The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: goon on February 27, 2012, 03:41:25 PM
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Hello Mustachians,
Background:
My partner and I were planning to buy a house for a long time, but recently crunched numbers and decided to continue renting until we can pay off our combined loans. So, that explains the cash we have in general savings/checkings instead of somewhere more useful (see below), not that I would even know what somewhere more useful would be.
Spending hovers around $4000/month (including $1220 minimum going to loans every month). Our combined income was nearly $10,000/month, before i got laid off last week. The new plan was to pay the loans off at about $5,000/month for the next 2.5-3 years. But, like I said, that won't work since I got laid off.
Now:
All we want to do is pay off loans asap. I've lost my job (about $6,000/month), and we have a combined $150,000 in student loans. We have a total of $35,000 in all our savings/checkings accounts (I was only with my employer for about 9 months). My partner is bringing home about $4,000/month, which is just enough for our expenses and minimum loan payments.
Our loans are as follows:
$14,350 at 4.3% fixed, minimum payment $200/mo
$142,000 at 7.5% fixed, minimum payment $1020/mo (interest rate is already discounted as low as possible for direct deposit, etc.)
Two questions:
I haven't done my taxes yet. I didn't have a retirement account through my employer. Should I put money into an IRA retroactively and deduct that amount from my taxes?
What's the best thing to do with our money right now?
I will get two more paychecks, totaling just under $12,000. But I also will probably be out of work for a little while because I didn't like what I was doing and really have no idea what it is I do want to do. Bonus points if you have any good job/career ideas for a 25 year old lawyer with two years' experience who hates research and writing but is an excellent speaker and has a good rapport with most people I meet.
If more info would be helpful, let me know. I appreciate any insight you can give me because I really feel lost right now when it comes to this stuff. All I want is for us to be debt-free.
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Sorry to hear about the layoff. If I were in your boat, I'd leave that $35k + the $12k in savings and just focus on finding the best possible job. The odds of your partner also losing his/her job are slim but at $4k a month of expenses, I would keep as much cash around as possible for now.
You have some opportunity costs for doing that with your money but my guess is that you'll find employment quickly enough that the costs will remain manageable.
Every time I am looking for work, I read 48 Days to the Work You Love.
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I second what Tanny said. I would keep the $35 + $12 in savings until you find employment.
I would also encourage you to work at reducing your monthly spending as much as you can to reduce the burden of your unemployment and give you a boost to your savings once you do start working again.
Once you have a job throw all the savings you have (minus a small emergency fund) straight into that high interest loan.
Spend some time thinking about what you would like to do in conjunction with your financial goals. You may not enjoy what you were doing, but would it be worth going back to a similar position to pay off your loans more quickly? Could you do it for 2 years and stop once your loans were paid? etc.