Author Topic: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!  (Read 9876 times)

FarmFam

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EDIT: Editing to add more details and to redo budget based on feedback.  Italicized is added.

I have to say that I know I made a lot of mistakes.  Especially the student loans.  All I can say is that I wish I knew then what I know now.  I am very frugal but my husband isn't but he has been trying.  I shared this blog with him and we are both ready to move forward.

I do understand that Retire in 7 years is not possible, but I feel the goal will keep me motivated.

Thank you for all the honest feedback!  And sorry for it being long.  I have a very detailed budget.

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Income: (Monthly)
Rental Home Income: 1125
Mine: BiWeekly After Tax, Accident Insurance, 401K: 1299
Spouse: Semi-Monthly after Tax, Health Insurance, HSA contribution: 1844

Credit scores are both about 675

TOTAL MONTHLY:  7,628.72 (includes rental income) 6,503 without rental income


Current expenses:
MONTHLY BILLS

Hulu   7.99 -> I am thinking of canceling.  Used to use as cable in our previous house through our smart tv. But we can’t use anymore in our new home because Internet is too slow.

Cell Phone   170.43 $112.00 including reimbursement and having others pay for their line ->  We pay for 3 people in our household and 1 for husband’s father ($10) and 1 for my grandmother ($18).  5 lines total.  No landline, though I am considering getting since we have bad cell phone reception at home and may need for an emergency.  This plan is actually really good, even compared with the suggested Ting or Republic Wireless.  But we may be able to cut more here.  I will detail our bill.

4 Lines for $100, unlimited talk and text with limited high speed but then slow speed 4G
3 phones have $7.99 Insurance.  Is this worth keeping?  We used this once.  The phones stopped working and they sent us refurbished ones.
Extra 5th line $10.00
Extra 4G data for Spouse work $10 but his work reimburses $30 for cell bill
Lookout Security for Teenager's phone in case we need to track him down (happened once) and he will start driving soon $4.00


Internet/Satalite Television   84.00 -> First time having cable in over 10 years!  We used to use Hulu through our TV, but the only option for “cheap” internet at our new home is DSL.  So we had to get cable if we wanted to watch shows, which we do.  This includes the Internet and Satalite cable (we can only get satalite where we live).  This introduction price will go up by $60 in a few months.  I think the internet without tv is about 55-65.

Internet 44.00 -> DSL if anyone knows of faster cheaper option for the middle of nowhere, please share.
Satalite Cable 44/97 (before/after discount) -> Plan to cancel or since my husband doesn't want to get rid of it because he wants to watch his football, he can pay out of his allowance.  I told him that is his only two options.


Home Security System   47.00 -> Makes me feel safe.  My husband wants to get rid of it, but I would have if we got a big dog instead of the free (but adorable) chihuahua he brought home!  This is going!

Electric Bill    300.00 -> Ranges from $160 - $300 Where we live, we can't have the temp go above 80 degrees because of mold.  But we keep it at 78 during the day and lower to 75 at night.  We can improve by keeping it at 78 at night.  I will also contact the electric company to see if we can improve on winterizing.  We already have the best insulation.  We can probably improve by adding tint to the windows.  The structure is already well shaded with trees and front porch on the south.  The side windows (east and west) need more shading.

Banfield   57.95 -> For two small dogs.  I am going to cancel when the subscription is up.  I am going to do my own shots and found a cheap vet about an 1.5 hr drive from here.  Also, twice a year, we have a vet come to the local Walgreens for $5 shots. I will add another section in the budget for the dogs.

Netflix   8.60 -> Watching movies on our smart tv.  Our satellite cable doesn't include HBO or cinemax.  They both suck anyway. Keeping since we are getting rid of cable.

Auto Insurance 151.03 -> For 2 cars.  We can’t currently shop for new one because my husband got a speeding ticket 6 months ago.  We are going to have to wait till it passes 2 years for it not to count.

TOTAL: 827 Brought down to 615 savings of 212

Dogs
heartworm med: 100 per year
flea med: 100 per year
Other shots: (estimated) 100 per year

TOTAL (year/month) $300/$25

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OTHER EXPENSES

BiWeekly
Groceries 200
Family Fun 60 7.50 (we go to Tuesday discounted movies)  Once a month

TOTAL 260  207.50 Biweekly

Primary Home Expenses MONTHLY

Water System      
Salt   11.00   2 bags per month at $5.50 each
Clorine   6.00   1 bottle per month
Water Test   2.08   Yearly water test with county
Carbon Media   5.56   Change every 3 years
Parts   13.89   Every 3 years fix major parts
Inspect Septic   16.67   Once a year
Sub-Total   55.19   
      
      
Lawn & Garden      
Pest Control   6.25   Estimated for Ant powder, Wasp spray, Home defense spray
Termite Bond   16.67   Yearly
Gas for Lawn   20.00   Estimated for Gasoline for Equipment
Presure Wash   0.83   Liquid for cleaning
Sub-Total   43.75   
      
      
Home Supplies      
Caulking   1.25   
Fridge Water Filter   8.33   
AC Filter   10.00   
Lightbulbs   4.17   estimated
Sub-Total   22.50   
      
      
TOTAL 121.44
   

Monthly Money Put Aside for Family and Holiday Expenses (I am just redoing this part.)

Car Registrations 12.50

Kids Only
Summer Clothes 8.33 4.17
Winter Clothes 8.33 4.17
Hair cuts       16.67
Christmas Fund 32.92 25.00  This and their birthdays are the only time my kids get toys and we do make sure it is something they use and play with.
Fall Sport   18.33
PTA   1.50
School Clothes   25.00
School Events   12.50
School Supplies   8.33
Spring Sport   18.33
Summer Activities   15.00
Birthday’s Gifts and Party   25.00 8.33
Halloween         5.00
Thanksgiving      4.12

Travel
Nothing right now.  But we want to put aside $2,000/year for summer vacation. This is at Zero right now.

TOTAL 238 178.95 PER MONTH (savings of 59.05)  -> We put this aside in a separate bank account and draw from it as needed for only these items.

Any expenses that are needed for my husband and me (clothes, gas, gifts for each other, etc.), we pay for ourselves out of our own money.  I will explain this later.


Expected ER expenses: (optional, if relevant)  I haven’t worked the numbers yet, but I am sure we can more than get by with $30,000 a year if we had no mortgage or any other debt or kids.  I do plan on working during retirement but mostly on my own businesses.  I had a very successful business before but stopped because I wanted to grow my family and it wasn't easy to do with a family.  I love to work and run businesses.

Assets:
$600, Employer Vangard, 401K, just started with my company 7 paychecks ago.  They match 5% of 20%.  This is 1% of my income.

I have 2 websites but I haven't worked with them in 2 years, so I haven't made an income on them in that time but it is costing me domain and hosting fees (about $500 per year).  Domains have good age. (Currently a liability, but can be an asset.  They used to pay for themselves.) I can bring this down by 275 by moving one of the sites to my other hosting account.  That will bring this down from 80 to 50 per month. (saving of 30 per month)  I can also work on making these money makers.  I have gotten freelance work from them, I just need to put in the time.

Liabilities:

After feedback I am now able to put an extra $870 towards the CC payments monthly.  I am still working to cut back more to increase this.

Primary Home: Worth 275,000, owe 245,000 with a 4.5% 30 year FHA mortgage with lifetime 250 per month MI.  Would like to refinance to conventional.  Total monthly payment with everything taxes, insurance…1950

Our current primary house is our dream home on a 6 acre farm.  We got it at a great price and am not interested in moving.  We are planning on getting to the point of growing food and we have chickens which give us eggs.

Rental Home: Worth 175,000, owe (total 215,000) 134,000 1st 30 year mortgage 6.5%, equity modified only paying 2% interest now, will end up being 6.5%in 2015 on 72,000 20 year loan.  Rental income is $1125, but putting aside $150 out of pocket per month to cover difference and possible expenses and vacancy.  Current renters want to buy it. Total montly payment with both loans 1250

Car 1: Owe 11,000, worth 5,300.  Runs good and reliable but husband ran up the milage because of work having him go to an alternative location 2 hours away once a week.  Monthly payments 363 at 8%.

Car 2: Owe 2,500, worth 7,700.  Runs good and reliable.  Good milage.  Monthly payments 127 at 8%.

TOTAL CARS: 13,500

3 at same store CC: Total of 2,200 at 0% for the moment.  Then 27% in Feb 2015.

1 other store CC: Total of 8,000 at 27%

TOTAL Credit cards: 10,500

STUDENT LOANS: Over 90,000!  Monthly payment 860.  The rates are between 3% and 6%.  Most are 3%.

TOTAL MONTHLY DEBT PAYMENTS: 1,654

HEALTH COSTS:
We pay a high deductive insurance about $600 per month through employer, and have $20 from each paycheck put in HSA account.  We are pretty healthy.  If we get sick we go to Walgreens which is $45 a visit compared to $100 elsewhere.  But the largest cost is my son's peanut allergy epipens at $800 a year (price almost doubles each year) because they expire in a year and our school needs their own set to stay there and won't take something expired.  We usually keep the previous year's at home instead of spending $400 for our set.  I am starting to seek other options and may have found one, but will need to learn to use a needle!  My oldest also broke his arm which put us $2,000 in the hole (already paid off) and so that that doesn’t happen again and because we now live on a farm and accidents can happen, I purchase employer based accident insurance at $12 per paycheck.

Health costs per paycheck: 332 (we are thinking of putting more aside in the HSA next year for increases epipen expenses.)

EXPLANATION OF SPOUSE AND WIFE MONEY MANAGEMENT

So, I am very good at handling the budget and the money.  But my husband likes luxuries and to splurg (especially on christmas gifts for his newphews and brother and parents) and beer.  If we go to a restaurant, I will drink water and he will order the most expensive beer and get two or three.  He got so man overdrafts on our joint account debit card. So I got rid of that bank option and got 2 more accounts so that he has his own and I had my own and I will put money in there for his gas and work expenses.  He was tire of me giving him an allowance and would complain that he wants to control his own money.  But at the same time, he wanted me to control our budget, pay our bills on time (because he couldn’t) and pay down our debts (which he got us into).  He also approved the budget yearly with me but still complained about what he was allowed per paycheck.

My solution, which we recently started, was that fine, you get to control your own money.  So, I split our budget by the percentage of our incomes.  Got him to approve the family budget.  Anything that was for us too, like clothes, our own car payments or his family gifts were taken out of the budget.  We also approved additional money to put aside to pay down the debts (currently 437 per month).  Then anything left over was given to us respectively out of our paychecks.  Now, he pays for his own family’s gifts and beer and what ever his heart desires, but the bills and debts and family expenses still get paid!  No more complaints!  If he spends all his money, too bad!  He already knows not to ask me, which he already tried. 

I did though take money for his car payment so that he doesn’t ruin his credit!  It is taken out before he gets the left overs from his check.

The money (allowance) is used to pay for our own cars' gas, car maintenance, tolls, car payments, and 401k.  I pay for my own car, websites and 401k out of my allowance.  He pays for his car out of his allowance.  The insurances, income deductions and taxes are split between us.  He also gets additional money from work to cover travel for the other work location.

Bi-Weekly allowances:
His allowance after car payment: 205 + extra travel work reimbursement
My allowance after car payment, websites and 401k: 115

If we eat out, it will come out of our allowance.  I found that this has been discouraging us to eat out!  Especially since he would many times invite his parents with us and then want to pay for them.  I told him he will have to pay for them out of his allowance.  He tried to get me to pay for them once and I told him "no".

The farm expenses also come out of our allowances.  We decide together on what is needed and pay 50/50.

Most of my favorite clothes are second hand.  I have no problem with saving on clothes.  But my car needs oil changes and I need to put aside for brakes as well or if something breaks.  And I pay for my vitamins out of my allowance.  I really can't spare anymore of my allowance.

He refuses to stop paying for gifts for his parents, brother and his wife, and their children.  So that savings is out of the question for him.  But he is paying out of his allowance.


SAVINGS AFTER CHANGES FROM FEEDBACK $394 PER MONTH! Now I have to go make some calls to cancel some stuff.  I am sure I can do better and am open to more feedback.  The holiday stuff I could only give in so much.  I do want my kids to enjoy the holidays somewhat.

To remark on the "husband's second job".  This isn't possible with our current work schedules.  I drop off the young one and he picks him up.  We can't do public bus with the young one because of his severe peanut allergy.  I don't trust them to watch him.  BUT, my husband did do some dj work for extra money which he is using to help pay for new tires needed for his car. 

I can make more money by picking up more freelance work through the websites.


Specific Question(s):

Where can we cut expenses?

How can we pay the debt down faster? 

Currently, I am planning on defering the student loan payments to pay the CC debt down faster by June, then taking those monthly payments and paying off the student loans.  But the student loans are about $10,000 interest per year.  It will probably increase by 5,000 if I defer till the CC are paid off.  Should I defer the student loans anyway?

Should I continue to put money aside for the family expenses or should I use that money to pay down the CC debt and then pay the family expenses as they come up?

Should I consolidate the CC debts in a personal loan with lower interest to pay off quicker?  The CC with no interest is going to be 27% soon and the interest is about $100 a month.

Should I pay off the car debt faster too or just keep paying the minimun for the last 2 years it is left?  I am just paying the car loans as is because I feel that the one that is owed more than what it is worth is not worth paying off early because if it is crashed beyond repair the insurance would pay off the loan, but if it was crashed and we paid off the loan early, we would have wasted that money on a car we no longer have and it would have come out of "our" pockets.  But I hope that doesn't happen, but you never know.

What do I do with the Rental Home that is upside down?  When the interest raises, we will be paying more on it monthly than we would get in rent.  I am not sure if we would be allowed to refinance and if we do, I still don't think the payments would be less than the rent payments.  Do we pay the difference out of pocket (maybe $500 per month) until the home is paid off and we use in the future as retirement income?  Or do we short-sell and later buy another rental when we are out of debt and in better financial situation (the current renters want to buy it)?

What do I do with my 401k?  I am not happy with my 401K performance.  They didn't give me the stats when they made me choose an option and the one I am in is based on retirement date.  It was started in 2006 and has a history of only a 6% return.  I already lost at -9%.  There was another option with more risk but created in 1990 with a 9% return history.  Should I change to that option (I think it was US equities)?  Or should I roll it over to a roth IRA and try Peer Lending investments at an average 7% with more risk? The employer match is only 5% on 20% of income, really not much, and if I leave before 5 years I won't get to keep it anyway.  I don't currently see anywhere for me to go in the company and am looking for a new position elsewhere to make more money and doing what my degree and experience is in.
« Last Edit: October 21, 2014, 04:13:37 PM by FarmFam »

MayDay

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #1 on: October 18, 2014, 12:08:29 PM »
So do you actually want to retire in 7 years? I'm kind of standing here with my jaw dropped to be honest.

FarmFam

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #2 on: October 18, 2014, 12:17:14 PM »
So do you actually want to retire in 7 years? I'm kind of standing here with my jaw dropped to be honest.

LOL!  I would love to.  But in all honesty, I don't think it will be possible.  The best I could come up with to pay off all the debt is 10 years.  That does include the mortgage for the primary home and would mean very lean living.  I got this amount of time by running a goal in Mint with all the debt.

We would be able to do it faster if we can find higher paying jobs.  Right now, I know I can make double what I am making now.  I settled with my current job because I love the people and company culture, but am now seeking something else that pays more and is more in line with my degree and experience.

So, right now, I am looking for ideas to pay the debt faster and do something better with my 401K contributions.  I am taking one bite at a time.

NinetyFour

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #3 on: October 18, 2014, 12:52:00 PM »
You really curb your spending.  HAIR ON FIRE.  Your husband needs to understand this.

Get rid of cable, Netflix, and Hulu.  Use your library.

Are you paying for lawn care?  You need to cancel that.

Just for starters.

Jon_Snow

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #4 on: October 18, 2014, 12:57:10 PM »
Retiring in 7 years is a pipe dream. I am sure you know this. But at least you appear motivated to get the journey started. Good luck.

Hotstreak

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #5 on: October 18, 2014, 01:03:44 PM »
Specific Question(s):

Where can we cut expenses?

How can we pay the debt down faster? 



There are plenty of places to cut expenses.  It will require some sacrifice, and it sounds like your spouse might not like it much.  Here are some estimated savings I came up with:

Hulu           - 8    Stop right now.
Cell phone   - 120  Stop paying for other people's phones, switch yours to Republic Wireless or Ting and don't use them much.
Satalite TV  - 50   You need to cut luxuries.
Security     - 47   Stop this now.
Electric       - 150  Use your warm clothes in the winter, learn to love the summer, weatherstrip your house.
Banfield     - 58   Good choice to stop this.
Family Fun  - 120  Have fun at home!  You can't afford this.
Lawn/Garden - 40   Clean up with elbow grease, buy cheap seeds for your garden.
Kids Only   - 100  Cut birthdays, clothes at thrift stores, cut halloween, how is thanksgiving another expense?  Cut it. Cut christmas.


TOTAL SAVINGS 693


Additionally, you don't say how much you spend for personal money, and how much he spends.  Presents for family, any food eaten outside the home, any beer that doesn't come from the grocery store.. all of that needs to go.  Neither of you should buy new clothes except from the thrift store, and only if needed.  If you know this part of your budgets we can figure out how much that savings would be.




How you can pay down debt faster:


Consolidate your credit cards at a lower rate.
Look in to refinancing your student loans at a lower rate.


I am nervous to recommend a short sale on the rental, because that will destroy your credit, which means you can't refinance out of the PMI on your home.  However, based on how money you are already losing, and the additional money you will lose at reprice, WITHOUT even counting repairs, you need to get out of this house ASAP.



wtjbatman

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #6 on: October 18, 2014, 02:23:13 PM »
So, right now, I am looking for ideas to pay the debt faster and do something better with my 401K contributions.

To be honest, that should be the last of your worries right now. Save enough to get your company match if possible (I don't know what your "5% of 20% of income" means), and invest the money in a low fee index fund or low fee target retirement fund. Ignore the short term results, the markets have been down lately, that's what you're seeing. You need to put the vast majority of your income towards paying off your debts.

1967mama

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #7 on: October 18, 2014, 03:34:45 PM »
There are plenty of places to cut expenses.  It will require some sacrifice, and it sounds like your spouse might not like it much. 

You need to cut luxuries.

Have fun at home!  You can't afford this.

+1 

Things sound way to luxurious and fancy around your house with your HAIR ON FIRE EMERGENCY! Hopefully, you and your husband can pull things together SOON and both get on the same page to get rid of your debt asap.

Then, you can start to make steps to saving for retirement. At this rate, 7 years to FIRE is totally unrealistic. But if you can get yourselves on a plan, then MAYBE you can retire at some point! This might be the motivation your spendy husband needs!

Setters-r-Better

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #8 on: October 18, 2014, 03:43:53 PM »
Can you explain if the income is pre or post tax and how much all of these total up to monthly and then how much is given to husband to spend as he wishes? Have you been tracking expenses or is this just what you think they are , like for groceries?

Elisabeth

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #9 on: October 18, 2014, 04:21:24 PM »
I feel like our situation is similar with the difference in goals/values between husband and wife.

That said, family fun does not have to cost much money. Last night we put the baby to bed, opened a $3 bottle of wine, and I whooped his ass in Monopoly - meaning he has to clean the house now. We spend $80/year on a national parks pass so we go hiking on weekends, grill out on the back deck, sit by a camp fire in the yard, etc.

Perhaps doing the math and showing your husband what it looks like would inspire him. You could make a table showing him how much interest you will both pay if you only pay the minimum on loans, and what his traditional (age 65?) retirement income will look like if he continues spending as he does. (Not good.)

I did this a while ago and it at least got my husband on board with a few goals, like never having debt again, and contributing weekly to an index fund.

One of the best pieces of advice I ever read came from financial writer Joshua Kennon. He said that if the people advising you about how to use/spend/save your money aren't rich, don't do what they did. Maybe your husband needs to get advice from folks who are managing their resources well.

rmendpara

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #10 on: October 18, 2014, 04:27:06 PM »
One step at a time. RE is a bit of a stretch, but there's no harm in setting your eventual goal.

Now, focus on the first step, and focus with laser-like precision.

You all have a spending problem and don't have the incomes to back it up. Get control of yourselves! Find a budget that lets you save at least 20% of your income (much, much more if you want to retire in 10 years or less).

This will not be easy. It will be painful. It will test your resilience many, many times. My best advice:

1) Learn how to budget. Set a budget and stick to it. No excuses.
2) Work to pay off credit card debt.

27% interest? Pardon my language, by why the hell are you worrying about your 401k if you are paying this much interest?

Your problems weren't created overnight, so don't expect them to go away overnight.

I believe you can do it! We all have to start somewhere, and you've already taken the most important step... admitting to yourself you want better.

Good luck.

plainjane

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #11 on: October 18, 2014, 06:42:05 PM »
401k - you have been in this plan for 7 paychecks.  So you started buying at a recent high.  You need to calm down here, and let it ride for a while.  A target year program is probably very right for you at your current level.  A full stocks plan will be even more volatile than you've got right now.  9% vs. 6% isn't comparable when you're looking over different time periods.

Consolidation of cc loans at such a high rate is a good idea, but I fear that you're dealing with symptoms and not causes.

Some small items - Let's be honest, you don't have $60 biweekly to go to the movies.  I'd recommend shifting this to a monthly event at best.  How about you shift to eating at home and having good beer for your husband there?  It will be _substantially_ cheaper for everyone.  Likewise, why isn't your husband driving the other car on days he has to drive to a location further away?

Home security - you complain about your husband, but this one is all you.  How can you get him to drop ongoing costs if you won't?  At very least, you should have to pay for this out of what is left of your "allowance"

And 500/year on domain names and hosting? If you aren't making money on them, there is no way they should cost this much. 

Now the tough love

Your budget is exceptionally detailed.  I'm not sure why you are going to this level.  I feel like you aren't going to be able to manage this degree of granularity in the long term, you are just setting yourself up for failure. (And are your costs including tax?  e.g. Hulu at 7.99)  Is this just a way for you to hide from reality? Try to get control by organizing _everything_? There is something odd here that you might want to think about because it might be contributing to your current financial state.


Let's rephrase your expenses into a monthly view.  I'm trying to work with what has been provided, I might be missing items or misunderstanding, but I feel like part of your problem is a combination of disorganization and granularity which is preventing you from seeing the true picture of your financial situation.

monthly utilities - 680 (cell, internet, electricity, auto insurance)
Mortgage - 1950
Groceries - 435
Home maintenance - 135 (also has car registration)
Health - 730 (600 + 60 + 24 + 800/12 for the annual Epipen)
= 3930

Set debt repayments
rental house (current difference vs. rent) - 150
cars - 490
student loans - 860
= 1500 (about to go up with the 6.5% mortgage on the rental)

So that is 5430 before you get to paying down credit cards or the kids.
Kids - 200 (annually you have set aside 400 for christmas, 300 for birthdays, 50 for thanksgiving - this is way more than you can afford)
NB, this is 100 more than you had listed as your total on shared monthly other costs

So now you're at 5630, and I'm not clear on how much you are paying on your credit cards (OMG 27%?!!!!) and we haven't gotten to your "entertainment addiction", or your personal allowances.

monthly entertainment - 230 (TV once your bill resets, hulu, netflix, family movies out)
monthly unwillingtobeanadult - 105 (dogcare, home security)
domain = 40/month
Total = 375 of superfluous spending you cannot afford while carrying cc debt at 27%

So that looks like 6005 of spending before your credit cards, and before your personal allowances.  In your current budget you have 495 left to cover both line items.

(edited to correct bad calculation on monthly health insurance costs)
« Last Edit: October 18, 2014, 06:48:25 PM by plainjane »

Hotstreak

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #12 on: October 18, 2014, 10:12:41 PM »

So that looks like 6005 of spending before your credit cards, and before your personal allowances.  In your current budget you have 495 left to cover both line items.



Thank you for converting the data to something easy to understand.  That really is a HUGE "budget".

Terrestrial

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #13 on: October 19, 2014, 08:52:47 AM »
Facepunch warning.  If you are sensitive don't read this.  It's not meant to be mean just help you understand the depth of hole you are in and how drastically you need to change your lifestyle:

Retiring in 7 years is never going to happen no matter how dedicated you get, barring a large windfall or a doubling of your income.  So throw that out off the bad.   I would be concerned about retiring ever, depending on what your current age is (I didn't notice it in there).  Your assets (I don't count cars) are literally $600 in a retirement account and 10% equity in a house.  No other cash/equity assets that you note, not even an emergency fund.  Retiring takes more than the absence of debt, it takes having enough assets to support yourself.   Right now i see no way you can kill 100k of CC/student loan debt in 7 years with your lifestyle, let alone begin to pay off over 200k of mortgage and build any investment base that is enough to produce the 30k you need.

Bottom line, you owe way to much and mostly not at great terms....even your decent rate primary mortgage has PMI attached to it.  Other people have already talked about where to trim you budget, take their suggestions and slash everything to the bone.  No eating out, no cable/netflix/etc.  No vacation (2k/year! when you have over 10k of CC debt at 27%!)...vacation for you guys now is free trips to local parks for hiking/camping or staycations at your house.   No xmas/bday presents for anyone who isn't your kids (not even you or your husband.  your guy's presents to each other for the next X years can be paying off debt...get your husband a decent six pack for xmas for 7.99).  Get rid of the website, sell if it possible, if not just stop paying and let it lapse.  Your efforts need to be on paying off debt not servicing a 'maybe asset but lets be honest you probably aren't going to get around to it until you pay XX more years of $500 fees'.  If it sounds drastic/harsh, it is.  Drastic is the only thing that will dig you out of this hole.

As for the credit cards I'd try and see if you can open another one that does 0% balance transfers.  Transfer it over, cancel the other ones (store cards are the worse...27% is bad even for credit card rates).  Only do this if you are POSITIVE you won't spend more once you have another card.  Your guys discipline does not seem great so that is questionable.  I have no idea what your credit is like so maybe this isn't possible anyway, you owe ALOT...but try.  Then take your savings suggested by drastically slashing your lifestyle and apply it.  You don't say what the student loans are at, sometimes these are quite reasonable.  If they are 4% or less you have a little more room to breathe and start saving, if 6% or over start getting really aggressive on those.

The rental...not in great shape.  Solidly in the hole on both an equity and cash flow basis.  I would imagine even if they do buy it they will pay market rate and not what you owe, so there is a short sale coming since you have no cash assets to pay the difference.  That's probably the best thing that can happen, get out now while you have someone willing to buy it.  Look at it this way, would you keep owning a stock that was purchased on margin and required you to keep paying 150 a month to hold it?  NO.  It's a bad investment, especially for your situation.  If you were on solid financial footing maybe you could see it through.  You're not...cut your losses, short sale it, get rid of the liability and drain on your money and the hassle.  Yes it will impact your credit.  Do the CC balance transfer first if possible.

To the poster that said this would impact the ability to refi the main house to shed the PMI:  This is true.  BUT...since she only has 10% equity in the house and no ability to pay any meaningful extra principal, it will be a good ammt of time before she qualifies for a refi anyway.  Short sale the rental now and in 3-4 years her credit will have recovered enough to refi the main house.  Her credit probably isn't great anyway based on her utilization with how much she owes, so it may recover even faster if she managed to ice the CC debt over that period as well.

Good luck!  You have made the most important step of realizing that you need to make a change. 

On a side note, it will be very difficult to accomplish anything if your husband isn't on the same page.  You have to get him to drastically cut the lifestyle...the eating out, beers, lavish presents, etc.  It doesn't matter if you put your head in the sand and say it's coming out of 'his account'.  All the debt you owe is both of yours, all the money you have available to pay it is both of yours.  How you classify it makes no difference, every $100 he spends on presents is $100 less debt you are paying off, regardless of which checking acct it came from.  If it helps convince him, look at it this way: while you owe that CC debt, every discretionary non-necessary purchase you make is being financed at 27%.  Every single one.  That's insane. 
« Last Edit: October 19, 2014, 08:59:53 AM by Terrestrial »

FarmFam

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #14 on: October 19, 2014, 09:56:25 AM »
Thank you so much everyone!  I really do appreciate the honesty!!!  I need it.

Ok, so I spoke with my husband and shared everything that everyone said.  He is onboard, but he is still holding tight on some areas, like christmas. 

I am concerned about the cable.  Yes, I know it is a luxury.  He said we can try to negotiate to keep the current price.  But I think if we can get Hulu to work on our TV then we can just get rid of cable and keep Hulu and Netflix like we used to do.  I also like the idea of the library; we sometimes to get movies from there and I don't care to watch my shows as soon as they air, I can wait till it comes out on DVD.

Some people were asking for more details on our budget.  I didn't because I thought it was long enough, but I will go ahead and edit it to see if I can get more advice and feedback.

The income is after tax.  I can add more details about this too.

And the budget is actual.  When we approve together a budget, we do a good job at keeping to it.  I also do my budget based on actual spending which I keep track of using Mint.  Therefore, it is a combination of our past spending and what we decide it will be.  I try to keep it close to our spending habits to make it easy to achieve.  But I will work on it more and edit the post so that I can get more feedback.

Regarding the 401K I was regretting the choice because as said, I think I should of paid the debt first.  That is about $180 per month that could have gone to my debt payments! 

Thank you, thank you, thank you. 

mjs111

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #15 on: October 19, 2014, 11:25:44 AM »
Lots of good advice here.

That $8,000 of credit card debt financed at 27% is just nuts.  I'd attack that first.  At 27% the balance doubles every three years (provided you aren't paying any balance down):

1.27^3 = 2.05

One suggestion that hasn't been offered yet would be to stop contributing to the 401(k) and focus that money on wiping out the 27% interest debt. Even if the employer matches 100% of what you put in, no multi-year average return is going to come close to the 27% you're paying on that card.

I'd even suggest delaying 401(k) contributions until after you've built up a 6 month emergency fund (after the debt is paid off).  Funds contributed to a 401(k) can't generally be taken out before 59.5 years of age without paying some stiff penalties, and what's more, if your funds are invested in stocks you have no reliability near term on what those stocks will be worth: if the 401(k) is your only source of financial assets then in an emergency you could be in trouble.  Retirement funds are successful long term compounding machines.  They're great, but I think can come secondary in terms of funding if you have short term emergency financial issues, which most of us would agree you're dealing with right now.

Awesome to see you here and good luck.  It definitely takes courage to post all the details like you did and absorb all the advice you're getting. 


Mike

« Last Edit: October 19, 2014, 01:44:01 PM by mjs111 »

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #16 on: October 19, 2014, 01:09:13 PM »
My take is pretty much the same as the others. You guys are in bad shape and need to attack the debt aggressively,  Dave Ramsey style. The high interest rate credit card needs to be the first.  You need an emergency fund so you don't have to resort to credit cards again.

Since you mentioned it,  if you have the ability to earn more,  you absolutely need to do that,  you don't have the luxury of choosing employment based on how much you like your coworkers.

I think you're doing well on grocery expense, so that's good.  Maybe you can cut a little more by growing more of your own.

No movies,  no entertainment that isn't free.

Can your husband pick up a second job for awhile?

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #17 on: October 19, 2014, 01:43:41 PM »
In agreement with the above.

OP--you correctly identified cable as a "luxury".  You are right.  And it's one you cannot afford right now.

If you have internet access (hopefully it's cheap), there is lots of good stuff to watch online (at no extra cost).  You cannot afford to be paying for Netflix or anything else.  Again--check out all the resources at your library.  It can be very fun to load up on DVDs, CDs, and books--all for free!

Terrestrial

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #18 on: October 19, 2014, 02:54:07 PM »

Ok, so I spoke with my husband and shared everything that everyone said.  He is onboard, but he is still holding tight on some areas, like christmas.

I am concerned about the cable.  Yes, I know it is a luxury.  He said we can try to negotiate to keep the current price.  But I think if we can get Hulu to work on our TV then we can just get rid of cable and keep Hulu and Netflix like we used to do.  I also like the idea of the library; we sometimes to get movies from there and I don't care to watch my shows as soon as they air, I can wait till it comes out on DVD.


With all due respect, I don't think you guys 'get' it yet.  Cutting back a little bit except still splurging on xmas gifts (that you are financing for other people at 27%), and negotiating keeping cheaper cable isn't going to get rid of 100k+ of debt.  Only DRASTIC changes will get you there.  You owe ALOT of money.  It's not skip a movie here skip a starbucks there kind of cutting back, it's a you need to free up an extra couple grand a month and even then it's going to take you a good while.

Whoever asked if your husband would be willing to take a second job, that's a wonderful suggestion.  Tell him the cable and the xmas presents are going (still buy for your OWN kids only just at a moderate level...nobody else, as as common etiquette make it clear that none are expected/will be accepted for yourselves). Bake your families a nice holiday treats platter or something or host a potluck dinner...if your family is caring they will understand your great need to get out of this bad situation and not expect you to keep buying things for them.   If he wants more than that he needs to get another job that pays for it.  It's still less productive than getting a second job and using it to pay down the debt (the best idea) but at least you aren't losing more ground this way.

If your goal is to retire at 67 (or later...or never) minor changes might work and after 30 years you would be kind of balanced out.  You seem to want to retire soon, 7 years is in no way even close to possible but 15 might be...if you make big changes.

Look at it this way.  You said you thought you could retire when you had no debt, a paid off house, and then could live on 30k a year.  You are starting at about NEGATIVE 350k from that goal (90k student, 10k CC, 245k mortgage).  This doesn't even count car debt or the upside down rental...i'm assuming you will pay off the cars (and keep driving them!) and shortsale the rental.  To get to your goal you need to get to about POSITIVE 750k which would support a 30k yearly withdrawal rate.
 
That's 1.1 million dollars from where you are now.  So far you have $600 saved.  This isn't a negotiate cable and keep buying Xmas presents kind of situation.

Good luck as you start to make hard choices, this criticism is meant to be helpful and not hurtful.

surfhb

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #19 on: October 19, 2014, 03:06:00 PM »
You won't be able to retire for a very, very long time....I'm so sorry :)

15 years is being optimistic and that's going to the extreme on the frugality end.    Personally I think you need to sell the homes ASAP, prepare to drive your cars a long time and start over in life.   Best part is you're older now and have (or hopefully have) the maturity level to know what debt and over consumption can effect your life later on.

FWIW.  I'm had to start out again later in life too so don't get down on yourself.  You seem to have a good attitude though .... Maybe the website passive income will take off if you really apply yourself.   Good luck
« Last Edit: October 19, 2014, 03:13:21 PM by surfhb »

FarmFam

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #20 on: October 19, 2014, 05:51:46 PM »
Alright, I posted what I came up with so far.  I think I still can do better.  But this is giving me a heart attack. 

I can probably still take out the Netflix and the one movie a month to no movies.

Husband refused to give up on cable because of football.  So, just like someone said about the security system that if I want it, my allowance should pay for it.  I made the same option for the cable.  I gave him the option of canceling or pay for it out of his allowance.  He also refused to get rid of the christmas gifts to his family so he is paying for it.

With all the additional savings, I am not changing our allowances.  They are staying the same.  So all that savings is going to additional payments to the debts until they are all paid off and then to as suggested, an emergency savings, then to retirement savings.

I am going to see if I can stop the 401k contributions.  If I can then, I will make this contribution to the debts instead (out of my allowance).

My husband and I still have a lot to talk about.  But I think that to keep our marriage healthy, if he wants to keep something that he feels passionate about, he should pay for it and same with me.

He said that if we die tomorrow, he wants to know we "lived".  My response was, if you died would you regret canceling cable.  He said of course not.  But this made me think, I want to know that I spend time with my kids, not that I spent time watching TV shows, when I die.  And living to pay off debt, is not a way to live either.  I wish I had made better choices! 

But I don't want this debt anymore because it is keeping me from enjoying my life.  I love my home and have what we want to have when retired.  We are already there, but we can't enjoy it because of the weight of the debt on the back of my mind.

I would be happy to work through retirement, doing what I love to do because I love to do it and not because I owe any debt!  I love my job, but have to leave it for better pay because of my debt.  I would be bored otherwise anyway.  You can only do so much fishing and traveling.

surfhb

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #21 on: October 19, 2014, 06:44:50 PM »
Can I ask how old you both are?   I didn't see it mentioned

I love surfing.  If someone told me to not do that I'd tell them to go to hell.    Keep the basic cable if that's what he enjoys.   The same goes for you as well.   

The point of the site is to show people they might not need all the things they purchase.     Do you need those 2 homes to live a happy life?   Of course not.    Why not rent in a home like the one you currently rent out? 

 I'm seeing that you could possibly put $4000 a month to debt while keeping cable, Xmas and your movies and a couple dinners out a month.   Continue on that path and youll be out of debt in no time

I'm 45, divorced with no home.  5 years ago I had a negative $20k net worth and lost my job of 16 years.    Today it's topping $100k.    I was the like drunk who hit rock bottom and I'm here to tell you that you both have hit rock bottom financially.   Add a job layoff or a medical condition to that and I'm sure you will see it slapping you in the face like it did me.   

It's either change now or die working because you have to.
« Last Edit: October 19, 2014, 08:12:27 PM by surfhb »

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #22 on: October 19, 2014, 08:00:49 PM »
OP, on the subject of football, does your husband need to watch a certain out of market team's home games every week, or is it enough for him to have a game on every Sunday. 

I ask, because the cable luxury is a bit on the heavy side if football is the only justification.  Have you considered going back to an over-the-air antenna?  With CBS, NBA and Fox alone, you will have football all day on Sundays and the thursday night game as well.  All in uncompressed HD that looks better than the compressed signal that cable/satellite passes off as high def. 

Check out I.P. Daley's media guide for a well-written explanation of OTA antennas.   In my household, we have a home made antenna mated to my home built home theater pc that DVRs any network TV I want and feeds the rest of our media habits through internet.  We pay for Netflix, but in comparison to a cable bill it's SO much cheaper and in my opinion leaves NOTHING to be desired.   If you can satiate your husband's thirst for football with free network TV, you could kill one of those big luxuries tomorrow.

Bethersonton

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #23 on: October 21, 2014, 09:59:41 AM »
All great advice above, just want to add one more thing: I'm a fan of Dave Ramsey for his early-stage financial advice for debt repayment and for his description of couples as usually having a "nerd" and a "free-spirit." The nerd loves numbers and can look at a spreadsheet for days; the free-spirit wants the big picture and then to go on living. It has nothing to do with being a spender or a saver; a free spirit can be the frugal one and the nerd can be the spender or vice versa.

Just reading through what you've said about you and your husband, it seems like he's definitely a free spirit and you are the nerd. It's not fair to either of you for him to just say "la la la la la" with fingers in his ears and you to hand him an allowance like he's your son. But I'm also getting the vibe from your insanely detailed, down-to-the-penny "budget" up above that you might be overwhelming him with detail and control when you try to have a financial discussion?

DR says that couples should hold a weekly budget meeting, and he tells the free-spirits that they have to promise to sit still and listen, and that the nerds have to promise to not make it a six-hour "Budget Summit" with Powerpoint and spreadsheets. Just ten minutes to check in with each other and look at the numbers. I highly recommend YNAB.

I say this all with kindness and to just give you a bit of perspective. Maybe some counseling as a couple or just many, many, many honest conversations could go a lot further than cancelling cable would (although you should do that, too, eventually). Good luck and I hope you keep us posted!

Sid Hoffman

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #24 on: October 21, 2014, 11:20:07 AM »
OP is spending almost $2400/month on their primary (farm) home and its associated costs.

That's a luxury.  That is the elephant in the room.  Even the credit card debt of $8000 @ 27% is only costing $180/month.

Louisville

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #25 on: October 21, 2014, 11:50:27 AM »
 

Ok, so I spoke with my husband and shared everything that everyone said.  He is onboard, but he is still holding tight on some areas, like christmas.

I am concerned about the cable.  Yes, I know it is a luxury.  He said we can try to negotiate to keep the current price.  But I think if we can get Hulu to work on our TV then we can just get rid of cable and keep Hulu and Netflix like we used to do.  I also like the idea of the library; we sometimes to get movies from there and I don't care to watch my shows as soon as they air, I can wait till it comes out on DVD.


With all due respect, I don't think you guys 'get' it yet.  Cutting back a little bit except still splurging on xmas gifts (that you are financing for other people at 27%), and negotiating keeping cheaper cable isn't going to get rid of 100k+ of debt.  Only DRASTIC changes will get you there.  You owe ALOT of money.  It's not skip a movie here skip a starbucks there kind of cutting back, it's a you need to free up an extra couple grand a month and even then it's going to take you a good while.

Whoever asked if your husband would be willing to take a second job, that's a wonderful suggestion.  Tell him the cable and the xmas presents are going (still buy for your OWN kids only just at a moderate level...nobody else, as as common etiquette make it clear that none are expected/will be accepted for yourselves). Bake your families a nice holiday treats platter or something or host a potluck dinner...if your family is caring they will understand your great need to get out of this bad situation and not expect you to keep buying things for them.   If he wants more than that he needs to get another job that pays for it.  It's still less productive than getting a second job and using it to pay down the debt (the best idea) but at least you aren't losing more ground this way.

If your goal is to retire at 67 (or later...or never) minor changes might work and after 30 years you would be kind of balanced out.  You seem to want to retire soon, 7 years is in no way even close to possible but 15 might be...if you make big changes.

Look at it this way.  You said you thought you could retire when you had no debt, a paid off house, and then could live on 30k a year.  You are starting at about NEGATIVE 350k from that goal (90k student, 10k CC, 245k mortgage).  This doesn't even count car debt or the upside down rental...i'm assuming you will pay off the cars (and keep driving them!) and shortsale the rental.  To get to your goal you need to get to about POSITIVE 750k which would support a 30k yearly withdrawal rate.
 
That's 1.1 million dollars from where you are now.  So far you have $600 saved.  This isn't a negotiate cable and keep buying Xmas presents kind of situation.

Good luck as you start to make hard choices, this criticism is meant to be helpful and not hurtful.

+++100
FarmFam - I'm sorry, but you are rearranging the deck chairs on the Titanic with your talk about Netflix/movie this and football/Christmas that. You need to get your head wrapped around much more drastic moves, like selling both houses and moving to the tiniest rental you can find, taking second jobs, declaring bankruptcy, etc., or you're never going to get out of debt, never mind retiring. Maybe not those exact drastic moves, but things on that order of magnitude.

Now, I fear that if you do get your head wrapped around that, then you'll be so discouraged that you'll continue to bury your head in the sand and won't make ANY changes. I hope you're stronger than that.

fb132

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #26 on: October 21, 2014, 11:59:30 AM »
I agree. If you want to retire in 7 years, it is possible, but you really have to cut almost everything and/or sell. If you only wish to retire, but you want to keep your current lifestyle, unfortunately it won't happen.

Bethersonton

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #27 on: October 21, 2014, 12:11:28 PM »
OP is spending almost $2400/month on their primary (farm) home and its associated costs.

That's a luxury.  That is the elephant in the room.  Even the credit card debt of $8000 @ 27% is only costing $180/month.

+1

(This is what I left out of my last comment. If I had more time I would run the numbers for you to see, with your current budget just how many years you have left in debt. It must be over a decade, and even $300/mo isn't going to shorten that by much.)

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #28 on: October 21, 2014, 12:38:40 PM »
Primary Home: Worth 275,000, owe 245,000 with a 4.5% 30 year FHA mortgage with lifetime 250 per month MI.  Would like to refinance to conventional.  Total monthly payment with everything taxes, insurance…1950

Our current primary house is our dream home on a 6 acre farm.  We got it at a great price and am not interested in moving.  We are planning on getting to the point of growing food and we have chickens which give us eggs.

Rental Home: Worth 175,000, owe (total 215,000) 134,000 1st 30 year mortgage 6.5%, equity modified only paying 2% interest now, will end up being 6.5%in 2015 on 72,000 20 year loan.  Rental income is $1125, but putting aside $150 out of pocket per month to cover difference and possible expenses and vacancy.  Current renters want to buy it. Total montly payment with both loans 1250

I'm not interested in living anywhere but a chateau in the south of France.  But that's not my life right now.  The fact that you already own the cash sink home of your dreams doesn't make it any more ridiculous.  You're spending an extra $1000 a month to have a hobby farm that you don't use.  Out of curiosity, are you waiting until you're in a better cash position to start farming?  Not sure if I need to point out the contradiction.

Since you're above water on the farm house can you sell it and live in the rental?

You can keep cutting cable and lattes, but, as others have said, you need to focus on the expenses that are taking up most of your budget if you want any meaningful return on your sacrifice.

FarmFam

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #29 on: October 21, 2014, 04:59:54 PM »
We are currently 38. 

Thanks for the advice on an antenna.  We were using that for 10 years.  I don't know why I didn't think of it.  But he has a specific football and baseball team.  He doesn't care much to watch the others unless he is bored.

Bethersonton, You are right, I am the nerd!  I have worked to finally get him to have budget meetings with me and I do my best to keep them short.  We have been doing this about 4 years now and is how we have managed to stay on budget.  I go through each item and make sure that he approves each one.  He has approved the amount of his allowance as well.  I make sure we discuss everything.  But we do have different views on retirement. I think he wants to work forever, I want to work but only doing what I enjoy and not because I need the money.  But this is a discussion I think for another post; I am not sure if it fits into this case study?

About the farm: We got a great deal on it.  It already has gone up in value by $25,000.  We have a business plan to make at least $7,000 (only producing on 1.5 acres) but it is taking us time to get to the point where the farm is productive.  Growing veggies doesn't happen overnight!  And there is a huge learning curve.  We are currently selling eggs but that income is reserved to go to my son's college which he starts in 4 years. 

After refinancing we will be paying 1796 with MI then minus 126 when we get over 80% equity and the property tax will go down as well when we can get the farm producing by maybe $2000.  They still aren't calculating our new taxes into the payments, so the next calculation with next years taxes will be down by $1000.  We should be able to bring our payment down to about $1496.  Home rentals/apartments are 1300/900.  So add in the farm income, we will be at about 913 out of pocket for payments for the mortgage.  That isn't bad for living on a farm. 

Of course it doesn't include the other $400 in maintenance, but that would be for any home-ownership.  Remember we don't have to pay water or sewage either.  And if we really want to get more out of our land we can have a solar farm to get electricity for our home which is easier and cheaper to install than on the roof. 

Also, we can grow our own food and save on food costs too!

We moved to where we are now because we were unhappy and depressed by the control the HOA had over us.  I was even on the board but because the manager didn't like me because I was close to discovering they were stealing money, she made our lives hell.  I will NEVER live in that situation again! 

After the feedback, I am now able to put an extra 870 to CC payments.  According the running the numbers:
The CCs should be paid in 5 months, [we will actually be able to refinance our primary home after this, which will give us some extra money to use to pay debts]
I am thinking of doing the cars next which will take another 5 months,
then the student loans, which will take 3 yrs and 4 months (maybe 2 months longer because am going to defer while paying the CC and car loans and the interest will add up during that time)
Then the mortgage will take 6 years

This is a total of 10 years, if we add our raises and any new income, we can finish faster.  One of my kids will be paying for himself in 4 years so we will have more money to put towards our debt.

When finished with the debt, it looks like with the same amount of money, it will take 20 years to save for retirement!  So currently, we are looking at 30 years to retirement. We are now 38, so it will be at 68.

If one or both of us lose our jobs, then we would fall behind.  But my husband already has people who would love to hire him and I am always applying for jobs and have my ability to freelance.  The college that I graduated from also helps with employment for all my career.  So I don't think we will be unemployed for long; unless the economy really tanks again!

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #30 on: October 21, 2014, 07:26:40 PM »
Just want to see if i have this correct...because your budget is very confusing...also, i understand getting paid biweekly gives you a few months with an extra paycheck...right??


Monthly
7628 income

Expenses
615 bills
25 dogs
420 food
122 home
180 sinking funds
1950 mortgage 1
1250 mortgage 2
363 car 1
127 car 2
860 SL
300 CC
670 health
410 spending him
230 spending her

6584 total

7628-6584 = 1044 "left over"

But you're saying it's 870 "left over"

Can you clarify???

surfhb

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #31 on: October 21, 2014, 09:44:55 PM »
30 years sounds about right.....that's if everything goes perfect

Personally, I'd rather start over now with no debt and retire in 15 ....it's your choice :)

Zamboni

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #32 on: October 21, 2014, 10:05:12 PM »
Quote
Husband refused to give up on cable because of football. 

I call BS on this because I manage to watch football just fine with the free signal the flies through the air just like it has since the 50's.

But maybe getting a crystal clear picture and his certain team every Sunday is that important to him.  In which case I agree that it's fine as long as he doesn't have many things in the wants category.   

A lot of changes need to be made or you'll be working forever, but you seem to get that.

Sid Hoffman

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Re: Case Study: Want to Retire in 7 Years, Lots of Debt, No Savings!
« Reply #33 on: October 27, 2014, 09:35:35 PM »
Of course it doesn't include the other $400 in maintenance, but that would be for any home-ownership.  Remember we don't have to pay water or sewage either.
...
When finished with the debt, it looks like with the same amount of money, it will take 20 years to save for retirement!  So currently, we are looking at 30 years to retirement. We are now 38, so it will be at 68.

I still disagree a bit on how much financial sense the farm house makes.  A large, high maintenance property will always cost more to maintain than a small, easy to maintain one.  I saw this between my parents' old house in the rainy Carolinas versus my basic house in the desert.  You're also kidding yourself when you say that water & sewer are free.  No, they aren't.  My parents' house had well problems several times over the 13 years they lived there and they probably spent at least $4000 keeping the well running normally.  Also, the well generally uses an electric pump (which means electricity, which means you pay for it), replaceable filters, and other regular costs.  Septic systems also require additional care that can turn into a sudden lump sum cost if things go wrong.  So honestly, I'm not trying to be difficult here but don't say that you have free water & sewer when all you're doing is shifting the burden of maintenance and repairs for each of those multi-thousand dollar systems to yourself.

As for your calculations saying you would retire at 68, that sounds reasonable, although probably later than it needs to be.  Did you include social security in that?  You'll be at full retirement age by 67, so there's a good chance you could retire at 62 and take regular retirement account distributions from age 62 through 70, then take social security at 70 in order to reduce those retirement account distributions.  It's still very encouraging to be planning as early as you are, but I think if genuine early retirement was your top priority (which it doesn't have to be; pick a lifestyle you want!) then you would have to sell that farm house in the next year if it's not genuinely producing income the way you say it can.

Again, I don't mean to be a downer, but I do want to help you take an honest look at things.  Never call anything free if there's risk associated with it, as is the case with maintaining your own well and septic system.  If you can be realistic about the costs then it will help you to make sure your financial plan is more true to life.  I still think that it's likely if your math says you can retire by 68 on investments alone then you can probably do it by around 62 when taking Social Security into account.  Still, you want to make sure the numbers add up in the mean time so you can turn such a plan into reality.