Author Topic: Reader Case Study - Stop investments to reduce debt?  (Read 13923 times)

primozaj

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Reader Case Study - Stop investments to reduce debt?
« on: September 23, 2015, 11:53:45 AM »
New reader here... I have a feeling as I wrote the post title that I already know the answer but I'm going to go for it anyway.  I'll give you my situation and then ask the question at the bottom.

Life Situation: Married, spouse on disability income (Long Term Disability through former employer) no dependents, SW Ohio

Gross Salary/Wages: $101k for me, spouse LTD around $30k - Mostly keep finances separate

Pre-tax deductions: 401k (USG Thrift Savings Plan) 8%, 5% match (max match), FSA - $650 (wishful thinking that my wife would be better when I should have maxed at $2500), 0.8% goes towards FERS pension

Other Ordinary Income: N/A

Qualified Dividends & Long Term Capital Gains: All dividends are reinvested

Rental Income, Actual Expenses, and Depreciation: Owned a house and essentially impulse bought a house (though its in a better area with more stable home values) though the wife and I were wanting to move to where we bought.  House was up for sale and couldn't get a buyer so I was forced to rent.  So I own a rental without 25% down, maybe that's good, maybe not.  I have a long term lease to a military member and his family; $910 per month - current mortgage $878 (P&I plus escrow)... did many repairs while I was living there; to date there has not been major repairs that need to be made.

Adjusted Gross Income: Around $91,500 if I did the math correct

Taxes: Withholdings from Pay stub - Fed 10%, Ohio 3.4%, Local 1.5%

Current expenses: Monthly - Utilities $250 (incl. Netflix/hulu, gas, elec, water, garbage, internet), $150 cell phone, $250 to Roth IRA, $100 weekly cash, $50 to no load MF, Car Payment $404, personal loan $459 (paying more than payment, this was used to help spouse's credit card settlements - was a severe drop in interest and kept her from drowning... a must do before marrying her), Mortgage $1325 (P&I plus escrow, pay about $15 extra per month), credit cards around $500 for normal expenses (groceries, gas, etc.) and gets paid on time every month.

Spouse pays $377 for a car, around $300 for school loans, $100 per quarter to IRA and $456 over to a joint account to help with the mortgage payment (so that's kind of double dipping)

Expected ER expenses: Not thinking ER at the moment... want to clear debt first...

Assets: Two cars (half way paid off, one at 0% other at 2.9%), two houses (rental and residence), My TSP around $260K, Roth IRA around $75k, stocks and funds around $4k, wife's Trad IRA around $24k, about $5000 in savings accounts (for rental property, vacations, and unexpected home improvements)

Liabilities: $15.5k left on unsecured loan at 9.9%, 40 months left at current payment of $459/mo.; $162k left on mortgage at 5% (due to wife's credit rating) 28.5 years left and pay $1325/mo.; $95.1K left on rental at 5% (can't refi w/o 25% down) and pay $877/mo. though offset by rental income; 2012 Prius $9500 remaining at 2.9% payment $378/mo. for 2 years; 2013 Prius $14k remaining at 0% payment $404 for 3 years.

Specific Question(s): So my question is should we stop funding investments to bring down the our unsecured loan that is at 9.9%?  I can lower my TSP to 5% to keep full maxing and can drop about $300 per month from investments to knock it down.  I'm already working on the discretionary piece (groceries, gas) and the cell phone.  I am just trying to make sense with the idea of stopping the notion to "pay yourself first."

Part of the concern is also getting ready in case we lose the disability income.  We are definitely going to have to get it together in that case and I want this debt off the books.  I know we've made some purchasing mistakes and have discussed becoming a one car family... we are just beginning the process... so I'll leave it at that... Fire away!

nereo

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #1 on: September 23, 2015, 12:10:20 PM »
Quote
Liabilities: $15.5k left on unsecured loan at 9.9%, 40 months left at current payment of $459/mo.; $162k left on mortgage at 5% (due to wife's credit rating) 28.5 years left and pay $1325/mo.; $95.1K left on rental at 5% (can't refi w/o 25% down) and pay $877/mo. though offset by rental income; 2012 Prius $9500 remaining at 2.9% payment $378/mo. for 2 years; 2013 Prius $14k remaining at 0% payment $404 for 3 years.

Specific Question(s): So my question is should we stop funding investments to bring down the our unsecured loan that is at 9.9%?  I can lower my TSP to 5% to keep full maxing and can drop about $300 per month from investments to knock it down.  I'm already working on the discretionary piece (groceries, gas) and the cell phone.  I am just trying to make sense with the idea of stopping the notion to "pay yourself first."

Yes.  Reduce your TSP just enough to get the employer match and then pay off that 9.9% debt unsecured loan.  At your income levels I'd consider switching from a ROTH to a tIRA, which will give you more in tax savings to pay off the debt. 
...and you are still paying yourself first.  You are paying the previous version of you who took out that loan in the first place.

Also - there's quite a bit of fat that you can trim in your budget.  Your car loans are horrific for someone trying to get out of debt.  School loans, car loans, unspecified unsecured loan at 9.9%, another family-member loan, two mortgages...  Here's the cold water: you've just barely treading water here when you should be surfing the wave at your salary.  MOST of your income is going to INTEREST ON YOUR DEBT.
Your rental isn't that great given you *will* have to put money into it in the future and your monthly rent check is just barely more than your monthly mortgage.  Hopefully next year you can raise the rent by ~5%.

zolotiyeruki

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #2 on: September 24, 2015, 08:48:51 AM »
Well, you've made a good first step in asking for advice.  But there's a lot you need to work on.  Your hair is on fire.  You're currently paying nearly $3000/mo (might be closer to $4k if you add the mortgage on the rental) just on debt.  Here's what I'd suggest:

1) Stop all retirement savings *except* for the 401k, and only contribute enough there to max the match.  If you're using the FSA money, keep that the same (or maybe increase it if needed).
2) Cut your spending now. 
----Cell phone bills to <$50 combined total for both of you.
----No more "$100 weekly cash"  That's money you shouldn't be spending.
----$500 for groceries/gas/household stuff is too much, especially since there are only two of you and you drive Priuses
3) Sell one of your cars.  I'd sell whichever car will leave you with less outstanding debt.
4) Steps 1-3 should free up ($100 from cell phones, $250 from Roth 1, $400 cash, $50 mutual fund, $400 car payment, $200 from reducing groceries & gas, and $15 from extra mortgage) = $1365/mo.
5) Start a debt snowball.  Apply that $1365/mo (and every penny you can scrape together) to the personal loan first.  Get that paid off in under a year.
6) Once that personal debt is gone, you'll be down to two mortgages and one car payment, plus student loans.  At this point, you can start investing for retirement again.  With the $1365/mo + $459/mo extra cash flow you have, I'd say max out a traditional IRA, then pay down your two mortgages until you can refinance them to a lower rate.

nereo's right about the rental.  If it's worth $100k and you're getting $900/mo in rent, you're only getting about a 5% return, assuming zero vacancy and zero maintenance.  That's pretty lousy. 

Out of curiosity, why might DW lose her LTD payments?  Is it some sort of medical condition that is being resolved, or is there a time limit on the payments?  I admit this is an area where I'm clueless.

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #3 on: September 24, 2015, 09:23:08 AM »
Are you paying PMI? If so, how much of the payment is it?
Estimated LTV?
How long have you been in the mortgage?
Has her score improved any since you settled the accounts? 
Or, is your income now high enough to qualify alone?
If so, I'd try to refi. 

Kaspian

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #4 on: September 24, 2015, 09:32:38 AM »
Definitely pay off that debt!  If somebody told me about an investment where I was guaranteed a 9.9% return, I wouldn't believe them.  And if I found out it was true, I'd be all it!

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #5 on: September 25, 2015, 09:05:16 AM »

Out of curiosity, why might DW lose her LTD payments?  Is it some sort of medical condition that is being resolved, or is there a time limit on the payments?  I admit this is an area where I'm clueless.

There is a 5 year time limit however if the surgeries work and the doctor clears her, she'll have to find a job quick because I assume they will cut her off at that time.   I don't have a lot of trust in insurance companies, and almost everyone in my family outside of me are in insurance.  That is why finding this site has been so helpful... both as a reality check and for the advice about getting FI.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #6 on: September 25, 2015, 09:10:51 AM »
Are you paying PMI? If so, how much of the payment is it?
Estimated LTV?
How long have you been in the mortgage?
Has her score improved any since you settled the accounts? 
Or, is your income now high enough to qualify alone?
If so, I'd try to refi.

Yes to PMI, only put 5% down... its on the order of $85/month
Owe about $162,500, house appraised for $179k at purchase time but didn't pay that much (Zillow estimates $181k)
Been in the mortgage since March of 2014 so 19 months
Her score has come up a fair amount
I need her score for a refi due the copious amount of unsecured debt.


zolotiyeruki

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #7 on: September 25, 2015, 02:44:21 PM »
Yes to PMI, only put 5% down... its on the order of $85/month
In that case, I'll revise my earlier advice--right after paying off the personal loan (step 5), snowball all that extra cash flow into your mortgage so you can get rid of PMI.  That's just money down the drain.  Then you can move to step 6.

Do you have PMI on both homes?

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #8 on: September 25, 2015, 03:43:49 PM »
How much is the rental property worth?  I only saw that you said you owe 95k.  If it's worth more than you owe, I would consider selling that ASAP to pay down your other debts.  Frankly you probably shouldn't own a rental in your financial situation, not to mention you don't say whether it's actually earning enough income to justify the expense. 

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #9 on: September 26, 2015, 08:43:59 AM »
Do you have PMI on both homes?

Yes, but the home that is being used as a rental was FHA when I bought it (lived there 5 yrs), so it was somewhat front loaded... its about $35 a month
« Last Edit: September 26, 2015, 08:56:23 AM by primozaj »

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #10 on: September 26, 2015, 08:51:30 AM »
How much is the rental property worth?  I only saw that you said you owe 95k.  If it's worth more than you owe, I would consider selling that ASAP to pay down your other debts.  Frankly you probably shouldn't own a rental in your financial situation, not to mention you don't say whether it's actually earning enough income to justify the expense.

Zillow says the home is around $108k.  I tried to sell it for 9 months in 2014 and it wouldn't move even with price drops, etc and it was shown a lot.  People watch too much HGTV and think they can get $400k finishes for $100k.

I was forced to look renting and got a great renter through AHRN.com.  They pay me $910 per month for a long term lease (3 yr) and it pays my P & I & Escrow ($887) with a tiny bit left over.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #11 on: September 26, 2015, 08:59:54 PM »
There is car and life insurance that I'm not sure was captured as well as gas/groceries, etc...

I'll have to do more digging to answer your questions, though I am digging deep after this post.  In the last two days I've lowered my TSP to the max match and stopped my IRA contributions.  I have set up automatic biweekly distros to the 9.9% loan of $265.  By my estimates with that additional it'll be gone in 13 months... so I'm starting to dig into the car situation as well as cell phones, though we don't get off contract until Dec... but I did put in my email for a Google Fi invite... anyway more to come as I trim the fat... thanks for the advice everyone!!

zolotiyeruki

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #12 on: September 27, 2015, 06:29:26 AM »
Those are some good first steps.  Knowing where the money is going is an important first step!

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #13 on: November 10, 2015, 01:31:55 PM »
So I'm going to post an update... well in the course of the treatment for my wife she ultimately passed away at age 40.  This was about 4 weeks ago and as I've been dealing with the grief there is also a sense of relief that she no longer has to take a ton of pills or see the doctor every week and get blood draws etc.  Interestingly enough, I always joked about "securing her financial future" when I did bills and input things into Quicken... I think her passing may have done just that for me.  Full disclaimer though, I'd take on everyone's debt in a second to have her back...

UPDATE

Life Situation: Widowed, no dependents, SW Ohio

Gross Salary/Wages: $101k for me

Pre-tax deductions: 401k (USG Thrift Savings Plan) 8% 5%, 5% match (max match), FSA - $650, 0.8% goes towards FERS pension

Other Ordinary Income: N/A

Qualified Dividends & Long Term Capital Gains: All dividends are reinvested

Rental Income, Actual Expenses, and Depreciation: House was up for sale and couldn't get a buyer so I was forced to rent.  So I own a rental without 25% down, maybe that's good, maybe not.  I have a long term lease to a military member and his family; $910 per month - current mortgage $878 (P&I plus escrow)... did many repairs while I was living there; to date there has not been major repairs that need to be made.

Adjusted Gross Income: Around $91,500 if I did the math correct Probably not correct as I've been doing edits

Taxes: Withholdings from Pay stub - Fed 10%, Ohio 3.4%, Local 1.5%

Current expenses: Monthly - Utilities $250 (incl. Netflix/hulu, gas, elec, water, garbage, internet), $150 cell phone (will change soon, in process of clearing up wife's accounts), $250 to Roth IRA, $100 weekly cash, $50 to no load MF, Car Payment $404 (soon to be gone, selling it to a wonderful college student that my wife mentored), personal loan $459 (reasoning in initial post, however a surprise insurance policy should eliminate this), Mortgage $1325 (P&I plus escrow, pay about $15 extra per month), credit cards around $500 for normal expenses (groceries, gas, etc.) and gets paid on time every month.

Spouse pays $377 for a car, around $300 for school loans, $100 per quarter to IRA and $456 over to a joint account to help with the mortgage payment (so that's kind of double dipping) (I will take over car loan though if I receive a death benefit from her LTD that will eliminate a lot of this; school loans forgiven)

Expected ER expenses: Not thinking ER at the moment... want to clear debt first...

Assets: Two cars (half way paid off, one at 0% other at 2.9%), two houses (rental and residence), My TSP around $260K, Roth IRA around $75k, stocks and funds around $4k, wife's Trad IRA around $24k, about $5000 in savings accounts (for rental property, vacations, and unexpected home improvements) (Acquiring wife's bank accounts with a sum of about $7k... I honestly didn't know she had that much but she became quite a saver after I bailed her out of her CC debt back in 2009)

Liabilities: $15.5k left on unsecured loan at 9.9%, 40 months left at current payment of $459/mo. (now under $15k but surprise insurance policy should take care of this); $162k left on mortgage at 5% (due to wife's credit rating) 28.5 years left and pay $1325/mo.; $95.1K left on rental at 5% (can't refi w/o 25% down) and pay $877/mo. though offset by rental income; 2012 Prius $9500 remaining at 2.9% payment $378/mo. for 2 years; 2013 Prius $14k remaining at 0% payment $404 for 3 years (being sold to college student in Dec).


At this point I'm just trying to pick up the pieces, both emotionally and financially, but if anything this event has shown how important it is to be FI and reminds one to make sure your beneficiaries are squared away.  Any advice from people who have lost loved ones (especially spouses) is much appreciated.

zolotiyeruki

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #14 on: November 10, 2015, 01:51:21 PM »
I'm terribly sorry for your loss--I can't imagine what kind of shock that would be.  And I have no advice to give, never having been in that situation.

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #15 on: November 10, 2015, 01:57:42 PM »
So sorry for your loss.

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #16 on: December 08, 2015, 08:52:31 AM »
I'm so sorry for your loss. It looks like you're making great progress on getting things in order.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #17 on: December 08, 2015, 11:33:12 AM »
Thanks for the condolences.  So once I get all of the death benefits and life insurance squared away I should be almost debt free (just houses).  Now the decision is do I pay down my rental property or my residence first?  So I'm looking for advice on my remaining debt or should I load up on my retirement?  I think many people have said to basically get my matching tax deferred money first and then pay down debt.  I think I've set myself up to do that. 

Rental P&I + Escrow - $887/mo (PMI $36-ish)
Rental Income - $910/mo
I have a renter with 2 years left of a 3 year lease so I'm not really looking to sell out from under them at the moment, however, we have been discussing a lease-to-own option.

Residence P&I+E - $1308/mo (PMI $85-ish)
Residence add'l P - $17/mo (I set my auto pay at $1325 and as E drops, P goes up)
Advice I have been given is to not make any major life decisions for a year (re: selling house, changing jobs, etc).  Though I know many would say to downsize, emotionally that could be hard getting rid of stuff so fast... I know its only stuff, but its what I have to remind me of my late wife (other than photos and memories).

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #18 on: December 08, 2015, 11:57:25 AM »
Thanks for the condolences.  So once I get all of the death benefits and life insurance squared away I should be almost debt free (just houses).  Now the decision is do I pay down my rental property or my residence first?  So I'm looking for advice on my remaining debt or should I load up on my retirement?  I think many people have said to basically get my matching tax deferred money first and then pay down debt.  I think I've set myself up to do that. 
...

So very sorry for your loss. 
My advice for people in situations like yours is to not make any drastic changes.  Going back to the discussion before your wife died it seems like you were leaning towards at least getting your matching tax-deferred money first, and then struggling whether to reduce debt or increase your other savings.

So here's what I recommend:  put all of the money from life-insurance and death benefits into a single savings account for the next 3-6 months and just let it sit there.  Take time to grieve for your loss.  Keep your current payments to pay down your debt the same.  You already had a plan before your wife passed, so don't change it now just because you have this windfall.  Revisit this question in summer, 2016.

In your case, moving slow may be the best thing you can do.

FrugalFan

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #19 on: December 08, 2015, 12:33:18 PM »
I just wanted to say that I am so sorry for your loss. I agree with the others, there is no rush to make drastic changes now. Please take the time to grieve.

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #20 on: December 08, 2015, 04:29:31 PM »
So, so  sorry for your loss. So much so that it seems crass to offer financial advice, but you're here, so please know I'm offering these suggestions very gently.

Consider a streamline or other re-fi on the rental and/or the primary. You should be able to get a sub 5% 30-year fixed loan, especially with two years to go on a seasoned lease. Don't fret too much about the PMI. It enabled you to get into the house with a minimal down and it is deductible on the rental. Look into the HARP program, it may give you more options.

Save to get your employer's full match, but not beyond that at work for now. Do NOT skip the Roth. Once a year has been missed, there is no make-up period. Don't lose out on the opportunity.

Don't sell your primary home right away in the name of downsizing. If, in a few months, you think you can handle it, consider a roommate. A great option is someone who works in your city but lives elsewhere so they're only around during the week.

Yes to paying off unsecured debt, no to paying down the mortgages. Your retirement balances are a tiny bit anemic, so they could use a bit of beefing up. Keep some the extra money on hand for a while, in the form of a temporarily amped-up EF. Once you find your new normal you can re-invest it, but the security of a bit of extra cash on hand right now is priceless.

In your new life, with your salary, relatively low mortgage costs, paid-off consumer debt and only one car, your should be able to plug your budget leaks and watch your savings rate skyrocket.

As to the no big moves advice, here's a (sorry, long-ish) tale from my own life. DH lost his high school sweetheart, the only-girl-he'd-ever-kissed wife of 25 years just four months after she was diagnosed with stage IV colon cancer at age 49. I'd known him from a distance for over a decade. I called him not long afterwards to do some work on my house (he's a contractor) and we started talking. Then we went on an "Is this a date or isn't it?"date, then another, and another. A few months later he proposed. I trusted my gut, said "Yes!" and we eloped only seven months after her death. Three weeks later, his dad died and we discovered that his mother was in the early stages of Alzheimer's. Over the next year, we each sold our primary homes (both two-story, no downstairs bedroom), emptied both and sold one of of my MIL's homes, rented out the other, and bought a clown house that was close to his work and well set-up for his mother to live safely with us. His then twenty-year old college student son was completely shell-shocked at the sudden loss of his beloved mother and initially did not want to move out of the family home. We kept him involved in the house-hunting process and promised him a better set-up with more privacy than his current arrangement. He went along with the plan, adjusted gradually, and has been a huge help in caring for his grandmother. I went from being an autonomous, globe-trotting, never married, FI single woman to a FIRE married woman with big house and a family of four adults to manage. Holy cow! My point is that we all experienced a lot of changes over a short period of time and so far, everything has worked out fine. We are all shocked at how well we have adjusted, except his mom who wonders who the hell we are and why we're in "her" house, LOL. Last night we decorated the Christmas tree together. We kept all of our Christmas ornaments and my MIL's beautiful, sidewalk-picked fake tree. Now the ornaments hang side-by-side on the tree and illustrate how beautifully our lives have intertwined.

More important than a specific length of time is to trust your gut and not make any moves that are completely out of character. Best wishes to you in this stage of your life's journey.

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #21 on: December 08, 2015, 04:48:35 PM »
I'm very sorry to hear about your loss as well. I will echo the sentiments of others. Don't make any drastic decisions till you are back in your right mind.

In the next few months you will want to:
sell one of the cars (if you haven't already)
decide if you are going to stay in your current house.
If you are going to stay for 5 ore more years refinance it get a 3% rate on a 15 year and get rid of the PMI.

Expect house interest rates to skyrocket in late 2016. The fed has kept them low to create the allusion of stability. No mater who the president is going forward, they will go up. They have to.

nereo

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #22 on: December 08, 2015, 07:35:22 PM »

Expect house interest rates to skyrocket in late 2016. The fed has kept them low to create the allusion of stability. No mater who the president is going forward, they will go up. They have to.
hmm.... I'm going to disagree.    Go up, almost certainly.  "skyrocket" - very unlikely.  The notes from each of the last several fed meetings have all stressed 'gradual' rate hikes and a 'slow return to normalicy' while remaining data driven. We might go up 1-2% over the next two years.  That's my crystal ball, anyway.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #23 on: December 09, 2015, 07:39:01 AM »
... here's a (sorry, long-ish) tale from my own life....

Thanks Diane C.  Its helpful to see things from more of a "post" perspective... sort of, there will be light at the end of the tunnel... eventually.  I really appreciate you sharing.

Just some more info... In the next week or so I will be selling my wife's car to a college student, whom my wife mentored.  I'm not going to make much profit on it, but this is what she would have wanted.  I did pay off the unsecured loan just before Thanksgiving... since we had already been making plans to knock that down ASAP.

My TSP is at 8% (+5% match) and I think I'll put my IRA money that is set aside into the tIRA that I inherited (and then put in my name) for the tax benefit.  My salary is below the phase out limits so I should see the total deduction.  Though maybe the Roth is better... I don't know... for as much as I pay attention to finances and the market, the Roth vs. Trad just boggles my mind (anyone have a good link to a thread on here?).

As much as I like the house I'm in and could stay there forever, I'm just not ready to commit to a refi at the moment.  And once again Diane, the roommate is a really good idea. 

davef

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #24 on: December 09, 2015, 08:47:52 AM »
Skyrocket means different things to different people. I was expecting about 1% per year over the next 3 years.
A jump from 3% to 6% over three years is skyrocketing by mustachian standards.

nereo

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #25 on: December 09, 2015, 10:02:04 AM »
Skyrocket means different things to different people. I was expecting about 1% per year over the next 3 years.
...
Well no, sorry, can't agree with you there. 
Skyrocket: verb, informal - (of a price, rate, or amount) increase very steeply or rapidly.
"the cost of housing has skyrocketed"

I think that's a pretty accepted definition of the term 'skyrocket'.  I'll admit that I'm a bit of a stickler when it comes to definitions and extreme language, but i think it's disingenous to try to argue both sides. 
you are welcome to believe that rates will skyrocket; some very smart people believe exactly this.  But to call +1%/year 'skyrocketing' is just adding more noise to the forum.

GoldenStache

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #26 on: December 09, 2015, 10:23:44 AM »

  But to call +1%/year 'skyrocketing' is just adding more noise to the forum.
[/quote]

1% increase on a 4% loan is a 25% change.  I would call that skyrocketing

my 2 cents

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #27 on: December 09, 2015, 10:49:24 AM »
Quote
  But to call +1%/year 'skyrocketing' is just adding more noise to the forum.

1% increase on a 4% loan is a 25% change.  I would call that skyrocketing

my 2 cents

a 25% change in... what, exactly? Yes, it's a 25% change increase in the posted interest rate, but that's doesn't mean it's a 25% increase in what you will pay. 
For example, say you have a $10k car loan (variable) with a 5 year note at 4%.  your payments are $184/mo.  Increase that to 5% and you pay $188/mo. - a 2% ($4) increase in your payment.

just my two cents - saying things like 'rates will skyrocket' when we're talking of going from near 0% to about 1% is misleading and unhelpful.  It's like publishing a headline saying "Fed to raise interest rates by 400% within 15 months!" - while there's some technical truth it's inflammatory in nature, and ignores any historical context  We're talking about going from the lowest rate in history to a rate that's still well below the median.

<ok, stepping off soapbox now>>
« Last Edit: December 09, 2015, 02:55:43 PM by nereo »

GoldenStache

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #28 on: December 09, 2015, 01:34:09 PM »
LOL..

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #29 on: March 23, 2016, 09:33:45 AM »
Yet another Update

Life Situation: Widowed, no dependents, SW Ohio

Gross Salary/Wages: $101k

Pre-tax deductions: 401k (USG Thrift Savings Plan) 10% (working up to max slowly to be safe until I know all estate expenses have been paid), 5% match (max match), FSA - $650, 0.8% goes towards FERS pension

Other Ordinary Income: N/A

Qualified Dividends & Long Term Capital Gains: Around $100/yr in taxable account but all dividends are reinvested.

Rental Income, Actual Expenses, and Depreciation: House was up for sale and couldn't get a buyer so I was forced to rent.  So I own a rental without 25% down, maybe that's good, maybe not.  I have a long term lease to a military member and her family; $910 per month - current mortgage $878 (P&I plus escrow)... did many repairs while I was living there; to date there have not been major repairs that need to be made. Net profit - $32/mo... when the renter moves out my plan is to sell.

Adjusted Gross Income: Around $89,000, if I calculated the adjustments correctly with my new TSP contributions.  Its hard to determine from this years' tax return since my late wife's income is on there.

Taxes: Withholdings from Pay stub - Fed 10%, Ohio 3.4%, Local 1.5% (Just realized I need to be paying an add'l 1% for local school district)

Current expenses: (All Monthly)
Utilities - $250 (incl. Netflix/hulu, gas, elec, water, garbage, internet)
Charity - $65
Cell phone - $63 with Google Fi, I pay for 2 GB but I haven't used all of it yet so I've gotten "rebates" between $7 and $15 over the last 3 or 4 months (I didn't prepay for the phone so that's $22/mo of the $63)
Roth IRA - $250
Cash - $400, Weekly ATM (bowling league, drinks on golf course, snacks at work) - This is where fat could be trimmed for sure
No load MF - $50, would like to raise this at some point (balance is around $3500 and pre-MMM I used it sort of like an emergency fund) 
Car Payment - $376 (which should get paid off from my wife's estate once all expenses have been taken care of)
Mortgage $1335 (P&I plus escrow, pay about $10 extra per month)
Credit cards -  $400 for normal expenses (groceries, gas, some meals, etc.) and gets paid on time every month.
Gym - $130 - I'm on a powerlifting team, so while I won't say that this is non-negotiable, if I did eliminate this expense I'd lose a large piece of how I maintain my well-being and life enjoyment
Expecting to add $100 for Grief counseling in the near future.

Expected ER expenses: Not thinking ER at the moment... however, my first cut at current annual living expenses has me between $48k and $59k, depending on how I account for allocating money to saving accounts and the like

Assets:
One car (KBB says its worth around $10k)
Two houses (rental and residence)
TSP around $260K
Roth IRA around $75k
Stocks and MF around $4k
Traditional IRA around $24k (inherited from late wife)
Around $5000 in savings accounts (for rental property, vacations, gifts, and unexpected home improvements)
$13,000 in a separate account to help clear estate issues, will likely be used to pay off car once expenses are squared away (plan to use some for a 529 for my new nephew)

Liabilities:
$162k left on mortgage at 5% (due to late wife's credit rating) 28 years left and pay $1335/mo. - not sure about the refi because I may move to a smaller place
$95.1K left on rental at 5% (can't refi w/o 25% down) and pay $877/mo. though offset by rental income
2012 Prius with $6000 remaining at 2.9% payment $376/mo. for 2 years


So if I can get final expenses squared away correctly and get my car paid off I should be in good shape.  I'm seeing how my spending rates are decreasing this year and making adjustments every couple of weeks to my TSP to get up to the max amount (also doing this to get out of the 28% tax bracket).  If that gets maxed I'm thinking about maxing my Roth (would doing this now help my pipeline options?) and then maybe paying down some principal on the rental property.  Seem reasonable?

I do need to look at trimming fat on expenses (and would like help).  I am pretty busy and tend to grab a burrito on my way home from the gym... it ebbs and flows but some weeks I buy breakfast and lunch at work.  I know that if I could just focus I could make more meals at home, but I personally feel that its hard to cook for one, though I know many people on here would disagree with that.  A lot has changed for me over the last 5 months and while its cheaper to sit and have a meal at home I do find some solace in going out and having a meal/beer where people are.  My life is lonely enough without my wife that I don't want to sequester myself just to save a few bucks.  Feel free to offer up suggestions.

Thanks

Axecleaver

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #30 on: March 23, 2016, 11:26:57 AM »
Hi Primo,

Just found your story. I'm really sorry to hear about your wife's passing. It sounds like you have a little social interaction, but could use some more. I do a lot with my local Elks lodge, and we have a few very active widows, one of whom told me recently that the lodge "saved her life." She is 88 now, joined at 65 when her husband passed away unexpectedly. At 88 she works about 20 hours a week to support our various community activities. I hope I am that active at 88.

We serve low-cost community meals ($5-6 dinners) for the lodge 2-3 times a week. Consider joining one of the kitchen crews, there is a lot of community spirit and I have a lot of fun joking around with my crew and serving meals to people who appreciate it. This would give you the benefit of community while not costing you a lot of money to eat out at every meal.

There's other orgs that do similar stuff, church groups, food pantries, Kiwanis, senior citizen groups, etc.

On the finance side, you should take a look at your withholding. Your taxes are going to change dramatically this year since you'll be filing as single in 2016 (unless you can use the Qualifying Widower with Dependent Child category). Your fed tax bracket will be 25%, possibly as high as 28% (single 28% bracket starts at $91k AGI). You are also phased out of IRA contributions, since you have a 401k available at work, these are limited starting at 61k, and totally phased out at 71k AGI. Source: https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

Next steps: Adjust withholding, pay down debt, then throw anything left over at the 401k until you can get to 18k contributions a year. That will help you avoid paying additional taxes.

formerlydivorcedmom

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #31 on: March 23, 2016, 11:40:23 AM »
Can you interest any of your coworkers in having an eat-in lunch every day, or even a few days a week?  A group of people where I work meets every day at 12:15 in the break room (or sometimes a conference room) for lunch.  Some people bring takeout from a local restaurant.  Some bring their lunch from home.  Regardless, they eat together and talk and laugh.  That could be a good way for you to transition into bring your lunch - you'd still get the social interaction with a fraction of the price.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #32 on: March 23, 2016, 01:58:18 PM »
Hi Primo,

Just found your story. I'm really sorry to hear about your wife's passing. It sounds like you have a little social interaction, but could use some more. I do a lot with my local Elks lodge, and we have a few very active widows, one of whom told me recently that the lodge "saved her life." She is 88 now, joined at 65 when her husband passed away unexpectedly. At 88 she works about 20 hours a week to support our various community activities. I hope I am that active at 88.

We serve low-cost community meals ($5-6 dinners) for the lodge 2-3 times a week. Consider joining one of the kitchen crews, there is a lot of community spirit and I have a lot of fun joking around with my crew and serving meals to people who appreciate it. This would give you the benefit of community while not costing you a lot of money to eat out at every meal.

There's other orgs that do similar stuff, church groups, food pantries, Kiwanis, senior citizen groups, etc.

On the finance side, you should take a look at your withholding. Your taxes are going to change dramatically this year since you'll be filing as single in 2016 (unless you can use the Qualifying Widower with Dependent Child category). Your fed tax bracket will be 25%, possibly as high as 28% (single 28% bracket starts at $91k AGI). You are also phased out of IRA contributions, since you have a 401k available at work, these are limited starting at 61k, and totally phased out at 71k AGI. Source: https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

Next steps: Adjust withholding, pay down debt, then throw anything left over at the 401k until you can get to 18k contributions a year. That will help you avoid paying additional taxes.

Thanks for the info about the Elks... I'm going to do some searching... I do know there is a Moose lodge nearby because they have a bowling league when I have mine.

Also, I appreciate you pointing out about the deduction limit on the tIRA.  Even with a maxed 401k I wouldn't be able to write anything off so I'll stick with the Roth for extra cash.  I expect to be at 25% after I max my 401k, but I knew I was going to get hit with 28% when I switched withholdings back to single.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #33 on: March 23, 2016, 01:59:42 PM »
Can you interest any of your coworkers in having an eat-in lunch every day, or even a few days a week?  A group of people where I work meets every day at 12:15 in the break room (or sometimes a conference room) for lunch.  Some people bring takeout from a local restaurant.  Some bring their lunch from home.  Regardless, they eat together and talk and laugh.  That could be a good way for you to transition into bring your lunch - you'd still get the social interaction with a fraction of the price.

We have a group that does that already, our IT folks.  I'll ask if they mind if I join them.  Thanks for the input.

SwordGuy

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #34 on: March 23, 2016, 04:18:01 PM »
So sorry for your loss.  I lost my dad 5 years ago and my mom last Sept.  It leaves a hole in your heart that takes time to heal.   Can't imagine how hard it would be to lose my wife.

And I feel for you having to go thru the estate process.  It's painfully time-consuming and it doesn't help when something you're dealing with triggers memories...

As far as your finances go, you are moving in the right direction.

"Rental Income, Actual Expenses, and Depreciation: ... House was up for sale and couldn't get a buyer so I was forced to rent.  So I own a rental without 25% down, maybe that's good, maybe not. "

25% down payment is irrelevant to your current situation.

"I have a long term lease to a military member and his family; $910 per month - current mortgage $878 (P&I plus escrow)... did many repairs while I was living there; to date there has not been major repairs that need to be made."

This is not a good rental situation.   You have a negative cash flow, you just do not know it.

Income
$10,920   ($910 * 12)
-     546   (5% vacancy and credit loss - military can break leases with change of station orders. )
=====
$10,374

Expenses
$10524    (PITI - principal, interest, taxes, insurance, pmi)
$  1092    (Repairs for things not yet broken or worn out.  My best guess knowing nothing about the condition of the property.)
$       ?     (Any utilities you have to pay.)
$       ?     (Any tax increases you cannot pass on to the client.)
$       ?     (Any increases in mortgage escrow amount.)
=======

I think you can see that rental property is a ticking time bomb of items that are wearing out as you read this.   If you can sell in 3 years, you might get lucky.  If not, the fuse on the time bomb is that much shorter...

I suggest Frank Gallinelli's book, "What every real estate investor needs to know about cash flow and 36 other key financial measures."

Again, best of luck moving forward.


primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #35 on: March 24, 2016, 09:13:49 AM »
25% down payment is irrelevant to your current situation.

I only stated this to show it was not my intentions to be a landlord and to say that since I don't have 25% I cannot refi


"I have a long term lease to a military member and his family; $910 per month - current mortgage $878 (P&I plus escrow)... did many repairs while I was living there; to date there has not been major repairs that need to be made."

This is not a good rental situation.   You have a negative cash flow, you just do not know it.

Income
$10,920   ($910 * 12)
-     546   (5% vacancy and credit loss - military can break leases with change of station orders. )
=====
$10,374

I'll clarify this... National Guard... doesn't get PCSed but can get deployed.  However, the guy is no longer living there, now just ex-girlfriend and kids.  Re-wrote the lease without his name, kept initial deposit.


Expenses
$10524    (PITI - principal, interest, taxes, insurance, pmi)
$  1092    (Repairs for things not yet broken or worn out.  My best guess knowing nothing about the condition of the property.)
$       ?     (Any utilities you have to pay.)
$       ?     (Any tax increases you cannot pass on to the client.)
$       ?     (Any increases in mortgage escrow amount.)
=======

I think you can see that rental property is a ticking time bomb of items that are wearing out as you read this.   If you can sell in 3 years, you might get lucky.  If not, the fuse on the time bomb is that much shorter...

I suggest Frank Gallinelli's book, "What every real estate investor needs to know about cash flow and 36 other key financial measures."

Again, best of luck moving forward.

I realize that this is a ticking time bomb, but while I lived there I had the kitchen and main bathroom redone so those are two huge pieces that shouldn't be an issue.  My worry is the roof needing to be replaced.  I don't pay any utilities and the house is in an area where we don't typically see major property tax increases (I lived in the house 5 years).  That said there is about 1.5 years left on the lease, she's a very good renter and has talked about buying the property.  We'll see where that leads, though I expect I'll have it on the market.

Its a long story about that house and this was all pre-MMM.  Bottom line was we bought "our" perfect first house together before I had sold "my" house.  In hindsight I realize the face punch worthy behavior.

My current plan, if I chose to keep doing what I'm doing job-wise, is to live where I am at now.  If the renter moves out early or doesn't want to buy the house I'll sell my newer house, which has an excellent chance to sell as its a new house in a very desirable area of town, and move back to the smaller house.  But who knows, I may sell them both and start doing something completely different.  My entire life is pretty much up in the air right now.

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #36 on: March 24, 2016, 02:17:36 PM »
Firstly let me say that my jaw dropped on the update about your wife, that must have been heartbreaking and I can only offer my most sincere condolences.

In fact, that's all I'm going to say.  Good luck with everything and I hope life balances out and eventually gives you enormous joy to counter this terrible sadness.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #37 on: June 08, 2016, 09:15:19 AM »
Another update - though I'm not sure the subject truly represents the initial case study anymore...

Life Situation: Widowed, no dependents, SW Ohio

Gross Salary/Wages: $105k

Pre-tax deductions: TSP 14% (slowly adding until I get to the max), 5% match (max match), FSA - $650, 0.8% of gross goes towards FERS pension

Other Ordinary Income: N/A

Qualified Dividends & Long Term Capital Gains: Around $100/yr in taxable account but all dividends are reinvested.

Rental Income, Actual Expenses, and Depreciation: House was up for sale and couldn't get a buyer so I was forced to rent.  I own a rental without 25% down and thus cannot refinance (confirmed with bank).  I have a long term lease (3 yrs with 1.5 yrs left); $910 per month - current mortgage $878 (P&I plus escrow)... did many repairs while I was living there; to date there have not been major repairs that need to be made. Net profit - $32/mo... when the renter moves out my plan is to sell.  She did ask about extending the lease a year and seemed interested in potentially purchasing the house.  I understand that this is a ticking time bomb.

Adjusted Gross Income: Around $89,000, if I calculated the adjustments correctly with my new TSP contributions.  Its hard to determine from this years' tax return since my late wife's income is on there.

Taxes: Withholdings from Pay stub - Fed 10%, Ohio 3.4%, Local 1.5% (Just realized I need to be paying an add'l 1% for local school district)

Current expenses: (All Monthly)
Utilities - $260 (incl. Netflix/hulu, gas, elec, water, garbage, internet)
Charity - $65
Cell phone - $63 with Google Fi, I pay for 2 GB but I haven't used all of it yet so I've gotten "rebates" between $7 and $15 over the last 3 or 4 months (I didn't prepay for the phone so that's $22/mo of the $63)
Roth IRA - $250
Cash - $400, Weekly ATM (bowling league, drinks on golf course, snacks at work) - This is where fat could be trimmed for sure, however I am finding myself spending much less these days
No load MF - $50, would like to raise this at some point (balance is around $3500 and pre-MMM I used it sort of like an emergency fund) 
Mortgage $1335 (P&I plus escrow, pay about $10 extra per month)
Credit cards -  $400 for normal expenses (groceries, gas, some meals, etc.) and gets paid on time every month.  Though now that its just me, the number seems to be dropping as my bank account is going up.
Gym - $130 - I'm on a powerlifting team, so while I won't say that this is non-negotiable, if I did eliminate this expense I'd lose a large piece of how I maintain my well-being and life enjoyment
Grief Counseling - $40 (its really about $120 per quarter)

Expected ER expenses: My first cut at current annual living expenses has me between $48k and $59k, depending on how I account for allocating money to saving accounts and the like, so I'd guess $40k in ER.  In full disclosure I'm not really concerned here yet, just working on getting a larger 'stache so I can worry about ER expenses.

Assets:
One car (KBB says its worth around $10k)
Two houses (rental and residence)
TSP around $260K
Roth IRA around $80k
Stocks and MF around $4k
Traditional IRA around $25k (inherited from late wife)
Around $5000 in savings accounts (for rental property, vacations, gifts, and unexpected home improvements, 529 for nephew)

Liabilities:
$161k left on mortgage at 5% (due to late wife's credit rating) 28 years left and pay $1335/mo. - not sure about the refi because I may move to a smaller place
$94.9K left on rental at 5% (can't refi w/o 25% down) and pay $877/mo. though offset by rental income

So over the last few months I was able to use some of the estate to pay off some debt and now all I have is my two houses.  So I'm looking for some opinions on what I do next.

1) I am going to work my way up to max-out my TSP contributions.  I am slowly adding this year just to make sure everything is stable as far as cash flow.  It is beginning to look much more stable so I expect to be at the max $ amount (paid bi-weekly) by the end of the summer.

2) I am going to start a 529 for my 2 mo. old nephew.  I guess I will see tax benefits but I can still offer it to him in 18 years.

3) After I have clarity about my cash flow I should have additional monies that I can put elsewhere.  Things are approaching a new normal so I think I will have between $50-$150 a month to put elsewhere.  My preference would be to send it to the principal of one of the houses.  So the question would be, which one? Is there a calculator I missed on here that will help me decide?  If it makes a difference, I want to unload the rental within 3 years and I am pretty confident I want to stay in my current house.
3b) If one of the houses isn't the best option then I assume its going to be investing.  So if that's the case, do you recommend Roth over my taxable account?

Thanks,
Primo

ShoulderThingThatGoesUp

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #38 on: June 08, 2016, 09:38:59 AM »
Always glad to see you're hanging in there. Not sure what the point of reducing the principle on the "ticking time bomb"  house would be.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #39 on: June 08, 2016, 09:58:56 AM »
Always glad to see you're hanging in there. Not sure what the point of reducing the principle on the "ticking time bomb"  house would be.

Me either... I guess I was thinking more along the lines of being able to take less for it in a sale...

Axecleaver

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #40 on: June 08, 2016, 11:43:34 AM »
Happy to see your update. It sounds like there are some definite choices to make around the two houses. How do you feel about your primary residence? On the one hand you say you're happy there, but you're thinking of downsizing. Getting out of the rental sounds like your top priority, though.

Rather than paying down the principle, build up your emergency fund - call it a contingency fund. This will give you options. You could refinance, or bring cash to the table to unload it in a fire sale. A better option might be to consider a rent-to-own deal with your current renter, these are generally pretty pro-landlord, if it falls through then you keep all the rent money and you're no worse off. A contingency fund of 15-20k might give you some options with either of your properties that you're not feeling are available today.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #41 on: August 09, 2016, 11:19:38 AM »
Some good news on the liabilities front... so in July I checked with the Credit Union about the current refi rates and I was able to secure a 3.375% rate for 30 years.  I chose 30 because of the payment estimations she gave me though if I remember right 20 yrs was the same rate and 15 was a tiny bit better.  Originally we bought the house with 5% down and it appraised for a little over ($3k) what we paid.  Well this time is appraised for a bunch more and basically all I had to do was pay the closing costs and I got the LTV at 80% so no more PMI!!!  So some real good news on that front.  The payments (w/ escrow) are around $1060/mo. and my plan is to keep dumping the $1335 I had set aside for the house in monthly.  So not only am I not paying PMI, I've increased my additional principle from like $15-ish per month to around $275/mo.  Now if I can just get clear of that rental...

On the personal front I'm doing okay.  Traveling a ton for work so I'm not having to pay for much these days.  Also, the woman I was seeing and I decided to split so that's been hard, but I've been making it through.  I will say that its interesting how my family and friends lives have seemed to go back to normal while mine still feels like a disaster from time to time.

nereo

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #42 on: August 10, 2016, 06:23:48 AM »
Sounds like your financial life is doing much better - I hope your personal life follows suit.
Eliminating the PMI and reducing your mortgage rates are great steps.
Keep up the good work and report back every few months

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #43 on: November 29, 2016, 11:12:14 AM »
Another update...

Life Situation: Widowed, no dependents, SW Ohio

Gross Salary/Wages: $105k

Pre-tax deductions: TSP 16% (almost at max), 5% match (max match), FSA - $780, 0.8% of gross goes towards FERS pension

Other Ordinary Income: N/A

Qualified Dividends & Long Term Capital Gains: Around $100/yr in taxable account but all dividends are reinvested.

Rental Income, Actual Expenses, and Depreciation: I have a long term lease (3 yrs with <1 yr left); $910 per month - current mortgage $878 (P&I plus escrow)... to date there have not been major repairs that need to be made, but upon a sale I concede that I will likely be buying them a new roof. Net profit - $32/mo which I am now sending to principal.  She did ask about extending the lease a year and seemed interested in potentially purchasing the house.  I understand that this is a ticking time bomb.

Adjusted Gross Income: Around $89,000, if I calculated the adjustments correctly with my new TSP contributions.  Its hard to determine from this years' tax return since my late wife's income is on there.

Taxes: Withholdings from Pay stub - Fed 10%, Ohio 3.4%, Local 1.5%

Current expenses: (All Monthly)
Utilities - $260 (incl. Netflix/hulu, gas, elec, water, garbage, internet)
Charity - $65
Cell phone - $63 with Google Fi, I pay for 2 GB but I haven't used all of it yet so I've gotten "rebates" between $7 and $15 over the last 3 or 4 months (I didn't prepay for the phone so that's $22/mo of the $63)
Roth IRA - $250
Cash - $400, Weekly ATM (bowling league, drinks on golf course, snacks at work)
No load MF - $50 (balance is around $4200 and pre-MMM I used it sort of like an emergency fund) 
Mortgage $1335 (P&I plus escrow & no PMI, pay about $275 extra per month)
Credit cards -  $400 for normal expenses (groceries, gas, some meals, etc.) and gets paid on time every month.
Gym - $130 - I'm on a powerlifting team, so while I won't say that this is non-negotiable, if I did eliminate this expense I'd lose a large piece of how I maintain my well-being and life enjoyment
Grief Counseling - $40 (its really about $120 per quarter)

Expected ER expenses: My first cut at current annual living expenses still has me between $48k and $59k, depending on how I account for allocating money to saving accounts and the like.

Assets:
2012 Toyota Prius V - 88k miles (KBB says its worth around $10k)
Two houses (rental and residence)
TSP around $287K
Roth IRA around $80k (just moved from EJ to Vanguard)
Stocks and MF around $4k
Traditional IRA around $25k (inherited from late wife, also moved to Vanguard)
Around $3000 in savings accounts (for rental property, vacations, gifts, and unexpected home improvements, 529 for nephew)

Liabilities:
$158k left on mortgage at 3.375% (refi in July) 29+ years left and pay $1335/mo.
$92.5K left on rental at 5% (can't refi w/o 25% down) and pay $900/mo. though offset by rental income

Updates:
1) I have been working my way up to max-out my TSP contributions ($18k).  Every month or so I add 1% just to make sure everything is stable as far as cash flow.  I expect to be at the max $ amount (paid bi-weekly) by the end of the year.

2) I started a 529 for my 2 mo. old nephew.  Right now it only has $500 in it but I plan on starting monthly contributions in 2017.

3) I seem to have gotten things to a very even-keel place and I'm pretty comfortable with everything at the moment, at least financially.


So where I am at now is that I travel a lot for work; like twice a month minimum.  It is nice to have someone else pay for my meals but I've begun to get a little spend crazy... to the point that when I'm home I also go out to eat a lot.  Its not hurting my bottom line yet but I can foresee it happening and I need to rein it in.  The other thing is that due to the travel and other things at work I'm not enjoying my current position all that much.  So I am looking for different places to go within my organization but I've also been considering doing something completely unrelated to Engineering... and by that I mean driving a semi or loading freight or something.  It seems that now that I've made it over a year since my wife's death, I just don't want to do what I was doing.  I don't have enough of a 'stache yet to FIRE and my plan was to hang on until 57 for the healthcare benefits but I don't know if I have it in me anymore.  I don't know if I'm looking for advice or encouragement or maybe just a change.  All I know is that I have appreciated everyone's input over the past year or so.

Thanks,
Primo

ShoulderThingThatGoesUp

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #44 on: November 29, 2016, 02:39:43 PM »
Your continued drive is admirable. Maybe you want a different area, not a different field?

FrugalFan

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #45 on: November 29, 2016, 06:46:51 PM »
Your continued drive is admirable.

+1

You're doing so well considering what you've been through. It sounds like you need a change, and your finances are in a good position to do so. Looking for something completely different might be helpful. What is it about sounding a semi or loading freight that appeals to you? Both sound hard and lonely to me, but if they sound good to you, that's what matters obviously. If I were in your situation I would look at a few options. For example, a similar job but in a totally different place, like somewhere I have always wanted to travel, or somewhere closer to family. Or a job that takes advantage of some skill sets provided by current job but different enough to feel different. Or a job that is a spinoff of current hobbies or interests (something artistic would appeal to me, for example). Or a job with a lot more flexibility, e.g. part time hours or remote/work from home possibilities.

Axecleaver

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #46 on: November 30, 2016, 10:15:27 AM »
A lot of folks who have been through what you have, feel unmoored and look to make a change. It's perfectly understandable. Consider discussing this during your grief counselling sessions. I guarantee your therapist has experience with this feeling. That doesn't mean it's a bad idea.

Please keep us updated on your story. Consider starting a journal in the journal section. There are a lot of supportive folks there who have provided me with perspective on my own story.

calimom

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #47 on: November 30, 2016, 07:34:28 PM »
Hi Primo, I just read through your journal. I'm so sorry for your loss, and can relate. I was widowed in 2007 with 3 young kids and life just…changes. Lots of things look different and motivation can really wax and wane. You sound like you're doing a lot of the right things by working hard, taking care of yourself, paying attention to your grief and just living your life. Solidarity! Hang in there.

primozaj

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #48 on: December 02, 2016, 06:56:08 AM »
All of my case study info is above but I've been wondering something about my savings.

I send (per month) $225 to a home improvement/repair account, $100 to a vacation account, and $30 to a gifts account (family birthdays, etc.).  I send an additional $274.13 to the mortgage on my primary house.  I'm wondering if I might be better off putting, say, $200 of that money into another savings account for something more emergency related.  I have a no load index fund that has about $4500 in it, so if I got into a pinch I could use that but I'm just wondering on your opinions of how to best use the $275.  Most of my friends aren't very mustachian so I can't really ask them and expect a reasonable answer...

former player

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Re: Reader Case Study - Stop investments to reduce debt?
« Reply #49 on: December 02, 2016, 07:48:51 AM »
I'm struggling a bit with your numbers, so bear with me, please, if I've got it wrong.

Gross income of $105k with deductions of $23,670 (TSP and FERS etc. at 21.8% plus FSA at $780) is $81,330, then taxes at 14.9% ($12,118) brings it down to $69,212, which is $5,767 a month.  (I'm ignoring the rental for the moment.)

Your listed expenses come out to about $3,000, including the additional money to the mortgage on your primary.

Where is the other $2,767 going?  The answer to that question is almost exactly 10 times more important than what you do with the $274.13 overpayment on the mortgage.