Author Topic: Case Study - Need some advice.  (Read 4151 times)

JC33MC06

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Case Study - Need some advice.
« on: July 20, 2016, 12:07:28 PM »
First thing long time reader and finally got the courage to post, so apologize if it's a little sloppy to read.

Situation:
Wife is about to graduate Nursing school and be a RN. Needing some advice on our plan to pay off all of her student loan debt and our other debt ASAP.

Life Situation:
Married filing joint, 0 kids.

Gross Salary:
Mine: $25,526 (roughly not including my BAH/BAS for being Active Duty) with BAH/BAS is $43,610.
Her:$38,400 ($20 per hour X 40 hours a week x 4 weeks x 12 months)(Using conservative hourly rate for new nurses and assuming no overtime or weekend increased pay.)

Pre-Tax deductions:
TSP have roughly 13,000 (mainly in C fund/L2050 fund)
Roth IRA roughly 5,000 (currently add $100 a month to it)

Other Ordinary Income:
None

Adjusted Gross Income.
Mine:$25,526-$3372=$22154
Her: $0 currently (Projected $38,400)

Current Expenses:
Income Per Month after allotments: $3,120

Monthly:
Rent: $925
Electric/Water: Average $165
Gas: Average $45
Internet:$60
Car Insurance: $125
Credit Card: $300
Groceries: Average $ 150
Spending Cash: $150
Trash: $17
Gas: $150
Total Expenses: $2,087
Total Left Over: $3,120-$2,087=$1,033

Assets:
2004 Toyota Rav4
2014 Hyundai Elantra
(Both are Paid off)
Total Asset: $8,000 (Estimate)

Liabilities:
Student Loan Debt (Mine and Hers combined): $66,325
Credit Card Debt: $14,785 APR: 12.9%
Total Liabilities: $81,110

The plan was to continue like we are now and use her paycheck to do nothing but payback the Loans/Credit card.
Also, Any advice you all have to maybe improve our Monthly spending. We are going to start investing after we pay off all the debt. If any additional information is required I will try my best to get it as accurate as I can.

-WYW

Cwadda

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Re: Case Study - Need some advice.
« Reply #1 on: July 20, 2016, 12:38:31 PM »
Cheers to putting yourself out there - that's a big first step!

Quote
Mine: $25,526 (roughly not including my BAH/BAS for being Active Duty) with BAH/BAS is $43,610.
So you are getting $25,526 for just pay, the remaining $18,084 do you get to use towards living expenses/housing?

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Her:$38,400 ($20 per hour X 40 hours a week x 4 weeks x 12 months)(Using conservative hourly rate for new nurses and assuming no overtime or weekend increased pay.)
I feel like $38,400 is a bit low for an RN. Where are you located?

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Credit Card: $300
Is this your credit card payment or is it the amount you are spending each month on your CC?

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Spending Cash: $150
Elaborate please.

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Student Loan Debt (Mine and Hers combined): $66,325
What are the percentage(s) for these loans?

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Credit Card Debt: $14,785 APR: 12.9%
As far as I know your hair is on fire and you should be putting any excess money into this, even before investments (unless there's a company match). You have until April 15th 2017 to max your Roth. Get rid of that credit card debt so it's not hanging over your head.

« Last Edit: July 20, 2016, 12:42:28 PM by Cwadda »

nereo

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Re: Case Study - Need some advice.
« Reply #2 on: July 20, 2016, 12:41:49 PM »
+1 to all of what Moustaches said.
Also - what is your SL debt terms? You might be able to refinance that to ~5% using someone life SoFi.

Finally, the single greatest thing both of you can do (but you in particular) is increase your earnings.  Hopefully in the years to come you can be promoted and start earning more than the $25k you are currently making.  Work hard, good luck!

MDM

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Re: Case Study - Need some advice.
« Reply #3 on: July 20, 2016, 12:57:36 PM »
Yes, see the 'Investment Order' tab on the spreadsheet referenced in How To: Write a "Case Study" Topic for supporting details on what others have already said.

JC33MC06

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Re: Case Study - Need some advice.
« Reply #4 on: July 20, 2016, 01:37:53 PM »
Clarifications:

Yes the $25k is my base pay and the 18K are non taxable allotments for housing/food

Currently located near St. Louis, MO which is where she will be working.

$300 is the amount I am paying per month I do not use the credit card anymore.

$150 for spending cash is for whatever we want to use it on for the moment (dinner/movie) or we save it to let it build up to do something a little more expensive. (ex. been saving it for a year and half to go to Vegas after her graduation).

Will have to look up the percentages.

So, don't max the Roth and put all that towards the credit card?

Cwadda

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Re: Case Study - Need some advice.
« Reply #5 on: July 20, 2016, 02:08:33 PM »
Quote
Yes the $25k is my base pay and the 18K are non taxable allotments for housing/food
So you can use that $18k for your housing and food expenses? Is that right? Sorry, I'm not well-versed in military compensation. Thank you for your service!

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Currently located near St. Louis, MO which is where she will be working.
If you're in the metro area I see no reason why she shouldn't make more like $50k+. Will she be looking around?

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$300 is the amount I am paying per month I do not use the credit card anymore.
Okay, good.

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$150 for spending cash is for whatever we want to use it on for the moment (dinner/movie) or we save it to let it build up to do something a little more expensive. (ex. been saving it for a year and half to go to Vegas after her graduation).
Okay, not bad. But really focus on eating at home and minimizing spending for the next 6-12 months until you're in a more comfortable situation.

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Will have to look up the percentages.
You might be able to look into SoFi (lots of folks on here have used that) or some military-related loan program to reduce your interest rates.

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So, don't max the Roth and put all that towards the credit card?
You'd be maxing your Roth for $458/month for each you and your wife. I'd focus on that credit card debt until it's gone. Then when your wife starts working you'll have a LOT more freedom to sock away money for retirement.

You could make that a goal though. Find a side hustle that pays $11,000 per year and allocate that money for the 2 Roth accounts. In the meantime, kill kill kill that credit card debt with fire.

notactiveanymore

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Re: Case Study - Need some advice.
« Reply #6 on: July 20, 2016, 02:37:48 PM »
It's like my little mission on this forum to bust the myth that starting RNs make 50k in the majority of the country. I'm a couple hours away in MO and base pay here for starting RNs is $21/hr (per publicly available info at the local university hospital), so I don't think you're very far off.

A few other notes on the RN thing. I'm not an RN, but somehow I ended up befriending a whole group of them!

  • For STL, it'll probably be 21-22/hr starting out
  • Most nurses work 36 hours a week base. Anything more is from picking up extra shifts
  • Shift differential for nights will be around $3/hr and for weekends around $4/hr.

Hopefully that will help when you're doing the figuring. Keep in mind that if she doesn't pass her boards the first time, she might still get hired but won't be making that full amount.

ETA: Also, your math for her salary is so off. There are not 4 weeks in 12 months, there are 52 weeks in a year. My calculation would be 22/hr * 36hr/wk * 52 weeks =$41,184. She could also look around for signing bonuses and like I mentioned above, if she is willing to work nights or weekends, she'll see a significant bump.
« Last Edit: July 20, 2016, 02:45:58 PM by theotherelise »

MDM

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Re: Case Study - Need some advice.
« Reply #7 on: July 20, 2016, 03:58:21 PM »
So, don't max the Roth and put all that towards the credit card?
Yes.  Is the reasoning clear?

myhotrs

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Re: Case Study - Need some advice.
« Reply #8 on: July 20, 2016, 11:55:46 PM »
Congrats JC33MC06! My wife is also an RN and she loves her job a lot, it pays great, and always needed. And as Cwadda says, Thank you for your service!

I'm a bit confused on your housing allowance, are the expenses listed being covered with that?

Also, maybe try to get cheaper internet and shop your car insurance.

JC33MC06

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Re: Case Study - Need some advice.
« Reply #9 on: July 21, 2016, 11:09:20 AM »
Yes the reasoning is clear as to why to pay off the credit card first.

For the Housing/Food Allowance it isn't two separate payments. It is a set amount that is split between your 1st paycheck on the 1st day of the month and your 2nd paycheck on the 15th of the month.
Ex. 1000 for Housing 300 for food so 1st paycheck you would get 500+150=650 and get the other 650 in the 2nd paycheck.

So your base pay which is your taxable paycheck is split in half as well then the 650 is added to that. It all comes to you as one amount not split up. So, you can use it for w/e if your rent is 800 that other 200 is usually used for utilities or you can just bank it.

Thanks theotherelise that does help a lot, and I do not see her not passing her boards hopefully (fingers crossed)

Thanks again for the help everyone.

JC33MC06

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Re: Case Study - Need some advice.
« Reply #10 on: July 28, 2016, 01:33:00 PM »
Bump

Still looking for some more advice :)

nereo

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Re: Case Study - Need some advice.
« Reply #11 on: July 28, 2016, 01:51:00 PM »
Bump

Still looking for some more advice :)

Honestly I'm not sure what other advice would be helpful here...
1) you absolutely need to start attacking that $12k cc debt at 12.9%.  You could play the 'transfer game' finding a lower interest card, but that's just a stop-gap measure and your hair is on fire and you need to tackle that debt.
2) once the cc debt is gone you've got those student loans to take care of.  What are the rates??  If they are >6% those too are a 'hair on fire' debt emergency.

Nothing else looks horrible (though "spending cash" of $150 is a red flag when you are paying $300/mo in cc bills).  You've got at least a year of dedicated debt paydown before you need to consider your next step.

justajane

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Re: Case Study - Need some advice.
« Reply #12 on: July 28, 2016, 02:09:21 PM »
$925 is high for rent IMO. I live in a desirable inner 270 suburb in STL and I could rent a one bedroom for cheaper than that. Can you clarify the number of bedrooms? When my husband and I married, we felt like we needed a two bedroom and paid around $700 a month in 2005. In hindsight, I wish we had gone with a cheaper one bedroom and saved more money before we bought a house.

This is the time to sock away retirement money and get rid of credit card debt. Live cheaply now when you're still young and don't have children. It will never be easier than it is now. Also, recognize now in your life that credit card debt is unacceptable. The cornerstone of frugal living and wealth accumulation is living within your means. If you have credit card debt for anything other than health emergencies, you are not living within your means.

nexus

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Re: Case Study - Need some advice.
« Reply #13 on: July 28, 2016, 04:11:27 PM »
(First time advice-giver here, so correct me if I go astray, please.)
Let me qualify the following by saying I live in an apartment, but $165/month for water & electricity seems a little excessive, no? My electric bill rarely ever tops $25. Water/sewage/trash is included in my rent

Maybe try some of the following:
a) Flex those badassity muscles and stop using the heat/air so much
b) Start taking showers instead of baths (or don't stay in there so long!)
c) Take fewer showers. I shower once every evening before bed. Don't see the point of doing it again in the morning since I went to bed clean.
d) Turn the lights off when you leave a room. leave NOTHING on when you leave.
e) Change your light bulbs to more energy efficient ones like MMM suggests, even if that means replacing the free ones that came w/the apartment. Put them in a safe place and swap them out again before you move. (My apartment's bathroom had 4 ridiculous old school big bulbs spanning the top length of the mirror. I took them all out and replaced them with 2 energy efficient bulbs that are just as bright.)
f) Adjust the timers and frequency on your yard watering stuff
g) Unplug crap you're not using. Even if its off, it still saps power. I plug keurig & toaster in just long enough to use them, then unplug 'em again when I'm done.
h) DOWNSIZE if possible. It'll help you unload crap you don't need/use to put towards debt repayment and reduce your monthly rent. MMM says something to the effect of "let Craigslist borrow it."

Here's my own two cents that I haven't seen much of since lurking on the forums:
Pick up a second part-time job somewhere and use those paychecks to go directly towards debt or into an investment account. I worked a full-time salaried position 40+ hours a week and on evenings and weekends I went and delivered pizzas to pay off my '06 Scion Xa much, much faster. I'm a sucker for tips. I like the immediate reward at the end of the night that I can go deposit into an ATM. (Then I sold my car, moved cross country and financed another one. Very dumb move on my part, but I digress.)

Here's what I like about this idea:
1. It makes you more badass. It shows just how hard you're willing to work to get ahead in life.
2. A second job keeps you busier.
3. If you're busy, you're not buying crap.
4. If you don't have as much free time, you're much more mindful of how and with whom you spend it.
5. If you're not home, you're not running up the utilities
6. That's your punishment for being in debt in the first place. You get more free time back when you get out of debt. It really translates into freedom and it defines a clear ending point.
7. *Because no one wants to work two jobs, it makes you even more mindful of what you're doing with your regular paycheck (unless you're silly enough to think extra income = extra spending).

Possible 2nd job options that are better than minimum wage
--> Pizza delivery person
--> Uber/Lyft Driver
--> Bartender (personal favorite)
--> Personal trainer (requires certification it has a higher barrier to entry)
--> Server/waiter: Depending on the state you're in. CA is great. $10 minimum wage plus tips. TN wasn't when I lived there. Less than $3/hr plus tips. A slow shift and you're boned.
--> I teach tennis lessons & string rackets despite being debt free and having a six figure income. I do it because I love teaching and I'm a nerd for tennis equipment. It also gives me more safety margin in case anything ever goes awry.

Bonus: If you like sports and are free after school hours, you can apply to be a high school or middle school [assistant] coach. For a few hours a night you get to give back to the community and be a mentor all while coaching students. Usually you get a paid stipend at the end of the season that has ranged --for me at least-- from $500 to $3,000. If your students go post-season, there's even an extra bump in the stipend. I managed to 'assistant coach' my high school team while I was in college all four years.

Double bonus: There are several really easy jobs you could take in the evening too. They may only be minimum wage gigs, but they just require attendance and minimal thought.
> Front desk at a gym
> Front desk at a hotel (overnight especially)
> Night janitor: This could be difficult if the job entails stripping & waxing floors, but most other janitor duties are pretty easy. Vacuum, sweep, trash, clean windows.
They can offer potential additional perks like free gym membership, discounted hotels, and new cleaning skills. (aside: You can learn how to strip and wax floors, then buy your own equipment and run your own business. I can't go anywhere now with tile floors without criticizing or admiring how well the tile floors are waxed and buffed. Next time you're in Target or Wal-Mart or anywhere with tile, just look for transitions in the wax from dirty to glossy or where the floors look glossy vs dull.)

Ideally, you'll have some skills from your day job or life experience that'll let you log some additional work hours for much better than minimum wage or wear and tear on your car, but it is what it is. Plus, let's face it. Those 2014 vehicles you've got there have depreciated below what you paid for them so why not try and make some cash out of them? **By the time you wear them into the ground with the extra miles from Uber/Pizza you'll be debt free and able to afford a nice, fuel efficient used car that you can pay for in CASH! Woot! Plus, who doesn't like a car that smells like pizza inside?

*Gross generalization here
**Every mile you drive drops the value of your vehicle & every day/month/year older it gets also drops the value up to a certain point where the prices more or less bottom out/even out.

Gronnie

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Re: Case Study - Need some advice.
« Reply #14 on: July 28, 2016, 04:44:50 PM »
Wow, $38,400 seems really low for an RN. Is she a BSN or ASN?

We live in MN and my wife made well over $60k her first year out of school.

I checked CoL and it is 21% more expensive here than St. Louis, which would mean an equivalent salary of ~$50,000.

yddeyma

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Re: Case Study - Need some advice.
« Reply #15 on: July 28, 2016, 06:12:20 PM »
Well, for other advice, can you get cheaper housing?  Rent a room with a kitchenette above somebodies garage, or rent out a room in your home.  Or how about house hacking....buy a duplex and rent out one side.  Or since you're military and will likely be moving around a bunch, buy a home that would make a good rental when you move.  Something near your base is ideal, you'd have a built in network of advertisers when you leave.

You are essentially getting $18k for housing, lower your housing bills and/or use them to build net worth and those dollars will work harder for you.  Checkout biggerpockets.com for landlord info (also a forum on here).

There are lots of loans available to you since you're military.  You can also borrow from your TSP for the down payment (not recommending this, its just an option).