Author Topic: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?  (Read 1776 times)

ebella

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32 yo unmarried but cohabitating attorney working for federal govt in Atlanta, GA until 2020.  Filing single, no dependents and going to keep it that way for foreseeable future.

Income:
Pre-deduction gross salary:$94,685
Post deuction monthly takehome: $5000
Deduct health insurance ($147.44 per month) and have pre-tax health care reimbursement account of $2000 annually.  This allows me to stay in the lower tax bracket and use pre-tax for everything health-related (glasses, massage therapy etc etc)
Non-income taxes: $575 for my professional privilege tax

Retirement:
No 401k or other retirement offered through employer:(
max out my Roth IRA each year (itís currently At $18,480.27).
Rolled over 401k from previous employers into IRA held by USAA (where I do all my banking) which totals: $15,988.32

Debt
$86,000 consolidated federal student loan. The original amounts varied and the interest rates range from 5.5 to 6.9%. Currently on income based repayment around $866 per month and enrolled is public service loan forgiveness with 100 more qualifying payments to make.

assets:
own my subaru outright
Emergency fund: $17,027.43 (I know I should diversify this more)
mutual fund: $20,359.79 (this was for downpayment so I put it in less risky short term bonds when I was thinking of using it)
I use Digit and have about $4500 in there right now which I was gonna put in Stash or some beginner investing app so I can learn more about investing.
Checking: $5000 or so every month

Other expenses:
Rent: $1275.
car maintenance and reg (I had some flat tire surprises which were unusual expenses but this is average since 2015): $55
Fees for Delta Amex and Chase Reserve: $21/mo
Amazon: $8.25
Costco: $4.20/mo
utilities: $30-50
phone: $36
Internet: $20
Grocery: $200
Dining out: $200
Renterís insurance: $8
Car Insurance: $75
Laundry: $30 (coin machines in the building, plus dry cleaning)
Charity: $10
Electronic: $30 (this is average of what Iíve spent since 2014 to replace laptop, phone etc)
Professional memberships/continuing legal education: $250 per year for annual bar reg or $20/mo
household supplies: 20
Travel: $200 (I visit that family in Europe at least once a year, usually try to use miles, also some cheaper trips around the US to see friends/beach/camping etc, so this is an average)
Clothing (average, I havenít bought new clothes since September): $20
Electronics: $30
Entertainment subscriptions: $19
Entertainment/hobbies: $50 (this is like going to a sport game, movie, or buying craft supplies)
Personal care (basically anything not covered by the healthcare resimbursement): $50
Gifts (varies): $20


I know I need to be investing more aggressively, I am unsure how to do it and am very wary of markets right now.  I also know I could be paying down more debt but am reluctant to do that because I kinda think the federal student debt system will implode like the mortgage one did and my situation is sort of weird because I have family who are permanent residents in Europe and in a few years, I should be eligible to gain citizenship there (once they also become citizens), which I plan to do.  Thatís kind of a contingency plan if shit hits the fan in the USA and I canít pay my loans or find gainful employment: I  will literally go live on a self-sustaining rural property in Europe.
But, in the meantime, Iíd like to stay in Atlanta, continue to practice law, ideally for the federal government (again, lots of assumptions here) or maybe for a big law firm (if thereís no chance of federal govt work improving and collect a bonus to throw at my loans) and own a modest home.  I donít care about kids or school districts or retiring early, I just want to meaningfully contribute to the community I live in and enjoy things like regular travel, local culture (1 or 2 meals out a week, the occasional concert), and the freedom of not being worried about financial disaster.  Debt and employment donít feel burdensome to me and I love budgeting, clipping coupons for everything and general DIY hacking.  What scares me is committing to things like property or a financial future built on the current very fragile system.
Iíve thought about buying a home with my mom as a co-owner.  It gives her a passive income stream (I would pay her monthly payments) and way to diversify (since she canít buy/sell stock as a foreign resident) and would probably give me a good rate but I donít feel compelled to do it if it means paying more than my rent.

So, what should I do?  Just get rid of the debt?  I feel like my expenses are already pretty paired down and quality of life is very important to me (i.e. not spending hours in car commuting or living in a place that is unsafe and making conscious choices about what I consume).  But how can I make the money I have work for me, especially when I have the debt and little tax-advantaged retirement options?

shinn497

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #1 on: May 03, 2018, 07:17:37 PM »
Question, if you went out of a job that allowed loan forgiveness and instead into the highest paying one you could find, how much could you earn? My impression of public service loan forgiveness is that it is just a way to get  people that could otherwise earn higher  income into lower income jobs that are less attractive.

If I were you, I would see if I could get a higher paying job. Obliterate that debt, and then dump everything into investments. I say just be done with debt. even if mathematically there are some other options that are enticing, not having debt is freaking awesome and allows you to invest with more confidence.

I mean with your income and profession, you could buy a house and pay it off and save up like 300 - 500 k in 10 years. I think that is awesome.

I say this because I make something similar (78k but 4700 take home and I'm a year younger) and, if i changed jobs, I would love to live in Atlanta because of the cost of housing. And if I did that is the plan I would do

CrispKale

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #2 on: May 04, 2018, 10:20:40 AM »
Just a question on your potential plan for walking away from your loan, aren't you worried about your credit history? As far as I know credit history both for future loans and for potential employment is international. Do you not worry about the default biting you in the future? Student loans are treated much differently then credit card debit it doesn't get written off.
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ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #3 on: May 04, 2018, 11:55:34 AM »
Question, if you went out of a job that allowed loan forgiveness and instead into the highest paying one you could find, how much could you earn? My impression of public service loan forgiveness is that it is just a way to get  people that could otherwise earn higher  income into lower income jobs that are less attractive.

If I were you, I would see if I could get a higher paying job. Obliterate that debt, and then dump everything into investments. I say just be done with debt. even if mathematically there are some other options that are enticing, not having debt is freaking awesome and allows you to invest with more confidence.

I mean with your income and profession, you could buy a house and pay it off and save up like 300 - 500 k in 10 years. I think that is awesome.
I say this because I make something similar (78k but 4700 take home and I'm a year younger) and, if i changed jobs, I would love to live in Atlanta because of the cost of housing. And if I did that is the plan I would do

A couple of answers to your question:
1) I already make what the average lawyer in Atlanta with my years experience does; there's this huge misconception that all lawyers earn 6 figures or can, that's very much not true.
2)  I could earn more if I get into one of the few I got a big law jobs here but, even then, it's unlikely I would make more than $200k and stay in it for 10 years; there's a fair amount of intentional attrition at that level and because of my career level I'd have to make partner in the next 5 years or be kind of forced out.
3) Even without intentional attrition, most people cannot do big law for more than 5 years tops because the long hours and stress correlates into not much money when you factor in the collateral damage to your health and other areas of your life. 
4)  I entered law to do public interest not to make money.  I would really rather work forever doing good work than work super hard for 10 years doing a job I hate just to retire early. I guess that makes me not much of a financial independence person; because I love working, but I only like doing it for the right cause.

ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #4 on: May 04, 2018, 12:03:16 PM »
Just a question on your potential plan for walking away from your loan, aren't you worried about your credit history? As far as I know credit history both for future loans and for potential employment is international. Do you not worry about the default biting you in the future? Student loans are treated much differently then credit card debit it doesn't get written off.

Oh I'm well-aware of bankruptcy laws and the fine print on on the contract I signed!  Also credit history is not international at all, each country has their own system for evaluating.  My mom rarely uses credit for anything where she lives; it's a mostly cash economy .  The assumption I'm making for my worst case scenario walking away from my US govt loans is that we are in a financial crisis (like with mortgages but with student loans and a huge deficit), I am unable to find a job that allows me to pay off my loans, and I no longer have any intention of moving back to the USA.  Which, tbh, not that crazy of a thought these days...

shinn497

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #5 on: May 04, 2018, 05:11:01 PM »
You know what, I am willing to bet that if you went scorched earth, I mean really scorched earth. Like liquidating your emergency fund and even downpayment, selling your car, moving to cheaper rent, etc. etc. You could have this debt done with within a year. It would not take you very long to rebuild your emergency fund and put a down payment on a house. Shit, in atlanta, if you were patient enough, you could buy a house in cash in like 3-4 years if you wanted to. Then save up like 300k- 500k and actually retire early. This whole process could be completed within 15 years. If you changed jobs, and earned like 200k, it would be like 5-6 years, so it wouldn't matter if you burn out by then. You'd be so secure, with so much fuck you money and a big asset, that it wouldn't matter what the economy does.

Just a thought. I think how well you do pretty much is related to how closely you do the above method. The reasons being is that the above way of doing things is SUPER intense. It isn't the numbers. Personal finance is ALL behaviour. So the more extreme and insane you do things, the more likely you are actually going to stick with them and accomplish them.

However, the more you veer and anemically do things. The more likely you are to skip debt payments, spend extra on fun but ephemeral things, not work as hard, and ultimately be less wealthy. But also remember, that if there is an actual crisis (which is very unlikely), the more in debt and lower earning you are, the more likely you are to get screwed.

That is the genius of early retirement. It isn't about the money. It is about not giving a fuck what happens in the world. Its freedom. But freedom doesn't come without working for it.

Anyway. I can't say exactly what you should do. But I'd advise you to think about your goals and values. Think of how much you want to be in a strong financial position, because you have the power to. It is just a matter of will. And there are no shortcuts.

MommyCake

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #6 on: May 07, 2018, 05:15:14 AM »
I would focus on paying down the debt because the interest rates aren't very low at 5.5-6.9. Can you refinance this or consolidate at a lower rate? 

ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #7 on: May 07, 2018, 09:36:16 AM »
I would focus on paying down the debt because the interest rates aren't very low at 5.5-6.9. Can you refinance this or consolidate at a lower rate?

I could probably refinance through a private lender but with less favorable repayment terms. i.e. not income based, no potential for public service loan forgiveness etc. Not sure how that would align with those career goals.  I know there is more interest accruing in debt than I could reasonably expect to get if I put the money to retirement/investment account or property.  But, its not just a matter of measurable interest rates because my goal ins' to have a shit ton of money, it's to do a career in public service.  How do we measure the costs of being tied to a private lender v. freedom of doing public service that you'e wanted to do all your life?

ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #8 on: May 07, 2018, 09:48:14 AM »
You know what, I am willing to bet that if you went scorched earth, I mean really scorched earth. Like liquidating your emergency fund and even downpayment, selling your car, moving to cheaper rent, etc. etc. You could have this debt done with within a year. It would not take you very long to rebuild your emergency fund and put a down payment on a house. Shit, in atlanta, if you were patient enough, you could buy a house in cash in like 3-4 years if you wanted to. Then save up like 300k- 500k and actually retire early. This whole process could be completed within 15 years. If you changed jobs, and earned like 200k, it would be like 5-6 years, so it wouldn't matter if you burn out by then. You'd be so secure, with so much fuck you money and a big asset, that it wouldn't matter what the economy does.

Just a thought. I think how well you do pretty much is related to how closely you do the above method. The reasons being is that the above way of doing things is SUPER intense. It isn't the numbers. Personal finance is ALL behaviour. So the more extreme and insane you do things, the more likely you are actually going to stick with them and accomplish them.

However, the more you veer and anemically do things. The more likely you are to skip debt payments, spend extra on fun but ephemeral things, not work as hard, and ultimately be less wealthy. But also remember, that if there is an actual crisis (which is very unlikely), the more in debt and lower earning you are, the more likely you are to get screwed.

That is the genius of early retirement. It isn't about the money. It is about not giving a fuck what happens in the world. Its freedom. But freedom doesn't come without working for it.

Anyway. I can't say exactly what you should do. But I'd advise you to think about your goals and values. Think of how much you want to be in a strong financial position, because you have the power to. It is just a matter of will. And there are no shortcuts.

Very interesting. 
Not sure I'd liquidate the emergency fund though.  Wouldn't that make me more vulnerable in a crisis? 
Am defs going to halve my rent in the next few months though due to cohabitation.
And you'd still advise property over straight up liquid asset cash in event of crisis and my ability to live somewhere else?
But you'd definitely say deal with debt before the acquiring property?  I worry that it will just keep getting more expensive if I don't invest in real estate now. 


civil4life

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #9 on: May 07, 2018, 12:08:47 PM »
I was in the Public Loan Forgiveness Program until about 8 months ago.  I switched my loans over to SOFI.  I went from 6.8% to a 3.75% variable rate.  I still had about 60 payments left.  For me though my loan was small and the amount forgiven would be close to breaking even.  In your case, you have significantly more loans than me.  I guess the first question is how confident do you feel you will be working in the public sector or non profit for the next 8.5 years?  It sounds like that is where your heart lies so baring catastrophe it sounds like the answer is yes to staying in the public interest arena.  Most government jobs are very secure.  Is there a reason you feel insecure with your employment?  How hard would it be if let go to find another public sector position?

Curious what is professional privilege tax?

Just a couple budget items.

Why do you keep credit cards that have annual fees?  Cancel them and get ones with no fees.  There are plenty of no fee cards that have rewards.
Why is the job not paying/reimbursing your professional fees.  I work in the public sector and my fees are reimbursed.

The next question is if you are a federal government employee you should have access to a Thrift Spending Plan (TSP).  These are the general equivalent to 401k, 403b, 457.  Here is there website https://www.tsp.gov/index.html.  I briefly looked at and if you are eligible these look like a great place to put your pretax savings.

My understanding of your assets are as follows.

IRAs - $18480 and 15988.32, Total $34,468.32
EF $17027.43
Mutual Funds $20,359
Digit $4,500
Checking $5000

Total Assets $81,354.75

From your expenses you spend about $2,500/month.  It is recommended that an EF be between 3-6 months.  For your a range of $7,500 to $15,000.  Your EF is on the high end of the range.  It is what you feel comfortable with.  What kind of account do you have it in?  You should consider at minimum looking for a high yield savings account or money market account so you are making a little bit of interest.

Checking you really only need to keep your currently monthly expenses in the checking account.  $2,500

What are your IRAs invested in?

It looks like Digit is some sort of savings account.  After the first 100 days it charges $2.99 a month.  I would definitely close that account now.

First check out this link https://forum.mrmoneymustache.com/investor-alley/investment-order/.  This is a breakdown of the order in which you should invest your money.

You have said you are fairly risk averse and a bit of a newbie with investing. 

Many of the people here use Vanguard for investments.  They have ETFs.  These are already premixed stocks and bonds based on types of stocks and your risk level.  Another one that I use is Targeted Funds.  These ones are based on when you are expected to retire.  The funds are managed so that as you age and get closer to retirement the funds are less risky.

Unfortunately I am not that great with investments either.   You are young and have plenty of time to ride out some highs and lows of the stock market. 

First check out the TSP.  If you can you want to max out your IRS contributions.
Depending on where your IRAs are at and the types of funds they are in you may or may not want to move them.
If you do one of the less riskier ETFs I would take all of your mutual funds and add them in, because they are partially mutual funds and bonds as well.
Then with your $2500 savings after maxing out any tax advantage accounts stick in the ETFs as well.

At this time I would only speed up payments to your student loan if you do not think you will be around long enough for forgiveness.  Also, if your current plan is not enough to pay off the monthly interest and your loan is increasing I would add at least enough to cover the interest and have the balance decreasing.
Givling - Payoff up to $50k in student loan or $25k on mortgage - referral code SG229715

ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #10 on: May 07, 2018, 03:18:25 PM »
I was in the Public Loan Forgiveness Program until about 8 months ago.  I switched my loans over to SOFI.  I went from 6.8% to a 3.75% variable rate.  I still had about 60 payments left.  For me though my loan was small and the amount forgiven would be close to breaking even.  In your case, you have significantly more loans than me.  I guess the first question is how confident do you feel you will be working in the public sector or non profit for the next 8.5 years?  It sounds like that is where your heart lies so baring catastrophe it sounds like the answer is yes to staying in the public interest arena.  Most government jobs are very secure.  Is there a reason you feel insecure with your employment?  How hard would it be if let go to find another public sector position?

Curious what is professional privilege tax?

Just a couple budget items.

Why do you keep credit cards that have annual fees?  Cancel them and get ones with no fees.  There are plenty of no fee cards that have rewards.
Why is the job not paying/reimbursing your professional fees.  I work in the public sector and my fees are reimbursed.

The next question is if you are a federal government employee you should have access to a Thrift Spending Plan (TSP).  These are the general equivalent to 401k, 403b, 457.  Here is there website https://www.tsp.gov/index.html.  I briefly looked at and if you are eligible these look like a great place to put your pretax savings.

My understanding of your assets are as follows.

IRAs - $18480 and 15988.32, Total $34,468.32
EF $17027.43
Mutual Funds $20,359
Digit $4,500
Checking $5000

Total Assets $81,354.75

From your expenses you spend about $2,500/month.  It is recommended that an EF be between 3-6 months.  For your a range of $7,500 to $15,000.  Your EF is on the high end of the range.  It is what you feel comfortable with.  What kind of account do you have it in?  You should consider at minimum looking for a high yield savings account or money market account so you are making a little bit of interest.

Checking you really only need to keep your currently monthly expenses in the checking account.  $2,500

What are your IRAs invested in?

It looks like Digit is some sort of savings account.  After the first 100 days it charges $2.99 a month.  I would definitely close that account now.

First check out this link https://forum.mrmoneymustache.com/investor-alley/investment-order/.  This is a breakdown of the order in which you should invest your money.

You have said you are fairly risk averse and a bit of a newbie with investing. 

Many of the people here use Vanguard for investments.  They have ETFs.  These are already premixed stocks and bonds based on types of stocks and your risk level.  Another one that I use is Targeted Funds.  These ones are based on when you are expected to retire.  The funds are managed so that as you age and get closer to retirement the funds are less risky.

Unfortunately I am not that great with investments either.   You are young and have plenty of time to ride out some highs and lows of the stock market. 

First check out the TSP.  If you can you want to max out your IRS contributions.
Depending on where your IRAs are at and the types of funds they are in you may or may not want to move them.
If you do one of the less riskier ETFs I would take all of your mutual funds and add them in, because they are partially mutual funds and bonds as well.
Then with your $2500 savings after maxing out any tax advantage accounts stick in the ETFs as well.

At this time I would only speed up payments to your student loan if you do not think you will be around long enough for forgiveness.  Also, if your current plan is not enough to pay off the monthly interest and your loan is increasing I would add at least enough to cover the interest and have the balance decreasing.

To clarify:
I clerk for a federal judge which is kinda like a residency for lawyers.  My term maxes out in 2020 (although I plan to stay till at least 2019) at which point I have to find other employment.  I just know that fed govt is not hiring lawyers right now.  They aren't enforcing laws so they aren't hiring anyone to do it and the laws they are enforcing (i.e. immigration) are....problematic for me.   On top of that they are eroding alot of the traditional security that comes with govt employment (at both state and fed levels)
As a term clerk, I am not eligible for any employer sponsored retirement like a TSP. 
The US Court system does not pay my annual fees and the (professional privilege) taxes associated with keeping my law license.  I could go on inactive license status but, because I don't want to take another bar exam (which is very expensive), I am staying active on mine and taking the continuing education so I can waive in to other states next when I hit the 5 year mark required by most states.  Multiple licenses in contiguous states make me a more attractive private sector employee, should that be something I want to pursue and, if I get a law firm offer, they may pay those waiver fees.

My emergency fund is in a money market account. My IRAs are in mutual funds targeted for 2050 retirement at a moderately aggressive risk held by USAA (just because that's been my bank since I was 16).
I keep the credit cards because they've ended up saving me money; as in I paid $1000 less than I normally would have paid to visit my aging twice in family in the last year.  I literally just do them for the these travel points and will probably churn them when the bonus expires. So after this year, I will probably cancel them and add new ones that may or may not have no fees.

I really like your suggestions re: the debts.  As I understand it, you're saying 1) pay down as much of debt as I can to stay interest free while awaiting employment prospects 2) invest remainder in ETFs?  But don't spread that remainder around into, say, buying a house/apartment/condo instead of investments?

How did you do the math re: breaking even?  I've tried to run it but am not sure how to plug it in.  At point I thought I was breaking even but on the studentloanhero calculator I was getting $65000 forgiven.  I am not great at math so that may be part of it.

civil4life

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #11 on: May 08, 2018, 08:24:39 AM »
It sounds like you would prefer over the long run maybe going to the public defenders side or even defending for immigration.  Both most likely qualifying for loan forgiveness.


Quote
I really like your suggestions re: the debts.  As I understand it, you're saying 1) pay down as much of debt as I can to stay interest free while awaiting employment prospects 2) invest remainder in ETFs?  But don't spread that remainder around into, say, buying a house/apartment/condo instead of investments?

How did you do the math re: breaking even?  I've tried to run it but am not sure how to plug it in.  At point I thought I was breaking even but on the studentloanhero calculator I was getting $65000 forgiven.  I am not great at math so that may be part of it.


1.  It would not be interest free.  What I am saying is that sometimes on the income contingent plans the monthly payment is so low that it does not even cover all of the interest that accrues through the month.  Therefore you are adding to the balance each month and never attacking the principle.  If you share your current loan balance, interest rate, and monthly payment I can take a look at it.

2.  I am saying that ETFs are a good place to begin with learning to invest.  Actually since you have quite a bit of money tied up in low risk funds, if it were me I would be putting my money all into stocks.  Vangard has a VSTAX ETF that I believe many here invest in.  There is a MMM post were this is discussed.

I am just a couple years older than you.  The money I have invested is in Targeted Retirement Fund 2050 with T. Rowe Price (This is just what my employer uses).  It is split 80% stocks 20% bonds.  As I age it will shift from stocks to bonds.

As far as buying a house that is a personal choice.  There are plenty of others here that will tell you that owning a home is not an investment.  I was raised to believe that it was.  However now that I have educated myself I see how it is no longer an investment.  Below is a really good link that shows the full pros and cons of renting vs owning.  https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html  I actually did buy a house and for my situation it made sense because my house payment was much less than renting in my area.
Givling - Payoff up to $50k in student loan or $25k on mortgage - referral code SG229715

ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #12 on: May 08, 2018, 09:18:18 AM »
If you share your current loan balance, interest rate, and monthly payment I can take a look at it.

[/quote]

Yea, that's I meant keeping interest from accruing.  So I have 6 diff loans (not eligible for consolidation) and tht total is as follows:
Original balance $84,186.82
Current balance (5/18): $86,099.01
Unpaid interest: $1912.19
remaining payments: 105 (although I believe it's really only 100, trying to get this worked out with dreaded FedLoan)
Est. eligibility for PSLF 8/8/2026
Monthly owed: $844.67 on IBR (it will go up this year as I got a raise)
average interest: 6.25%

Wayward

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #13 on: May 08, 2018, 10:58:59 AM »
1.   First, make absolutely sure you are eligible for the Public Service Loan Forgiveness Program (PSLF), meeting all criteria (they are very tricky with their requirements), and that you truly plan to work in a qualifying job for the entire 120 payments. 

If you are worried about the collapse of the federal student debt system (as I am, I also have student loans and work in public service, but decided to not to go with PSLF) then all the more reason to get rid of them ASAP imo.  I would suggest checking out the analysis tool below to see if refinancing and paying the loans quicker would be more efficient.

https://studentloanhero.com/news/public-service-loan-forgiveness-uncertain/
https://www.cnbc.com/2018/01/12/student-loan-forgiveness-isnt-often-a-forgiving-process.html
https://www.biglawinvestor.com/do-you-qualify-for-pslf/

https://millennialmoola.com/2016/08/29/student-loan-analysis-tool/

2.   I would cancel Digit immediately and not get Stash, they charge excessive fees and that is exactly what you want to avoid.  Most people here invest in Vanguard for a reason; high quality funds with super low costs.  Also, check out the fees for your USAA IRA, just because you do your banking there doesnít make it the best option.  To educate yourself more about investing check out http://jlcollinsnh.com/stock-series/

More on why fees are so important check out: https://www.sec.gov/investor/alerts/ib_fees_expenses.pdf

3.   As for the house, it really depends on your long-term goals.  Personally, I donít ever plan on buying as I have a strong aversion to be tied down to one location and want to travel.  The job you are in currently doesnít seem permanent, I would find another job as soon as you are able (Iím not saying go big law, just something that offers better benefits, like matching on the 401k, etc).  I would NOT buy a house right now as you want to keep yourself as free as possible in case you need to move for a new job, unless you are sure you want to remain in that area.

You donít need to retire early if you donít want to, becoming financially independent just means having choices - if you love your work by all means keep doing it!

4.   As for the lack of a 401k plan at your current employer, look into a SEP-IRA or Solo 401k.  Maxing out a Traditional 401k would be helpful for you to ďhideĒ your income and lower your income-based repayment (IBR) minimum payments if you continue with PSLF.
Play a game to pay of student debt with Givling, sign up with code RW411953!

Sign up for a 5% interest savings account with NetSpend here: http://www.mynetspendcard.com code 3230468760
(info at https://www.financialpanther.co/netspend-account/)

shinn497

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #14 on: May 08, 2018, 11:36:19 PM »
You know what, I am willing to bet that if you went scorched earth, I mean really scorched earth. Like liquidating your emergency fund and even downpayment, selling your car, moving to cheaper rent, etc. etc. You could have this debt done with within a year. It would not take you very long to rebuild your emergency fund and put a down payment on a house. Shit, in atlanta, if you were patient enough, you could buy a house in cash in like 3-4 years if you wanted to. Then save up like 300k- 500k and actually retire early. This whole process could be completed within 15 years. If you changed jobs, and earned like 200k, it would be like 5-6 years, so it wouldn't matter if you burn out by then. You'd be so secure, with so much fuck you money and a big asset, that it wouldn't matter what the economy does.

Just a thought. I think how well you do pretty much is related to how closely you do the above method. The reasons being is that the above way of doing things is SUPER intense. It isn't the numbers. Personal finance is ALL behaviour. So the more extreme and insane you do things, the more likely you are actually going to stick with them and accomplish them.

However, the more you veer and anemically do things. The more likely you are to skip debt payments, spend extra on fun but ephemeral things, not work as hard, and ultimately be less wealthy. But also remember, that if there is an actual crisis (which is very unlikely), the more in debt and lower earning you are, the more likely you are to get screwed.

That is the genius of early retirement. It isn't about the money. It is about not giving a fuck what happens in the world. Its freedom. But freedom doesn't come without working for it.

Anyway. I can't say exactly what you should do. But I'd advise you to think about your goals and values. Think of how much you want to be in a strong financial position, because you have the power to. It is just a matter of will. And there are no shortcuts.

Very interesting. 
Not sure I'd liquidate the emergency fund though.  Wouldn't that make me more vulnerable in a crisis? 
Am defs going to halve my rent in the next few months though due to cohabitation.
And you'd still advise property over straight up liquid asset cash in event of crisis and my ability to live somewhere else?
But you'd definitely say deal with debt before the acquiring property?  I worry that it will just keep getting more expensive if I don't invest in real estate now.

You can still have a small emergency fund, like say 1000$, but that is it.

The idea is that you just try to defeat your debt hard and fast and be done with it. Because you are going hard, you are more likely to actually do it. If having a small emergency fund makes you uncomfortable, that is the point, you will be more motivated to budget, be frugal, and potentially look for other sources of income to pay debt faster.

The thing is that you can devise complicated plans that anemically pay debt, and maybe you can invest. But complicated plans, in practice, tend to not hold up over time. This is doubly true if they have many moving parts or are under certain assumptions.  Simpler plans that get you emotional and disciplined will win out. At least that is my belief.

Fwiw I think the same thing about investing. I pretty much just use betterment. I am not recommending them. I just like them because it is super turnkey. I would rather focus on working and budgeting to put the money in the account than take on the extra emotional burden of figuring out a complicated way of investing. But that is me.

ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #15 on: May 10, 2018, 08:49:07 AM »
1.   First, make absolutely sure you are eligible for the Public Service Loan Forgiveness Program (PSLF), meeting all criteria (they are very tricky with their requirements), and that you truly plan to work in a qualifying job for the entire 120 payments. 

2.   I would cancel Digit immediately and not get Stash, they charge excessive fees and that is exactly what you want to avoid.  Most people here invest in Vanguard for a reason; high quality funds with super low costs.  Also, check out the fees for your USAA IRA, just because you do your banking there doesnít make it the best option.  To educate yourself more about investing check out http://jlcollinsnh.com/stock-series/

3.   As for the house, it really depends on your long-term goals.  Personally, I donít ever plan on buying as I have a strong aversion to be tied down to one location and want to travel.  The job you are in currently doesnít seem permanent, I would find another job as soon as you are able (Iím not saying go big law, just something that offers better benefits, like matching on the 401k, etc).  I would NOT buy a house right now as you want to keep yourself as free as possible in case you need to move for a new job, unless you are sure you want to remain in that area.

4.   As for the lack of a 401k plan at your current employer, look into a SEP-IRA or Solo 401k.  Maxing out a Traditional 401k would be helpful for you to ďhideĒ your income and lower your income-based repayment (IBR) minimum payments if you continue with PSLF.

1. Def eligible as I work for the government and am on the program already. But this is assuming govt still has money for it by 2026 which, with current tax plan and federal budget seems dubious...
2.  Done and done. No trading fees on USAA, but account maintenance fee expense ratios range from 1.10% (aggressive IRA investments for the IRA) to .58% and .63% for my emergency and former housing downpayment funds (which is what I am considering moving into a more aggressive investment account or using to throw at my student loans).  I feel like those fees are pretty average, for mutual funds but I know it would be less with Vanguard.  i guess move it all to Vanguard index funds?
3. Yea, I think that's a good idea, unless I can get something where I can airb&b part of it or its the same as what I currently pay on rent and allows me to get a tax writeoff....
4. Not eligible for a SEP or Solo.  I've already looked into this:(

Wayward

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #16 on: May 10, 2018, 10:38:44 AM »
1.   First, make absolutely sure you are eligible for the Public Service Loan Forgiveness Program (PSLF), meeting all criteria (they are very tricky with their requirements), and that you truly plan to work in a qualifying job for the entire 120 payments. 

2.   I would cancel Digit immediately and not get Stash, they charge excessive fees and that is exactly what you want to avoid.  Most people here invest in Vanguard for a reason; high quality funds with super low costs.  Also, check out the fees for your USAA IRA, just because you do your banking there doesnít make it the best option.  To educate yourself more about investing check out http://jlcollinsnh.com/stock-series/

3.   As for the house, it really depends on your long-term goals.  Personally, I donít ever plan on buying as I have a strong aversion to be tied down to one location and want to travel.  The job you are in currently doesnít seem permanent, I would find another job as soon as you are able (Iím not saying go big law, just something that offers better benefits, like matching on the 401k, etc).  I would NOT buy a house right now as you want to keep yourself as free as possible in case you need to move for a new job, unless you are sure you want to remain in that area.

4.   As for the lack of a 401k plan at your current employer, look into a SEP-IRA or Solo 401k.  Maxing out a Traditional 401k would be helpful for you to ďhideĒ your income and lower your income-based repayment (IBR) minimum payments if you continue with PSLF.

1. Def eligible as I work for the government and am on the program already. But this is assuming govt still has money for it by 2026 which, with current tax plan and federal budget seems dubious...
2.  Done and done. No trading fees on USAA, but account maintenance fee expense ratios range from 1.10% (aggressive IRA investments for the IRA) to .58% and .63% for my emergency and former housing downpayment funds (which is what I am considering moving into a more aggressive investment account or using to throw at my student loans).  I feel like those fees are pretty average, for mutual funds but I know it would be less with Vanguard.  i guess move it all to Vanguard index funds?
3. Yea, I think that's a good idea, unless I can get something where I can airb&b part of it or its the same as what I currently pay on rent and allows me to get a tax writeoff....
4. Not eligible for a SEP or Solo.  I've already looked into this:(

Yes, I would transfer at least the USAA IRA with 1.10% expense ratio: https://investor.vanguard.com/account-transfer/transfer-ira.  Then keep 3-6 months in a high-yield savings account (like Ally and NetSpend/Insight) and move the remainder with the former house down payment (read the JL Collins stock series first though).  Have you maxed out your ROTH IRA amount this year?  If not, you could do that then put the extra in a taxable account or, as you said, put it towards the student loans if that is what you decide. 

Since you seem quite risk adverse, don't be afraid to take your time and do more research about stocks vs bonds to feel comfortable first.  That way you don't get scared when it drops and take it out at a loss.

Also, you may enjoy Thrifty Gal's blog http://thepowerofthrift.com/well-hello-there-2/ (she was also in law and retired early to travel the world).
Play a game to pay of student debt with Givling, sign up with code RW411953!

Sign up for a 5% interest savings account with NetSpend here: http://www.mynetspendcard.com code 3230468760
(info at https://www.financialpanther.co/netspend-account/)

ebella

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Re: Pay Down Debt, Invest More or Buy Property? Or can I do all 3?
« Reply #17 on: May 11, 2018, 02:53:41 PM »
Have you maxed out your ROTH IRA amount this year?  If not, you could do that then put the extra in a taxable account or, as you said, put it towards the student loans if that is what you decide. 

Also, you may enjoy Thrifty Gal's blog http://thepowerofthrift.com/well-hello-there-2/ (she was also in law and retired early to travel the world).

Most definitely been maxxing out that Roth since I graduated law school:)
and yes I have read her blog, she's great!