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Started By
Message
re: Postponing 401k contributions to pay of debts
Posted on 11/12/13 at 7:38 am to SmellslikeKevinBacon
Posted on 11/12/13 at 7:38 am to SmellslikeKevinBacon
quote:
We like our cars.
We're Americans - we all like cars.
quote:
It may be a depreciating asset but the loans are manageable. Both notes are under $400 a month.
$800 per month would absolutely crush my 6-figure income.
quote:
The only debts i have left to pay off are a $4500 credit card bill, about $15k, in student loans, and two car notes that are both about $16k.
So - you have a little over $50k and you want to pay all that off with your retirement - ~$20k of that is credit card and student loans (and nothing can be done about those) and $32k for cars - if you could swing it to get out from under both car notes - you could be debt free in about 24 months, give or take.
quote:
I don't agree with selling the cars. It is not necesary at this point in my life. I am not struggling to pay these bills.
You appear less than willing to make any sacrifices to accomplish a goal of becoming debt free - except for your retirement - which is the one thing that truly is an investment (other than the student loans) and, if funded, will provide an income for you in the future. The cars and credit cards are unnecessary drags on your financial stability.
1
Posted on 11/12/13 at 9:27 am to Ace Midnight
I manage the car notes. I understand the logic behind selling the cars. The loans on the cars are fairly new. My wifes's car loans is in year two of a 6 year not and my jeep note is in the first year of a 5 year note. I don't think that if we sold the vehicles it would be able to to pay off the loans and leave us with enough money for dependable vehicles. I drive 30 miles each way for work so i need a dependable vehicle, same with my wife. I do make sacrifices to pay off the debt. We have a budget for each pay period. once bills and groceries are paid we put all extra money on our debts. We live in a small house, with old furniture, never go out, or eat out. We do not spend hardly any money on frivolous things. Before we got these two vehicles we both drove beaters with high mileage. The cars were on their last legs. They were paid for but the repair bills were starting to add up. So we made the decision to pull the money from our budget to get vehicles. That is the only thing we have splurged on period during the time we have been paying on our debt. i understand that it may not have been a good idea, but I also like to enjoy some of the money I make.
You really do not know me at all to make this assumption. i feel like my situation could be worse than what it is. I make due and sacrifice hobbies and all sorts of other things to pay on these bills and put my kid through school. I try and I do the best to my ability to make it right.
quote:
You will not have these debts paid off in two years. I am fairly confident you will have increased your total debt by that time.
Not trying to flame, but I have known several people with your mindset that want to pretend like they are going to get out of debt. They never do, and always rack up more.
You really do not know me at all to make this assumption. i feel like my situation could be worse than what it is. I make due and sacrifice hobbies and all sorts of other things to pay on these bills and put my kid through school. I try and I do the best to my ability to make it right.
This post was edited on 11/12/13 at 9:29 am
Posted on 11/12/13 at 9:56 am to SmellslikeKevinBacon
quote:
My wifes's car loans is in year two of a 6 year not and my jeep note is in the first year of a 5 year note.
So you went from owing $0 to about $35k in a little over a year?
I'm not knocking you making decisions on what you feel is best, but your budget appears to be stretched pretty thin. I would do the snowball on the CC, then the SL, then the cars. You should be full on Baby Step 2 for 3 to 5 years. That's a long time. And by the time you get done - those cars will be looking pretty "old" again.
Those cars just cost millions - I know whereof I speak. I did the whole "Let's buy a bunch of cars" thing - it did not end well. I do carry a loan on the wife's truck, but I had enough in Baby Step 3 to have paid for it. I am "borrowing" the money from myself in that case. It does not sound like you have much of an emergency fund, either, but I hope I'm wrong about that.
Anyway, good luck with it. I've increased my net worth by over $60k in 4 years following Ramsay's principles, generally. I kept my retirement contribution enough to get the match and I borrowed money for cars (one at a time, of course), but then those became my Baby Step 2 until resolved - I've worked about 1000 hours of overtime over that period, and only taken 1 family vacation. I only buy used cars and I drive them until they cannot be driven any longer.
Posted on 11/12/13 at 9:59 am to SmellslikeKevinBacon
quote:
Now i see the importance
Not trying to be an arse but I don't think you do.
quote:
I manage the car notes.
Almost anyone can "manage" a car note, doesn't mean you should have them. I have two and I'm trying like hell to get rid of them. You were in this hole and got not one but two new vehicles. $700-$800 a month on luxury with that kind of debt is not smart.
If you don't mind me asking (sorry if you already said this), what do you and your wife do/make?
You're 34 years old and frankly, you saying you only have $1000 saved for emergencies is frightening. I guess you had no choice but to take out notes on those vehicles with no cash available.
Again, not trying to be an arse but I think to tackle this, you're going to have to change your mind set a bit.
This post was edited on 11/12/13 at 10:21 am
Posted on 11/12/13 at 10:04 am to CQQ
quote:
you're going to have to change your mind set a bit.
I just don't see a willingness for him to do this. He's already admitted he doesn't think the cars are a problem - but he's going to cut his retirement for Baby Step 2 (which is in the program, by the way, at least officially) - so, he did good by doing BS 1 ($1,000 in an emergency fun) - he just has an unusual idea of what constitutes an emergency (I need a dependable car) - my youngest drove a Honda Accord with 1/3 of a million miles on it for 10 months. That is doable - that's a sacrifice that demonstrates you're serious about the debt.
The OP was about $20k in the hole 2 years ago - then he took a big bite out of about $35k to $40k in new cars - but he doesn't see that this is his big budget hole - his 401k contribution is the problem.
We tried to help him - he'll work through it - or end up in Chapter 13. I wish him the best.
Posted on 11/12/13 at 10:26 am to Ace Midnight
Solid advice. I agree the cars were not a smart financial decision but our old cars were done. I do have a little over a $1000 saved for emergencies. I do use the snowball method and with the payment schedule we laid out we have 2 years and all of the debts will be paid for. We have had other small debts that we have paid off, these are the biggest of our debts. To be honest if we would not have taken out the loans for the cars we would be close to finished. My budget is stretched pretty thin. But we have it planned out pretty well to take care of everything. It just gets boring staying home and using all the money you make to pay off your past mistakes and debts. It will be all that much better in two years though, hopefully I can find a way to make it shorter than that.
I currently put $200 a month in the savings account I have set-up for the emergency fund. Should I just keep putting that money in there or should I divert it to the debt?
I currently put $200 a month in the savings account I have set-up for the emergency fund. Should I just keep putting that money in there or should I divert it to the debt?
Posted on 11/12/13 at 10:36 am to CQQ
No offense. I got a late start on my career path. I make $86k a year and My wife makes $40k. You are right it is frightening to only have that saved. That is why i am trying to fix that.
I have changed my mindset a good bit since starting to get rid of this debt. As i stated earlier all my wife and I do is stay home and pay bills. I am trying like hell to get rid of all of my debt minus the house note at the moment. If I do that I can free up about $2000 a month in income.
As it stands now my outstanding debts monthly payments are as follows"
Credit card: min payment is $94 but starting next month Will be be paying closer to $500-$660 a month on it.
Student loan: $258 a month, in six months I will be rolling over the payments from the CC to this.
Car note 1: $384
Car note 2: $361
According to my calculations I should be able to knock this out in 2 years and about 3 months. If i could put my kid in public school it would be even quicker. But the public school around here are horrible for the most part. But it would free up about $5000/year
I have changed my mindset a good bit since starting to get rid of this debt. As i stated earlier all my wife and I do is stay home and pay bills. I am trying like hell to get rid of all of my debt minus the house note at the moment. If I do that I can free up about $2000 a month in income.
As it stands now my outstanding debts monthly payments are as follows"
Credit card: min payment is $94 but starting next month Will be be paying closer to $500-$660 a month on it.
Student loan: $258 a month, in six months I will be rolling over the payments from the CC to this.
Car note 1: $384
Car note 2: $361
According to my calculations I should be able to knock this out in 2 years and about 3 months. If i could put my kid in public school it would be even quicker. But the public school around here are horrible for the most part. But it would free up about $5000/year
Posted on 11/12/13 at 10:50 am to SmellslikeKevinBacon
quote:
I currently put $200 a month in the savings account I have set-up for the emergency fund. Should I just keep putting that money in there or should I divert it to the debt?
I would divert it to the debt. Your snowball plan, overall, is solid - the only problem is - something ALWAYS happens.
You must be doing something right - I have an $1100 mortgage, $278 car note, and $400 student loans and my just-under-6-figure gross is under a lot of stress. Private school and $800 in car notes would have me in Chapter 13.
Posted on 11/12/13 at 11:46 am to Ace Midnight
I live as simple as possible. It's really a boring life. 
I agree something always happens. My wife and i have a joke that anytime we have over $1000 in the savings you can expect something to happen within that week. It always does. If I wouldn't have bad luck I would have no luck at all.
We were really bad off four years ago with no budget and no plan. Hell we did not even keep track of the check book, we just checked online to see "if we had money". It was horribly irresponsible. We had several credit cards and lines of credit. We have fought our way to this point, it just gets tough staying disciplined.
I agree something always happens. My wife and i have a joke that anytime we have over $1000 in the savings you can expect something to happen within that week. It always does. If I wouldn't have bad luck I would have no luck at all.
We were really bad off four years ago with no budget and no plan. Hell we did not even keep track of the check book, we just checked online to see "if we had money". It was horribly irresponsible. We had several credit cards and lines of credit. We have fought our way to this point, it just gets tough staying disciplined.
Posted on 11/12/13 at 12:22 pm to SmellslikeKevinBacon
quote:
We have fought our way to this point, it just gets tough staying disciplined.
It's not insurmountable, but I fear the car debt will drown you. And you'll start to "miss" the car payments (and the cars will be starting to show a little age at that point).
I wish you the best. I have 2 cars now with over 100k miles on them - my goal is to put 200k on each one before replacement.
Posted on 11/12/13 at 1:34 pm to Ace Midnight
I had over 100K on one vehicle and close to 300k on my Honda. I was very content without having car notes. We didn't have car notes for close to three years before we bought our vehicles. My wife caved first and I wasn't too far behind. I'm hoping that my next vehicle purchase will be a cash purchase. The vehicles we have now should last us quite a while.
Posted on 11/12/13 at 1:43 pm to SmellslikeKevinBacon
quote:
The vehicles we have now should last us quite a while.
Famous last words of a Jeep owner.
(FTR - I cannot endorse Toyota products any more highly, from a mechanical/reliability standpoint. Before it was wrecked - by the youngsters, I might add - my Tacoma had ~175k and, with new shocks/tires, rode like a new vehicle and had - other than oil change stuff - exactly 3 sets of tires, 1 set of shocks, 1 battery and 1 radiator replaced. The A/C was still cold, there was no rust, and only a handful of small squeaks here and there.)
I drive a Lexus ES 350 now (paid $24k in the used market) and my wife has a Toyota Tundra (also from the used market). Other than a condensor - zero mechanical problems with the Lexus and the Tundra has been problem free.
Posted on 11/12/13 at 3:13 pm to Ace Midnight
I don't think you can kill a Tacoma. They are like my wife's Civic Si. I think they are good for a million miles.
I'll Drive my jeep until the motor quits, then i'll just put another motor in it and keep driving it.
I'll Drive my jeep until the motor quits, then i'll just put another motor in it and keep driving it.
Posted on 11/12/13 at 7:26 pm to SmellslikeKevinBacon
quote:
I'll Drive my jeep until the motor quits, then i'll just put another motor in it and keep driving it
That is the right thing to do with respect to cars. And if your car loan had a low enough interest rate (2% or lower) it would make a great deal of sense not to pay it off early.
The problem with selling your car is that you won't get anywhere near what it is actually worth, even if you keep it in good condition. Should have bought a junker instead but that's water under the bridge now.
That said, the fact that you're in your early thirties and paying 6% for a car loan instead of 0% tells me your credit rating isn't disastrous but could use some help. And you need to start using extra cash to save and invest instead of "managing" loan payments. It may be that the best thing to do is get a second job.
Posted on 11/12/13 at 9:25 pm to Ace Midnight
Transfer your credit card debt to a new card with no interest balance for 12months. Pay it off ASAP
Posted on 11/13/13 at 7:02 am to foshizzle
It's 3.9% I made a mistake on that one.
This post was edited on 11/13/13 at 7:03 am
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