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re: Which debt to tackle first?
Posted on 7/31/16 at 7:59 am to TheHiddenFlask
Posted on 7/31/16 at 7:59 am to TheHiddenFlask
quote:
Which debt to tackle first? There is a lot of shifty advice here, so I'll help you out. Reduce your 401k contributions to the minimum required to get the company match. Do not fund an IRA until your trailer is paid off. Pay off the trailer first. It's the highest interest rate and close to the smallest balance. It's also secured debt and it is secured by your home. This is an absolute no brainer. Pay off her car next. It's a low interest rate, but it's a small balance, so paying it off will decrease your total debt service the most. Start funding a ROTH if you are eligible, keep 401k at match minimum. Price out refinancing your student loans. You have a pretty good rate, but you never know what's out there. Your student loans because of size, even though the rate is sloghtly lower. Her student loans. Your truck. I understand wanting to have a nice vehicle if you are working all the time. You probably "shouldn't" have bought such a baller vehicle, but it sounds like you can make it work, so props to you. Come and find me somewhere if you have questions.
This is what I'd say also. I don't think you'll get 30k for the trailer to be moved. Prob 25k so you'd want to get it below before you go to sell it. The only thing I'd add is you need to do this extremely aggressively. Like pay the trailer off in 2 years max. Once you do that you'll have some breathing room. One thing to keep in mind is your current state will change real fast once kiddos come. So while you can pay things off extremely fast. My wife and I were paying off 20k a year for a few years when we were your age. We are appreciating it now.
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Posted on 7/31/16 at 8:57 am to Brazos
quote:
Dave Ramsey would tell him to sell her car and his truck. It's takes a lot of discipline to follow his plan but from what I hear it's totally worth it if you follow through.
Problem is they need transportation to get to work and they have to replace the vehicles. Which means a new car loan. If they have cash to buy a vehicle outright they should just knock out a loan.
Other thing to consider is the trailer and student loans might be tax deductible, so that has to go into the calculations.
Posted on 7/31/16 at 9:26 pm to Athletix
quote:
My situation. 25 married. Wife's a teacher income is around 43000. She's just starting so I don't know her exact monthly take home, but safe to say around 2500-2700. My take home varies greatly with overtime each month. My minimum take home per month is around 3800, but I can get to around 6000 a month. Safe average is around 4500.
Our debts
My student loans- 31,000 avg %= 5.8
Her student loans- 60,000 avg%= 6.1
My truck- 41,000 2.89%
Her car- 18,000 3%
Trailer home- 43,000 10%
My reason for starting this thread is the trailer home. I live on family land and plan on building a house next to the trailer in 5-8 years. So, I'm trying to make sure I'm correct in directing all of my extra money towards the trailer even though I'll be out of it in 5-8 years...
I would echo Hidden Flask recommendations to a T.
Just wanted to add something...you are correct that with your combined incomes you can fairly easily afford to service that debt. However, don't automatically dismiss all the posters here telling you to be careful with your debt load.
It's very easy to get in a habit of assuming life is static, and when curves come your way debt does nothing but add to the stress level. I know because I've been there. I was in my mid-20s with 2 cars, boat, and house added to 100k student loans. I could easily "afford" the payments, but when life happened it made some difficult decisions even more difficult as "how do I pay my monthly bills" had to enter the equation.
If you love the truck, keep it. Just factor in that it adds to the time/effort it will take you to reach your goal of the house in 5-8 years. You clearly have have a willingness to work overtime - use that opportunity to your advantage.
Good luck to you.
Posted on 7/31/16 at 10:57 pm to Athletix
Trailer first, good lord that is absudly high interest rate
Consolidate your student loans and try to get the rate down. ( who the #%*! Racks up 60k in loans to be w teacher). Can she not so the program where she teaches at a shitty school and gets money towards her loans?
Also what are you doing with a college degree and a job that has overtime?
Consolidate your student loans and try to get the rate down. ( who the #%*! Racks up 60k in loans to be w teacher). Can she not so the program where she teaches at a shitty school and gets money towards her loans?
Also what are you doing with a college degree and a job that has overtime?
Posted on 7/31/16 at 11:03 pm to barry
quote:
Also what are you doing with a college degree and a job that has overtime?
Posted on 7/31/16 at 11:07 pm to southernelite
I can't think of a job you need a 4 year degree for that has overtime that's as substantial as he's getting.
This post was edited on 7/31/16 at 11:08 pm
Posted on 8/1/16 at 12:06 am to barry
quote:
NOMT
I appreciate the response. I hear the advice here about being cautious acquiring new debt.
I really believe I can pay the trailer off in 2 years from September, when the wife starts getting paid. Her entire monthly income will go to debt clearing.
quote:
I can't think of a job you need a 4 year degree for that has overtime that's as substantial as he's getting
I'm a plant operator
... The 4 year degree was for a different career route. When I got out of school I sort of fell into this job. I have to work about 400 hours of overtime a year just in normal scheduled overtime, but I can work 1000+ if I wanted to. I normally just pick up the days during the week when no one is home. My wife has a masters in school counciling/ psych. She's just about done with her license which she could use to effectively double her income. However, it would require her to make a 40 minute drive and hustle to make that money. I know good and well that she would drop that job as soon a we had a kid (prob in 2 years). So, I took the lesser of the two evils and compromised. Working in the school is a decent second income, great schedule, and in this case it's 3 miles from the house... When kids come she has no excuse to stay home.
I've pretty much given most of the details of my life in this thread... I've also gotten what I wanted out of the thread so it can be anchored...
Posted on 8/1/16 at 12:58 am to Athletix
quote:
I'm a plant operator
So you don't need the 4WD for work.
Sell the truck (replace with $15k vehicle) and the trailer. Rent something, pay down the student loans, and save up for a home.
Posted on 8/1/16 at 1:08 am to Golfer
Never said I need it for work. Where I go hunting I need a 4wd. I'm sure you guys would recommend give that up as well... If I rent I'm dropping a grand a month in rent with no return. I'd also have to move away from the land so contracting out a home would be more difficult. With my shift schedule Id probably just hire a contractor and not do shite at the house... I'll pass...
Posted on 8/1/16 at 1:13 am to Athletix
You can buy a 4WD used vehicle for $15k.
You're throwing away money right now on a trailer since it's a depreciating asset with a high interest rate.
But since you've got it all figured out. Good luck to you.
You're throwing away money right now on a trailer since it's a depreciating asset with a high interest rate.
But since you've got it all figured out. Good luck to you.
Posted on 8/1/16 at 1:54 am to Golfer
You just told me to sell my trailer. So take a big loss so I can rent. I could build in a year if I didn't contract it out and did none of the work myself. That's probably 50k plus I'd be giving up to jump into the home you're advising me to hurry up and get into.
Or I could wait the couple years until I'm ready to do everything myself. That's what 30k + I'd dump info renting. No return. Nothing to show for it. Oh also the big loss I gave up in selling that depreciating asset to rent.
I can negate some of that bad interest by paying the home off in 2 years of so.
The advice on the truck... I hear ya but I'm not trading mine in.
Is this everyone's comment when I don't listen to their bad advice?
Or I could wait the couple years until I'm ready to do everything myself. That's what 30k + I'd dump info renting. No return. Nothing to show for it. Oh also the big loss I gave up in selling that depreciating asset to rent.
I can negate some of that bad interest by paying the home off in 2 years of so.
The advice on the truck... I hear ya but I'm not trading mine in.
quote:
But since you've got it all figured out. Good luck to you.
Is this everyone's comment when I don't listen to their bad advice?
Posted on 8/1/16 at 6:35 am to Athletix
If your household income is 160K like you say, there's nothing wrong with a 40k truck, other than the fact that it adds a lot of debt to your total you are looking to pay down.
The interest on the trailer is what I would tackle first. Whether it's depreciating or not, if you are keeping it, you're gonna owe it whether it depreciates or appreciates.
OP came here to ask what he should pay for first and all most everyone has done is shite on his lifestyle and tell him to change it
The interest on the trailer is what I would tackle first. Whether it's depreciating or not, if you are keeping it, you're gonna owe it whether it depreciates or appreciates.
OP came here to ask what he should pay for first and all most everyone has done is shite on his lifestyle and tell him to change it
Posted on 8/1/16 at 6:56 am to Croacka
10% interest in the trailer is going to be around $8,000 in the first 2 years alone. Add in the depreciation and you are talking about it costing $400/ month the first two years.
1. Pay off trailer
2. Pay off car
3. Pay off truck
4. Pay off student loans
1. Pay off trailer
2. Pay off car
3. Pay off truck
4. Pay off student loans
This post was edited on 8/1/16 at 6:58 am
Posted on 8/1/16 at 7:33 am to Athletix
Her car
Your student loans
Her student loans
Your truck
Trailer
Your student loans
Her student loans
Your truck
Trailer
Posted on 8/1/16 at 8:53 am to Athletix
There are a lot of nobody posters on here just being dicks. The Ramsey hallelujah choir is the dumbest bunch of self assured assholes I have ever met and they really don't have any idea of finance outside of what Dave told them.
I swear if one more person asserts that debt on a depreciating asset is different than debt on an airplane predicting asset, I'm going to start an intellectual battle to send them back into the caves the my slithered out of.
I swear if one more person asserts that debt on a depreciating asset is different than debt on an airplane predicting asset, I'm going to start an intellectual battle to send them back into the caves the my slithered out of.
Posted on 8/1/16 at 8:55 am to Athletix
That 10 percent rate on the trailer is giving me a lot of pause. However... it's still home acquisition debt so it's still tax deductible. (assuming you itemize on your taxes).
In the end I don't think it changes the payoff order.
Her car
Your student loans
Your truck
Trailer
Her student loans
Also, if you truly want to tackle debt, here is an idea. Do your budget based on your actual non-OT earnings. Set aside money in the budget to attack debt. Then, take every dime you earn of OT and put it towards debt as well.
Yeah, the truck was a goofy purchase, but you don't have any credit card debt or personal loans, and that alone puts you in really good company. If the worst financial decision you make as a 25 year old is a new truck, then you are doing rather well.
In the end I don't think it changes the payoff order.
Her car
Your student loans
Your truck
Trailer
Her student loans
Also, if you truly want to tackle debt, here is an idea. Do your budget based on your actual non-OT earnings. Set aside money in the budget to attack debt. Then, take every dime you earn of OT and put it towards debt as well.
Yeah, the truck was a goofy purchase, but you don't have any credit card debt or personal loans, and that alone puts you in really good company. If the worst financial decision you make as a 25 year old is a new truck, then you are doing rather well.
Posted on 8/1/16 at 9:40 am to TheHiddenFlask
quote:
There is a lot of shifty advice here, so I'll help you out.
Reduce your 401k contributions to the minimum required to get the company match. Do not fund an IRA until your trailer is paid off.
Pay off the trailer first. It's the highest interest rate and close to the smallest balance. It's also secured debt and it is secured by your home. This is an absolute no brainer.
Pay off her car next. It's a low interest rate, but it's a small balance, so paying it off will decrease your total debt service the most.
Start funding a ROTH if you are eligible, keep 401k at match minimum.
Price out refinancing your student loans. You have a pretty good rate, but you never know what's out there.
Your student loans because of size, even though the rate is sloghtly lower.
Her student loans.
Your truck.
I understand wanting to have a nice vehicle if you are working all the time. You probably "shouldn't" have bought such a baller vehicle, but it sounds like you can make it work, so props to you.
Come and find me somewhere if you have questions.
This is what I would do. That trailer at 10% is something you have to pay off quickly. 10% is a really high interest rate. have you thought about trying to refinance it?
Posted on 8/1/16 at 10:10 am to TheHiddenFlask
quote:
This is how dumb Ramsey jackasses are. They want you to invest in hopes of achieving a volatile 6% return instead of paying off debt which will give you a guaranteed 10% return.
Brilliant.
I'm not a Ramsey follower but he says to pay off debt before investing lol.
But you clearly forget that 401k is taxed deferred, so anything contributed is pre-tax and therefore an instant tax bracket return. If he is going to be making $140k that's a 25% return instantly. So yeah I'd say 25% return over 10% on debt is better.
Are you going to go for strike 3?
Posted on 8/1/16 at 10:16 am to baldona
quote:
I'm not a Ramsey follower but he says to pay off debt before investing lol.
But you clearly forget that 401k is taxed deferred, so anything contributed is pre-tax and therefore an instant tax bracket return. If he is going to be making $140k that's a 25% return instantly. So yeah I'd say 25% return over 10% on debt is better.
It's ok if you don't agree with Ramsey (many don't) but at least get right what he says.
The idea is this: temporary turning off 401K contributions allows you to plow that money into paying off debt. Once the debt is paid off, you can turn back on contributions and even contribute more to "catch up".
Also I don't think it's correct to look at it as a 25 percent return. It's more of a 25 percent discount to invest. Whereas, that 10 percent interest rate keeps going.
Posted on 8/1/16 at 12:23 pm to Ex-Popcorn
I'm here. I never said it was his advice, just that it was he advice his followers were giving. You're still a total dumbass.
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