Poke Holes in my FIRE Plan

[Outlier]

So I wanted to make a rundown of everything my wife and I have done and are trying to do in order to achieve FIRE.
We both have full time jobs and a rough monthly income of 4k per month combined.
Here's the picture of how we were in February 2014 with rough numbers but close totals since a lots changed since then.

House 30 year fixed 5.5%        $ 66,000
Discover card at 29% interest   $  3,000
Amazon card at 25% interest    $  3,000     
Chase card at    29% interest    $  3,000
Capital One card 29% interest   $  3,000
Car loan 4.3% interst                $  4,700
Subsidised student loans 6%     $ 10,500

We had about $1,000 as an emergency savings fund and she had $10,000 in an IRA.

So now lets move onto how it looks today.

House 15 year fixed at 4.4% interest $68,000
Student Loans  at 6%                       $10,200
Discover Card at 24%                       $        0
Chase card at     29%                       $        0
Private loan at 0%                            $ 7,600
Car loan at 4.3%                              $ 4,400

I'm working a second job as a handy man and she's paying in $100 a week towards paying off that private loan as fast as possible. We've cut down our TV bill, started shopping smarter and buying used. We don't go out to eat much anymore and just try and save more in general.

Short term my plan is to pay off the private loan as fast as possible then up our emergency cash from $1,000 to $5,000 so we are covered if a car dies. Then I'm going after the remainder of the student loan debt.
My savings rate is still my biggest issue. The best savings rate I've managed yet at the end of a pay period is 24% to pay toward debt.

Long term my goal is to pay everything but the house off and start making monster payments on the house to pay it off. Then I'll buy another house and rent the current one. Hopefully I'll have learned enough about real estate by then to rinse and repeat until we have a passive income that's cash flowing enough to retire.

So what could I be doing better? 


 

[Outlier]

Did I post something wrong to have 134 views and no replies? Have I somehow messed up MMM forum etiquette?

[Primm]

Couple of things:

1/ It's a bit hard to give you advice on how you can do things better without an idea of how much you spend. A breakdown of actual costs would help.

2/ You state the picture between Feb 2014 and today (7 months later) has changed. BUT by my calculation your total debt then was $90,200 sorry, my mistake, $93,200. Your total debt today is $90,200. What's changed? You've managed to convert your high interest CC's to 0% loans (private - I assume from a relative) and yet you have paid a grand total of $0 $3k off your debt. (That's not as bad as I thought, sorry about that...)

Read this: hair on fire debt emergency. Then get back to us with some numbers.

Edited because I can't count, even if I use a calculator apparently.

[TomTX]

Here's the big hole: It's not a FIRE plan. It's some debt shuffling. You're saving some interest, I guess - but as pointed out, the debt is nearly the same level. You have some rudimentary ideas of what you want to do next. Your monthly budget (and change in that budget) is only hinted at.

[80Westy]

What car(s) do have, cost, year, miles, mpg?  How far are you commuting (my assumption)?

[oldtoyota]

What happened to the Amazon and Capital One cards?

I agree with the PPs. We'd need to see your spending to give detailed advice.

Totals for both columns would be helpful so we don't have to take time to add it up ourselves.

[RapmasterD]

I'm going to be generous and write off your house. Still, your remaining debt is nearing 50% of your GROSS take home pay.

Not our business, but how old are you guys? If you're late 20s, then breathe deep and keep on running (that debt down)! You've got plenty of time.

[Sdsailing]

It is a small amount of debt in absolute terms.  I would focus on increasing your salaries and earning power.

[Outlier]

Alright let me try to answer everything in one shot.

1. What is the private loan. My grandmother is very wealthy. My siblings have asked her for things to the point where she just hates us. I've never asked for anything. I asked for cash to clear up my wife's credit card debt and if I die swinging a hammer I'll die paying her back as fast as I can because I don't want to ask for money from family. My wife pays $200 bi weekly to the cash loan. I pay every job I can get swinging a hammer to that loan on top of my job. I'll pay anything to get that debt paid faster. I've been selling my video games on craigslist to get that paid.

2. Cars. I have on 05 Impala paid cash. Wife has on 09 New Beetle that has the loan on it. We both drive about 45 minutes opposite directions for our 9 to 5 jobs.

3. My wife's credit card debt was unknown to me because we kept finances separated. The cards that went away are the remainder of the cash loan from my grandma. 

4. We are both 33 and I'm the only one but my hair is on fire. I want out of debt yesterday. I've been using mint for 3 months so just tell me what daily data you want and I'll provide it.

[joe travers]

With regard to your spending specifics, check out the "How to write a case study" thread. http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/. This is the info we want to see in order to analyze your spending and provide feedback.

You said you've had a 24% savings rate -- the net of which went toward paying off some of your debt. Technically, the money you "save" doesn't go toward paying off debt. What you "save" goes toward, for example, an investment like a Vanguard fund. Paying off debt is simply part of your expenses. To put it another way, when you're paying off debt, you have a savings rate of 0% -- and that's ok because that's the only thing you should be doing when you have debt.

From a broader perspective -- and here's a facepunch -- you need to put the idea of FIRE on ice for the time being. Your FIRE plan seems so simple -- just buy another house and rent your current one, study real estate, rinse & repeat, etc. -- but it comes off as somewhat naive. If you are into real estate and know how it works, then great. But for right now, just focus on understanding your spending. Understanding that is key because once you do, you can pay off of debt much more quickly. And only then, when your debt is gone can you begin to think about your real estate plan for FIRE. 

[marty998]

Alright let me try to answer everything in one shot.

1. What is the private loan. My grandmother is very wealthy. My siblings have asked her for things to the point where she just hates us. I've never asked for anything. I asked for cash to clear up my wife's credit card debt and if I die swinging a hammer I'll die paying her back as fast as I can because I don't want to ask for money from family. My wife pays $200 bi weekly to the cash loan. I pay every job I can get swinging a hammer to that loan on top of my job. I'll pay anything to get that debt paid faster. I've been selling my video games on craigslist to get that paid.

Ask your Grandma why she is wealthy. If she gives you a "back in my day we spent less than we earned, saved for a rainy day blah blah blah blah blah" spiel LISTEN VERY CAREFULLY TO IT and do the same.

[Outlier]

Alright let me try to answer everything in one shot.

1. What is the private loan. My grandmother is very wealthy. My siblings have asked her for things to the point where she just hates us. I've never asked for anything. I asked for cash to clear up my wife's credit card debt and if I die swinging a hammer I'll die paying her back as fast as I can because I don't want to ask for money from family. My wife pays $200 bi weekly to the cash loan. I pay every job I can get swinging a hammer to that loan on top of my job. I'll pay anything to get that debt paid faster. I've been selling my video games on craigslist to get that paid.

Ask your Grandma why she is wealthy. If she gives you a "back in my day we spent less than we earned, saved for a rainy day blah blah blah blah blah" spiel LISTEN VERY CAREFULLY TO IT and do the same.

Oh I do. I wish I could turn back a few years and talk to my grandfather when he was still around. He was vice president of design at Chrysler. He had a very cool career and I never really talked to him about it. My grandma talks about money like it might run out tomorrow and every company she has an account with is bleeding her dry. It's nowhere near true but she's 86 and evaluates every dollar like it might be the one that will break her.

She was angry that we had been paying interest on debt. When she loaned me the money she said rich people do not pay interest and I never should on anything ever again. That's one heck of a lesson from someone of wealth. The rich only get paid interest. I'll never pay interest to anyone again if I can avoid it.

[Primm]

Oh I do. I wish I could turn back a few years and talk to my grandfather when he was still around. He was vice president of design at Chrysler. He had a very cool career and I never really talked to him about it. My grandma talks about money like it might run out tomorrow and every company she has an account with is bleeding her dry. It's nowhere near true but she's 86 and evaluates every dollar like it might be the one that will break her.

She was angry that we had been paying interest on debt. When she loaned me the money she said rich people do not pay interest and I never should on anything ever again. That's one heck of a lesson from someone of wealth. The rich only get paid interest. I'll never pay interest to anyone again if I can avoid it.

I think I like your grandmother.

[chasesfish]

A few other comments:

Why are you worried about replacing a 2005 and 2009 car?  They're barely broken in. Is your credit good, if so, stop worrying about the "emergency fund" and pay down the other debts as soon as possible.

You're in good shape on your mortgage right now, the others should be your target.

Why the heck are you both driving 45 minutes each way?  After you get your house in order, think about that one.

[TomTX]

Oh I do. I wish I could turn back a few years and talk to my grandfather when he was still around. He was vice president of design at Chrysler. He had a very cool career and I never really talked to him about it. My grandma talks about money like it might run out tomorrow and every company she has an account with is bleeding her dry. It's nowhere near true but she's 86 and evaluates every dollar like it might be the one that will break her.

She was angry that we had been paying interest on debt. When she loaned me the money she said rich people do not pay interest and I never should on anything ever again. That's one heck of a lesson from someone of wealth. The rich only get paid interest. I'll never pay interest to anyone again if I can avoid it.

I think I like your grandmother.

Damn, I like Grandma. A lot. She knows what's up.

Most financial companies ARE bleeding you dry.

I'm not thrilled with the slightly derogatory tone that seems to be coming from you about her. You have demonstrated poor money management skills by paying stupidly high interest rates. Your family have burned her repeatedly by fucking up with money and going to her for more. Yet, she was willing to help you with thousands of dollars, interest free.

I do commend your attitude of paying Grandma back first.

Have you sent her a nice thank-you letter yet?

Seriously. A dead-tree, snail-mail letter. Handwritten, if you can.

[TomTX]

A few other comments:

Why are you worried about replacing a 2005 and 2009 car?  They're barely broken in. Is your credit good, if so, stop worrying about the "emergency fund" and pay down the other debts as soon as possible.

You're in good shape on your mortgage right now, the others should be your target.

Why the heck are you both driving 45 minutes each way?  After you get your house in order, think about that one.

Agreed. The commute is just stupidly long.

The car I'm thinking of replacing next year is a battered 1995 Saturn SL1 with no AC. In Texas.

[CU Tiger]

2. Cars. I have on 05 Impala paid cash. Wife has on 09 New Beetle that has the loan on it. We both drive about 45 minutes opposite directions for our 9 to 5 jobs.

3. My wife's credit card debt was unknown to me because we kept finances separated. The cards that went away are the remainder of the cash loan from my grandma. 

4. We are both 33 and I'm the only one but my hair is on fire. I want out of debt yesterday. I've been using mint for 3 months so just tell me what daily data you want and I'll provide it.

Read this older post, and consider your car, home, and jobs.

http://www.mrmoneymustache.com/2012/09/15/reader-case-study-the-long-road-to-mustachianism/

[Outlier]

Oh I do. I wish I could turn back a few years and talk to my grandfather when he was still around. He was vice president of design at Chrysler. He had a very cool career and I never really talked to him about it. My grandma talks about money like it might run out tomorrow and every company she has an account with is bleeding her dry. It's nowhere near true but she's 86 and evaluates every dollar like it might be the one that will break her.

She was angry that we had been paying interest on debt. When she loaned me the money she said rich people do not pay interest and I never should on anything ever again. That's one heck of a lesson from someone of wealth. The rich only get paid interest. I'll never pay interest to anyone again if I can avoid it.

I think I like your grandmother.

Damn, I like Grandma. A lot. She knows what's up.

Most financial companies ARE bleeding you dry.

I'm not thrilled with the slightly derogatory tone that seems to be coming from you about her. You have demonstrated poor money management skills by paying stupidly high interest rates. Your family have burned her repeatedly by fucking up with money and going to her for more. Yet, she was willing to help you with thousands of dollars, interest free.

I do commend your attitude of paying Grandma back first.

Have you sent her a nice thank-you letter yet?

Seriously. A dead-tree, snail-mail letter. Handwritten, if you can.

That's a really good idea. I'm going to do that.

[Outlier]

2. Cars. I have on 05 Impala paid cash. Wife has on 09 New Beetle that has the loan on it. We both drive about 45 minutes opposite directions for our 9 to 5 jobs.

3. My wife's credit card debt was unknown to me because we kept finances separated. The cards that went away are the remainder of the cash loan from my grandma. 

4. We are both 33 and I'm the only one but my hair is on fire. I want out of debt yesterday. I've been using mint for 3 months so just tell me what daily data you want and I'll provide it.

Read this older post, and consider your car, home, and jobs.

http://www.mrmoneymustache.com/2012/09/15/reader-case-study-the-long-road-to-mustachianism/

This is a very valid point. Mint constantly tells me that we spend something like $500 a month on gas. Right now I drive 37 miles north and she drives 30 miles south every day. We burn through a used car every other year. I usually sell them off at 200k miles. I don't know why but they always die just before 200k. I know neither employer will let us work from home. I'll see what I can do about ride sharing.

[oldtoyota]

Oh I do. I wish I could turn back a few years and talk to my grandfather when he was still around. He was vice president of design at Chrysler. He had a very cool career and I never really talked to him about it. My grandma talks about money like it might run out tomorrow and every company she has an account with is bleeding her dry. It's nowhere near true but she's 86 and evaluates every dollar like it might be the one that will break her.

She was angry that we had been paying interest on debt. When she loaned me the money she said rich people do not pay interest and I never should on anything ever again. That's one heck of a lesson from someone of wealth. The rich only get paid interest. I'll never pay interest to anyone again if I can avoid it.

I think I like your grandmother.

Damn, I like Grandma. A lot. She knows what's up.

Most financial companies ARE bleeding you dry.

I'm not thrilled with the slightly derogatory tone that seems to be coming from you about her. You have demonstrated poor money management skills by paying stupidly high interest rates. Your family have burned her repeatedly by fucking up with money and going to her for more. Yet, she was willing to help you with thousands of dollars, interest free.

I do commend your attitude of paying Grandma back first.

Have you sent her a nice thank-you letter yet?

Seriously. A dead-tree, snail-mail letter. Handwritten, if you can.

That's a really good idea. I'm going to do that.

I am glad you are going to do that…but, man, no wonder she is angry. I'd be angry too. I'm betting your siblings never sent her a thank-you note either.

Sheesh. I also like your grandmother. She's a generous person, it sounds like.

[Outlier]

Alright so I guess a small change came out of this discussion already. I found a carpool buddy and figured out the savings. I'll be able to save $100 a month and help someone else who has a longer drive than me do the same.

[Cheddar Stacker]

This is a very valid point. Mint constantly tells me that we spend something like $500 a month on gas. Right now I drive 37 miles north and she drives 30 miles south every day. We burn through a used car every other year. I usually sell them off at 200k miles. I don't know why but they always die just before 200k. I know neither employer will let us work from home. I'll see what I can do about ride sharing.

Ridesharing will help, so I'm glad you've found a carpool buddy. Good start.

Here's a more radical thought and the type of change that will really accelerate things for you.

Whoever has the lower paying job (or the least desirable job, up to you) should begin looking for a job in the general area where the other person works. Preferably a much higher paying job than their current one.

Once that new job is established, a new residence should be found within a few miles from both of your jobs. This residence should be modest, and a good value. With your "hammer swinging" skills you can even find a serious fixer-upper and do your thing.

Higher income, lower commuting costs, substantially less commuting time, possibly lower housing costs, more time to work on your house, untaxed capital gains from the appreciation on your house, more time together as a couple. Sounds like a lot of good things to me.

[Outlier]

This is a very valid point. Mint constantly tells me that we spend something like $500 a month on gas. Right now I drive 37 miles north and she drives 30 miles south every day. We burn through a used car every other year. I usually sell them off at 200k miles. I don't know why but they always die just before 200k. I know neither employer will let us work from home. I'll see what I can do about ride sharing.

Ridesharing will help, so I'm glad you've found a carpool buddy. Good start.

Here's a more radical thought and the type of change that will really accelerate things for you.

Whoever has the lower paying job (or the least desirable job, up to you) should begin looking for a job in the general area where the other person works. Preferably a much higher paying job than their current one.

Once that new job is established, a new residence should be found within a few miles from both of your jobs. This residence should be modest, and a good value. With your "hammer swinging" skills you can even find a serious fixer-upper and do your thing.

Higher income, lower commuting costs, substantially less commuting time, possibly lower housing costs, more time to work on your house, untaxed capital gains from the appreciation on your house, more time together as a couple. Sounds like a lot of good things to me.

I agree with you and there's no flaws in that thinking. I consider the income level my wife and I currently have very fortunate since it's pretty high for a low cost of living rural area. We come in around 80k combined in an area where 45 is median. Long drives to work are considered normal but in MMM thinking could make a huge impact.
I'd actually love to work closer to where my wife works. Our lives would be a lot easier if we didn't spend our days over an hours drive apart and on different shifts.

I'm sold on the idea and eventually with my new 15 year mortgage my current house will be a viable rental property so it could work out really well.

[acemanhattan]

Wait, you said in the initial post you two make $4k combined per month.  Now you are saying you bring in $80k per year.  Talk me through this.

[Outlier]

Wait, you said in the initial post you two make $4k combined per month.  Now you are saying you bring in $80k per year.  Talk me through this.

I'm really bad at financial math sometimes. The 4k number in my first post is right. I'm not sure how I managed to screw that up sorry.

[Unkempt Stash]

Reading your post encouraged me to finally sign up for the forum.

I have a similar amount of student loans. I just refinanced them. I was able to get a 3% student loan as a refinance through discover to clear up my federal loans that were at 6.9%. This is saving me something like 100$ in interest every month (which I am clearly applying directly to the principle).

If they are all subsidized and you are about to return to school or feel that some of the other federal loan benefits are worth it, it may not be the best choice.
But it's one thing you may want to consider.

[Outlier]

Reading your post encouraged me to finally sign up for the forum.

I have a similar amount of student loans. I just refinanced them. I was able to get a 3% student loan as a refinance through discover to clear up my federal loans that were at 6.9%. This is saving me something like 100$ in interest every month (which I am clearly applying directly to the principle).

If they are all subsidized and you are about to return to school or feel that some of the other federal loan benefits are worth it, it may not be the best choice.
But it's one thing you may want to consider.

Welcome to the forum. I might end up refinancing my student loans. It's not a ton of money owed but I have other loans I'm paying extra on to get rid of first so it could help. Good to know I could knock 3% off the balance. This thread was my first experience with getting feedback on my real numbers. I know I need to do better at knowing all the numbers now. I thought I was on top of knowing everything about my finances but I've got a ways to go. It felt a bit brutal but I guess they call it getting punched in the face around here for a reason.

[HawkeyeNFO]

CheddarStacker is 100% correct.  I think you are spending a lot of money on your commuting, and not really getting a good return on your money and time spent in traffic. 

spending $500/month on gas, out of $4000/month of income.  That plus buying another car every year, paying for insurance, maintenance, and other car stuff, easily eats up 20-30% of your income.  If you can get your worksites to be close together, then relocate closer to them both, that would be a win. 

Where in Michigan?