Author Topic: This or That  (Read 909 times)

Hypnotize18

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This or That
« on: June 22, 2018, 04:44:36 PM »
Looking for some advice on where I should focus my efforts. I will provide a little background first. 

I have made some rather large and unfortunate financial mistakes and have been paying for them.   I have managed to fight through some of them, but am looking to those who have succeeded with money to offer up some information to move further along.
As I mentioned I made some missteps, I have taken on 2 extra jobs in the last 2 years to help clean up some of this.  Here is where I stand now.

I am mid 30ís never married and no kids, my primary job provides a pre-tax income of around 41,500 and that will increase 8 percent in July and another 10-15 percent next July.  The 2 part-time jobs add an extra 10k a year pre-tax.  I plan to only focus on the income that comes from my ďcareerĒ and not the 2 side jobs as I am looking to quit those in the next few months. 

My current liabilities are as follow:
Home mortgage balance 55,000 with a payment of 373.00(this includes taxes and insurance) with a 30yr 4.6% rate.   I have around 25 years left on this loan. Home appraised for 119,000
Home equity loan. 33,000 with a payment of 268.00 at 5.25%  this is a 15 year loan.
Student loans(recently consolidated) balance of 27,000 payment of 180.00 and interest rate of 4.3% ( have applied for Public Service Loan Forgiveness)
1 credit card remaining with a balance of 700.00(this will be paid off in August)

My monthly expenses are as follow:
Cellphone- 260.00 per month.  I know this sounds outrageous, however I carry 3 lines and have grandfathered unlimited data and hotspot coverage on 1 of the lines.  The area I live has no cable internet service available to me at my home.  I could use satellite, however it is limited and much slower and I must have sufficient speeds as I work at home on occasion.  I had satellite when I first moved and my experience with it was terrible.
Car insurance 43.00 per month.  I have no car payment and I have actually only had a car payment for 12 months in my entire life.  I drive an old truck that was given to me by my grandfather.  However, the truck is a pretty big fan of gasoline and that puts me around 240.00 per month in fuel.  I also live in a very rural area so biking isnít the answer here, its 30 miles to the nearest town.  I do however combine as many trips as possible and do any needed shopping when I am in those areas.
I average around 45.00 per week  or 180.00 per month in groceries.
I allot myself 100.00 a week to spend at my discretion. ( I realize from reading some post that this may be considered a lot by many).
My utilities are covered by a roommate, they pay no rent. ( I am fine with this arrangement)

Take home pay-2700.00 per month
Total liability payments- 821.00
Total expense payments-723.00
Weekly discretionary 100.00 (400 per month)
Remaining funds 700-800 per month

Of course the grocery and gas numbers are an estimate, those numbers may go up or down a little, but they are very close.   

I guess my real question is do you see anything that can be improved upon?  I know some of the obvious answers such as the cell phone, but I am stuck in hard spot with that, there really is no alternative answer that I am aware of?
Would you be more apt to try and pay down the mortgage or use the free money to invest?  A little background on the home it is a family home, so I do not look at it as an investment, It is not an option for me to ever sell the home, even if life leads me in other directions in the future, I would not do so as it is part of a family farm.  Because I donít see the house as an investment, I am having a hard time deciding to try and pay it off more quickly it feels like any extra money should be going to investing?  I have worked hard to pay off consumer debt, and get down to the place I am now.  Hence, why I do not want to include the 2 part time jobs income, I am tired and ready for some free time.

Also, my main job is a government job and I will have a pension upon retirement, I know many here are looking for early retirement, I am as well, however my idea of that is age 55 which is the first option I would have to retire with pension benefits.  I really enjoy my job and co-workers so that is really not the main reason I am here.   As I mentioned I have made some  real mistakes and one of the largest was withdrawing money from my 401k of the job I had in college, I was broke and when I found a new job I cashed it out.  Therefore I lost a ton of money and hate to think of what the beauty of compounding would have done to that by now.  However, I am trying to live where I am now and not dwell on that. 
As, I stated I would love to have any advice or comments that you would like to offer.


Life in Balance

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Re: This or That
« Reply #1 on: June 22, 2018, 05:08:28 PM »
Do you have a pre-tax retirement option at work in addition to your pension?  Does it match any contributions?  Without knowing about that, I would suggest putting at least some of your extra monthly $$ toward your loan at 5.25%.  That way, while you figure out what retirement options you have for saving, you could at least make some progress on a medium-interest loan. 

Hypnotize18

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Re: This or That
« Reply #2 on: June 22, 2018, 05:26:57 PM »
I do have a 401k option, and I do contribute to that.  They only match 50.00 per month which I do take advantage of.  I have basically stopped any kind of savings to get credit card debt paid down to the level I am at now.  I do want to build up an emergency fund as I am lacking in one that would sustain me in any kind of real emergency.  Also, the 401k has limited investment options, should I consider just keeping the match and opening a Vanguard Roth? 

I do get a yearly bonus each September and I plan to use that to make a large principal payment on the Home Equity Loan each year.

Life in Balance

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Re: This or That
« Reply #3 on: June 22, 2018, 06:51:13 PM »
Without knowing the details of your 401k options, the match seems pretty small.  So, a Roth might be a good idea, particularly since you are currently in a lower marginal tax bracket, but are expecting several raises soon.  If you have $800 extra each month, you could max the Roth at $450ish/month and still pay down the principal on your Home Equity loan.  But I would get your emergency fund in place before both of those so that you don't have to use the credit cards again. 

Dabnasty

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Re: This or That
« Reply #4 on: June 25, 2018, 09:22:16 AM »
The $100/week "discretionary" is something to focus on. You admit that this is high but more importantly this is just a bad way to account for your spending. The more specific you can be the better.

The way I see it, all of my spending is discretionary because I decide how to use my money. The purpose of writing everything down is so that you can see your whole financial picture but this category leaves a hole. If you spend it, make a category for it. As an example the categories I use which may account for your "discretionary" black hole include: home (cleaners, toiletries, appliances), restaurants, hobbies, entertainment, clothes, and alcohol.

The first thing I would do is read through your post again. Are you missing any monthly costs that could be accounted for like one of the categories I mentioned above? This doesn't need to be things you actually pay on a monthly basis, it can also include annual costs/12 or daily costs*30. The more you can account for the better, even if it's just estimates. One category I don't see is home maintenance (some people estimate 1% of home value annually but it depends on the condition of the house). I'm sure there are others but you're the best person to figure that out.

Next I would reformat your spending categories to make things easier for commenters to read while adding any new categories you come up with. When I browse through case studies I'm much more likely to offer advice when I can see a clean layout where I can easily see all the spending categories. Make your spending look a bit more like your income list so it's easier to see the whole picture.

Dabnasty

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Re: This or That
« Reply #5 on: June 25, 2018, 09:31:19 AM »
You mentioned $240/month in fuel but you didn't specify a commute or MPG for the truck.  If you're spending that much on gas you might be better off buying something more fuel efficient but it's hard to say without more detailed vehicle information.

Assuming you commute, how far?
What is the MPG?
Does the truck require a lot of maintenance?
What is the resale value on it?
You mentioned you're on a farm, does the truck get used as a truck?
Does it carry sentimental value which makes all of the above irrelevant?

dougules

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Re: This or That
« Reply #6 on: June 25, 2018, 11:38:34 AM »
Do you track all of your spending including smaller purchases?  That's one thing I think's important because it allows you to go back and see where the money is going.  Then you can really assess what is and isn't worth it to you. 

Could you be more specific on what the $100 usually goes towards? 

Frankly, I would pay off the mortgage.  At 4.6% I don't know if you're really going to do any better with mutual funds at this particular moment.  You're right that the house isn't an investment, but eliminating the mortgage payment is an investment.  You also have the side benefit of not having a bank that could foreclose on the house if something crazy happened.  I know some folks here will disagree and say you should pay the minimum and invest the rest.  The truth is that you win either way whether you decide to pay it down or invest the money. 

You really should do the math on getting an efficient car.  $240 is a lot for gas.  You may come out ahead to switch to an inexpensive efficient car.  If you want to keep the truck, for sentimental value or use as an actual truck, you might even still come out ahead to have both and use the efficient car most of the time.  It would also mean you would be putting a lot less wear and tear on the truck.  You'd need to do they math, though, or give us more specifics on your driving habits and how many mpg you get on the truck. 

If you're working two extra jobs, how much does that add to your driving?  That also affects the numbers.