Author Topic: Reader Case Study: We are Finally DINKS - Now Where to Begin?  (Read 3993 times)

mountainjillian

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Hi there and thanks for looking at my topic!  Some basic details: My husband is 31, I am 30 - no kids (yet).  He just took 3 years off of working to complete his lifelong dream of finishing his bachelors degree and I supported the household in the meantime.  Recently, he took a job at a car dealership while he looks for a "career" job.  This means we are finally DINKS after a frustrating 3 years on one income.  We have a fair amount of debt, and I just don't know the best place for us to begin living a more mustachian life.  I would love any input on where we should begin!  We have a lot of goals, and I'm just not sure where the best place is to start.

Income: $52,500 (me) and $36,000 base salary (husband) for a total of $88,500 or about $5286/month after tax and various pre-tax deductions (I take $140 out of my paycheck pre-tax per month to pay for medical expenses related to a chronic disease and then there are my Simple IRA contributions)

Current expenses:

Mortgage - $921.52/mo

HOA fees - $260.00/mo

Car & Homeowners Insurance (State Farm): $62/mo

Electric Bill: average $60/mo (includes heating)

Husband's Student Loans: $28.86/mo for husband, soon to be more and not sure how much! 

My Graduate Student Loan: $204/mo

My Undergraduate Student Loan: $101/mo

Consumer Credit Card: $350.00/mo

Hospital Bill: $180/mo

Gym: $40/mo

Cell Phones: $160.00

Netflix: $8/mo

Spotify: $5/mo

Gas: Average $120/mo

Groceries: Average $500/mo

Eating out/Buying Alcohol: Average $100/mo

Total: $2750.73

Assets:

Car - 2004 Jeep Liberty with about 150,000 miles on it, fully paid off, worth around $4,500

House - bought it for $180,000 in 2012 and is now probably worth at least $250,000

Savings - $1,400

Simple IRA - $900 so far, contributing 7% of my paycheck now at $300/mo, employer is matching up to $1500/year

Liabilities - UGH, this is where it gets ugly:

Mortgage - $921.52/mo - this includes an escrow amount for our property taxes which is $709.08 a year (owe a total of $176,838.61 at 3.25% interest rate)

Husband's Student Loans: $28.86/mo for husband, soon to be more and not sure how much!  Assuming at least 6.5% interest.

My Graduate Student Loan: $204/mo at 6.55% interest rate (owe a total of $13,300.18)

My Undergraduate Student Loan: $101/mo at 3.5% interest rate (owe a total of $8,641.36)

Consumer Credit Card: Did a balance transfer to freeze the interest rate for 18 months and am throwing $350.00/mo to get it paid off before it starts accruing interest again - I have about 8 months left of this freeze!  We still owe a total of $2,818.24

Hospital Bill: We owe about $4000 from an incident last year - not accruing interest and we have about 22 months to pay it off.  We contribute $180/mo towards this which is what the hospital is requiring

So now that we suddenly have more money than we are used to having, what should we tackle first?  It is our goal to not give ourselves a "lifestyle" upgrade but instead be smart and get ourselves into a better place financially. 

I should note we have some upcoming goals.  We both are eager to get rid of the Jeep for obvious mustachian reasons: IT SUCKS.  But, my husband doesn't want to simply sell it for cash and buy something more gas friendly that is old - he wants to save up for a newer car with under 60,000 miles (but has at least agreed to pay cash for it so we are compromising here).  The second goal is wanting to have kids in the near future, but we also recognize financially we aren't yet in a place for that - but want to be ASAP.  Finally, we are some of those crazy kids who want to eventually buy a piece of land and build a tiny house on it.  So that's another savings goal.

NOW WHAT?!

What do my fellow mustachians think?  I am obviously a beginner!
« Last Edit: July 22, 2014, 02:17:46 PM by mountainjillian »

TeresaB

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #1 on: July 22, 2014, 01:49:14 PM »
You can get much cheaper cell phones. Republic Wireless or Ting depending on your needs. (I have a Ting referral link if you want it.)

I would eliminate the gym, netflix, and spotify. There are cheaper ways to entertain yourself and exercise. (Book recommendation: "You are your own gym". Get it, plus movies and music, from your local library.)

You should be able to cut your food budget without too much difficulty. Are you buying ingredients, or meals? You should be doing the first.

Can you reduce your gas? Is a job within biking distance?

Once you've cut wherever you can, throw the money at your debt. Start with the one with the highest interest rate (probably the credit card). (Make minimum payments on the others.) When the first debt is paid off, take all that money and throw it at the one with the next highest interest rate.

TrulyStashin

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #2 on: July 22, 2014, 01:55:51 PM »
Welcome!  If you really dedicate yourself to Mustachianism, you'll feel much better about life within a few months.  I'm 15 months into this and am very grateful.

1) reduce your Simple IRA contributions to the bare minimum amount needed to get your employer's match.
2) change your cell phone plan ASAP.  You can easily cut this in half.
3) kill Spotify.  Sorry, but it's a no-brainer.  Use the free version of Pandora.
4) for 2 people, you can cut your groceries by probably $100, maybe more.
5) figure out which loan has the highest interest rate and dump every dime into it.  Once it's gone, repeat with the next highest loan.  From what you listed here, I vote that you crush your grad student loan (6.55% interest).

Your $2818 debt is frozen at 0% for 18 mos.  By my math, you can pay $156/ mo and it will be paid off in time.  Don't pay more than necessary to get it paid of by the end of the promo period.  Why are you paying $350/ mo?

Likewise, your hospital debt isn't accruing interest so pay as agreed and focus on other debts.

How much can you get for the Jeep -- what's the gap between what you'll get and what you'll pay for a reliable, non-clown used car?

The good news is, you have lots of room to tweak/ improve and you're making good money.  With a carefully crafted strategy and discipline, you'll make progress very quickly.


mountainjillian

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #3 on: July 22, 2014, 02:00:52 PM »
Great suggestions so far friends and thanks! 

To clarify, I am throwing $350 at the credit card right now because we have less than 18 months left - I think I have about 8 months.  Whatever it is, this is what I've got to pay per month to get 'er done with the time I have left! 

I think we could get at least $4500 for the Jeep, maybe a tiny bit more.  I think we'll need at least $10,000 to get the kind of (non-clown) car that my husband would be comfortable with purchasing.  So we'll need to save at least $5500 to get there.

Will definitely reduce the Simple IRA contribution after I meet this year's match (getting started late, husband just got the job!) and put the extra towards the graduate loan debt!  Good suggestion!

Spudd

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #4 on: July 22, 2014, 02:05:53 PM »
(Book recommendation: "You are your own gym". Get it, plus movies and music, from your local library.)

By the same author, targeted at women but I'm sure valid for both sexes - "Body by You". This has easier variations of the exercises in "You Are Your Own Gym" and I really love it.

TrulyStashin

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #5 on: July 22, 2014, 02:11:33 PM »
Gotcha, thanks for clarifying.

Are you using Mint or YNAB for tracking your spending?   I don't see any $$ allocated to eating out and I suppose it's possible you NEVER eat out, but unlikely, right?   

So that made me wonder if other $$ is leaking out in ways that you're unaware of.  Mint really helps me put a stop to that.

mountainjillian

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #6 on: July 22, 2014, 02:15:59 PM »
Oh YES - money definitely leaks out - though not a ton (at least, in my opinion).  We probably go out to eat once every other week, spending around $40 a pop.  And, we occasionally will buy a bottle of wine, maybe twice a month spending around $20/mo.  I don't currently use Mint, but I've used it in the past... it was a little overwhelming to me if I'm being totally honest.  But I should start using it again!

TrulyStashin

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #7 on: July 22, 2014, 02:17:56 PM »
What if you sold the Jeep now and used whatever cash you got from it for a less-than-desirable car with better MPG (not what hubs wants to do, I know) but with the understanding that when you meet _____ financial goal you'd upgrade to the $10k version he'd prefer?

Create a spending/ debt reduction plan and figure out an aggressive goal that is about 1 year away.  Make that your "better used car" goal.

You just got through a long stretch on one-income.  Surely you can deal with a less-than car for 1 year, right?  Meanwhile, getting rid of that Jeep will really help reduce expenses.

mountainjillian

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #8 on: July 22, 2014, 02:22:44 PM »
TrulyStashin, that is as awesome idea about having an aggressive 1-year goal and then upgrading the car to something a bit nicer, I might have to bring that one up to the Hubs!  I like it!

TrulyStashin

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #9 on: July 22, 2014, 04:16:01 PM »
It's also possible that over the course of the year it will feel SO good to get your finances squared away that the nicer car becomes much less important.

Pre-MMM, I drove a BMW.  Now, I drive a '07 Prius but I am so enamored of watching my wealth move in the right direction that I really, really don't care what I drive.

Seņora Savings

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Re: Reader Case Study: We are Finally DINKS - Now Where to Begin?
« Reply #10 on: July 22, 2014, 05:05:42 PM »
I get $3100.38 when I add up your expenses, $2236.52 in current expenses.  Which is not bad.  AWESOME job on thinking about debts when you got more money instead of thinking about the nicer car that you want. 

You should have $2000 a month even before mandatory debt, maybe once you get rid of the >6% debt you can consolidate discretionary spending (phone, car savings, gym, eating out)  into one or two buckets.  If there's $500 that can go towards either a car or a bottle of wine your priorities might change.