Author Topic: Hope for us?  (Read 1858 times)

DrO

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Hope for us?
« on: April 27, 2018, 03:36:32 PM »
Hi Folks,

Long time lurker.

LIFE SITUATION:

My wife (38) and I (40) have a had a pretty rocky financial journey to this point, culminating in a bankruptcy in April of 2016. I’ll get to that in a bit. Anyway, I got a late start to my career due to a dead-end job after undergraduate that led to pursuing a lengthy PhD. The upshot is that my career (academia) didn’t get going until I was 32 years old. We have 4 children and file a joint return.

Kids are 14, 11, 8, & 6. They eat a lot!!!

GROSS SALARY/WAGES

Me: I will gross around $88,ooo in 2018 ($80,799 in 2017). I am a professor and teach as many overloads (classes on top of my regular load) as I can. I get 0.875% of my base salary ($68,266) for each additional class, which works out to about $6,000 per class. Overloads are not an entirely reliable resource, however, as sometimes courses do not make (that is, not enough students enroll, and the course is cancelled). This explains the variation between last year’s income and what I expect this year. It is also worth noting that I tend to take home less money because I am on a 9-month contract. My income during the summer comes exclusively from teaching summer school courses.

My wife: She homeschools our kids but recently started a side hustle that brings home about $700 per month (except in June, July, and August). All told she will have earned roughly $6000 in 2018. This number could definitely go up, especially if she decides to take on a couple of students—an idea we’ve been playing around with. Anyway…

Total: $94,000
Monthly take-home pay averaged: $6400

PRE-TAX DEDUCTIONS

Retirement account: 9% contribution with matching 9% from employer.  Currently this account has $178,000.
Insurance: $228 (Kids on Medicaid; wife is on a religious cost-sharing program included in monthly expenses below)
Delta Dental: $19

ADJUSTED GROSS INCOME

(2017): $79,394 I would guess this would be closer to 86K in 2018.

TAXES

Fed, $360 per month
State, $280 per month
Medicare, $130 per month
SS: $540 permonty

Rough total $1,300 per month.

MONTHLY EXPENSES

PAYEE   AMOUNT
Gasoline   $350.00
Charity   $300.00
Medicine/supplements   $150.00
Savings   $500.00
Misc   $600.00
Groceries   $1,050.00
Alcohol   $220.00
Medishare   $253.20
Snapbox   $99.00
Kindle Unlimited   $10.69
Wild & Free   $19.00
Netflix   $11.76
Care Credit   $35.00
C-Spire   $137.76
Progressive (cars)   $103.50
Freetime   $7.48
Credit Card   $90.00
Rent   $1,183.65
ATT   $75.00
Sparkle Stories   $15.00
Audible   $22.95
Netflix   $10.69
Utility company   $310.00
Student loan 1   $154.82
Student loan 2   $261.05
Camper Insurance   $11.05
Ruby Med. Bill   $102.30
TOTAL   $6,083.90

ASSETS
2 old cars (paid off)
Savings: $500

LIABILITIES

Mark’s student loan: $112,000 (per month: $274 income-based repayment.)
Sarah’s student loan: $18,000 ($158 per month) 3.375% interest rate
Credit card: $2,800 ($90 per month) 21% interest rate
Care Credit (medical credit card): $500 ($30 per month)
Medical bill for daughter: $250 (2 more payments)

Questions:

(1)   I have confirmed with my student loan provider that I qualify for public-service forgiveness of my student loans after 10 years of repayment. (I have 8 years to go). My intuition is that it doesn’t make sense to dump extra money into paying this thing off if it is going away in 10 years anyway. Am I seeing this the right way? On the other hand, my wife’s loan is not eligible for forgiveness. Should I start dumping money into it?

(2)   Based on my income, is FI before 50 even a possibility? I feel like every time we get a little extra money something breaks, needs replacing, gets sick, etc. In other words, I feel like I’m constantly REACTING to calamity. We just can’t get the ball rolling…

(3)   As noted above, we went through a bankruptcy in April of 2016. We are trying to repair our credit so we can purchase the house we are currently renting for 1150 per month. Chapter 7 requires a minimum of two years to pass before one can purchase a house. Anyway, at a 4.9 % interest rate our monthly payment would be around $950 per month. Good idea?

ysette9

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Re: Hope for us?
« Reply #1 on: April 27, 2018, 07:04:57 PM »
How much are you saving each month? What is your emergency find like? Where are your expenses for clothes and shoes and haircuts and all of that miscellaneous household stuff? Are you saving for college for your kids, and do you want to? What happens when you need to replace one of your cars?

It appears to me that you have a fairly precarious situation and need to dig yourselves out of your hole before even thinking of buying a house. My personal opinion is that with four kids and debt that adds up to over a year’s worth of income, having one parent stay at home to school the kiddos is a luxury you can’t afford right now. What would the situation look like if she went back to work and focused her earnings on tackling the student loans?

Have you put your numbers into the case study spreadsheet to see how many years to FI it spits out?

zolotiyeruki

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Re: Hope for us?
« Reply #2 on: May 01, 2018, 10:41:58 AM »
1) It looks like the interest rate on DW's loan is low enough that it's probably not worth pumping everything toward that loan.

2) Based on your income?  Certainly.  Based on your spending?  HECK NO.  You've got some serious spendypants habits going on.  More on this below.  The reason you feel like you can't get ahead is because A) you don't have an emergency fund, and B) your spending is worthy of a facepunch.*

3) It *might* make sense.  Keep in mind that although your monthly payment would be lower, you'd also have to take on more of the maintenance/repair of your home.  At the same time, you'd be building up equity.  So I'd say go for it.

I think your priorities need to be (in order):
1) cut your spending*
2) use the excess cash flow to build up an emergency fund.
3) once you have your EF built up, THEN you can start thinking about saving for retirement.

*For someone who's in a precarious financial position, it sure seems like you have a lot of unnecessary monthly expenses/subscriptions (over $400/month worth!!!):
  • Medishare   $253.20
  • Snapbox   $99.00
  • Kindle Unlimited   $10.69
  • Wild & Free   $19.00
  • Audible   $22.95
  • Freetime   $7.48
  • Sparkle Stories   $15.00
There are free or cheaper alternatives to all of these.  Your grocery bill could probably stand to be a bit lower, and your alcohol consumption can certainly be cut back.  You could probably save $200/mo easily here.  Your car insurance should be cheaper, since you have two older cars.  Get liability insurance only and save a few dozen dollars per month.  You have camper insurance? Why?  Is it legally required?  Is C-spire your internet provider?  Why is it so ridiculously expensive?  Do you have an alternative?

$600/mo for misc?  You need to take a closer look at that and figure out where that money is going.  For our family, the "Misc" category is frequently the cause of a lot of budget woes.

gpyros85

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Re: Hope for us?
« Reply #3 on: May 01, 2018, 11:05:18 AM »
Please! Reduce your alcohol consumption, not only will your pockets help you but also your health!!