Author Topic: Case Study - Debt Repayment and Wedding Costs  (Read 5597 times)

ashfo

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Location: Northern Ontario
Case Study - Debt Repayment and Wedding Costs
« on: March 13, 2015, 12:24:19 PM »
Topic Title: Debt repayment and wedding costs

Income:

Me: $3220 monthly ($1610 bi-weekly actually, so two months I get 3 paychecks, goes toward debt/savings)
Him: $4224 monthly ($1056 weekly, so there are 4 months with an extra paycheck, just absorb into budget)

Total Net: $7444

Possibly future income: $1100-$1200 around September from a two-bedroom basement apartment.


Current expenses:

Mortage (w/ property tax) - $1400
Mortgage Insurance - $36
Room Rental - $300 (I work in another city 1.5 hours away so stay there during the week, looking for local work)
Hydro/Water Bill - $125
Natural Gas - $125 (equal billing, we actually haven't used this amount so I am thinking of going to just paying the actual bill)
Home Insurance - $101
Internet - $65
Netflix - $8
My Cell - $50 (contract)
His Cell - $73 (contract)
My Car Insurance - $128
His Car Insurance - $153
Gas - $300
Car maintenance - $150
Groceries - $300
Eating Out - $300
Beer Store/LCBO - $100
Travel - $200
Books - $50
Video Games - $50
Movies - $35
Car Loan - $310 ($155 bi-weekly)
Credit Line (8.10%) - $1340 ($670 bi-weekly)
Parental Loan - $150 ($75 bi-weekly)
Visa (0% until Aug. 31/15) - $10
Emergency Fund - $200 ($100 bi-weekly)
Wedding Savings - $800 ($400 bi-weekly)

Total = 7444


Assets:

House: $200,000
My work RRSP - $8500 (work contributes 7% of my salary without any contribution from me)
My personal RRSP - $2850
2010 Honda Fit - $10,000
2008 Toyota Corolla - $6,000
Wedding Savings - $4,137
Emergency Savings - $3,214

Mortgage Trust Account - $40,000 (mortgage plus improvements for creating a two-bedroom apartment in our basement)

Total - $274,701

Liabilities:

Mortgage - $232,435 @2.89% (5-yr with 4.5 years remaining)
Car Loan (Honda Fit) - $830 @ 4.99%
LOC - $12,715 @ 8.10%
Visa - $8751 @ 0% until end of August 2015 (this and LOC were for waterproofing basement)
Parental Loan - $19,609 @ 3.5%

Total - $274,340


Specific Question(s): Right now we are only paying the minimum on the Visa with the 0% and putting the bulk of our debt repayment toward the LOC.  We would then pay the Visa off with the LOC right before the 0% expires.  Is this the way I should do it, or should I put the bulk right on the Visa?

Also we have $7351 in our wedding savings and emergency fund combined.  Should I put this all toward our debt and use our LOC to fund our wedding costs and any emergencies that may arise?  Our wedding will cost in total about $15,000, some purchases/deposits have already been made.  My parents are contributing $3000 for the wedding as well.  Also any monetary wedding gifts we get will go toward debt repayment but I don't actually count on that for our debt repayment plan. And once we have our basement apartment made and rented out that will go toward debt repayment as well, and then savings.


ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #1 on: March 13, 2015, 12:28:52 PM »
According to your calculations you have a net worth of under $500. These things:

Eating Out - $300
Beer Store/LCBO - $100
Travel - $200
Books - $50
Video Games - $50
Movies - $35

No.

They add up to $735/mo, i.e. more than your net worth.

RexualChocolate

  • Stubble
  • **
  • Posts: 222
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #2 on: March 13, 2015, 01:16:11 PM »
You've come to the right place to get your financial world in order!

"Which debt to pay first" is nibbling around the edges, not getting the debt in the first place is the real value add versus saving a few thousand in interest charges.You need to clearly specify your goals and where you want to be in 5, 10, 20 years financially.

If I read this correctly, you have 30k of unsecured debt (CC, LOC, Parents). Where is this coming from? I'd repay all of the debt and resolve to not get into anymore going forward. You want your net worth to go up every month. Start calculating this and watch it grow.

I'm not really sure what a "Mortgage Trust" account is, is this just cash? If so, use it to pay down your debts. Additionally, why are you so far underwater on your house, owing 230k on an asset worth 200?


garion

  • Stubble
  • **
  • Posts: 134
  • Age: 31
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #3 on: March 13, 2015, 01:27:11 PM »
What is costing you $150/month in car maintenance with 2008 and 2010 cars? My 2009 Honda Fit costs me exactly nothing in maintenance on an average month.

On the same note, your car insurance also seems high. My husband and I saved some money overall when we combined our accounts (but mine before we combined them was already like $60/month), so you might want to do that if you still have 2 separate policies.
« Last Edit: March 13, 2015, 01:30:38 PM by garion »

humbleMouse

  • Bristles
  • ***
  • Posts: 297
  • Location: Minneapolis
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #4 on: March 13, 2015, 01:30:45 PM »
If I were in your situation the last thing I would be thinking about is spending 15k on a wedding.  You make plenty of money yet don't have any money.  I would focus on getting some money first.

MustachianAccountant

  • Bristles
  • ***
  • Posts: 433
  • Age: 41
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #5 on: March 13, 2015, 01:51:31 PM »
I'd say stop with the wedding savings and just use what you have + parental contributions for your wedding. Still gives you $10k-ish for a wedding. That frees up $800/month.
Expenses to cut have been mentioned already.
Honestly, that looks like a hair on fire situation, and I don't think you realize it.

Here are some things that you don't need to spend a lot on for a wedding:
Photographer (we've looked at our pictures twice in 10 years of marriage. Just ask all the invitees for their pictures after the fact, and get a really basic package from a pro to supplement)
Dress (doesn't need to be new. You won't wear it again.)
Flowers (money spent with nothing to show. They die pretty much immediately, and I couldn't tell you what the flower arrangements looked like at any wedding I've attended. Cheap out on these)
A DJ (have a friend do it, or just put a playlist together and plug in your mp3 player)

Things I'm happy we spent money on:
Rings (look at them every day)
Decent food (if there's anything guests remember, it's the food. But don't count on getting to eat any yourself. You'll be busy!)

I'm sure others will have things to add. Might want to start a separate thread to get input on what people would/wouldn't spend wedding money on in retrospect.

sjc0816

  • Stubble
  • **
  • Posts: 246
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #6 on: March 13, 2015, 02:06:29 PM »
I may be in the minority...but I would get married at the courthouse or elope.  We were in a not spectacular financial position when DH and I were engaged. My parents offered us a wedding or cash....and we gladly took the cash and did a quick ceremony just the two of us on the beach.  Best decision we have ever made.

Weddings are a HUGE waste of money. HUGE.

MustachianAccountant

  • Bristles
  • ***
  • Posts: 433
  • Age: 41
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #7 on: March 13, 2015, 02:37:45 PM »
I may be in the minority...but I would get married at the courthouse or elope.  We were in a not spectacular financial position when DH and I were engaged. My parents offered us a wedding or cash....and we gladly took the cash and did a quick ceremony just the two of us on the beach.  Best decision we have ever made.

Weddings are a HUGE waste of money. HUGE.

I agree, and would recommend eloping/courthouse wedding as well, but it's often hard to see the wisdom of that from "the other side." The less-than-ideal-but-still-ok decision is to only spend money on what matters.

justajane

  • Handlebar Stache
  • *****
  • Posts: 2147
  • Location: Midwest
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #8 on: March 13, 2015, 02:47:27 PM »
You guys spend a lot of money.

$135/month on books, video games and movies? Say what? Play, read and watch what you have. Netflix has more movies than you could ever watch.

Take that money and accelerate paying the loan to your parents. Pay it off. Familial loans breed resentment.

mj84

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #9 on: March 13, 2015, 03:30:06 PM »
My husband and I got married last September, and it was the worst financial decision we have ever made. My two-cent is that if I were you, I'd pay down the high-interest debt first before thinking about spending your savings on a wedding ceremony. I learned the following from my wedding planning experience and the ones from my friends:

1. You almost always end up spending more than what you have budgeted for--vendors will convince you one way or another why it is better to have the more expensive option than the less expensive ones because after all, this is supposed to be a once-in-a-lifetime experience...they will appeal to your emotion and your vanity...and countless brides and grooms have fallen into that trap

2. You almost never recoup catering costs from your guests--you would think that your guests can cover 80% their own food and drinks' costs from the gifts that you get, but it is often not the case; in fact, I spoke to quite a few recent brides and they were shocked that some guests didn't give anything at all...in addition, any money you get from guests is certainly expected to be returned in the future, one way or another (you'll be getting wedding invitations, baby showers, and etc.), so whatever money you spend on catering is simply a sunk cost. And the best way to keep it simple is to invite as fewer people as possible

3. You will be incurring a huge opportunity cost by spending months of your time and energy to plan the wedding instead of doing something else, which is far more likely to be productive

4. Frienship could be an unintended casualty of a wedding--this is not money-related, but i think is worth noting: by planning my wedding, I learned far more than I should of some of my friends/guests...having to chase them down for RSVPs (multiple times), having to babysit some inconsiderate guests by accomodating their various requests and many more...honestly, a few guests like these will irritate you so much that it will almost certainly have a negative impact on your friendship in the future

Whether or not to have a wedding is a personal decision (often, the parents will have a lot of say), but if your parents are flexible and you and your partner share the same value, skip a costly event which is to entertain your guests; instead, do something for you two and invest the money for your future.

However, if you do decide to have a wedding, I'd be more than happy to share a few money-saving tips on the planning part

justajane

  • Handlebar Stache
  • *****
  • Posts: 2147
  • Location: Midwest
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #10 on: March 13, 2015, 04:13:11 PM »
I guess I'm old fashioned. I never thought of the gifts my guests gave as a way to "recoup" the cost of the wedding. Having said that, I was also surprised by certain people who came empty handed. Mind you, I had no expectations for a high monetary value. I would have been happy with a heart felt card or a handmade gift. But to come with nothing at all? Rude.

My best cost saving tip? Have an appetizer wedding rather than a sit down one. We had high top tables and spent a little more on the servers to walk around with appetizers, but many people commented on how classy the reception was. It was short (ca. 2.5 hours) and ended by around 7:30. Out of town guests took it as an opportunity to hang out and explore the city and catch up with other guests.

Also, offer beer and wine only. No liquor or cocktails.

garion

  • Stubble
  • **
  • Posts: 134
  • Age: 31
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #11 on: March 13, 2015, 06:28:27 PM »
Never count on gifts from guests to pay for anything. We didn't nearly make back the cost of the wedding in gifts, but that was not our intention.

That being said, my husband and I had a fairly non-mustachian wedding last summer, and I for one do NOT regret it (yet?) because it turned out to be completely lovely, was a great excuse to see friends and family from far away (who would never all be in the same place at the same time otherwise), and was just an altogether great time for us and everyone involved. Friends and family still bring up how much fun they had at our wedding. It was a once-in-a-lifetime event. I know many here would disagree with my logic on this, but just providing an alternate opinion. OP didn't actually ask if she should cancel her wedding.

That being said, my thoughts on costs:

- Food: get someone who is NOT a wedding caterer if possible, and some type of food that can be delicious without being crazy expensive. We had our favorite high-end burger place cater and it was perfect. Everyone loved it, and it was cheaper than any of the wedding caterers we met with, for more options.

- Drinks: Beer, wine, and soft drinks is fine. We saved a lot by bringing in our own cases and just paying for a bartender. My husband actually brewed a lot of the beer himself, but that's optional :). I suppose you could also avoid a bartender altogether depending on your venue's requirements.

- Flowers: Not worth spending money on. We had a family friend do them for twice the wholesale cost, but I still don't think it was necessarily worth the money. Get a bouquet if you want one, but you could save a lot by using something other than flowers for centerpieces. Then you could sell them afterwards too! Oh and on the same note, check CraigsList or similar for used decorations.

- Timing: You could save a lot by having it at lunch time/on a day other than Saturday/off-season.

justajane

  • Handlebar Stache
  • *****
  • Posts: 2147
  • Location: Midwest
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #12 on: March 13, 2015, 06:51:38 PM »
I agree with everyone else about the flowers.

For flowers, I had a simple bouquet, as did my sister (the only bridesmaid - another way to save money). I believe there were some flowers on the pews (can't remember - see how little flowers matter?). What I do recall is that we used a fabulous, huge arrangement at the front. It was incredible! Guess how much it cost? I think around $50. Wanna know why? Because it was fake flowers that the florist used. It was so far up front that no one could tell anyway, and these were really high quality fake flowers (who knew they existed). I think we told someone after the fact, because they commented on how beautiful the arrangement was. I'm being honest when I tell you that you couldn't tell they were fake. It was the florists' suggestion when we told him we wanted to save money, and he said he did it all the time. The money was just for the arrangement and the transportation costs.

On the tables at the reception we did twigs that I bought at Michaels. It was Christmas, so they were spray painted silver and surrounded by those glass pebbles in a vase. We also filled the reception hall with $1 white poinsettias that were also the party favors.


ashfo

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Location: Northern Ontario
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #13 on: March 14, 2015, 08:10:45 AM »
A few questions have come up that I would like to answer.

Parental Loan - This is from my dad offering to pay off my Student Line of Credit so I would get a lower rate and he could get more interest than the 1% or so he was making in his high interest savings account.  He offered this to both of my sisters as well and has told me to pay off my higher interest debt first. So at 3.5% this will be the last to pay off and he is fine with that.

CC & LOC were for water proofing the foundation, new weeping tiles, and installing window wells as we had several below grade windows and a leaky basement this fall.  With us putting in a basement apartment we felt this needed to be done so we could safely finish the basement without the fear of a future leak.

The Mortgage Trust Account and the fact that we are under water on our mortgage is because it is a mortgage plus improvements mortgage.  We got $40,000 above the purchase price of the home to finish the basement as a two bedroom apartment. We will be doing some of the work ourselves so I hope to have a little left over so that we can put it on our debt.  We will start the work in May after the snow has melted.

Car maintenance is so high as I purchased winter tires (used) and rims this year.  Since I work in a city that is 1.5 hr drive from where I live on weekends, I end up needing more oil changes.  And his car needs new winter tires in the fall so I guessed at this number and averaged it all out.

Our goal is not to retire extremely early.  We have a 25 year horizon to retire around 55.  We are trying to keep wedding costs down, but we want the full wedding too.  He will not give up video games.  Right now I am working on trying to get him to stop eating out so much during the week, and both of us like to go out on weekends and that is my focus right now. 

Car insurance will be combined in June when his is up for renewal.  He still has an accident on record which makes his higher.  Last year I got him to get quotes and he save $1000 on what he was paying.  I just renewed mine in January and that is the best rate I could get.  Ontario has high insurance rates, and I need comprehensive for the loan, as well as living in the north and driving a lot, I've hit a dear once in my life already, and always see them between the city I live and work.

garion

  • Stubble
  • **
  • Posts: 134
  • Age: 31
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #14 on: March 14, 2015, 08:53:34 AM »
If the mortgage trust is to finish the basement, could you use some of it to pay off the improvements you already made on the basement?

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 2982
  • Location: WDC
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #15 on: March 15, 2015, 07:03:58 AM »
I M concerned when I see you have more in a wedding fund than in an emergency fund. To me, that says you are putting more emphasis on "the wedding" (one day of your entire lifetime) than on "your marriage" (the rest of your life, together).   

Your 5 year mortgage loan - is that really a 5 year loan to payoff or does ithe balance just reset in 5 years?  So you will likely pay more for housing when the term expires? 

Seņora Savings

  • Stubble
  • **
  • Posts: 179
  • Age: 31
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #16 on: March 15, 2015, 11:49:47 AM »
There's plenty of savings without even having to change your lifestyle.  Do you buy used books and video games?  If your fiance can start buying used games and selling them back three months later that video game budget can go down.  This doesn't even require him to get two years behind the times, just maybe 3 months.  Do you check your library for books before buying them?  Do you buy them used?

You may not want to retire early, but, as others have said, you have a net worth of $500 and plan to spend $12000.  How much money have you earned in your life?  If you've only been working for one year, your savings rate is 0.5%.  That's setting you up to retire on social security.

On the debt question, I would throw the wedding fund at the LOC and take out another LOC to pay for the wedding.  No need to pay 8% on that money between now and the wedding.  Then remind yourself that you are taking out a line of credit for a photo album and a chicken dinner for all of your friends.

Freeme

  • 5 O'Clock Shadow
  • *
  • Posts: 44
Re: Case Study - Debt Repayment and Wedding Costs
« Reply #17 on: March 15, 2015, 12:09:01 PM »
My experience was 18 years ago we really wanted a wedding, budgeted 10,000 (didn't have that money but that is what we agreed to spend) it cost about 20,000 with honeymoon. Everything was more expensive than planned. Now 18 years later I just for the first time in our marriage have no credit card debt. Literally just this month paid the last payment. Now granted only found MMM 2.5 years ago and made significant changes to our spending habits. Just watched the wedding video last weekend many of the people who attended we don't have in our lives anymore (work, softball friends and so on). If I were to do it again I would plan just as lovely on the beach with only very close friends and family. People I know will be in my life later. Spend actually $5000 or less. You never know what comes up in your life that you will have to pay for and debt is just like the grim reaper hanging over your life. Like carrying around heavy baggage. You would not believe the amount of conversation that will be had around your bills and budgets. I loved my wedding but it came at a cost now that I'm older and wiser I would not have paid.