Critique my plan

[riverwed070707]

My financial goals for 2012 are as follows:
-pay off car ($2k balance)
-save $9000 for school/emergencies
-begin paying down SLs quicker ($9900 bal)

I have 1,280/month to put toward these goals. My primary goal this year is the savings one becuase we may or may not be trying to sell our second home at the end of 2012 and we need to be able to cover the mortgage payments if it comes to that. At the same time, I don't want to lose sight of our debt free goal.

This is what I'm thinking, but I'd like some feedback.


The car wil be paid off in February with $200 left over to save. Ideally, I'd like to maintain a $200 savings payment to a separate account to prepare for a new car when we need one. The one I'm paying off is an 01 Civic, and it's in great shape with low miles but at $200/mo its going to take some time to save up for a replacement so I'd like to start now...at the same time, I really question whether this money would be better spent putting toward loans.

I put school and emergencies in the same category because we make 2 payments a year for school and then I rebuild the account. This keeps our efund high throughout the year, with a dip at tuition payment time that can quickly be rebuilt. If a huge emergency arose during that time, the fall back plan is student loans -- not ideal, but I figure its better than automatically taking student loans in order to keep the emergency fund up. I plan to contribute $750/month to this account.

Minimum payment on student loans is $140, but I currently have the payment set at $180 so we'll call that the minimum. Once the car is paid, I will start contributing $330/mo to these. We will also get a decent return (I didn't adjust in time) and I get a bonus each december, all of which will go toward the SLs.

I estimate at the end of the year I will have $3k in the efund (small but with the extra $1100/mo cash flow if needed for the other house), $2,200 in the car fund and owe around $5,500 on the student loans.

Does this sound like a safe plan?

[bjl584]

Looks good. I'd probably knock the car debt out first. It's a depreciating asset, and the SL's have tax advantages. The Civic should last another 7 to 10 years if maintained, so that would be between $16800 and $24000 for a replacement car using your $200 a month savings plan.

The SL's are low compared to a lot of peoples. (Ask me about mine. ) So, I's focus on the EF fund. Once fully funded start chipping away at the loans.

[BuckyBadger]

Was there any resolution/change from your previous thread about your husband's schooling? I apologize if I missed an update...

I like your plan -- but are you contributing anything toward retirement? If not, I'd try to sneak some Roth contributions in there somewhere.

[riverwed070707]

Originally Posted by BuckyBadger

Was there any resolution/change from your previous thread about your husband's schooling? I apologize if I missed an update...

I like your plan -- but are you contributing anything toward retirement? If not, I'd try to sneak some Roth contributions in there somewhere.

He's scaling back his classes for now (2-3/semester instead of 4-5). This will allow him to spend more time on the classes he's taking, pick up more hours (we're hoping he'll bring in $800-1000/mo compared to $500-600 now) and also cut costs through reduced tuition from fewer classes and prolonging his time at community college.

I contribute 10% to my 401k (about $350/mo) and we also put $100/mo in a Roth IRA for DH.

[bjl584]

Originally Posted by riverwed070707

He's scaling back his classes for now (2-3/semester instead of 4-5). This will allow him to spend more time on the classes he's taking, pick up more hours (we're hoping he'll bring in $800-1000/mo compared to $500-600 now) and also cut costs through reduced tuition from fewer classes and prolonging his time at community college.

I contribute 10% to my 401k (about $350/mo) and we also put $100/mo in a Roth IRA for DH.

As soon as other goals are met I'd bump up the Roth contributions.

[riverwed070707]

Originally Posted by bjl584

As soon as other goals are met I'd bump up the Roth contributions.

Well that would be ideal but chances are it's going to be a while before that happens. I do have my 401k set to increase 2% every year, so I forgot that as of Jan. it will be 12%. By the time my SL debt is gone it will be 16% and we'll be able to start maxing a Roth for DH if he doesn't have an employer plan by then. Obviously the goal would be to max it now, but the $100 is still more than 10% of his income so its not *that* bad, right?

Oh and I also contribute $100 to an HSA each month -- one more savings vehicle to add to the list -- although its benefits are mostly mitigated by the fact that I spend $80 on my Rx.

[jpg7n16]

Pulling from another thread of your's, aren't you receiving an inheritance soon?? (Mutual fund or savings account?)

Where does that come in your plan?

If you still have family debt and school costs, why give it all to your child's college fund?

[bjl584]

Originally Posted by riverwed070707

Well that would be ideal but chances are it's going to be a while before that happens. I do have my 401k set to increase 2% every year, so I forgot that as of Jan. it will be 12%. By the time my SL debt is gone it will be 16% and we'll be able to start maxing a Roth for DH if he doesn't have an employer plan by then. Obviously the goal would be to max it now, but the $100 is still more than 10% of his income so its not *that* bad, right?

Oh and I also contribute $100 to an HSA each month -- one more savings vehicle to add to the list -- although its benefits are mostly mitigated by the fact that I spend $80 on my Rx.

10% to Roth is good. You can put up to $416 a month though, so as a longer term goal I would look at increasing it when possible. Personally, I capped my 401K contribution at 10% so that I could fund my Roth fully. I like having better control and better investment options than my 401K offers. I can invest in anything within my Roth, and all gains are tax free.

HSA is pretax, so it's an excellent thing to take advantage of. If you figure 20% tax rate, then everything you purchase out of your HSA is essentially at a 20% discount.

[riverwed070707]

Originally Posted by jpg7n16

Pulling from another thread of your's, aren't you receiving an inheritance soon?? (Mutual fund or savings account?)

Where does that come in your plan?

If you still have family debt and school costs, why give it all to your child's college fund?

Personal choice. It's an inheritance I'm very emotional about and it's a small gift I couldn't otherwise give to her. I think sometimes its OK to be emotional about money and this is one of those scenarios. It won't be spent paying off debt when we are perfectly capable of handling it through other means.