We pay twice that for 1 full-time preschool.

How much are you upside down on the truck? I would knuckle down and pay off the difference, then sell it in a private sale to maximize the price you'll get. Think about all the costs associated with this truck: 12% interest (am I remembering that right? that's nuts!), insurance, and higher gas mileage. I know it sucks to get rid of what is probably a nice car, but it really is sucking away your cash needlessly. Depending on the interest rates of that credit card, I would prioritize the truck. Go after it with serious determination to get that loan down.



im probably upside down about 8000, its crazy. its so confusing on what to do with this truck, im thinking ill never break even coz by the time i knock off 8000 on it, the value will be lower again. i guess i will have to do it aggressively.

yeah, its draining to watch two toddlers, that's why we signed them up right away as soon as they turned 2.5 years old. they are in school 3 days a week, for half a day., then we make use of the endless classes at YMCA on other weekdays, and weekends, keeps them occupied, for a flat 74 fee per month

payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #22 on: December 07, 2013, 06:25:10 PM »
we currently dont have any liquid funds/savings, do you this it is wise to split the extra funds in half and i save the other half as Emergency fund? im thinking of putting this into ROTH IRA so it grows more, and if we need it, we can access it quickly?

im just not comfortable to dumping all extra towards debt, and not have a stash for unexpected events.

Rebecca Stapler

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #23 on: December 09, 2013, 03:10:54 PM »
I understand not wanting to have zero emergency fund cushion. It's up to each of us to decide what kind of cushion makes us comfortable, but it doesn't always have to be in cash. It could be in your credit card limit and your ability to make that money in a month before the CC bill is due. It could be in your Roth IRAs and you withdraw just the principle in a severe money emergency. It's important not to confuse your E Fund with your anticipated annual expenses -- things that occur once or twice a year but you can put a number on it now and can set aside $$ each month towards that expense, so you'll have the cash when it's due (like life, car, disability insurance premiums or real estate tax).

Dave Ramsey recommends $1,000 in an E Fund, and if I had a steady income then that's what I'd use. Heck, when we had a steady income, we relied solely on our Roth IRAs as emergency cushions and we'd dump our entire checking account into loans each month. If it makes you more comfortable, take the $1,000 from your first month and put it in an EFund, then put the other $400 into a debt -- like that car loan! It will feel good, I promise :)

As for your $8k upside down on the truck: Given the savings you budgeted, it won't take you forever to pay it! Just 6 months or so. Once you pay off the truck, you can get a new-to-you car (that is the same value as the truck) with better gas mileage and no car loan at a ridiculous rate.

Rebecca Stapler

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #24 on: December 09, 2013, 03:12:36 PM »
Oh, as for whether to invest or pay off debt, here's my take: If you have a 12% interest car loan, you're not likely to earn more in your investments than you're losing with that loan. Once it gets to the point where your debt's interest rates are lower than your expected investment yield, then I think you should split them up and invest in your retirement.

payitoff

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #25 on: December 09, 2013, 04:47:36 PM »
UPDATE:

so i called the old student loan company where were making $300 payments on, which they have mentioned that we only have 3 more payments to go, and we will be eligible for a settlement offer. so by Feb 2014 is our 3rd and last payment arrangement, and we will have the option to take the settlement of $12,468 instead of paying the whole balance of $25k, i was honest with him and told him there's no way we will have $12k in 2 months, so he said that if we can come up with just the half, they can spread the other half over in 11 months, that's gonna us $13,000! 

so with that said, i am now torn whether to make extra payments on the truck or set the extra money aside to jump on that settlement offer in Feb.?

truck:
$1400/mo extra towards monthly payment 

old student loans:
$1600/every 2 weeks to come up to $6400 by end Feb 2014 -- HOW???



CommonCents

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Re: Reader Case Study: Starting over and digging out really deep
« Reply #26 on: December 09, 2013, 09:02:36 PM »
UPDATE:

so i called the old student loan company where were making $300 payments on, which they have mentioned that we only have 3 more payments to go, and we will be eligible for a settlement offer. so by Feb 2014 is our 3rd and last payment arrangement, and we will have the option to take the settlement of $12,468 instead of paying the whole balance of $25k, i was honest with him and told him there's no way we will have $12k in 2 months, so he said that if we can come up with just the half, they can spread the other half over in 11 months, that's gonna us $13,000! 

so with that said, i am now torn whether to make extra payments on the truck or set the extra money aside to jump on that settlement offer in Feb.?

truck:
$1400/mo extra towards monthly payment 

old student loans:
$1600/every 2 weeks to come up to $6400 by end Feb 2014 -- HOW???

If you do the settlement offer, make sure you get it in writing before you send over the cash.  It doesn't sound from your recent post that it's feasible  though.  And what happens if you don't come up with the second 6k?  I'd be wary of committing to a plan that requires you to come up with a sum if you aren't 100% sure you can do it.