Author Topic: Need Help...Can I pay off this debt any faster?  (Read 4062 times)

Marigold

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Need Help...Can I pay off this debt any faster?
« on: March 18, 2013, 08:20:31 PM »
Hi All,

I am Marigold. My husband and I live in Canada with our 1 year old child. We are doing okay so far, but have some debt to deal with. We are on the same page now financially but by failing to plan, we sometimes spend too much on groceries, diapers, etc.

Mr. Marigold makes approximately 80,000 per year at his regular job. He also gets an annual bonus of about 10,000 that he puts in his RRSP. He takes part in his work's "matching" program, where you can buy their stock and they will match it to 4%. He has about $100,000 in his RRSP. He also has a little side hustle where he usually makes about $2-5000 per year.

I make approximately $55,000 in a public servant position with a defined benefit pension plan. I have medical benefits that cover 80% and dental that covers 90%.  We both have life and disability insurance through work. I also have a side hustle writing. I don't make much at it, but about $1000 per year.

I have $1500 in an RRSP

Our 2009 vehicle is paid for and in good condition, I use public transit for commuting and my husband is close enough to walk.

We have a mortgage of about $265,000 on a home with a (conservative) value of about 375,000.


The really BAD:
I have a student loan (now at 25,000 was at 40,000 originally, interest rate is 5.5)
two lines of credit one at $34,000 (interest rate 5.5) and the other at $16,000 (6.0)



Thanks!
« Last Edit: March 19, 2013, 12:52:41 PM by Marigold »

marty998

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Re: Need Help...Can I pay off this debt any faster?
« Reply #1 on: March 18, 2013, 10:48:02 PM »
Electricity bill. $250/month when that doesn't include hot water is incredibly high.
(edit this...just had a think....Canada/snow/cold? ok makes a little more sense....we have sun all year around, 15c-35c, so my judgement may not be appropriate)

Phones...$200 a month....I.P. Daley....someone needs your assistance.

Neither of you drive to work yet you still spend $200/month on car fuel? And you haven't listed your public transport fares in the budget either.

Childcare is one of those things....easy for the armchair critic to say "$882 cut it" but its not that simple is it. I'll steer clear on that one.

There seems to be a fair bit of "net" income missing. I put the gross numbers (excl. bonus) into your budget and I can't imagine your husband has a tax rate of 44% on an income of 80k. Are there a lot of pre-tax deductions coming out?



« Last Edit: March 18, 2013, 10:53:18 PM by marty998 »

Another Reader

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Re: Need Help...Can I pay off this debt any faster?
« Reply #2 on: March 19, 2013, 05:10:59 AM »
You are not hugely extravagant, but on the other hand you are not going to get anywhere until the debt goes away.  At the rate you are paying, it's going to take a long time to pay it off.

In your shoes, I would cut everything - gifts, entertainment, cell phones, college savings - and I would take the savings from that plus every dime of side gig income and start with the highest interest rate, lowest principal debt.  It's still not going to get paid off tomorrow, but a highly disciplined pay-off will easily cut a year or two off the repayment period.  If one or both of you could increase your side income, that would help even more.

What about your retirement savings?  Is that part of what comes out of your gross income?  Not sure how the Canadian system works, but would it make sense to divert some of this money to debt pay-off temporarily?  What about taking a couple of those bonuses and put them toward the debt pay-off?

As an aside, I dislike this budget spreadsheet.  The "jar money" confuses everything.  In your shoes, I would track all the spending in something like Mint, and then use a more straightforward spreadsheet. 

Marigold

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Re: Need Help...Can I pay off this debt any faster?
« Reply #3 on: March 19, 2013, 06:39:03 AM »
Hi

Thanks for the responses!  Both of our paycheques have savings deductions before we get them. My husband is saving 18 percent of his net income through his work savings of RRSP and stock options.  We would like to use his bonus for debt repayment, but we would lose a lot of it to taxes, so his work rolls it directly into his RRSP...For my work, I have pension deductions and deductions for the medical/dental coverage that covers our family. I also have an "ecopass" for the bus (about $120 per month) deducted from my paycheque through work.

Hydro is a big problem for us.  I am not surprised it was pointed out. We get the bill every 2 months and it's been as high as 500 dollars, but luckily, the last two bills have been closer to 300. We use our washer, dryer, dishwasher during off hours but our friends all have lower bills...we live in a house that's about 2,000 square feet and built in 2007, so it's not like we should have "old" home issues like high heat bills...I am not sure what we're doing wrong.

The budget is through Gail Vaz Oxlade, but the jar portion of it is a bit messed up because I don't use all her categories. I should re-do it.

We will try and increase the side business and be more strict with less spending...

Thanks! :)

gecko10x

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Re: Need Help...Can I pay off this debt any faster?
« Reply #4 on: March 19, 2013, 07:14:45 AM »
Hydro is a big problem for us.  I am not surprised it was pointed out. We get the bill every 2 months and it's been as high as 500 dollars, but luckily, the last two bills have been closer to 300. We use our washer, dryer, dishwasher during off hours but our friends all have lower bills...we live in a house that's about 2,000 square feet and built in 2007, so it's not like we should have "old" home issues like high heat bills...I am not sure what we're doing wrong.

Can you get the kWh/ day reading for us? For only 2000 sq ft, there must be some big power hogs somewhere... what kind of light bulbs do you use? Are there a lot of lights that stay on 24/7? Do you have a big computer that is left on 24/7? Entertainment system (receiver) on all the time? Is your house heated via electric or gas?

Self-employed-swami

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Re: Need Help...Can I pay off this debt any faster?
« Reply #5 on: March 19, 2013, 07:18:47 AM »
As an aside, I dislike this budget spreadsheet.  The "jar money" confuses everything.  In your shoes, I would track all the spending in something like Mint, and then use a more straightforward spreadsheet.

This is Gail Vas-oxlade's budget sheet, from Til Debt Do Us Part.  It's a cash system for variable expenses.

:)

plainjane

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Re: Need Help...Can I pay off this debt any faster?
« Reply #6 on: March 19, 2013, 07:39:35 AM »
You're dumping a lot into RRSPs, but I guess since it's all through work, they're taking it into account and you aren't getting a big tax refund.  If not, you should take that tax refund and use it for a lump sum payment on your high interest debt. 

In addition to all the "find more money" suggestions people have for you, I think you should take some of the money you're putting into RRSPs and use it to pay down that debt. I'm not sure how old you guys are, so 100k in RRSP is without context.  But assuming you've been putting in 18% on 80k for 5 years + bonuses to get to that level, you are pretty young. 

Take the hit on the taxes for your bonus and you'll make 6% guaranteed on it by paying down your loan.  You'll be paying taxes on your RRSPs eventually, it's just deferred taxes, not a tax dodge.

Marigold

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Re: Need Help...Can I pay off this debt any faster?
« Reply #7 on: March 19, 2013, 08:22:40 AM »
Hi

the KWh/day for the last Hydro bill was 29.33.  Our average daily electricity cost is 3.94 it says on our bill.  We use the energy efficient bulbs and there aren't any lights left on during the day.  My husband also has the temp on a timer, so that the temperature goes down when no one is home. We pay approx 300 (sometimes more) every 2 months to hydro and 60-100 to Enbridge every month.  That's included under Gas/Water at $200 per month

We do leave all our appliances, computers plugged in during the day, but other than my husband's computer, none of them are on.  Should he be powering down his computer during the day? or is it worse to turn it off and on?

Good tip on the bonus money plainjane.  Better to bite the bullet on taxes now to get the debt paid off faster.

Thanks

gecko10x

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Re: Need Help...Can I pay off this debt any faster?
« Reply #8 on: March 19, 2013, 08:43:13 AM »
At 29 kWh/day, I'll retract my previous statement about power hogs. While it's not great, it's not too bad. (As a single data-point reference, we use about 36kWh/day in winter for a 1900 sq ft house with people home all day- but our whole house is electric, and we are not very badass.) While you could likely do better here, it sounds like the source of the inflated cost is mostly from price/kWh (sounds like you pay about $0.17/kWh? That's 70% higher than our cost).

Kazimieras

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Re: Need Help...Can I pay off this debt any faster?
« Reply #9 on: March 19, 2013, 11:38:15 AM »
I'll echo plainjane's comment and take the tax hit on the RRSP contribution with the bonus and pay off the debt. Don't forget, RRSPs just change when you pay the taxes on the income... it will always be taxed eventually.

If you're wondering about the power hogs in your house, go to the library (I live in the same city as you) and get a kill-a-watt- meter. You can plug it in and see how much power everything is using. Also consider cooking during off-hours. I usually eat dinner (just due to how my wife and I live) during the off-peak times, which is a big savings in the winter.

Also consider switching phone providers. For land lines and internet, try Teksavvy as they are a lot cheaper than Bell and Rogers and offer equal or better service. For your cell phones consider sometime lower-cost like Wind (30/month for unlimited) which works in most areas of the city.

You may want to consider temporarily stopping payments to the RESP. I believe you can contribute later, and it will still be matched, and I think it is doubtful anything is earning the same as your LOC rates... so you'll be better off to pay off the debt sooner than later.