Author Topic: advice - short term goals  (Read 2723 times)

rollie_in_mn

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advice - short term goals
« on: May 27, 2013, 07:58:28 PM »
So here's my situation... I would love to hear some other opinions/ideas, because I'm at a roadblock in my own head.

My (non-mustachian) hubs is currently a full time student, and will be for the next 2 years. He's getting a degree in math/statistics, and he's very interested in research and data analysis so he should be reasonably employable once it's finished. In the meantime, it's just me bringing in an income. It's a pretty decent income for our area, my base salary is $63,900, with a 5% performance bonus + profit sharing each year (averages 8.5%), so we are getting by. I handle all of the money, hubs gets a a fixed allowance each month for his cell phone, all car costs (including gas and insurance), and a little spending money so he doesn't go nuts.

After reading MMM's article "Your Debt is an Emergency" I decided to start paying down everything much more aggressively than I had been, to the point where I currently have a $375 remainder after paying all of the bills each month, most all of this goes to pet care and food for us, and nothing meaningful going to savings ($50 per pay period). We have a $4,000 cash cushion, but to me that doesn't seem like much.

If all goes according to plan, all of my non-student loan debt will be repaid on Aug 9th of this year. Hubs has no credit card/other debt. That will leave me a $675 surplus for the month of August, and a $975 surplus going forward. I'm also expecting a raise in August, so there may be more than that. When I say "surplus", I just mean "not earmarked for a bill". We still have to pay for food and any incidentals out of the surplus.

Considering that we only have $4,000 in cash savings, and I have $41,000 in outstanding student loan debt, I'm at a crossroads as to what is the best course of action when we do hit that $975 surplus every month. I'm trying to figure out what the best course of action is for the next 2 years, while hubs is not working. Once he goes back to work, because we've gotten accustomed to living nicely on one income, I think we can use whatever he earns to destroy any remaining debt.

In the meantime, I want to make sure we are reasonably secure, and also doing the smartest things with our cash over the short term. Part of me wants to start ramping up savings again, in the event that hubs' job search takes us out of state or some other unexpected things happen. Having $14,000 in cash a few years ago when we moved to MN on short notice was a lifesaver. And then part of me is saying that if I increase my current SL payment from $300 to $700, I could be out of debt in like 6 years instead of 20, which would be incredible.

I'm also working with hubs on optimizing our expenses, I know we have a lot of room for improvement. I'm just trying to start from the point of "if nothing else changed except this debt repayment being over, how much would we have left over each month?" as a baseline, and then seeing how much reducing expenses will further improve our situation.

Thoughts? Face punches??

Joel

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Re: advice - short term goals
« Reply #1 on: May 27, 2013, 09:13:07 PM »
Figure out an amount that makes you feel comfortable having in your checking account. It could be 5k, 10k, 15k, whatever you feel comfortable with. Once you reach that amount, then start throwing excess at your student loans.

If your student loan is being charged interest at 6%, I would have a preference to keep that number closer to a bare minimum.

rollie_in_mn

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Re: advice - short term goals
« Reply #2 on: May 27, 2013, 09:25:23 PM »
Figure out an amount that makes you feel comfortable having in your checking account. It could be 5k, 10k, 15k, whatever you feel comfortable with. Once you reach that amount, then start throwing excess at your student loans.

If your student loan is being charged interest at 6%, I would have a preference to keep that number closer to a bare minimum.

Thanks for the input :) I was lucky and able to consolidate years ago when the rates were pretty low. The rate on my student loans is 4.8%

I struggle with figuring how much would make me feel *comfortable* to have in cash. Being a single income couple for the first time makes me feel paranoid about how much we might need.

Joel

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Re: advice - short term goals
« Reply #3 on: May 27, 2013, 09:32:55 PM »
How secure is your job? Is there a possibility you could get laid off or fired? If that were to happen, how long could it take you to find work again?

What about your health? What if a medical emergency came up?

What if your vehicle needed repairs?

3 months is a safe cushion in case anything does happen.

All of these things are things to consider. Personally, I keep between 10 and 20k in my checking account and invest the excess.

I don't have any debt, but if I had debt at 5%, I would likely keep something lower like 5k to 10k in my checking account.