Author Topic: Reader case study-where to throw my money at first?  (Read 3998 times)

robotqueen

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Reader case study-where to throw my money at first?
« on: August 20, 2014, 05:19:31 PM »
I am 25, the husband is 27, and our daughter is two. I've been gainfully employed as an RN for the past three years. At first I was full time, but went to part time to be with my daughter more after she was born. I recently became a full time employee again. My husband just quit a dead end job, and is currently working part time. He starts an additional part time job with UPS next week. I converted him to mustachianism last year, and we payed off his credit card debt.

We have a few hair on fire emergencies... My question is: should I throw all our extra money at the debt and put investing on hold... Or pay a little extra on the loans with 2% interest and continue investing?

income:
Me $2200 take home average
Husband's hobby job $280 + some commission
Ups will probably be about $1500 take home
total 3980$

expenses
Mortgage $340 (includes property tax and insurance)
Utilities $180
Internet $50
Cell phone $26
Netflix $8
Car insurance $88
Student loan $300
Car loan $400
Gas $100 we bike a lot, but I cannot make it 30 miles to grandmas house with a toddler in tow
Lilly's super secret savings account she won't know about $50
Food $400
Diapers, house hold stuff, dog food, hair cuts $40
total $ 1982

assets
403b $15000 contributing 8% and company contributing 3% of my yearly income
401k from husbands last job-$8600... Do we roll this over or should we pay down debt?
Stocks $19000 with quarterly dividend checks ranging from 160-300
Savings account $1500
Daughters secret stache $750
Pontiac g6 that has seen better days but it is paid off
total 44850

liabilities
Mortgage $39000 left at 2%-bought a pos and used sweat equity to make it nice (paid $50000, appraised at $63000)
Student loan $19000 at 6% in October I find out if I qualify for 60-80% loan forgiveness because I work in a high needs low income area
Car-25000 at 2% thanks to huge tornado and cash for clunkers there are not very many good used cars in my area and none at a good price when I was in the market. I will keep this car for 15+ years unless I stumble upon a good used car with under 75k miles
total $83000

Let the face punching begin


4alpacas

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Re: Reader case study-where to throw my money at first?
« Reply #1 on: August 20, 2014, 05:29:18 PM »
I'm sure you'll receive some facepunches about your car ($588/month), so I will focus on other topics. 

In your situation, I would focus on paying down your student loan at 6% (if you have to pay it).  I would continue to contribute to your retirement account and slowly pay down your 2% debt. 

Cheddar Stacker

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Re: Reader case study-where to throw my money at first?
« Reply #2 on: August 20, 2014, 06:52:30 PM »
Holy low mortgage robotqueen! Great job there. A few notes:

1) Your house is an asset so you should list it.
2) How did you get a mortgage for 2%.
3) Car(s) is expensive, but I wouldn't pay down the 2% loan unless you sell the car to do so.
4) SL interest rate is high but I would wait until October when you find out about forgiveness before acting on it. If you need to pay it all, hit that pretty hard next.
5) Invest heavily, preferably in tax deferred accounts.
6) A kiddie account is a great idea but don't be afraid to use it in a true emergency.

I don't realy see hair on fire or facepunches. You financed a car, so that's not great, but I think you guys are in decent shape.

robotqueen

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Re: Reader case study-where to throw my money at first?
« Reply #3 on: August 20, 2014, 08:28:07 PM »
Besides 401ks and 403bs are there any other types of tax deferred accounts? What are some good resources for learning more about investment options?

About the mortgage: my husband got the house before we started dating. This was when banks were giving loans to everyone for more house than they could afford (he was a full time college student with a part time retail job). Then the housing market crashed. We used the making homes affordable act and refinanced, that's how we got 2%. I am not sure how much his interest was before, but I assume it was high since he didn't havemuch of a credit history at that time.

Goldielocks

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Re: Reader case study-where to throw my money at first?
« Reply #4 on: August 20, 2014, 09:14:16 PM »
Oh, boy.

$25,000 financed car on a take home salary of $48k (approx) per year.  You have it financed over more than 3 years, too, which is always a poor choice IMO.  Maybe you were in a higher income when you purchased it, but sometimes we lose our jobs (as you see), so paying down major committed debt in a shorter time is always a good idea.   

Your monthly spend on it really should be closer to $550 per month, if it were based on 3 years financing.    If you want to stop the insane car payment, in fewer years, please add $150 to $200 per month to it.

Note, car cost need to add $100 gas, $88 insurance, and let's say $22 maintenance, per month, for a nice round number:  "Real" Total car cost, using 3 years of financing only, is $760.   That is close to 35% of your total expenses.   


Guessing that you put $2k down on it, that is one nice car.  Could you buy an econobox instead, even a new one with four seats?   There must be one on the market now, and you can sell your car and switch out for $10k savings..?

I would then throw money into an emergency savings account (use it for tuition if you don't need it first), then increase your non-locked in investments, Roth etc. 

Overall, you are doing fine, with 33%+ savings rate (income versus expenses), and more income likely on the way, so roll over the 401k.

(please double check that you have all your expenses listed, though, I don't see property tax, presents for christmas, vacations, home repairs, etc)


Cheddar Stacker

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Re: Reader case study-where to throw my money at first?
« Reply #5 on: August 20, 2014, 09:18:16 PM »
Yes. IRA's, both Traditional and Roth. HSA's. 529's. Keep hanging out here and you'll start to pickup the details.

Resources:
Go poke around in the investor alley on this forum.
Read jlcollins.com stock series.
Read madfientist.com retire even earlier.

Many other places to look, but that's a really big beginners crash course.

robotqueen

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Re: Reader case study-where to throw my money at first?
« Reply #6 on: August 21, 2014, 02:40:26 PM »
Thanks for the ideas and advice.

BooksAreNerdy

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Re: Reader case study-where to throw my money at first?
« Reply #7 on: August 22, 2014, 06:56:23 AM »
If you bike a lot and already have a paid off Pontiac, could you sell the car with the loan?

You can contribute to two IRAs per year, Roth or traditional. Contribute 5500 to each. Being lower income, I would go with a Roth for now.

Good for you for the ultra cheap mortgage and low cost of living in general, car excluded. Groceries are reasonable, phones too. Good for you not having cable TV.

One thing to note, if you had a much cheaper car or only one car, your insurance would be half or less per month. We have two cars, a 93 corolla and an 01 Hyundai. Insurance is about $40/mo. But it isn't the insurance that's killing you. Its the car loan.