Author Topic: I could use some advice on the rest of my life  (Read 25603 times)

Kev

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I could use some advice on the rest of my life
« on: May 06, 2014, 01:15:21 PM »
Hey everybody, I've been reading through the articles for a few months and now I'm ready to get involved in the community! But first I need some advice on what should be the next course of action in my life.

I graduated from college a few years ago and I currently have $40k in loans. I'll have $30k in the bank by the end of this month and I'll be moving out with my girlfriend this summer (renting for a year because of job locations) and plan to get married and buy a house the year or so after.

As everyone knows, when you get married to a person, you also marry their family........and their debt! My girlfriend's in deep, she graduates from school this month and she'll have about $110k in loans. That's $150k in loans between us! I'll make about $50k this year and she'll make $30k so that's an annual income of $80k. I already paid off one loan that had a crazy high interest rate but I'm hesitant to pay off more loans with a wedding and home purchase coming up next year. I've taught my girlfriend many ways to save her money but as you can see, she wasn't financially aware at all before we met. How should I go about attacking this debt with enough money for the wedding/house?

*Edit* Just a note, I'm contributing to my 401k and have about $1500 in stocks right now, trying to save more! *Edit*
« Last Edit: May 06, 2014, 01:17:14 PM by Kev »

HAULIN3

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Re: I could use some advice on the rest of my life
« Reply #1 on: May 06, 2014, 01:27:57 PM »
I can tell you I wouldnt even think about buying with that much in debt.  I've heard that home ownership can be a CURSE if you arent ready financially.. Plus getting married is a big enough thing to get used to...  Plus you can see by her debt repayment how much she is willing to sacrifice to get that new house by how she helps attack debt first... (idk  that's just my personal feeling)

Get married.... get a new house...then you have to furnish it.... then you have babies... then you have medical debt (potentially)... then there are baby clothes and braces and fast forward 20 years and you are still paying on student loans and also two new cars and college for the kids.....  depressing...

Elaine

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Re: I could use some advice on the rest of my life
« Reply #2 on: May 06, 2014, 01:29:44 PM »
Hi and welcome! The great thing about this forum is that it will give you tools to get your debt under control. The advice you get will be honest, and in my case I hope you consider it "tough love". I only dish it out because the criticisms I got when first starting out here have seriously helped my finances:

I think that most people on this forum will tell you that your hair is on fire, debt wise. Even contemplating shelling out a couple thousand dollars for a modest wedding when you are 150k in debt is insane, like jumping off a skyscraper because you think you can fly insane. If you want to get married ASAP, then just do a courthouse wedding. An expensive wedding is a product, just like anything else. A lovely courthouse wedding with a backyard reception is just fine.

As far as the house, it sounds like you want to buy one for emotional reasons, because it is part of the growing up/getting married package (unless there is another reason you didn't mention). If it's for the idea of financial security/adulthood, you need to put that aside right now. Even if you could get qualified for a mortgage with your average earnings and high debt, all it would mean is that you'd have the PERCEPTION of home ownership, while actually being even deeper in debt. You would be living on the edge, and if one of you lost your jobs, you'd pretty much be screwed. 

Also, owning a home is more expensive in terms of upkeep than renting, so you will be paying off your school loans even more slowly. The only exception I can think of, is if you live somewhere where renting is insanely expensive and owning is insanely cheap. I can't think of a place where that's the case, but maybe somewhere it is. Even so, I'm not sure that you would get approved for a mortgage.

I know it's not what you want to hear, but you need to throw as much as you can toward that debt. Once you're rid of it, or at least have made a huge amount of progress, you can start thinking about houses.

Tallgirl1204

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Re: I could use some advice on the rest of my life
« Reply #3 on: May 06, 2014, 01:33:15 PM »
Golly, I hate to be one of the first to pile on, but here's my advice.  You're not in any position to throw a big wedding. 

I got married at the courthouse on a pleasant afternoon, with no fanfare, so maybe I'm biased-- but it seems to me that good marriages last no matter how  much was spent on them.  We had NO wedding at all ($75 for the license), but one of the best big weddings (100 guests or so) I ever attended cost the bride and groom under $200.  It was potluck, we all happened to be living in a beautiful place so their backyard was plenty nice enough, and the money went entirely to a few cases of beer and the bride's bouquet.  Everyone dressed up in their best clothes that they already owned, and everyone was just happy to be there to celebrate the couple's happiness.  People who love you will just be happy to be there. 

Do you feel obligated to seriously feed and entertain everyone?  Then think burgers and brats and a softball game (I've been to one of those, too).  Or rent out the county park ramada and ask your cousin Harold the barbecue king to do the honors (yep). 

But please, do NOT for any reason (1) go further into debt OR (2) delay paying down your hair-on-fire student loans in order to host some big shebang that will probably disappoint somebody anyway.  Go ahead and pull the band-aid off if necessary, and disappoint everyone. 

Others can speak to the buy-a-house or not better than I can, but I'm inclined to suggest you treat the student loans like the mortgage they are, and rent a rat trap (perhaps with 3 more of your friends to really make it cheap) while you buy your freedom. 

And-- if your girlfriend isn't on board with waiting to buy a house, or not having the wedding of her dreams, ask yourself the important question of whether you two are really well-suited for each other.  Marriages break up over money differences.  Best to have this talk now, before kids or shared pets or a shared couch make it harder to extract yourself-- I"m not saying that you aren't well-suited, because all I have to go on is your brief note-- but truly, truly, you need to really be on the same page financially before you make this commitment. 


randymarsh

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Re: I could use some advice on the rest of my life
« Reply #4 on: May 06, 2014, 01:37:33 PM »
I have a total of 70K in student loans, expect to earn around 45K starting out and I'm not even thinking about buying a house until all my debt is basically gone and I have a 20% down payment.

The 2 of you have a shit ton of debt, a decent income, and lots of planned expenses. You need to decide what things you really want. Because I don't think you're going to be able to be debt free, have a (I assume expensive) wedding, and buy a house all within the next 2 years.

Cheddar Stacker

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Re: I could use some advice on the rest of my life
« Reply #5 on: May 06, 2014, 01:45:23 PM »
IF you both decide to move out of the parents' houses (I'm assuming that's where you're at) get the cheapest rent you can find for at least 1 year and attack the debt. I would personally stay with mom and dad another year if at all possible, even if you both live in one of their basements' and pay rent. Don't buy a house until you get rid of a big chunk of that debt. Despite what most people will tell you, a house is a terrible investment in the true sense of the word.

IF parents are paying for the wedding try to influence it a bit and keep the costs down without upsetting your girlfriend or either family too much. If you are paying for it, courthouse.

Honeymoon should be as cheap as possible. HINT - I don't mean find the best deal you can on an all inclusive beach resort. Check out this post from another financial blogger often quoted on these forums.

Do everything you can to not spend that $30K. It should go towards debt reduction. Once you cut the debt in half and you've gotten rid of all the high interest junk, consider investing more.

Welcome to the forums, and good luck!

skunkfunk

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Re: I could use some advice on the rest of my life
« Reply #6 on: May 06, 2014, 01:52:58 PM »
Are parents paying for the wedding? If not, reconsider.

Don't buy a house. You would be crazy to buy a house in your position. You are better off remaining flexible and paying down high interest debt. Home ownership costs twice as much money as you think it will. Source: regret buying a house. I just bought it 8 months ago. I was up until 12:30 AM replacing my AC condensor fan motor last night.

BlueHouse

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Re: I could use some advice on the rest of my life
« Reply #7 on: May 06, 2014, 01:54:01 PM »
I'm not really very mustachian yet, so this advice is a face-punch waiting to happen:
The order of events in which you tackle each of your goals is completely up to you.  A lot of people jump right into marriage and home-buying when they still have debt.  A lot of people differentiate  "good debt" vs. "bad debt" and count student loans and mortgages as "good".  If you follow that thinking, you'll just be like a lot of other people in America, and like a lot of other people on this forum before they found MMM.
But if you look at some of the comments in other topics such"what would you do different?", I think you'll see that the vast majority of us wish we had found MMM much earlier and we realize how much different our financial future would be if we had followed the principles from an early age.  You're at that fork in the road where you get to make a decision on how you want to tackle things.  It's great that you're asking, but you need to figure out how long you want to be on the hamster wheel and how much you want these things that the rest of America considers "normal" for your age / marital plans. 
I guess what I'm starting to learn from MMM is it's okay to be different and have different goals (no one really NEEDS 2.5 children, 4 bedroom ranch house, etc).  So what do you WANT? 

Kev

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Re: I could use some advice on the rest of my life
« Reply #8 on: May 06, 2014, 02:00:24 PM »
Hi and welcome! The great thing about this forum is that it will give you tools to get your debt under control. The advice you get will be honest, and in my case I hope you consider it "tough love". I only dish it out because the criticisms I got when first starting out here have seriously helped my finances:

I think that most people on this forum will tell you that your hair is on fire, debt wise. Even contemplating shelling out a couple thousand dollars for a modest wedding when you are 150k in debt is insane, like jumping off a skyscraper because you think you can fly insane. If you want to get married ASAP, then just do a courthouse wedding. An expensive wedding is a product, just like anything else. A lovely courthouse wedding with a backyard reception is just fine.

As far as the house, it sounds like you want to buy one for emotional reasons, because it is part of the growing up/getting married package (unless there is another reason you didn't mention). If it's for the idea of financial security/adulthood, you need to put that aside right now. Even if you could get qualified for a mortgage with your average earnings and high debt, all it would mean is that you'd have the PERCEPTION of home ownership, while actually being even deeper in debt. You would be living on the edge, and if one of you lost your jobs, you'd pretty much be screwed. 

Also, owning a home is more expensive in terms of upkeep than renting, so you will be paying off your school loans even more slowly. The only exception I can think of, is if you live somewhere where renting is insanely expensive and owning is insanely cheap. I can't think of a place where that's the case, but maybe somewhere it is. Even so, I'm not sure that you would get approved for a mortgage.

I know it's not what you want to hear, but you need to throw as much as you can toward that debt. Once you're rid of it, or at least have made a huge amount of progress, you can start thinking about houses.
Thanks for the replies everyone, I wouldn't have made a thread if I wasn't looking for honest answers!

I live in New Jersey so unfortunately renting is quite expensive, that's why we are considering a house or a condo purchase.  My girlfriend won't be up for a courthouse wedding but luckily she isn't opposed to cutting corners (cheap venue, buffet/bbq style food, etc.). I'm going to check out the link that Cheddar Stacker posted about the cheap honeymoon and based on the replies so far it looks like I'm going to try and knock out a few more high-interest loans with my $30k.

Argyle

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Re: I could use some advice on the rest of my life
« Reply #9 on: May 06, 2014, 02:01:22 PM »
Your fiancée didn't know The Way of the Mustache before — but how does she feel about it now?  Has she read the site?  Or Your Money or Your Life?  Have you had long discussions about how you'll handle finances?  Those would be the next crucial steps.  Ideally you can decide together how to move forward.  This includes the big-picture questions, but also the logistics, e.g. are you (singular) going to pay off her debt?

And what field is she in, and is there a promise of more than a $30,000 job in her field?

Elaine

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Re: I could use some advice on the rest of my life
« Reply #10 on: May 06, 2014, 02:05:12 PM »
Holy Crap! You're going to buy in NJ? It has some of the highest property taxes in the country! Highest closing costs in the country! Highest overall housing costs in the country! I rent in NYC and I have never paid more than 750 for my share. My fella and I had roommates for 8 years before moving into our own place. With roommates, we were paying about $400 each. Buying is NOT going to be cheaper than renting in NJ.

payitoff

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Re: I could use some advice on the rest of my life
« Reply #11 on: May 06, 2014, 02:07:09 PM »
Hello,

try to take a cruise to the Bahamas and get married there or on the ship by the Captain, if family wants to go with then they can pay, it will be their wedding gift to you, normally in your location, cruises cost from $249/person, you get married/honeymoon in an exotic island, who would think you paid for it too cheap?

we flew to Vegas and got married there for $1500, complete with limo pick up/drop off, flowers for me and the groom with a color of my choice. check lake las vegas, its gorgeous there, you can get married there in a chapel for less than $5000 too.

destination wedding is a key to avoid having to invite everybody ;)

skunkfunk

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Re: I could use some advice on the rest of my life
« Reply #12 on: May 06, 2014, 02:09:18 PM »
I live in New Jersey so unfortunately renting is quite expensive, that's why we are considering a house or a condo purchase.  My girlfriend won't be up for a courthouse wedding but luckily she isn't opposed to cutting corners (cheap venue, buffet/bbq style food, etc.).

Buying is expensive too. With a quick google search I found a pretty decent 1 BR 1 Bath 945 sq ft apartment for 1400/month. That's high, but it's workable. Much less expensive than buying there and locking yourself in to a place that you might not want a few years from now, not to mention you pay thousands in closing costs for the privilege of going into an outrageous amount of debt. Two newlyweds straight out of college have little reason for more than 1000 square feet. That place is $700 / person / month.

If you spend more than $6k on your wedding, you've spent too much in my opinion. You really have too much debt to spend $6k, but that is where I would draw the line. That means plan for $3k, as costs for fancy stuff balloons out of control when you aren't ready for it.

Kev

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Re: I could use some advice on the rest of my life
« Reply #13 on: May 06, 2014, 02:19:31 PM »
Your fiancée didn't know The Way of the Mustache before — but how does she feel about it now?  Has she read the site?  Or Your Money or Your Life?  Have you had long discussions about how you'll handle finances?  Those would be the next crucial steps.  Ideally you can decide together how to move forward.  This includes the big-picture questions, but also the logistics, e.g. are you (singular) going to pay off her debt?

And what field is she in, and is there a promise of more than a $30,000 job in her field?
She's a teacher so yes there's a promise of more money.....but probably not too much. And she hasn't read the site but we have discussed how we'll handle our finances. She's up for attacking the loans by saving more of her money and buying less things (I couldn't believe how much she used to buy, she's improved a lot!) but she's not going to go full blown mustache. We haven't talked about if I'm going to pay her debt but I'm willing to and plan on doing so. I'm going to read through all these threads about getting your spouse on board, there seems to be a lot of them from what I've seen so far.

MKinVA

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Re: I could use some advice on the rest of my life
« Reply #14 on: May 06, 2014, 02:32:06 PM »
If she's a teacher, can't she take advantage of the loan forgiveness program where she pays a certain percentage of her salary toward the student loans and then all is forgiven after 10 years? And on an aside, why the hell would you take on that much debt in student loans to be come a teacher? Sorry, off subject?

Cheddar Stacker

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Re: I could use some advice on the rest of my life
« Reply #15 on: May 06, 2014, 02:32:44 PM »
Just some more light reading if you haven't stumbled across this yet. Maybe a few ideas to run by the girlfriend?

http://forum.mrmoneymustache.com/ask-a-mustachian/are-you-planning-a-wedding-right-now-or-did-you-do-so-recently/

CU Tiger

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Re: I could use some advice on the rest of my life
« Reply #16 on: May 06, 2014, 02:40:38 PM »
My husband and I got married when I was 31 and he was 32. We’d known each other for three years, been engaged for one. I was making $20,000 and my husband was finishing up a PhD after the funding had run out on his grant. We were broke, but not in debt. I got a second job, making minimum wage. He started teaching as an adjunct at a local college, and about 8 months later got a very good job in IT.
The first 3.5 years of our marriage we lived in a 2 br/1 bath apartment. It was older, kind of dingy, and definitely beige. Beige carpet, beige walls, lots and lots of beige.  It was boring and sometimes the neighbors were noisy and it also cost way more than the tiny places I’d lived in as a single woman. But it didn’t cost that much, so we were stashing money away as fast as we could. We were growing our savings every month.

We finally lucked into an awesome little house (really did luck in, it was in a neighborhood a friend lived in, and she heard through the grapevine that a small builder had bought two houses and was flipping them) for a price of $130,000. We bought our house when we were in our mid-30s and paid it off in 14 years. We are now 48 and 49 and own the whole thing! (I’m still excited about it.)

You sir, are young, and have lots and lots of time to worry about getting a house. Even if you live in NJ, you don’t have to rush into the largest purchase of your life, while you are in HAIR ON FIRE debt. As others have said, if you dive into even more debt before you tackle those student loans, they’ll be like luggage you will drag around until you retire at the ripe old age of 70. That’s typical of the average American who says, “I’ll always be in debt…” but it doesn’t have to be that way.

You and your fiancée have the opportunity to spend the first few years of your lives busting it, to set yourself up for a future so bright you gotta wear shades, while rainbows and unicorns follow you around, announcing how awesome you are. Go cheap on the wedding, get some extra jobs, cut your expenses to nothing (no new cars, no cable, no fancy vacations, nothing but the basics) and get rid of those school loans. You can do it!

I actually look back on the “broke” years as sort of fun. We had a lot of potlucks, watched a lot of videos with our friends, played cards, went to the library, went home to my hometown for our vacations. The fact that we were together made it fun, and we’d never been rich (and didn’t expect to have the same standard of living that our parents did after 30-40 years in the workplace) so it didn’t feel like we were downtrodden. We do spend more money now, because we make more money now, and because even paid-for houses need upkeep, and because we can. But we still save a butt-load of cash every month, we still go to the library every week, we still don’t have cable, and we watch more movies on Netflix than at the theater.

Tackle the debt monster now, while you are young and strong and you won’t have to still be fighting it when you are older and tired!


HAULIN3

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Re: I could use some advice on the rest of my life
« Reply #17 on: May 06, 2014, 03:24:02 PM »
Hi and welcome! The great thing about this forum is that it will give you tools to get your debt under control. The advice you get will be honest, and in my case I hope you consider it "tough love". I only dish it out because the criticisms I got when first starting out here have seriously helped my finances:

I think that most people on this forum will tell you that your hair is on fire, debt wise. Even contemplating shelling out a couple thousand dollars for a modest wedding when you are 150k in debt is insane, like jumping off a skyscraper because you think you can fly insane. If you want to get married ASAP, then just do a courthouse wedding. An expensive wedding is a product, just like anything else. A lovely courthouse wedding with a backyard reception is just fine.

As far as the house, it sounds like you want to buy one for emotional reasons, because it is part of the growing up/getting married package (unless there is another reason you didn't mention). If it's for the idea of financial security/adulthood, you need to put that aside right now. Even if you could get qualified for a mortgage with your average earnings and high debt, all it would mean is that you'd have the PERCEPTION of home ownership, while actually being even deeper in debt. You would be living on the edge, and if one of you lost your jobs, you'd pretty much be screwed. 

Also, owning a home is more expensive in terms of upkeep than renting, so you will be paying off your school loans even more slowly. The only exception I can think of, is if you live somewhere where renting is insanely expensive and owning is insanely cheap. I can't think of a place where that's the case, but maybe somewhere it is. Even so, I'm not sure that you would get approved for a mortgage.

I know it's not what you want to hear, but you need to throw as much as you can toward that debt. Once you're rid of it, or at least have made a huge amount of progress, you can start thinking about houses.
Thanks for the replies everyone, I wouldn't have made a thread if I wasn't looking for honest answers!

I live in New Jersey so unfortunately renting is quite expensive, that's why we are considering a house or a condo purchase.  My girlfriend won't be up for a courthouse wedding but luckily she isn't opposed to cutting corners (cheap venue, buffet/bbq style food, etc.). I'm going to check out the link that Cheddar Stacker posted about the cheap honeymoon and based on the replies so far it looks like I'm going to try and knock out a few more high-interest loans with my $30k.

hahaha!!!! Weddings.....  I was married 33 years ago and my best girlfriend got married in the same month!  I spent $500 her parents spent $5,000! She was divorced within a year... hmmm...

I had a beautiful church wedding on a friday evening in September. I think the priest charged me $25... it was candlelit (church candles) and my flowers and my maid of honors flowers. She bought a beautiful dress for $20.  We had a reception in the church hall and opened gifts in front of the guests!  No dancing... no dinner... no dj....no wedding favors... just Cake and punch!  I had SO many compliments on the wedding... I wouldnt trade it for anything... (I  borrowed my cousins dress and she let me have it after her divorce about 18 years later)

sorry... I had to...

randymarsh

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Re: I could use some advice on the rest of my life
« Reply #18 on: May 06, 2014, 03:44:39 PM »
If she's a teacher, can't she take advantage of the loan forgiveness program where she pays a certain percentage of her salary toward the student loans and then all is forgiven after 10 years? And on an aside, why the hell would you take on that much debt in student loans to be come a teacher? Sorry, off subject?

Only if you teach in a designated low income district.

DollarBill

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Re: I could use some advice on the rest of my life
« Reply #19 on: May 06, 2014, 04:22:08 PM »
Just some more light reading if you haven't stumbled across this yet. Maybe a few ideas to run by the girlfriend?

http://forum.mrmoneymustache.com/ask-a-mustachian/are-you-planning-a-wedding-right-now-or-did-you-do-so-recently/

You beat me to it...lol

Kev

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Re: I could use some advice on the rest of my life
« Reply #20 on: May 06, 2014, 04:27:19 PM »
If she's a teacher, can't she take advantage of the loan forgiveness program where she pays a certain percentage of her salary toward the student loans and then all is forgiven after 10 years? And on an aside, why the hell would you take on that much debt in student loans to be come a teacher? Sorry, off subject?

Only if you teach in a designated low income district.
I think you get $17k for teaching in a low income school but there's another one for federal loans where you get them forgiven after 10 years of no missed payments.

Also, I know my girlfriend wants to get married on the beach so I know we can get past many costly wedding traditions through that. But of course I sent her that link haha

Beckyemerson

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Re: I could use some advice on the rest of my life
« Reply #21 on: May 06, 2014, 04:32:03 PM »
Hi Kev!
Great news! You can pay this debt off and have money in the bank quicker than you think. You can do it! Being frugal is hard at first but once you get used to it, it's can be fun.

EMP

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Re: I could use some advice on the rest of my life
« Reply #22 on: May 06, 2014, 04:47:18 PM »
If she's a teacher, can't she take advantage of the loan forgiveness program where she pays a certain percentage of her salary toward the student loans and then all is forgiven after 10 years? And on an aside, why the hell would you take on that much debt in student loans to be come a teacher? Sorry, off subject?

Only if you teach in a designated low income district.
I think you get $17k for teaching in a low income school but there's another one for federal loans where you get them forgiven after 10 years of no missed payments.

Also, I know my girlfriend wants to get married on the beach so I know we can get past many costly wedding traditions through that. But of course I sent her that link haha

You can get up to $17.5K with teacher loan forgiveness after 5 years in a Title I school depending on the subject you teach.  Most teachers will only qualify for $5k. 

The 10 year thing is IBR with PSLF and has been discussed elsewhere.  I come down on the just pay the damn things side but YMMV. 

On another note, would you face a tax penalty to marry if you're both working?

bearkat

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Re: I could use some advice on the rest of my life
« Reply #23 on: May 06, 2014, 04:50:40 PM »
Looks like you and I both came to a best place to hear the *face-punching truth*. My wife and I got married 6 months ago, and we've been to probably a dozen weddings in the last year (this is what happens when you grow up in TX). The price ranges from the weddings were probably a couple hundred for the courthouse / backyard combo to maybe close to six figures for the church/country club wedding with 300 guests, crazy lights, seated steak dinner, open bar etc ...

Point is the wedding is really for the two of you (and your mothers) and everyone else just happens to be there. If you're like us, the wedding will fly by so fast that you'll hardly remember what you did (well, maybe that was just the alchohol, i don't know). So plan a wedding that will make you happy, but rember that spending money does not equal happiness ... especially in weddings/marriage.

La Bibliotecaria Feroz

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Re: I could use some advice on the rest of my life
« Reply #24 on: May 06, 2014, 05:55:45 PM »
I know a lot of people have told you not to buy until you're in a better financial position, but I wanted to add my story. Husband and I were eager to settle down. Kids were still a few years away, but we had some money and thought we'd go ahead and buy a four-bedroom house.

Three years later, we wanted to move for job reasons. The market tanked, we lost our entire down payment and them some, and the short sale trashed our credit. And we never did have kids in the house anyway.

Part of the problem is that when you buy, you want to buy your permanent home, right? You want room for your 2.5 kids and your dog. But when you're renting pre-kids, you may be happier a one-bedroom. Rent on a one-bedroom, generally a lot lower than the mortgage payment on a larger establishment.

Good luck--and congrats on the engagement.

Derrian

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Re: I could use some advice on the rest of my life
« Reply #25 on: May 06, 2014, 05:57:19 PM »
Your fiancée didn't know The Way of the Mustache before — but how does she feel about it now?  Has she read the site?  Or Your Money or Your Life?  Have you had long discussions about how you'll handle finances?  Those would be the next crucial steps.  Ideally you can decide together how to move forward.  This includes the big-picture questions, but also the logistics, e.g. are you (singular) going to pay off her debt?

And what field is she in, and is there a promise of more than a $30,000 job in her field?
She's a teacher so yes there's a promise of more money.....but probably not too much. And she hasn't read the site but we have discussed how we'll handle our finances. She's up for attacking the loans by saving more of her money and buying less things (I couldn't believe how much she used to buy, she's improved a lot!) but she's not going to go full blown mustache. We haven't talked about if I'm going to pay her debt but I'm willing to and plan on doing so. I'm going to read through all these threads about getting your spouse on board, there seems to be a lot of them from what I've seen so far.



Hi Kev,
Not knowing anything about what type of school your significant other works at (public/charter/private) or what she teaches (sped/esl/stem subjects/elementary/arts) I would heavily caution buying a house while she is in the first 4 or 5 years of her career. Statistically speaking half of all teachers will leave the profession within the first 5 years (I'm a teacher as well) and in the past few years I have seen many teachers leave the profession only to have their financial wellbeing ruined trying to find other opportunities. Most have ended up walking away from their homes due to being underwater and unable to make mortgage and student loan payments. Additionally, before she has 4 or 5 years of experience, she runs the risk of being laid of with or without cause due to budget cuts (as a former New Jersey resident, these are common) depending on what she teaches. If she teaches STEM or Sped it is less likely as these receive federal funding, if she teaches non core content classes or elementary it becomes more likely.

randymarsh

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Re: I could use some advice on the rest of my life
« Reply #26 on: May 06, 2014, 06:35:27 PM »
I think you get $17k for teaching in a low income school but there's another one for federal loans where you get them forgiven after 10 years of no missed payments.
[/quote]

There is one repayment option, IBR, that forgives the remaining balance after 25 years. Another one is called pay-as-you-earn and it requires 20 years of payments. Any forgiven amount from these plans is added to your taxable income, resulting in additional tax liability.

Psychstache

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Re: I could use some advice on the rest of my life's
« Reply #27 on: May 06, 2014, 08:35:43 PM »
I think you get $17k for teaching in a low income school but there's another one for federal loans where you get them forgiven after 10 years of no missed payments.

There is one repayment option, IBR, that forgives the remaining balance after 25 years. Another one is called pay-as-you-earn and it requires 20 years of payments. Any forgiven amount from these plans is added to your taxable income, resulting in additional tax liability.

Teaching in a public school while making IBR or PAYE payments  for ten years would make her eligible for public service loan forgiveness (which is quicker and has no additional tax liability).

edited to fix quotes and grammar
« Last Edit: May 07, 2014, 06:26:43 AM by ksaleh »

Mrs.FamilyFinances

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Re: I could use some advice on the rest of my life
« Reply #28 on: May 06, 2014, 10:06:22 PM »
110k in student loans for a 30k JOB???

Live in the folks basement, on her income alone, and every penny of your income goes to student loans. No big wedding, no house purchase. You don't have the means.

JPinDC

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Re: I could use some advice on the rest of my life
« Reply #29 on: May 07, 2014, 08:02:35 AM »
What kind of field is she getting into? Could she find a second job? I'd suggest rent (or live with parents) and take on some side hustles to boost that income.

Personally, and this might just be me, I wouldn't be comfortable marrying someone until they got that debt under control.

Cpa Cat

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Re: I could use some advice on the rest of my life
« Reply #30 on: May 07, 2014, 09:03:36 AM »
I would do a courthouse wedding and potluck reception at a parents' house. Let your parents spread the word to family that you aren't having a wedding because of your student loan debt.

If your parents want to contribute, try to convince them to use the money for your debt, instead. Her parents, especially - because OMG that's a lot of debt for a little salary.

If you're lucky, people will feel sorry for you and give you monetary gifts.

110k in student loans for a 30k JOB???

Live in the folks basement, on her income alone, and every penny of your income goes to student loans. No big wedding, no house purchase. You don't have the means.

+1 to this. People live on 30k a year and so can you. If you follow Mrs Family Finance's advice, you'll be financial secure in no time.

Put your home-buying on a 5 year plan. You will have a better idea of where you want to live and where your careers are at.

I don't think it's an absolute necessity to live in the parental basement - but if you can tolerate it, it's clearly the cheapest option available. Otherwise, find a cheap one-bedroom apartment.

And this is just level headed advice - but she's the one with the student loan debt that far outmatches her income. It's important that you get her on board with a mustachian budget before you marry her. Otherwise, her past and present financial choices are going to bog down your entire lives together. A few years of belt-tightening in the beginning of your marriage is all it will take to get you on track for financial security.
« Last Edit: May 07, 2014, 09:05:10 AM by Cpa Cat »

nawhite

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Re: I could use some advice on the rest of my life's
« Reply #31 on: May 07, 2014, 04:40:15 PM »
I think you get $17k for teaching in a low income school but there's another one for federal loans where you get them forgiven after 10 years of no missed payments.

There is one repayment option, IBR, that forgives the remaining balance after 25 years. Another one is called pay-as-you-earn and it requires 20 years of payments. Any forgiven amount from these plans is added to your taxable income, resulting in additional tax liability.

Teaching in a public school while making IBR or PAYE payments  for ten years would make her eligible for public service loan forgiveness (which is quicker and has no additional tax liability).

edited to fix quotes and grammar

I just want to settle this for everyone with the actual information from the Department of Education:

There are 3 programs available for student loan forgiveness for teachers that are available if and only if you are on one of the percentage based repayment plans (Income Based Repayment, Pay As You Earn or Income Contingent Repayment Plan)

1) The Teacher Loan Forgiveness Program https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacher
Requirements: You work for 5 complete and consecutive school years in a low income school (as listed on the special list at: https://www.tcli.ed.gov/CBSWebApp/tcli/TCLIPubSchoolSearch.jsp) and have made 5 years of on time payments (and do a ridiculous amount of paperwork every year)
Benefits: Up to $17,500 if you are a Science, Math, or Special Education teacher. $5,000 otherwise (only federal loans count, no private loans)

2) The Public Service Loan Forgiveness Program https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
Requirements: You work for 10 years full time at a non-profit (most schools) or government position. You make 120 payments in full on time. You do and even more ridiculous amount of paperwork every year.
Benefits: Forgiveness of the balance of all Direct Federal student loans (private loans don't count)

3) You just wait out the Pay As You Earn payment plan
Requirements: You make 20 years on on time, full payments on a loan being paid back with a Pay As You Earn payment plan.
Benefits:  Forgiveness of the balance of all Direct Federal student loans (private loans don't count)

With some of these plans, you have to pay taxes on the forgiven amount. So lets say you had 50k in federal student loans, you go on the PAYE plan, and after 10 years you have made $20k in payments but now own $60k (because your payments aren't as big as the interest accrued). Now your 60k is forgiven, but you have to pay income taxes on that or $15k-$20k. So you still end up paying 40 grand even though you did all the work to qualify for this program. It is a better financial decision to just pay off the loans as fast as possible.


BPA

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Re: I could use some advice on the rest of my life
« Reply #32 on: May 07, 2014, 05:25:02 PM »

And this is just level headed advice - but she's the one with the student loan debt that far outmatches her income. It's important that you get her on board with a mustachian budget before you marry her. Otherwise, her past and present financial choices are going to bog down your entire lives together. A few years of belt-tightening in the beginning of your marriage is all it will take to get you on track for financial security.

+1

It seems that she does not see the debt as much of a hair on fire issue as you do.  I hope she comes around to see it for what it is.

EMP

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Re: I could use some advice on the rest of my life's
« Reply #33 on: May 07, 2014, 05:37:07 PM »
I think you get $17k for teaching in a low income school but there's another one for federal loans where you get them forgiven after 10 years of no missed payments.

There is one repayment option, IBR, that forgives the remaining balance after 25 years. Another one is called pay-as-you-earn and it requires 20 years of payments. Any forgiven amount from these plans is added to your taxable income, resulting in additional tax liability.

Teaching in a public school while making IBR or PAYE payments  for ten years would make her eligible for public service loan forgiveness (which is quicker and has no additional tax liability).

edited to fix quotes and grammar

I just want to settle this for everyone with the actual information from the Department of Education:

There are 3 programs available for student loan forgiveness for teachers that are available if and only if you are on one of the percentage based repayment plans (Income Based Repayment, Pay As You Earn or Income Contingent Repayment Plan)

1) The Teacher Loan Forgiveness Program https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacher
Requirements: You work for 5 complete and consecutive school years in a low income school (as listed on the special list at: https://www.tcli.ed.gov/CBSWebApp/tcli/TCLIPubSchoolSearch.jsp) and have made 5 years of on time payments (and do a ridiculous amount of paperwork every year)
Benefits: Up to $17,500 if you are a Science, Math, or Special Education teacher. $5,000 otherwise (only federal loans count, no private loans)

2) The Public Service Loan Forgiveness Program https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
Requirements: You work for 10 years full time at a non-profit (most schools) or government position. You make 120 payments in full on time. You do and even more ridiculous amount of paperwork every year.
Benefits: Forgiveness of the balance of all Direct Federal student loans (private loans don't count)

3) You just wait out the Pay As You Earn payment plan
Requirements: You make 20 years on on time, full payments on a loan being paid back with a Pay As You Earn payment plan.
Benefits:  Forgiveness of the balance of all Direct Federal student loans (private loans don't count)

With some of these plans, you have to pay taxes on the forgiven amount. So lets say you had 50k in federal student loans, you go on the PAYE plan, and after 10 years you have made $20k in payments but now own $60k (because your payments aren't as big as the interest accrued). Now your 60k is forgiven, but you have to pay income taxes on that or $15k-$20k. So you still end up paying 40 grand even though you did all the work to qualify for this program. It is a better financial decision to just pay off the loans as fast as possible.

Just a few things

With Teacher Loan Forgiveness it's usually just one form that you fill out and the head administrator at your school signs off on.  Not a ridiculous amount of paperwork. 

With PSLF the forgiven amount is NOT considered taxable income. 

Direct Loans qualify for PSLF, but FFELP loans do not.  Know what kind of loans you have.

And on that note FFELP loans are eligible for IBR, but not PSLF or PAYE.  Of course you could always solve the FFELP problem with a new colsolidation loan if it's an issue. 

ShortInSeattle

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Re: I could use some advice on the rest of my life
« Reply #34 on: May 07, 2014, 07:09:43 PM »
Hey.

Congrats on your degrees and engagement!

I'd recommend you sit down with your SO and talk through your rough plans for the next few years, and perhaps put together a budget. Ask questions like "When it comes to the wedding, what is most important to you? (location, family, etc) What kind of house do you want to live in?

Then run down your budget:

Student Loan Payments: $$$ for XX years at X%
Retirement Savings: $$ (% of income)
Taxes: $$
Then take a look at rent payments vs, mortgage payments, expected bills, etc.

You have ideas about what you want, then there is the math. Talk goals together, then do the math together. Make your choices and tradeoffs together.

In your situation, I'd use your 30k as an emergency fund, minus perhaps 5k for a modest wedding. Then I'd do the following:

1. Rent a college-style apartment.
2. Contribute 10-15% of your income to retirement.
3. Throw all remaining funds at those student loans until paid off.
4. Save up a house downpayment next.
5. Rachet up your savings % as your income grows.

That's just me though. I think the most important thing is that you and the SO start talking goals & tradeoffs together ASAP.

SIS


« Last Edit: May 07, 2014, 07:13:37 PM by ShortInSeattle »

golfer44

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Re: I could use some advice on the rest of my life
« Reply #35 on: May 07, 2014, 07:11:18 PM »
What's the rush to get married?

samburger

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Re: I could use some advice on the rest of my life
« Reply #36 on: May 08, 2014, 09:26:14 AM »
That's just me though. I think the most important thing is that you and the SO start talking goals & tradeoffs together ASAP.


This. You mentioned that you haven't discussed whether you'll pay her loan or not. That tells me you two have a LOT to talk about.

You need to nail down a plan together, stat.

Kev

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Re: I could use some advice on the rest of my life
« Reply #37 on: May 08, 2014, 10:48:11 AM »
Hey.

Congrats on your degrees and engagement!

I'd recommend you sit down with your SO and talk through your rough plans for the next few years, and perhaps put together a budget. Ask questions like "When it comes to the wedding, what is most important to you? (location, family, etc) What kind of house do you want to live in?

Then run down your budget:

Student Loan Payments: $$$ for XX years at X%
Retirement Savings: $$ (% of income)
Taxes: $$
Then take a look at rent payments vs, mortgage payments, expected bills, etc.

You have ideas about what you want, then there is the math. Talk goals together, then do the math together. Make your choices and tradeoffs together.

In your situation, I'd use your 30k as an emergency fund, minus perhaps 5k for a modest wedding. Then I'd do the following:

1. Rent a college-style apartment.
2. Contribute 10-15% of your income to retirement.
3. Throw all remaining funds at those student loans until paid off.
4. Save up a house downpayment next.
5. Rachet up your savings % as your income grows.

That's just me though. I think the most important thing is that you and the SO start talking goals & tradeoffs together ASAP.

SIS
Thanks Short, that looks like a good plan. We will do the math together soon after she graduates, it's just been hectic with her graduating and working in her final semester.  Last year we added up our expenses and we realized how much we could cut back and it worked well, we both spend a lot less than we used to once we sat down and took a look at what we were spending money on.

I currently contribute what my company matches to my 401k. Is it more beneficial to increase that percentage or should I use the money towards the student loans instead?

Capsu78

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Re: I could use some advice on the rest of my life
« Reply #38 on: May 08, 2014, 11:01:31 AM »
When I first read the subject header, I was thinking the OP might be being a touch dramatic.  But having read through your situation and many of the good luck/ tough love replies, I realize I don't have any strategic advice for you other than these thoughts_

As the son of a member of the Greatest Generation, and a Boomer myself, I would just like to apologize to you for having to come of age after the "worst of all generations"- Mine.  We, as a nation, have failed these kids who came after us by allowing the feds and their cronies in the financial markets and universities to hijack the ambitions of todays crop of Young Adults- heck, we don't even treat them as adults (Health coverage until 26) yet we set up a system whereby universities raised and raised tuition fees to be collected right from the banks based on no collateral (impressionable undergrads with little to no financial knowledge going $110K into debt to become a teacher is an upside down equation)  to fund rock climbing walls and Deans for Bitter Womym Studies that generate nothing more than more Bitter Womyn.   
I am just a simple guy but I could see from a mile away that this common acceptance of these type of debt load so early in life prevents the first steps of a normal transition to adult very very difficult- No first adult car, no fancy wedding, no entry to the housing market- all things that set our entire economy back. 
The grey haired, pony tailed crowd in academia used to have a common phrase- "Don't trust anyone over 30".   What they should have been saying all along is "Don't trust US when we get over 30".  They are not looking out for you. 
Sorry for the rant- I just wonder what type of life will be left for my grandkids by the time they hit adulthood.
« Last Edit: May 08, 2014, 11:04:59 AM by Capsu78 »

Paul der Krake

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Re: I could use some advice on the rest of my life
« Reply #39 on: May 08, 2014, 11:31:49 AM »
Have you considered moving? If your future fiance's job is kind of set at 30k regardless of location, you might find that they do fetch a lot more purchasing power, well pretty much in anywhere else in the country.

You're both young and she hasn't even started working- it would be easier to move when you have only one careeer established somewhere (yours), than two.

zarfus

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Re: I could use some advice on the rest of my life
« Reply #40 on: May 08, 2014, 11:39:20 AM »
How much would the house be?  If it's NJ, I personally wouldn't consider buying unless you would consider relocating. 

Do consider ideas for cheaper weddings...even making it a lunch-time celebration will knock off a considerable amount.

GL and congrats!

mbl

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Re: I could use some advice on the rest of my life
« Reply #41 on: May 08, 2014, 12:39:02 PM »
Lots of good advice being given here.

Overall I would counsel you at this time to slow down......slow it all down.

First, your GF is just graduating from school and hasn't even begun working yet.
You are both very young and in a great deal of debt.   Actually she's in a great deal of debt and you are in some reasonable debt but large enough.
Does your GF view this debt as large?  Does she realize the monthly cost and how that will cut into everything else she will want to do.   And, for the record,  student loan debt is only discharged by paying it off in full or by dying.

Based on her profession she has a very high loan to expected income ratio if you will.   Add to that your loans and you have a mountain of debt.

First you both have to agree on what your priorities are.   This is a very telling thing to hear from a potential spouse.    People don't change their minds or values very much.  What you see is what you get.   If you value fiscal responsibility and the goal of living a life free of debt and with the freedom that provides, you might consider having a very long and serious discussion with each other.    Find out if she truly wants to live this way.....that being a fiscally responsible and conservative life.  If not, and you are growing to be a more frugal and debt averse man......I would wait on getting married. 

Very few things will rival the strife that can occur in marriage if there is big disagreement on financial matters and how money is earned and more importantly how it is saved first not spent first......saved first. 

If you are able to identify the goal of  being debt free before you take on a marriage and a home and then kids, I would suggest that you utilize your current living arrangement.  That being to stay at home for a year or two before you marry or move in together.     This could give you the  chance to address this debt in a large way which would provide more freedom of choices down the road.   Delayed gratification. 

I would suggest you think once, twice and more than three times before you allow yourself to be tethered to such a large debt even through marriage.

nawhite

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Re: I could use some advice on the rest of my life
« Reply #42 on: May 08, 2014, 12:52:43 PM »
I currently contribute what my company matches to my 401k. Is it more beneficial to increase that percentage or should I use the money towards the student loans instead?

Simple answer: It depends on you emotions about debt and the interest rates on your student loans.

Complicated answer: Financially the best decision is based on the interest rates on the loans. If that interest rate is less than what you would expect to earn in another investment minus inflation, then you should be investing instead. This also depends on your emotions and how risk averse you are (and taxes but it gets really complicated if you include those).

For simple math, lets use this example. Lets say your student loan interest rate is 3.4% and inflation in 1% and you think your long term CAGR (compound annual growth rate) of your investments is 9.1% (happens to be the all time CAGR of the SP500), then financially, the best plan is investing more and paying off the loans slower because the 9.1% minus 1% inflation you'll earn in stocks is more than the 3.4% interest you'll pay on your student loans.

BUT... if the student loans make you feel depressed, pay them off. Also, the math above only works if things continue at the average pace they have had historically. There is a HUGE variance in the performance of stocks so you may end up loosing money. This is where your emotions and feelings about risk come into play.



Personally, your situation sounds a lot like mine 4 years ago. Fresh out of school, about to get married to a teacher, new jobs (100k gross salary between the 2 of us), $160k in student loans between the two of us.

We had our parents pay for the wedding and honeymoon. Each set of parents offered 5k so we set a hard limit on the wedding and honeymoon budget of 10k (ended up with 6k on wedding and 4k on honeymoon). We moved around 3 times in the past 4 years because of job changes between the 2 of us so be careful buying a house until you feel settled in your community and jobs. Last year everything fell in our laps that buying a house was the right move and we bought something small with 10% down (with a gift from our parents). A couple of job changes in there bumped the income to $140k between us.

So over time our loan vs investing idea has moved (due to some loans having different interest rates and me getting a better understanding of the tax benefits of investing) but now we max out 401k's and IRA's and then put every other cent we can spare into loans. Currently today we put about $30k into 401ks and IRAs, $45k into student loans and $12k into a mortgage per year. We'll have all the student loans paid off in another 2 years and are planning to retire to fun part time jobs in 3 years. By saving in the retirement accounts now, we'll have 150k in them at age 30 so if we never add to them again, we're hoping they'll be around 400-600k at 65.

Take your time, don't get into illiquid assets like houses until everything lines up (good find price-wise, in the right neighborhood, when you both feel very settled and safe in jobs you've had for months), and don't spend any more than you absolutely have to. Your co-workers will buy much more than you do. They can do that because they aren't poor. You are poor! Just don't choose to  be ignorant of that fact and you'll be fine.

Edit: I used the wrong number for CAGR before. Fixed now.
« Last Edit: May 08, 2014, 01:29:35 PM by nawhite »

James

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Re: I could use some advice on the rest of my life
« Reply #43 on: May 08, 2014, 01:17:00 PM »
Hey everybody, I've been reading through the articles for a few months and now I'm ready to get involved in the community! But first I need some advice on what should be the next course of action in my life.

I graduated from college a few years ago and I currently have $40k in loans. I'll have $30k in the bank by the end of this month and I'll be moving out with my girlfriend this summer (renting for a year because of job locations) and plan to get married and buy a house the year or so after.

As everyone knows, when you get married to a person, you also marry their family........and their debt! My girlfriend's in deep, she graduates from school this month and she'll have about $110k in loans. That's $150k in loans between us! I'll make about $50k this year and she'll make $30k so that's an annual income of $80k. I already paid off one loan that had a crazy high interest rate but I'm hesitant to pay off more loans with a wedding and home purchase coming up next year. I've taught my girlfriend many ways to save her money but as you can see, she wasn't financially aware at all before we met. How should I go about attacking this debt with enough money for the wedding/house?

*Edit* Just a note, I'm contributing to my 401k and have about $1500 in stocks right now, trying to save more! *Edit*


Since you have read MMM, the next course of action should be pretty clear. You pay off your debt. Why in the world do you have $30k in cash and $40k in debt? That doesn't make sense to me...


Regarding specifics, you give very little to go on. You don't give your current living expenses, your expected spending on the wedding, what you would spend on a house, what you would put toward your loans, etc.

Cheddar Stacker

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Re: I could use some advice on the rest of my life
« Reply #44 on: May 08, 2014, 02:01:19 PM »
 
Hey everybody, I've been reading through the articles for a few months and now I'm ready to get involved in the community! But first I need some advice on what should be the next course of action in my life.

I graduated from college a few years ago and I currently have $40k in loans. I'll have $30k in the bank by the end of this month and I'll be moving out with my girlfriend this summer (renting for a year because of job locations) and plan to get married and buy a house the year or so after.

As everyone knows, when you get married to a person, you also marry their family........and their debt! My girlfriend's in deep, she graduates from school this month and she'll have about $110k in loans. That's $150k in loans between us! I'll make about $50k this year and she'll make $30k so that's an annual income of $80k. I already paid off one loan that had a crazy high interest rate but I'm hesitant to pay off more loans with a wedding and home purchase coming up next year. I've taught my girlfriend many ways to save her money but as you can see, she wasn't financially aware at all before we met. How should I go about attacking this debt with enough money for the wedding/house?

*Edit* Just a note, I'm contributing to my 401k and have about $1500 in stocks right now, trying to save more! *Edit*


Since you have read MMM, the next course of action should be pretty clear. You pay off your debt. Why in the world do you have $30k in cash and $40k in debt? That doesn't make sense to me...


Regarding specifics, you give very little to go on. You don't give your current living expenses, your expected spending on the wedding, what you would spend on a house, what you would put toward your loans, etc.

I was in a similar situation 1 year after graduation. Cash almost equaled my student loans. I was saving for a house, engagement ring, honeymoon, etc. (All facepunchworthy I know). 1 year later, almost no cash and sl debt doubled since my wife had just as much-and we're still paying them 11 years later so maybe that should tell you something.. I don't regret anything but I do wish I'd found this site as early in life as kev and others like him. Good luck kev!

lady brett ashley

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Re: I could use some advice on the rest of my life
« Reply #45 on: May 08, 2014, 02:23:25 PM »
I just want to weigh in on the house: don't do it.  That is, don't do it yet.  I really can't say i regret buying our house, but when (if) we do it again, i'll do it a lot differently.

The main reason i say to wait on the house isn't directly financial, but because it's hard to know what you need in a living space until you've tried a few things (this goes 10x if y'all are planning to have kids in the future).  The spouse and i moved in together when we bought the house, so we didn't really know what our joint needs were for a living space.  We also had no concrete plans for our future (esp. relevant regarding kids).  And we were sure we were going to stay in that house forever.

The problem with buying a house with all of that uncertainty, is that you feel safer planning for the most you're going to need.  That's stupid, and you're extremely likely to over-buy.  Our house is by no means huge (1300 sf), but as a couple we didn't even begin to use most of it (except as a storage locker for owning too much junk) - and even with 3 kids in the house we have two rooms that never see any action.

Now that we've lived with each other for 5 years, and kids for 2, we have a really clear idea of our priorities.  Which means that when we move, we will be buying or renting with a list of real criteria, not our "best guess" or "what we think we like" criteria, and we're guaranteed to end up with a better place because of that.

Plus, we're moving.  The place we were going to stay forever?  We got damn sick of it (not, actually, the house, but the location).  Fortunately, we live somewhere with low house prices vs. rent and a fairly stable (maybe appreciating a bit) market.  If we had made the mistakes listed above and a bad financial decision, we would be totally stuck (either literally, in this house, or figuratively having to decide whether to eat the loss).

I will say, though, that owning a house has been fun.  We just should have waited - even if i do like re-doing drywall.

adesertsky

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Re: I could use some advice on the rest of my life
« Reply #46 on: May 08, 2014, 03:06:56 PM »
Please do not buy a house in NJ!  People regularly pay over $1K a month just for property taxes!  And I thought mine in the Chicago suburbs were bad...

Kev

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Re: I could use some advice on the rest of my life
« Reply #47 on: May 09, 2014, 10:29:52 AM »
Hey everybody, I've been reading through the articles for a few months and now I'm ready to get involved in the community! But first I need some advice on what should be the next course of action in my life.

I graduated from college a few years ago and I currently have $40k in loans. I'll have $30k in the bank by the end of this month and I'll be moving out with my girlfriend this summer (renting for a year because of job locations) and plan to get married and buy a house the year or so after.

As everyone knows, when you get married to a person, you also marry their family........and their debt! My girlfriend's in deep, she graduates from school this month and she'll have about $110k in loans. That's $150k in loans between us! I'll make about $50k this year and she'll make $30k so that's an annual income of $80k. I already paid off one loan that had a crazy high interest rate but I'm hesitant to pay off more loans with a wedding and home purchase coming up next year. I've taught my girlfriend many ways to save her money but as you can see, she wasn't financially aware at all before we met. How should I go about attacking this debt with enough money for the wedding/house?

*Edit* Just a note, I'm contributing to my 401k and have about $1500 in stocks right now, trying to save more! *Edit*


Since you have read MMM, the next course of action should be pretty clear. You pay off your debt. Why in the world do you have $30k in cash and $40k in debt? That doesn't make sense to me...


Regarding specifics, you give very little to go on. You don't give your current living expenses, your expected spending on the wedding, what you would spend on a house, what you would put toward your loans, etc.

I was in a similar situation 1 year after graduation. Cash almost equaled my student loans. I was saving for a house, engagement ring, honeymoon, etc. (All facepunchworthy I know). 1 year later, almost no cash and sl debt doubled since my wife had just as much-and we're still paying them 11 years later so maybe that should tell you something.. I don't regret anything but I do wish I'd found this site as early in life as kev and others like him. Good luck kev!
Thanks Cheddar, I started looking into these things when I saw how long my parents were paying their mortgage for. They helped me and my brothers with money so much that they didn't have enough for themselves. I want to try and attack this head on!

OldDogNewTrick

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Re: I could use some advice on the rest of my life
« Reply #48 on: May 09, 2014, 10:44:31 AM »
All good advice given. One more thing though, starting a marriage drowining in debt can be a one way ticket to divorce court. Debt is draining emotionally, it'll tear you apart.

Defer your dreams a year to 18 months. Live in your parent's basement or spare bedroom. Throw every cent you both have at the debt and kill it as quickly as possible.

Another thought, I've found it good advice and have followed it for the most part.... rent for the first year in your community/neighborhood. You'll have a MUCH better idea after a year if it is a good fit. A year also gives you time to hunt for bargains. 20% down minimum recommended too.

Kev

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Re: I could use some advice on the rest of my life
« Reply #49 on: May 09, 2014, 10:48:46 AM »
I currently contribute what my company matches to my 401k. Is it more beneficial to increase that percentage or should I use the money towards the student loans instead?

Simple answer: It depends on you emotions about debt and the interest rates on your student loans.

Complicated answer: Financially the best decision is based on the interest rates on the loans. If that interest rate is less than what you would expect to earn in another investment minus inflation, then you should be investing instead. This also depends on your emotions and how risk averse you are (and taxes but it gets really complicated if you include those).

For simple math, lets use this example. Lets say your student loan interest rate is 3.4% and inflation in 1% and you think your long term CAGR (compound annual growth rate) of your investments is 9.1% (happens to be the all time CAGR of the SP500), then financially, the best plan is investing more and paying off the loans slower because the 9.1% minus 1% inflation you'll earn in stocks is more than the 3.4% interest you'll pay on your student loans.

BUT... if the student loans make you feel depressed, pay them off. Also, the math above only works if things continue at the average pace they have had historically. There is a HUGE variance in the performance of stocks so you may end up loosing money. This is where your emotions and feelings about risk come into play.



Personally, your situation sounds a lot like mine 4 years ago. Fresh out of school, about to get married to a teacher, new jobs (100k gross salary between the 2 of us), $160k in student loans between the two of us.

We had our parents pay for the wedding and honeymoon. Each set of parents offered 5k so we set a hard limit on the wedding and honeymoon budget of 10k (ended up with 6k on wedding and 4k on honeymoon). We moved around 3 times in the past 4 years because of job changes between the 2 of us so be careful buying a house until you feel settled in your community and jobs. Last year everything fell in our laps that buying a house was the right move and we bought something small with 10% down (with a gift from our parents). A couple of job changes in there bumped the income to $140k between us.

So over time our loan vs investing idea has moved (due to some loans having different interest rates and me getting a better understanding of the tax benefits of investing) but now we max out 401k's and IRA's and then put every other cent we can spare into loans. Currently today we put about $30k into 401ks and IRAs, $45k into student loans and $12k into a mortgage per year. We'll have all the student loans paid off in another 2 years and are planning to retire to fun part time jobs in 3 years. By saving in the retirement accounts now, we'll have 150k in them at age 30 so if we never add to them again, we're hoping they'll be around 400-600k at 65.

Take your time, don't get into illiquid assets like houses until everything lines up (good find price-wise, in the right neighborhood, when you both feel very settled and safe in jobs you've had for months), and don't spend any more than you absolutely have to. Your co-workers will buy much more than you do. They can do that because they aren't poor. You are poor! Just don't choose to  be ignorant of that fact and you'll be fine. What kind of work do you do now and what fun job are you looking to retire to?

Edit: I used the wrong number for CAGR before. Fixed now.
This is good stuff! I'm in a very similar situation to what you were in, so this is a great help. And I agree, admitting that I'm poor is a big help when debating on spending. Need a new couch? Better find one for free because I'm too poor to buy one!

OldDog, that's some good advice. Living in the area not only lets you get a feel for it but it also allows plenty of time to see every house on the market throughout the year!

 

Wow, a phone plan for fifteen bucks!