This is the situation. My husband and I (of less than one year) are in the process of paying off our debt. We have paid off $20,000 since March of 2014. We expect to have all of our consumer debt paid off by December 31, 2015. Our plan is to then attack our significant student loan debt (specifics listed below); however, we do not anticipate paying off the student loans until October 31, 2018.
We are not currently contributing money towards any retirement accounts to pay off our debt faster. In fact, we have hardly any retirement at all. I am 30 years old, and my husband is 36 years old. Fortunately, we do make $180,000 (total gross household income).
My question is, should we continue our “pay all debt before contributing towards retirement” plan or should we suspend paying off the student loans to max out retirement, etc. The interest rates on the student loans are rather high. I greatly appreciate any advice and look forward to your comments!
1. Mohela (my loan) - Balance: $22,862.61.
Subsidized Loan = $7,482.80, 5.125% interest rate.
Unsubsidized Loan = $15,379.81, 5.125% interest rate.
Pay-off date: May 31, 2016.
2. Sallie Mae (husband’s loan) - Balance: $54,577.47.
• Law Student A = $13,267.22, 9.25% interest rate.
• Bar Study Loan B = $11,556.26, 4.75% interest rate.
• Law Student C = $11,627.23, 4.75% interest rate.
• Law Student D = $18,126.76, 4.75% interest rate.
Pay-off date: February 28, 2017.
3. NelNet (husband’s loan) – Balance: $116,042.45.
• Loan A = $48,527.34, 7.125% interest rate.
• Loan B = $58,920.17, 7.125% interest rate.
Pay-off date: October 31, 2018.
ADDITION OF CASE STUDY - MY BUDGET
Here are the details:
Income: $180,000 gross household, $9,985.36 monthly net.
(We also receive quarterly bonuses of $3,500 gross, which are not included in the $180,000 monthly net figure listed above.)
Current Monthly Expenses: $7,957.29.
Fixed –
1. Mortgage = $1,677.70.
2. Gym = $180.00.
3. Lawn treatment = $42.00.
4. Student loan payments (details referenced in the original post) = $1,601.37.
5. Credit card minimums = $404.00.
6. Honda = $366.35.
7. Acura = $270.87.
8. Pest control = $35.00.
9. Verizon - $225.00.
10. Utilities - $285.00.
11. Childcare - $150.
Total = $5,237.29.
Variable –
1. Food = $1,480.00.
2. Household = $1,020.00.
3. Tithe = $120.00.
4. Gas = $100.00.
Total = $2,720.00.
Assets:
1. Equity = $370,000.00 (conservative estimate) - $233,840.75 (mortgage) = $136,159.25.
2. My 401k = $786.51.
3. College savings plan = $668.33.
Liabilities:
1. Credit cards = $25,565.14.
2. Vehicles = $25,024.77.
3. 2013 taxes = $4,291.57.
We anticipate paying off our credit cards, cars, and tax bill by December 31, 2015, with the overage in our monthly budget, quarterly bonuses, annual bonuses, and miscellaneous bonuses provided through husband’s firm (referrals, trials, etc.). Therefore, by 12/31/15, we will be left with the student loans and mortgage, which prompts the original question, pay off the loans or max out our retirement . . .
Also, please hack this budget. Thus far, I moved to a cash only system, cut cable, cut internet, cut lawn care, cut dining out, cut shopping, and cut our entertainment budget. I feel like I have made some progress but am very open to everyone's thoughts.
I greatly appreciate your time and attention to this matter!