Author Topic: New Baby & 100K in Student Loan Debt - What's Next?  (Read 3415 times)

lduhaime1

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New Baby & 100K in Student Loan Debt - What's Next?
« on: February 23, 2020, 07:23:31 PM »
Looking forward to some advice.  My wife and I are both in our early 30s living in high cost of living area. We have a lot of student loans that really soak up the bulk of our income each month.  In addition, we have a 6 month old, healthy baby YAY but day care is EXPENSIVE boo. We go back and forth between wondering if we should cash out stocks to put towards the student loans or save it for a safety net and I'd love to hear some thoughts.  The car is definitely an unnecessary expense - wife uses public transit and I drive 5 miles round trip to work/bike when the weather is nicer. We would need a car but probably one that isn't as nice.

Questions
1. Should we cash out stocks and put it towards one of the loans or does it make sense to have a safety net, especially with a new baby?
2. With such a tight budget, does it make sense to keep contributing to the Roth or should I just rely on the TIAA through work?
3. Any other ideas of optimization welcome.

Life Situation
Married file jointly 6 month old baby

Wages
After taxes we take home 8600 a month

Monthly Expenses
Mortgage 2001 --> taxes, insurance included
Day Care 1600
Student Loans 1800
Car Loan 383
Car Insurance 200
Life Insurance 100
Cable 116
Phone 121
Electricity 65
Gas Heat 100
Condo Ins/Water 200 --> since it is a condo the mortgage includes walls-in insurance this is wall-out insurance
Therapy 250
NYTimes/Netflix 20
Compost 20
Boiler Payment 71 --> Mass Save offers a 0% 7 year loan on qualifying boilers, since ours was so old we qualified for the loan - the boiler is ours not a rental if we sell the house before the loan is up we could pay off the loan with the house sale

total: 7047

Transfers:
Roth IRA 350
College Fund for Baby 100

Amount left after expenses and transfers 1100

Groceries: we average 500 dollars a month
Take Out/Going Out to eat --> this is a huge issue that we have really done a terrible job with since having the baby approx. $150
After that - I really don't know where the money goes - huge red flag...

Total Left is $450 but I know we aren't making that so I am afraid it gets nickel and dimed away...

Assets
Me Retirement
22000 TIAA - work sponsored I contribute 5% work matches 5%
15600 Roth IRA - contribute 350 post tax every month
6500 403B - from an old job just sitting at the moment
Massachusetts Teacher Retirement - I am now in a private school and can't contribute. If I cash this out I am not sure what it is worth and it will start me back at year 1 if I ever return to public school.

Wife
58000 - she contributes 7% work contributes an additional 3%

Stocks
25000 - mostly in Apple stocks we were gifted from a grandparent - there is some emotional attachment to these but could cash some of them out if it makes the most sense

House

Not sure if this counts but it is currently valued at 450,000 - netting us 100,000 if we sold

Total Assets 120,600 without house 220,600 counting the house

Liabilities
What do we do with all these student loans?

Lender                     Original       Current

Mortgage @ 3.625   371000   349000
MGL 1 @ 4.2%           11755   9551 - student loan
MGL 2 @ 6.5%          17600   7600 - student loan
MGL 3 @ 6.3%          13000   6000 - student loan
Discover @ 4.75%   12500   8852 - student loan
MOHELA @5.5%   26500   16000 - student loan
MOHELA @5.5%   56000   49000 -student loan
Car @ 3.9%          26000   17000
Boiler 0%                  8000        7000 - 0% thanks Mass Save!
Credit Card 18%                       2500


Thanks!
« Last Edit: February 24, 2020, 03:20:40 PM by lduhaime1 »

Kayad

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #1 on: February 23, 2020, 10:34:33 PM »
Nuts and bolts:
1.  Pay off that 18% cc debt first things first.  How did that happen?  Figure out what went wrong and make sure it never happens again.  Stop all unmatched retirement contributions until youíve killed that.
2.  Your spend doesnít have a line item for food, diapers, clothes, medical, your cc debt, etc.  Are you sure you are running in the black? Kudos for aspiring to get a handle on your spending, but I think a few months of careful record keeping is going to be necessary for you to really see where the $ is going.
3.  Unless you are in some sort of repayment program, try to refi your loans with first republic at 1.95%.   I wish I had lived in one of the states where they had branches...  Failing that, one of the other private lenders, should be able to get you under 4% easy.  If for some reason you canít refi,  investment order would say prepay your 6+% loans even before unmatched retirement contributions.  I would avoid cashing out tax advantaged accounts, and youíd have to pay capital gains to liquidate the 25k.  That may be necessary, once we see your accurate budget numbers.
4.  You are probably in the red budget wise, or very close.  Emergency, hair on fire situation.  Get rid of the car.  It is costing you ~7k a year, and you say you donít really need it.  You can Uber around and rent a car for weekend trips and still end up way ahead.  If needed, tell yourself it is just for a couple of years.  $110 cable-do you really need that?  Cell is high, read around for ways to lower that.
5.  Once you are able to again contribute above match to retirement, I would contribute to 401/403/tira instead of Roth.  Your marginal tax rate is high enough that tax savings are significant.  You are really just getting started on savings, so use tax savings to get more $ invested and working for you.

Good luck!

ericrugiero

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #2 on: February 24, 2020, 07:27:48 AM »
I personally would sell the Apple stocks, keep $1000 for an emergency fund and make a big dent in the loans.  You could pay off the 18% credit card, the two student loans over 6% and still have money left for paying off something else.  Will the interest rate on the discover card go up?  If so, that is before the 6.3% student loan. 

CAUTION:  when selling the stocks pay attention to how much you will owe in taxes.  I'm not an accountant but I believe it will look something like this.  You pay taxes on how much the stock has increased in value since it was given to you.  That was your "basis".  So, if it was worth $15,000 when you got it then you pay taxes on the $10,000 it went up.  That (I think) will be at the long term capital gains rate so it shouldn't be a ton of money but you don't want to get to next April and have a surprise about how much you owe the government.  Figure it out and keep enough cash in the bank to cover that tax. 

I'll 2nd the suggestion to look at traditional vs roth investments.  Traditional saves you money on taxes now vs later. 

Take a hard look at your expenses, there is some low hanging fruit there.  Cell plans and cable bill are both higher than you "need".  What does your grocery spending look like?  That's a common area for overspending.   

My guess is that a $450K house in MA isn't outrageous but is it more than you need? 

The car is costing you quite a bit of money per year.  It's easy to not realize how expensive they are between payment, insurance, depreciation, taxes & registration, maintenance, etc.  Take a hard look and see if you need a cheaper car or even just rent one as needed.   

You need to get serious about the debt you have.  See this post.  https://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/


 

Aunt Petunia

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #3 on: February 24, 2020, 08:06:50 AM »
1. Sell the car. Sell a little bit of the apple stock to pay off the loan and buy a cheaper car. 5k max. Or go carless if you can.
2. Implement budget cuts outlined below. Pay off the cc debt and establish an emergency fund.
3. Refinance the student loans for a lower rate, pay aggressively on anything with a higher than 5% interest rate.
4. Go traditional on your IRAs, use the tax savings to contribute even more next year.

Monthly Expenses
Mortgage 2001- does this include taxes and insurance? You can shop around your insurance to get this down a little. Make sure you are not prepaying because you have a nice low interest rate.
Day Care 1600-probably not much you can do about this right now.
Student Loans 1800- try to refinance for a lower rate.
Car Loan 383-sell the car and get a cheap beater. Sell some of the apple stock if you have to in order to get this gone.
Car Insurance 200- liability only on a beater should be about$30.
You didn't list registration as an expense. In my state the registration cost drops based on the age of the car. Not sure about yours.
Life Insurance 100- maybe you can get this cheaper through work
Cable 116- I take it this includes internet too, cut the tv service if you have it. Or pay a neighbor a little bit to use their internet.
Phone 121- get cheap MVNO plans, $50 max for 2 phones
Electricity 65
Gas 100- is this for heat or for the car?
Condo Ins/Water 200- is the insurance not included with your mortgage?
Therapy 250- can you temporarily suspend this until the cc debt is gone and you have an emergency fund
NYTimes/Netflix 20- suspend temporarily until cc debt is gone
Compost 20- not sure what this is, can't you just start a compost pile in your backyard?
Boiler Payment 71- leave alone for now

total: 7047- I found you about $900 in budget cuts above
I take it the other 1100 is for food and stuff?

Transfers:- suspend these temporarily until the cc debt is gone and you have an emergency fund
Roth IRA 350
College Fund for Baby 100

Laura33

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #4 on: February 24, 2020, 08:46:35 AM »
So I'm a little worried that you're fixated on the student loans and didn't even mention the CC debt.  At 18%, that is killing you.  That also suggests that you don't know your monthly expenses as well as you think you do, because if you were actually clearing $1100/mo., you wouldn't be running in the red.  And as Kayad noted, you don't even account for groceries, baby expenses, etc.  My advice:

1.  Track your spending, to the penny.  You really, really need to know where all that money is going before you can develop a reliable plan.

2.  Pay of the CC ASAP.  If you need to, sell a bit of stock.  But do not run it back up!  Most people who pay off CC debt go back into debt almost immediately, because they haven't fixed their spending problem.  If you run the debt back up again, do not keep selling more stock to pay it down -- then you're really just using your savings to fund your current lifestyle.  Instead, if the first try doesn't take, then you need to do it the hard way, by cutting the budget, so you really "feel" the pain (which tends to be the only thing that persuades most people to avoid CC debt in the future). 

3.  Stop contributing to the college fund.  You cannot afford to pay for your kid's college until you have your own paid off.  The good news is that this is not forever:  daycare expenses tend to go down every year or two as your kid ages into the older groups.  And every time that happens, that will free up a little more money for your other priorities, like college.

4.  Stop contributing to the Roth.  At your incomes, you will want to max out your pre-tax savings.  So that money should either go toward your 6%+ loans or toward your work retirement accounts.

5.  Sell the car.  It is costing you way more than you think to host a lump of metal in your driveway on the off chance you might want to drive it once in a while.

In terms of priorities, you should be throwing every spare cent at the CC debt, even if it means not getting the match in your retirement accounts.  Once you get that paid off, you can resume the match and put the extra money toward your other priorities. 

If you can refinance the loans, great -- particularly the 6% ones.  If not, then paying down those two loans is your highest priority after you contribute up to the match.  Then move on to the 5.5% ones.  But note that you do not need to pay off those 4% loans early -- those are at a pretty decent interest rate, (and even the 5% ones aren't bad if you're comfortable letting those ride).  Decide which ones are worth it to you to pay off early, and then once you get those done, you can use the money you've freed up to (i) put as much as you can toward retirement, and (ii) resume college savings. 

diapasoun

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #5 on: February 24, 2020, 12:48:38 PM »
Can you talk more about the boiler payment? Is this a payment plan for a boiler you bought? That's my understanding from the loan section, but I wanted to double check (a rental boiler is usually a bad idea financially).

wellactually

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #6 on: February 24, 2020, 01:09:18 PM »

Monthly Expenses
Mortgage 2001
Day Care 1600
Student Loans 1800
Car Loan 383
Car Insurance 200
Life Insurance 100
Cable 116
Phone 121
Electricity 65
Gas 100
Condo Ins/Water 200
Therapy 250
NYTimes/Netflix 20
Compost 20
Boiler Payment 71

total: 7047

Transfers:
Roth IRA 350
College Fund for Baby 100


Things I have on my budget that aren't included here:
- Home maintenance
- Car maintenance
- Groceries & Toiletries
- Charitable Giving
- Spending Money
- Date Night / Entertainment
- Haircuts
- Clothing
- Gifts
- Travel
- Gym

Some of those may not apply and many people have larger buckets, but it feels unlikely to me that you don't spend at least another $500/month on those kinds of things, cutting your extra in half.

I think you need to go back and see what you actually spent the last couple months and track more going forward. Agree with others about the CC and selling the car.

QUESTION: Is the money in the Roth your only available liquid-ish cash for emergencies?

lduhaime1

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #7 on: February 24, 2020, 03:24:42 PM »
Nuts and bolts:

3.  Unless you are in some sort of repayment program, try to refi your loans with first republic at 1.95%.   I wish I had lived in one of the states where they had branches...  Failing that, one of the other private lenders, should be able to get you under 4% easy.  If for some reason you canít refi,  investment order would say prepay your 6+% loans even before unmatched retirement contributions.  I would avoid cashing out tax advantaged accounts, and youíd have to pay capital gains to liquidate the 25k.  That may be necessary, once we see your accurate budget numbers.


Thanks so much for your ideas. I had no idea loans could be refinanced at such a low rate! Are the those variable or fixed? A follow up question would be if both the wife and I have stable jobs, does committing to a variable but low rate make sense? Or is it always better to go for the fixed rate?

Sorry if those are pretty basic questions - but thanks for your help!

lduhaime1

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #8 on: February 24, 2020, 03:33:51 PM »
So I'm a little worried that you're fixated on the student loans and didn't even mention the CC debt.  At 18%, that is killing you.  That also suggests that you don't know your monthly expenses as well as you think you do, because if you were actually clearing $1100/mo., you wouldn't be running in the red.  And as Kayad noted, you don't even account for groceries, baby expenses, etc.  My advice:

1.  Track your spending, to the penny.  You really, really need to know where all that money is going before you can develop a reliable plan.

2.  Pay of the CC ASAP.  If you need to, sell a bit of stock.  But do not run it back up!  Most people who pay off CC debt go back into debt almost immediately, because they haven't fixed their spending problem.  If you run the debt back up again, do not keep selling more stock to pay it down -- then you're really just using your savings to fund your current lifestyle.  Instead, if the first try doesn't take, then you need to do it the hard way, by cutting the budget, so you really "feel" the pain (which tends to be the only thing that persuades most people to avoid CC debt in the future). 


Thanks for your insight - you are definitely right and I am fixated on the student loans - I am not quite sure why I think because they seem to just be constantly there...

We definitely need to track our spending to the penny.  I feel like we go through periods where we do well with this then when life gets busy the wheels fall off.  I would love to hear how other people find a system that works for them. We have tried Mint but it seems like accounts constantly need to be resynchronized and I have trouble keeping track of all the transactions and putting them in "buckets".

We do well when we write down all transactions the old fashioned way...maybe we should stick to that.

Most of the credit card debt came from a few housing projects that needed to be completed right after the baby was born.  Part of replacing our boiler was a 2700 dollar rebate that we are waiting on from Mass Save.  Fronting that money basically took away our savings account and then the credit card debt crept up.

In terms of selling stock, I am definitely for that option but I am intimidated about the tax process and need to do more research on how much we need to put away for taxes.

lduhaime1

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #9 on: February 24, 2020, 03:42:42 PM »
Wow, definitely overwhelmed with the helpful suggestions - thank you all:

Some initial thoughts from the first read through:

First and foremost - come up with a way to track every penny spent this money to really figure out where the money is going

2. take care of that credit card debt

3. look into student loan refis

4. carefully consider the car and how much it costs us for getting very little actual use

More for me to research:

I'd love to learn more about the tax implications of selling some stock

Learn how people manage budgets in a sustainable manner

Thanks again!

lduhaime1

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #10 on: February 24, 2020, 03:47:50 PM »
Can you talk more about the boiler payment? Is this a payment plan for a boiler you bought? That's my understanding from the loan section, but I wanted to double check (a rental boiler is usually a bad idea financially).

It is a payment plan for a purchased boiler through the mass save program - 7 year loan 0% interest.

lduhaime1

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #11 on: February 24, 2020, 03:50:23 PM »


QUESTION: Is the money in the Roth your only available liquid-ish cash for emergencies?

Opps missed that - we have about 1500 in savings account

Goldielocks

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #12 on: February 24, 2020, 04:19:25 PM »
First look:
1) CC debt at 18% - this had better be for an emergency doctor visit.  Pay it off fast and get a $3k emergency fund for future.

2) Utilities, phone, etc are very high.  Some is due to your region but not that phone bill.

3) $2.4k/yr for one car insurance?  Cut it in half.  High deductible, get a low cost car and take optional insurances off.  If it gets totalled, you are out a car. and that is ok for you.  Just cover your liability / injury protection with insurance.

4) $1200/yr life insurance is very high for being in your early 30's.  Look at alternate term insurance. How much do you already have with your employers?   Cut this back to just enough to cover your mortgage for now, as term life insurance on each of you.   With both of your working, the other person can figure it out if the mortgage is paid off.

5) Sell the car.   Get rid of the loan.   If your insurance is high because of a bad driving record, maybe wait 6 months or a year before getting another car so your insurance goes down.   Get a cheap car.  Think $5k or less.

6)  Set up four cash buckets - Groceries, His discretionary, Her Discretionary, and baby / household discretionary.
Pay every thing in cash for a while.  Move cash into envelopes every 2 weeks and spend from the envelopes when you shop.  You can save for later.  This is the only way to really understand how you are spending in a fundamental, gut-driven way.

7)  Once you do the above, then you can look at selling your stocks.   I would rather you save to pay off the higher rate loans, first / instead.  Keep the stocks for another "emergency" fund or when you are very clear in your minds that you need it. 

I suspect that you will be fine once you tidy up items 1-6 and won't need to sell the stocks, but it is an option.


diapasoun

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #13 on: February 25, 2020, 10:26:29 AM »
We do well when we write down all transactions the old fashioned way...maybe we should stick to that.

If this is what works for you, then do it! I tried using Mint for a while and I too found it a right pain in the ass. The only thing I use Mint for now is keeping some vague track of networth -- I just grab all my transactions out of my accounts once a week or so and plonk them into a spreadsheet.

MaggieD

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #14 on: February 26, 2020, 03:29:27 AM »
#1 - pay off the CC - use the 1500 thatís in savings to start with today.

The stock has a cost basis that is likely lower than its current price.  When withdrawing, you only pay taxes on (selling price minus cost basis) on the shares you sell.  The brokerage should have this information fairly easily available.  I think youíll have a 15% capital gains tax rate based on your numbers.  Iíd start with taking out enough to get the CC paid off ASAP.

SimpleCycle

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #15 on: February 26, 2020, 04:59:20 AM »
I'm guessing you are running in the red every month.  +1 to tracking expenses in whatever way works for you.  I personally like YNAB because it makes me check in and categorize every transaction.

Other people have provided advice re: the credit card debt, but I'll just say you need to get back into the black or you will never get ahead.  If that means not using credit cards at all for a while, that's probably the best idea.  And it almost certainly means cutting expenses, especially now that you have that daycare payment to deal with.

Regarding the student loans, can you tell us more about the specifics?  Are they all federal loans or are some of them private?  Whose loans are they - yours, hers, or both?  Are you eligible for any loan repayment as a teacher?  How far are you into the 10 year term for each one?

I suspect the way the debt is structured is killing you, because the minimums are higher on a bunch of small loans than they would be on one larger loan.  Refinancing can help with that too - you get one payment and it's often lower than the individual payments you have now.  I suspect you're not going to get as low as 2%, but I think 4% or 5% are likely from a place like Earnest or SoFi.  You should each refinance your own loans in your own name (not jointly) and see what they offer you for terms.  It looks like $88k at 4.5% for 10 years would have a $912 payment, or $1225 for 7 years.  I have an Earnest referral link, it gets us each $200 if you use it, but obviously you should use whoever gives you the best terms. https://www.earnest.com/invite/heather1962

One note about refinancing is that federal loans have certain benefits that you lose when you refinance.  Eligibility for public service loan forgiveness and a lot of the deferrment options are not available for refinanced loans.  It may still be worth it to refinance, but you need to be aware of what you are giving up by doing so.

So for now, I'd say you need the following baby steps:
1. Pay off 18% credit card.
2. Track all your spending.
3. Look into loan refinancing.

Car Jack

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #16 on: February 26, 2020, 08:50:02 AM »
Stop college savings and I'd even say if it's not a 529, take all the college savings money out and pay down student loans.

I'll be contrarian and say unless you're in Back Bay or something where you can always walk/bike everywhere, keep the car.  You absolutely won't get as much for it as you think you would. 

Here's the biggie.  Sell the house.  Sorry.  Your debts will far more easily be paid down without the costs associated with the house on your shoulders for maybe the next decade.  Buy after the loans are paid and you have extra savings.

I wouldn't save anything for retirement beyond any match amounts.  Pay down the debts.  I know I sound like Dave Ramsey here.  But I feel better than I deserve today, so what the heck.

Kids are expensive.  The end on that.  I'm at the point where one of mine is part time college, finishing his final courses and those costs are about gone.  Other son is in community college.  Oh...both of them are driving my cars.  I'm also in Mass, so I know what things cost here.  But I'm much older than you and been there.  Your car isn't dragging you down financially....your house is.

Laura33

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #17 on: February 26, 2020, 10:59:11 AM »
I'll be contrarian and say unless you're in Back Bay or something where you can always walk/bike everywhere, keep the car.  You absolutely won't get as much for it as you think you would. 

. . . .

Your car isn't dragging you down financially....your house is.

I disagree with this.  The car is the third-largest monthly expense -- it is costing at least $700/mo., even assuming minimal gas, maintenance, depreciation, and incidentals (parking, registration, inspections, etc.). 

In addition, somewhere to live is necessary; sounds like for them, having a car is not.  So the real comparison is "current housing costs - alternative housing costs" vs. car costs.  If their alternative housing option would save them less than c.$700/mo., then they'll actually save more by ditching the car. 

And that's just the carrying costs.  It doesn't consider (i) the cash in hand provided by selling the car, and (ii) the amount of interest avoided by paying off that CC debt with those proceeds (or, alternatively, the amount of additional investment earnings/lower taxes from using the car sale to pay off the CC debt instead of selling stock to do so).

The car is the low-hanging fruit here:  on a dollar-per-unit-of-value-provided basis, it is by far the largest drag on their pocketbook.  I agree that all things should be considered, including housing.  But the car should be considered first, because it is (i) providing the least value for the money expended on it, and (ii) is easiest to sell.

frugalfoothills

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #18 on: February 26, 2020, 02:01:32 PM »
Just chiming in to say there is no right way to manage a budget. The right way is whichever way works for you. Some folks here are "set it and forget it" types that let the apps like Mint, YNAB, etc. do the tracking and have everything automatically depositing into various accounts, bills paying, etc. Good for them and their well-oiled machines. That ain't me!

I am most successful when I am most actively engaged in my money management. For me that means I work out of an Excel spreadsheet where I have a chronological schedule three months in advance of each paycheck, and line items for which bills will be paid out of said paycheck. Each paycheck is sectioned out into non-negotiable savings (for you this would be non-negotiable savings AND debt repayment), bills, and variable expenses (groceries, gas, etc.) It looks something like this:

Pay Date: X
Take Home Pay: $2,000

Mortgage: $530
Car Insurance and Taxes: $70
Car Maintenance: $50
Emergency Fund: $50
House Sinking Fund/Home Maintenance: $300
Vet: $20
Power: $75
Water: $75
Cell Phone: $55
Groceries: $200
Gas: $55
Misc Spending: $200 (restaurants, clothes, fun stuff)
TOTAL: $1,680
DELTA: $320

Then once every bucket has been accounted for you can really see what is left and adjust accordingly. I have $320 left after all my responsibilities are taken care of! I can allocate that accordingly depending on my goals, needs, etc.

The main thing is that nothing is a surprise, ever. Your budget/schedule is proactive, not reactive, to the financial requirements of your life. If you pay your car insurance quarterly, you still have a line item per paycheck or per month for that, and you stash that money away in anticipation of that bill coming due. You then have a line item for that bill on the date it is due. I repeat... nothing is a surprise, ever.

Part of the way I make sure there are no surprises or that I'm running short when a bill comes due is to pay every bill on payday, whether it's due or not. If the bill is due during that pay period, it gets paid ON pay day. One other trick that I used during the debt-paydown year of my life was to partially pay certain large bills to make my pay periods consistent with each other. OR, if a partial payment isn't an option, create a separate account (I call mine "Holding") and split the bill in half yourself. I do this for my mortgage each month so that I don't have one paycheck with $1000 coming out. Think about the same concept on a smaller scale to balance your income stream.

I personally like doing it this way because I manage my income to the dollar and feel that I have a ton of control when I'm able to see everything this way and adjust buckets as needed. I have formulas that also let me see how my diligent saving will impact each bucket into the future, and back when I was in debt repayment mode, that was hugely motivating as I could see how (if I stick to the budget!) in 3 months time my debts would be smaller, or gone, etc.

Find what works for you and make it enjoyable. Best of luck!

lduhaime1

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #19 on: February 27, 2020, 05:06:41 PM »

Regarding the student loans, can you tell us more about the specifics?  Are they all federal loans or are some of them private?  Whose loans are they - yours, hers, or both?  Are you eligible for any loan repayment as a teacher?  How far are you into the 10 year term for each one?

I suspect the way the debt is structured is killing you, because the minimums are higher on a bunch of small loans than they would be on one larger loan.  Refinancing can help with that too - you get one payment and it's often lower than the individual payments you have now.  I suspect you're not going to get as low as 2%, but I think 4% or 5% are likely from a place like Earnest or SoFi.  You should each refinance your own loans in your own name (not jointly) and see what they offer you for terms.  It looks like $88k at 4.5% for 10 years would have a $912 payment, or $1225 for 7 years.  I have an Earnest referral link, it gets us each $200 if you use it, but obviously you should use whoever gives you the best terms. https://www.earnest.com/invite/heather1962

One note about refinancing is that federal loans have certain benefits that you lose when you refinance.  Eligibility for public service loan forgiveness and a lot of the deferrment options are not available for refinanced loans.  It may still be worth it to refinance, but you need to be aware of what you are giving up by doing so.

So for now, I'd say you need the following baby steps:
1. Pay off 18% credit card.
2. Track all your spending.
3. Look into loan refinancing.

This is exactly what I was wondering - do a bunch of smaller loans end up costing more in interest than one large loan even if the interest rates are near the same? Why is this? Sorry if that may be a dumb question...

Regarding the loans they are his and hers basically split down the middle 49k each.  The MGL loan listed above are Federal loans from my undergraduate degree and maybe a bit from my masters...I have taken advantage of some teacher forgiveness due to working in a Title 1, high needs school.  That took 5000 dollars off the loans as of 2 years ago. I feel comfortable refinancing the federal since I've already taken advantage of the 5000 dollar forgiveness and my job is stable so hardship options aren't a huge concern.

The loans are due to be paid off starting 8/2022, 1/2024, and last 12/26.  The 16,000 dollar MOHELA and 8k Discover student loan are both mine as well.

My has the other MOHELA at 49K.

Wayward

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Re: New Baby & 100K in Student Loan Debt - What's Next?
« Reply #20 on: March 21, 2020, 07:21:33 PM »
1.  Pay off credit card ASAP.  Seeing as the market has really plummeted, I wouldnít sell any stock right now.  However, you could tighten up the budget and throw the extra funds toward the credit card (e.g. cut the college fund, eating out, lower grocery bill, optimize car insurance and life insurance, etc.).  Personally I have auto pay set to pay the statement balance only, if you do that you will not pay any interest.   

2.  Track your spending better.  I use an Excel spreadsheet (attached), which has worked better for me than Mint because I need to enter everything manually and that makes me consider everything I spend more.

3.  Refinance the student loans - you should be able to get a really great rate right now.  Consolidating the debt will usually give you a lower monthly payment than a bunch of separate loans, plus a lower interest rate means more of your payment will go toward the principal!   

4.  I would still contribute to a 401k (up to the match only) and IRA - especially since stocks are on sale right now, but I would suggest switching to traditional.  https://www.madfientist.com/traditional-ira-vs-roth-ira/  You donít mention which company/stock you are invested in, but I would suggest checking the expense ratios on everything you have and make sure the costs are not super high.  Vanguard VTSAX is excellent, but Fidelity is also good.

Let us know how it goes!