Author Topic: Where to start?  (Read 5818 times)

suzziesnow

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Where to start?
« on: December 31, 2017, 11:52:38 AM »
Hello all! I am an new Mustachian and ready to get serious about growing our stache!  I have been reading the blog for a month now and just joined the forum. Well..here it goes...

My husband owns a small construction business in the middle of no where (No big money here). I am homeschooling the last kiddo for the next year and half to get him graduated.

My dh income is about $45,000 per year after taxes. He is 48.
I have no income but I started a side hustle so I hope to add $2000 pretax a month soon. I am 43.

Student loan debt $30615.00 @ 6.76%!! (HOLY COW!)
No credit card debt
No car debt
Mortgage - $31,000 @ 3.1%
Savings $24,000.00 just a standard savings account (yes I know bad bad bad) (took us forever to save this)
We have a roth IRA worth $11,000.00
A property that has been in the family for over 150 years with a house on it (house is gutted) No money is owed on this. We want to move there at some point. We pay yearly taxes about $2000.00 per year.

No business loans! They were all paid off this year!!

My question is where do we start? Both my dh and I are MOTIVATED to retire. We do not have the luxury of unemployment so we need to have at least 3 months for emergency put aside. Do we tackle the student loan and to do so do we cash in our Roth? Do we start investing for retirement? Do we do both and if so how? Then what? HELP!!!

MDM

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Re: Where to start?
« Reply #1 on: December 31, 2017, 01:29:35 PM »

marty998

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Re: Where to start?
« Reply #2 on: December 31, 2017, 01:54:04 PM »
What are you saving the $24,000 for? What are your student loan monthly payments?

Why earn < 1% on 24,000 and pay 6.76% on $30,000?

Noting that you need a 3 month emergency fund, why not simply put the rest towards the loan?

suzziesnow

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Re: Where to start?
« Reply #3 on: December 31, 2017, 02:20:22 PM »

suzziesnow

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Re: Where to start?
« Reply #4 on: December 31, 2017, 02:23:41 PM »
What are you saving the $24,000 for? What are your student loan monthly payments?

Why earn < 1% on 24,000 and pay 6.76% on $30,000?

Noting that you need a 3 month emergency fund, why not simply put the rest towards the loan?

I know it is crazy but my dh gets nervous if we dip below $20000 in savings. I believe we only need 3 months emergency cash. In the winter months we always stack enough cash for Jan-March/April. I am for putting it toward loans. My student loan payments are $220 a month.

Wayward

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Re: Where to start?
« Reply #5 on: January 02, 2018, 10:27:18 AM »
If you don't already, start tracking your spending!  Once you do, see where there is room to improve/cut costs.

The $24,000 savings needs to be working harder for you. Perhaps have a conversation with the DH about his concerns and see if there could be a compromise of keeping only 3-6 months of expenses in savings?  I recommend Ally for the emergency fund (1.25% APY) and NetSpend/Insight for 5% savings.  Any leftover I would use on the student loans.  Also, have you looked into refinancing them for a better rate through SoFi, Earnest, etc.? 

YoungGranny

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Re: Where to start?
« Reply #6 on: January 02, 2018, 02:01:28 PM »
What is your annual spending? How much are you able to save? That's the information that will help people on this forum give you more specific advice.

I would not touch the IRA that's using long-term money for a short term problem. I would focus on paying off the student loan debt - you could pay off a large chunk of it with the money sitting in your savings account (reserve enough for 3 months or so). Then every additional dollar you get could be thrown at it and I bet you could free yourself of that this year. You should also be putting more money in an IRA to save for retirement.

suzziesnow

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Re: Where to start?
« Reply #7 on: January 02, 2018, 05:04:03 PM »
If you don't already, start tracking your spending!  Once you do, see where there is room to improve/cut costs.

The $24,000 savings needs to be working harder for you. Perhaps have a conversation with the DH about his concerns and see if there could be a compromise of keeping only 3-6 months of expenses in savings?  I recommend Ally for the emergency fund (1.25% APY) and NetSpend/Insight for 5% savings.  Any leftover I would use on the student loans.  Also, have you looked into refinancing them for a better rate through SoFi, Earnest, etc.?

We have started tracking our spending this month. Hopefully we can figure out where we can cut and save.  Thanks for the recommendation for the savings. I have not looked into refinancing for a better rate yet. I want to take some of the savings and pay off one loan in a quick swipe and throw everything else at the second to get it paid for by the end of the year. DH is not on board with this. He says it spreads us too thin (even with 3 months savings in emergency fund) Ugh.

suzziesnow

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Re: Where to start?
« Reply #8 on: January 02, 2018, 05:05:35 PM »


I would not touch the IRA that's using long-term money for a short term problem. I would focus on paying off the student loan debt - you could pay off a large chunk of it with the money sitting in your savings account (reserve enough for 3 months or so). Then every additional dollar you get could be thrown at it and I bet you could free yourself of that this year. You should also be putting more money in an IRA to save for retirement.
[/quote

This is what I want to do but dh is not on board with this idea.

tinylittlemonkey

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Re: Where to start?
« Reply #9 on: January 02, 2018, 06:22:56 PM »
I’d keep 3 months of savings and put the rest towards student loans.

I’m in the same boat as you (although a lot larger). What are your payments, for how many years, and are they consolidated?

I’m in the process of refinancing with SOFI.  If I were in your situation financially (but my life), I’d pay a lump sum to the loan, then refi at a lower rate and aggressively pay on it with everything I had.

CrispKale

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Re: Where to start?
« Reply #10 on: January 02, 2018, 06:24:08 PM »
Hi Suzziesnow welcome to the tribe!

Everyone has to start somewhere in their journey so don't feel to overwhelmed. You gave a fair bit of information but some pieces are missing that could help you better decide what to do.

1. What are your current monthly expenses? If your not currently tracking I'd start tracking for at least two to three months. There are plenty of examples in the forum case studies or I also have a link to my format in my bottom signature. Once you have an average monthly or annual expense amount it's not to hard to calculate the number of years till FIRE.

2. Don't remove funds from the IRA. At the stated ages the time to recover the account back is too great to risk meaning expenses can always ebb and flow lost time is irrecoverable.

3. Are you wanting to rent out your current house and move to the new property? If so, How much in rent are you expecting?

4. How much in renovations do you expect to pay (on gutted house)? What's the renovation timeline?
« Last Edit: January 02, 2018, 06:25:54 PM by CrispKale »

Wayward

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Re: Where to start?
« Reply #11 on: January 03, 2018, 08:04:08 AM »
If you don't already, start tracking your spending!  Once you do, see where there is room to improve/cut costs.

The $24,000 savings needs to be working harder for you. Perhaps have a conversation with the DH about his concerns and see if there could be a compromise of keeping only 3-6 months of expenses in savings?  I recommend Ally for the emergency fund (1.25% APY) and NetSpend/Insight for 5% savings.  Any leftover I would use on the student loans.  Also, have you looked into refinancing them for a better rate through SoFi, Earnest, etc.?

We have started tracking our spending this month. Hopefully we can figure out where we can cut and save.  Thanks for the recommendation for the savings. I have not looked into refinancing for a better rate yet. I want to take some of the savings and pay off one loan in a quick swipe and throw everything else at the second to get it paid for by the end of the year. DH is not on board with this. He says it spreads us too thin (even with 3 months savings in emergency fund) Ugh.

Perhaps your DH is not on board because he's unsure of how much is really needed to cover your monthly expenses.  I would suggest tracking your spending for the next few months to get a good idea of your normal expenses.  Beware, it can be shocking at first to see how much you actually spend on "necessary" things!  Once you get a better feel for your spending you can create a 2018 spending plan (I make a simple Excel speadsheet) to project approximately how much you will spend over the year, including mortgage, utilities, food, personal care and things like annual subscriptions (Costco, car insurance, antivirus computer program, etc.), gifts, car maintenance, and clothing as well as any planned purchases (new laptop, hot water heater, etc.) along with projected income. 

It might make him feel more comfortable with letting go of some of the savings if he can actually see a budget/monthly expenses.  Have you asked him for his suggestions/ideas or perhaps read some MMM articles together and have a deep conversation about your financial goals?  I would suggest not making it all about debt, but what kind of life you want for the future and creating steps together on how to get there.

If you haven't already, read https://forum.mrmoneymustache.com/ask-a-mustachian/how-to-convert-your-so-to-mmm-in-50-awesome-steps/

Then perhaps read together http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ or http://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-hero-in-one-blog-post/

In the interim definitely check out the savings accounts so your money is working for you!  (I always keep enough in checking for upcoming expenses + a buffer, everything leftover goes to service debt or save)

suzziesnow

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Re: Where to start?
« Reply #12 on: January 04, 2018, 04:54:40 PM »
Today my dh had an eye opening experience! We are currently doing the Frugalwoods challenge. Today the email was about how small investments can become a large over time. She had a link to a calculator for index funds. I put the monthly payment in that we are paying for the student loan over 15 years. He could believe it! He said to pay off that S.O.B! so we can start investing that money! Yay! He seen it my way!! We are going to pay off the one loan and knock out the rest by the end of the year. We are also going to refi the one just so we stop getting hit with such a high interest rate!!

YoungGranny

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Re: Where to start?
« Reply #13 on: January 05, 2018, 06:34:20 AM »
Today my dh had an eye opening experience! We are currently doing the Frugalwoods challenge. Today the email was about how small investments can become a large over time. She had a link to a calculator for index funds. I put the monthly payment in that we are paying for the student loan over 15 years. He could believe it! He said to pay off that S.O.B! so we can start investing that money! Yay! He seen it my way!! We are going to pay off the one loan and knock out the rest by the end of the year. We are also going to refi the one just so we stop getting hit with such a high interest rate!!


Awesome progress!!! Glad your DH is on board!! You'll make progress so quickly.

Wayward

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Re: Where to start?
« Reply #14 on: January 05, 2018, 06:39:37 AM »
Today my dh had an eye opening experience! We are currently doing the Frugalwoods challenge. Today the email was about how small investments can become a large over time. She had a link to a calculator for index funds. I put the monthly payment in that we are paying for the student loan over 15 years. He could believe it! He said to pay off that S.O.B! so we can start investing that money! Yay! He seen it my way!! We are going to pay off the one loan and knock out the rest by the end of the year. We are also going to refi the one just so we stop getting hit with such a high interest rate!!

Wow, that's awesome!  Congratulations, I'm sure you will have that student loan gone in no time!! 

A word of caution though, I personally realized recently I've been so laser focused on paying debt, that I've neglected investing.  I forget who it was on this forum that asked another case study if they wanted to be a debt free worker bee or financially free living off their investments?  I would suggest knocking out that one loan and depending on the refi interest rate, start investing also, especially if there's any employer match on the 401k as per https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153!

Please update us or perhaps make a journal to track your progress!  Best wishes for a happy, healthy, and prosperous New Year!!   

suzziesnow

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Re: Where to start?
« Reply #15 on: January 05, 2018, 03:55:52 PM »
Today my dh had an eye opening experience! We are currently doing the Frugalwoods challenge. Today the email was about how small investments can become a large over time. She had a link to a calculator for index funds. I put the monthly payment in that we are paying for the student loan over 15 years. He could believe it! He said to pay off that S.O.B! so we can start investing that money! Yay! He seen it my way!! We are going to pay off the one loan and knock out the rest by the end of the year. We are also going to refi the one just so we stop getting hit with such a high interest rate!!

Wow, that's awesome!  Congratulations, I'm sure you will have that student loan gone in no time!! 

We son't h

A word of caution though, I personally realized recently I've been so laser focused on paying debt, that I've neglected investing.  I forget who it was on this forum that asked another case study if they wanted to be a debt free worker bee or financially free living off their investments?  I would suggest knocking out that one loan and depending on the refi interest rate, start investing also, especially if there's any employer match on the 401k as per https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153!

Please update us or perhaps make a journal to track your progress!  Best wishes for a happy, healthy, and prosperous New Year!!

We don't have any employer matched 401k but we are going to knock this out while investing in our Roth also. Thanks!!

ginjaninja

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Re: Where to start?
« Reply #16 on: January 10, 2018, 09:59:17 AM »
Today my dh had an eye opening experience! We are currently doing the Frugalwoods challenge. Today the email was about how small investments can become a large over time. She had a link to a calculator for index funds. I put the monthly payment in that we are paying for the student loan over 15 years. He could believe it! He said to pay off that S.O.B! so we can start investing that money! Yay! He seen it my way!! We are going to pay off the one loan and knock out the rest by the end of the year. We are also going to refi the one just so we stop getting hit with such a high interest rate!!

Congratulations on getting him to see the light!  The other thing that MMM blog talks about as far as an emergency fund is using a home equity line of credit.  This could be worth looking into for true emergencies because it will have a lower interest rate but still allow you to keep less cash on hand.  Also, if you want to keep that much cash around make sure it is in a savings account making at least 1% interest.  There are so many online banks that have at least this (capitalOne, Discover, etc).

dreams_and_discoveries

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Re: Where to start?
« Reply #17 on: January 11, 2018, 12:17:33 PM »
Today my dh had an eye opening experience! We are currently doing the Frugalwoods challenge. Today the email was about how small investments can become a large over time. She had a link to a calculator for index funds. I put the monthly payment in that we are paying for the student loan over 15 years. He could believe it! He said to pay off that S.O.B! so we can start investing that money! Yay! He seen it my way!! We are going to pay off the one loan and knock out the rest by the end of the year. We are also going to refi the one just so we stop getting hit with such a high interest rate!!

Congratulations on getting him to see the light!  The other thing that MMM blog talks about as far as an emergency fund is using a home equity line of credit.  This could be worth looking into for true emergencies because it will have a lower interest rate but still allow you to keep less cash on hand.  Also, if you want to keep that much cash around make sure it is in a savings account making at least 1% interest.  There are so many online banks that have at least this (capitalOne, Discover, etc).

Great news on that one, sounds like you are making progress together.

2Birds1Stone

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Re: Where to start?
« Reply #18 on: January 12, 2018, 11:55:21 AM »
I would advise against cutting down to 3 months of spending for the EF.

You have 1 income, and it's sporadic due to the nature of your husbands work. Unlike many DINK couples here, husband losing his income due to illness, bad luck, etc may take longer than 3 months to recoup from. Once your side hustle starts earning $2k/month, or heck even half of that I would lower the EF.

Best of luck! You came to a great place for motivation and advice.

civil4life

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Re: Where to start?
« Reply #19 on: January 12, 2018, 02:16:16 PM »
Kind of out there suggestion.

If husband insists on keeping large emergency fund consider a home equity loan to payoff the student loan.  That would be a much lower interest rate and still be able to deduct the interest on taxes.

If you refinance the student loan on MMM there is a referral link to SOFI.  You get $300 for using the link.