Author Topic: How bad is it?  (Read 3439 times)

warbirds

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How bad is it?
« on: March 26, 2014, 08:55:20 PM »
I grew up a poor kid with a roof over my head, food every day and about nothing else.

Upon graduation from high school I joined the military and served 10 years.

I got out with zero debt, zero significant savings, a wife, and 2 engineering degrees securing my working career in the private sector.

My wife- became a stay at home mom of our 2 little ones shorty after amassing 30K in student loans for an MBA- which has basically never been put to use.

I am now 35 and have made all the classic uneducated, poor person mistakes.

We have 60K total debt (30K is wife's MBA) and about 50K of "net worth"- if equity in my home is figured into that figure.
Or maybe not, as I owe $240 on my house.

I'm about 1/2hr from my office, but 10 months of the year I ride a paid for motorcycle, when not on the bike I commute in a paid for old sedan.

I'm currently putting at least 2K a month toward the debt & 4% of my salary into the company 401K, which is matched.

I'm a long way from FI, but my great income seems like all hope is not lost.

Am I the only one here with bunches of consumer debt I don't want?

Is 2years too long to feverishly work to get rid of that debt?
Am I worrying about debt that is manageable when I should instead be putting that money into some other investment NOW?

All feedback is welcome- thanks!

ender

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Re: How bad is it?
« Reply #1 on: March 26, 2014, 09:24:10 PM »
Unrelated but what's your favorite warbird?

I was talking to the SO about this literally this evening. I think the SBD Dauntless is my favorite :)

MarciaB

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Re: How bad is it?
« Reply #2 on: March 26, 2014, 09:49:51 PM »
I'm thinking about your smart wife with the MBA - put her on the path to reading voraciously about personal finance, debt reduction, investment planning, etc. She has the brainpower (obviously) and the skills (spreadsheet skills, study skills focus and drive). That MBA degree can come in very handy when applied to your family finances and forming a plan for FI. 

Ask her to read every post on this blog, and then head to the library to read a couple dozen personal finance books. Don't stop there! Have her generate a list of maybe 100 more books, and you and she read through those between you. Become the experts on your life, your finances, and your future. You two sound like a serious brain trust to me. What could possibly stand in your way? (hint: nothing).

I'm envisioning that within 5 years you and the Mrs will be in a much better place. Debt free, savings rich. And 10-15 years from now you'll be kicking some serious ass and congratulating yourselves for a job well done.

Keep us posted!

Frankies Girl

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Re: How bad is it?
« Reply #3 on: March 26, 2014, 10:02:48 PM »
No idea if it really is bad based off of what you've posted. Sounds like you're not doing too badly, but you probably could be doing much better. I personally think it is crazy to have that much debt, but out in the rest of the world, you are probably on par with the spender/consumer-driven masses. It also depends on what part of the country you live in (for instance, Cali is insanely expensive COL), what you're actually making and what your goals are. So the question would really be: are you spending and paying down debt efficiently or are you squeaking along doing a tiny bit better than the national average while still wasting tons of money... and if so is that good enough for you?

If you really want some help, you'd need to post your expenses and income and debts in a case study so the forum can focus on the inefficiencies and point you to better options in getting your hair-on-fire debts under control/build your stache.

http://www.mrmoneymustache.com/forum/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/
« Last Edit: March 27, 2014, 01:44:41 AM by Frankies Girl »

innerscorecard

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Re: How bad is it?
« Reply #4 on: March 27, 2014, 01:21:46 AM »
Your situation sounds ok. A little bit like mine in some ways. Remember that the best time to plant a tree was 10 years ago but the second best time is today (or something like that).

Gray Matter

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Re: How bad is it?
« Reply #5 on: March 27, 2014, 01:41:58 AM »
When I was your age (you whippersnapper!), we had 40K in consumer debt, 30K in car loans, and a few thousand in student loans.  We had about 200K in home equity (which we promptly lost when the housing market crashed) and about 200K in retirement savings.  So we were a little ahead of you in retirement savings, but otherwise similar after we lost the equity in our home.

Now, eight years later, we have no consumer, car, or student debt (it took us just a few years to pay all that off) and we have 965K in retirement savings, 105K in college savings, 120K in non-retirement savings, 280K in real estate and home equity, and 30K in cash.  And honestly, we could have done much better than this had we found MMM sooner.  We do have two incomes, but most of the second income has gone to pay for childcare and other home-related expenses that we wouldn't have needed if one of us didn't work.

So...it feels much better to be on this side of it, but you can do it!  Once you start paying off debt and saving more, you'll be amazed at how quickly it snowballs.

As for whether to pay off debt as quickly as possible, or invest more, we'd need to know interest rates on debt to be able to advise there.

Thegoblinchief

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Re: How bad is it?
« Reply #6 on: March 27, 2014, 08:35:56 AM »
What is your AGI (taxable income)?

What is the APR on the debts?

Depending on the answers to these, it may make more sense to max the 401(k) before prepaying debt.

Also, what about other expenses? You have a nice amount of free cash flow, but could it be even better?