Sorry in advance for the long-winded post.
So my wife and I are finally getting our sh*t together and to start living a more frugal lifestyle. About damn time, as we’re 32, would like to buy a house and start a family. Background: I finally graduated from Engineering school 4 years ago and I’m now a mechanical engineer. I make about $65k (pre-tax/insurance/401k). My wife graduated 5 years before I did, with a Journalism degree. She’s never been a journalist, but she has been employed since she graduated. Her student loans are now $250 away from being fully paid off.
Two years ago, my wife cut her hours at her day job (where she was making $45k but was also very unhappy) to start a business with her friend. Without getting too specific, it’s a food business in a fairly high growth health food category. They’re making a lot of sales, are on Amazon and in the process of getting into the local Whole Foods stores. She works her ass off and I’m really proud of all the work she’s put into it and the progress made. But she’s finding it’s really difficult to make much profit. We’ve agreed that she’ll give it another year before throwing in the towel. I would like to pick your Mustachian brains on the business, but that’s a topic for another thread.
Anyway, she’s now down to only 1 day per week at her old desk job, which will become 0 here in the next month when her coworker returns from maternity leave. Long story short our total household income has decreased in the past couple years, and will level off at the 65k I make, where it will likely be for at least another year. If she folds on the business, we’ll have around 5k in debt from the business (an LLC) that I believe will become our personal responsibility.
We’ve recently transitioned most of our spending to the debit card and would like to stop buying anything with credit cards. At least until we are more confident in our buying habits and have better self-control. I’m looking for a simple tool to track our budget and spending that will provide maximum benefit with a minimum input of time and effort. We’ve tried YNAB (too confusing and too much work/mantainence), Mint (we put our accounts in there and categorize stuff, but then don’t pay enough attention to it). I found the PearBudget spreadsheet which I might try out. I just need to find a way to make myself look at it and spend some time updating things weekly.
That’s really our biggest problem. I’ve read all the MMM posts, understand the how and why of frugality, investing, and early retirement. But it’s the actual execution of it that’s so difficult for us. We’ve cancelled our Amazon Prime membership, and have been much more strict about buying things lately. But we could still do better. And we always go in cycles. Whenever we get down or something in life gets hard, we try to make ourselves feel better by buying stuff that we don’t need and that never really makes us feel any better. Then we get strict again for a while then slowly slip back into our old bad spending habits. What can we do to stop this cycle? I don’t want to say the odds are against us, but we were both raised in middle class families that made plenty of money to live confortably but our parents were still always short on cash because they always spent first, and thought about the bills and savings last. Which we easily tend to do if we’re not vigilant.
We’ve thought about switching to all cash for everything that’s not a monthly bill, but then it’s much more difficult to track what you’re spending your money on. Thoughts?
We have about $15k in credit card debt, spread among 3 cards, though we also have a couple cards that are now at 0 balance. About 10k of our CC debt is on a high-interest card (SWA Chase Visa), and we have enough available credit to, with a strategic few transfers, get it all transferred to other cards using 0% interest balance transfers. Is there any reason not to do this?
Alternatively, I talked to my Credit Union about a personal loan to consolidate it all. They suggested a car loan would carry a lower rate than a personal loan. We do not own a house, but we do fully own both our cars, a 2010 Honda Fit and a 2012 Prius. But why do this and pay interest when I can get it all onto 0 interest cards and chip away on it as fast as possible there?
One of the cards we have with 0 balance is a Chase Sapphire. You get good rewards with it, but we’ve stopped using it (cause we’d rather get SWA miles) and paid it off totally. You can’t transfer balances directly from one Chase-owned CC to another. So since the Sapphire has a $100 annual fee, I need to either
A) Close it, or
B) Transfer balances to it from our Citi and/or Discover card
Finally, I still have $32k in student loan debt. I’ve been paying the minimums since I graduated, so those balances have been dropping, albeit painfully slow. Started out with like $43k after I graduated. 12k of that is a Discover student loan at 3% interest. The rest are various federal loans at 4-8%. I’m thinking about consolidating the higher-interest federal loans with SoFi, Earnest, or the like.
We also have $12k in savings that we’d like to keep as an emergency fund / hopefully future partial down payment on a house. Should we move some or most of it to a CD or money market? It’s a big enough amount to make me antsy about letting it sit there without any growth.
Finally, we do have some investments, all in the form of 401(k)s or rollover IRAs from previous jobs’ 401Ks. I put the minimum in that each paycheck to get the employer contribution. I put in 4% of my salary, and they put in 1%. Definitely not great compared to other employer 401(k) plans I’ve seen and been a part of, but still I think an automatic 25% return is worth deferring some debt payment for.
We’ve also both had a bunch of odd digestive health problems pop up in the past couple years that we’ve been dealing with. A lot (most?) of the test and treatments have not been covered by our wonderful mandatory health insurance, even though we pay $5,150 per year for health insurance for the 2 of us. Several hundred dollars for another test or cocktail of supplements and medications every few months does not help the savings or debt paydown rate. But we really want to get our health back 100% before starting a family.
What should we do with the CC balance, student loans, and bugeting?
What other thoughts, comments, or advice do you have for us?
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