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  • asb2012
    replied
    This is going to be so much more harder than what I expected But we are still on track and more exhausting too. And I think its crazy because we both have great credit scores however this debt is weighing us down. Also are ultimate goal would be to buy our first home.

    Leave a comment:


  • snafu
    replied
    OP: I too am concerned that you are contributing to an employer retirement program without asking how much you are being charged in fees and what your money buys. 2nd you are investing in a an automatic program which might be wonderful or awful or something between those two extremes. You're a smart guy and with a small amount of facts and time I'm confident you can work out if you need to change the program. Heck, just list what you own on this site and we'll all jump in with opinions.

    Cell phone contracts are wicked! They are written to benefit cell phone providers not You the client. There is no one to protect you. If you want to use new products/technology...you pay whatever they charge. The providers have turned the utility on it's ear! We pay an incredible cost for the convenience of being 'on call' 24/7 even for incoming from wrong numbers! If you take a call from an unknown area code, out of your area, the 'roaming' fee is horrendous. You are not getting a $ 300. - $ 500. phone for free, you just pay for it via your contract. It's like getting a new fridge and adding it on your 30 year mortgage.
    Providers have been adding fees for services they haven't offered because they know people don't scrutinize the bill according to investigative TV programs like Nightline.

    I figure now before signing a contract the 1st question must be to highlite and have the salesperson explain the procedure to cancel and the cost in penalties & fees to cancel the service for something that works better.

    Leave a comment:


  • isaac
    replied
    Originally posted by skydivingchic View Post
    Yes, if the employer only matches 5% of OP's contribution, it might change my advice. However, most employer matching plans I've seen are something like "100% of the first 5%" (so you contribute 5% of your pay, employer contributes 5% of your pay; you contribute 10%, employer contributes 5%) or "50% of the first 6%" (you contribute 4%, employer contributes 2%; you contribute 6%, employer contributes 3%). In the first case, OP should contribute 5% of their pay to gain the full match, which is a 100% return on investment. In the second case, OP should contribute 6% to get a 50% return on investment. If the matching is only 5% of what the OP puts in (not 5% of their pay), the return on investment drops to 5%, making it smarter to pay off any debt above 5% interest. Though to be technical about it, any money the employer contributes also has 40+ years to grow (at least in OP's case). If the contribution is invested even very conservatively, it will likely yield more total $ over the course of the next 40 years than the extra money OP will spend in interest now paying off debt at a slower rate due to contributing to a 401k.

    Oh I understand now! I was thinking if say you made $100, and you contributed $5, and your employer contributed $5 then you made 5%. I see now a match of $5 on $5 investment is 100%, not 5% Thanks for clearing that up!

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  • skydivingchic
    replied
    Originally posted by isaac View Post
    I have a question regarding this

    Let's say they match her 5% of her contribution. Wouldn't she be taking a loss by contributing on a 5% return rather than paying down a 20% debt? Or am I wrong somewhere?
    Yes, if the employer only matches 5% of OP's contribution, it might change my advice. However, most employer matching plans I've seen are something like "100% of the first 5%" (so you contribute 5% of your pay, employer contributes 5% of your pay; you contribute 10%, employer contributes 5%) or "50% of the first 6%" (you contribute 4%, employer contributes 2%; you contribute 6%, employer contributes 3%). In the first case, OP should contribute 5% of their pay to gain the full match, which is a 100% return on investment. In the second case, OP should contribute 6% to get a 50% return on investment. If the matching is only 5% of what the OP puts in (not 5% of their pay), the return on investment drops to 5%, making it smarter to pay off any debt above 5% interest. Though to be technical about it, any money the employer contributes also has 40+ years to grow (at least in OP's case). If the contribution is invested even very conservatively, it will likely yield more total $ over the course of the next 40 years than the extra money OP will spend in interest now paying off debt at a slower rate due to contributing to a 401k.

    Leave a comment:


  • isaac
    replied
    Originally posted by skydivingchic View Post
    For now, you probably only need to worry about putting enough into the 401k to capture any employer matching - that is free money you don't want to pass up.

    I have a question regarding this

    Let's say they match her 5% of her contribution. Wouldn't she be taking a loss by contributing on a 5% return rather than paying down a 20% debt? Or am I wrong somewhere?

    Leave a comment:


  • skydivingchic
    replied
    Originally posted by asb2012 View Post
    Yeah it would be $600 to get out our contract as we have my mom on our line as well and she pays her own bill. We both contribute to a 401k plan and both our employers match I also have another investment plan thing where they take out my check but I dont understand none of it. I know we should be giving more than what we do but it's confusing. I don't understand the stocks or bonds should we mix it. I will look into getting out if our contract too.
    It may or may not be worth breaking the cell contract, I just wanted to point out that you should do the math before dismissing it outright.

    The bolded part above is a red flag. You should definately understand and know where your money is going. I would look into this to see what the investment is and if it makes sense for you.

    For now, you probably only need to worry about putting enough into the 401k to capture any employer matching - that is free money you don't want to pass up. After you've knocked some of the debt out, you can look to contribute more. The minimum recommended going to retirement savings is 10% of your gross income, not counting anything your employer puts into the plan. 15 - 20% is better.

    But beyond the employer match, you guys have bigger fish to fry right now. The interest rate on some of the debt is insane. My recommendation would be to get everything with interest rates higher than the student loans (6.4%) wiped out. Then revisit your budget, savings, and retirement contributions.

    Leave a comment:


  • asb2012
    replied
    Yeah it would be $600 to get out our contract as we have my mom on our line as well and she pays her own bill. We both contribute to a 401k plan and both our employers match I also have another investment plan thing where they take out my check but I dont understand none of it. I know we should be giving more than what we do but it's confusing. I don't understand the stocks or bonds should we mix it. I will look into getting out if our contract too.

    Leave a comment:


  • Wino
    replied
    We paid $600 total to break our contract. I don't know how much was penalty and how much was amount due. I do know that they lied to us when we opened the account, and I won't do business with liars. They lied to use a month later, too.

    And two months after that.

    I'll do business with T-Mobile again the moment that it can be reliably determined that 43ll has frozen over.

    Leave a comment:


  • skydivingchic
    replied
    How much is the penalty for breaking the cell phone contract? It may be worth it to pay the fee if you can save more over the next 14 months. To give you an idea, we were with Verizon before and were paying ~$100 per month for two regular phones. We switched to Page Plus (rides on Verizon network). Currently paying ~$75 per month total for one smart phone (unlimited talk, unlimited text, and a bunch of data, don't remember exact amount) and one regular phone ($0.04/min talk and $0.05/text). So ~$25 per month savings and an upgraded phone. If we had gotten the smart phone on Verizon we would have been required to purchase a data package, adding ~$30 per month.

    On another note, do either or both of you have access to a 401k or equivalent through your employer? If so, are you contributing? How much does your employer match?

    Definately go for as much overtime as you can and work on getting that debt hammered out. You can do this.

    Leave a comment:


  • Gailete
    replied
    As you know without Debt a middle class family can not make their dreams come true. When a person planning to start a business he fist think about debt. debt in my opinion is very important to srart a business and future plans etc. You should take reasonable debt which you can payback easily. This will reduce and kick out all your tention. Listen without only a first class family can make their dreams come true not a middle class. i am also from a middle class family. i would like you to go for Debt in order to secure your future.
    Nonsense. I started a business 10 years ago with only what we had in the house and have built it up from there. We did not have to think about debt to get it going. Debt does not secure anyone's future but it can destroy a person's future.

    Leave a comment:


  • Wino
    replied
    I recently paid $600 to get out of a cell phone account. I'd do it again tomorrow.

    I won't go in to details, but I will state - categorically - that T-Mobile is staffed with liars, con men, and low life-scum.

    I apologize to low-life scum for the comparison.

    Leave a comment:


  • asb2012
    replied
    thanks Skydivingchic you are giving great advice and facing the truth on my debt is really hard but I know we can do it. I am going to take a look last month bank statement and find out what we are spending on that def can be cut out. I know one expense is giving money to family members that is gone. Also Yea I forgot to put in the sunday Newspaper subscription we get. and small things like that/ that end up adding up in the long run. We are cutting off cable in Jan when contract is over and just keeping internet which will save $100 a month. Also our cell phone contract is still good for another 14months We have started working towards credit card #2 and we will have it paid off at the end of the month. Both of our jobs give overtime. So we are going to start working more hours at both of our jobs and allocate all that money to debt

    Leave a comment:


  • mgkimsal
    replied
    Originally posted by mark.1
    When a person planning to start a business he fist think about debt. debt in my opinion is very important to srart a business and future plans etc.
    Speak for yourself. It's not the first thing everyone thinks about when starting a business.

    Leave a comment:


  • Tree0164
    replied
    Originally posted by isaac View Post
    Nobody mentioned your $850/mo Rent. I'm not sure where you live / what the cost of living is like there.

    I live in rural West Virginia and $850/mo would be a VERY NICE PLACE, much more than my wife and I would ever need.

    We currently pay $575/mo for a roomy 2bedroom/1bath apartment, but we checked right across the river from us (2miles) and there's a 1bed/1bath place for just $450/month. Since it's just Husband/Wife/Dog 1bed/1bath is fine, that's an extra $125/month contributed to our House Downpayment savings.

    .
    Actually $850 is probably very good. Rents are going for much higher in my area Southern New England and most of the country. For your apartment 2 bedroom/1 bath rents are starting at $1200, 1 bedrooms are starting at $850.

    Leave a comment:


  • p_wyt_12
    replied
    Hi asb2012 , if I may share some general principles on the strategies how to get out of the debt.

    "It is not how much money you make. It is how much money you save." However, since there are still debts, I believe you should first pay debt off. I do not think it will help if you are saving yet the interest is less than the credit card interest.

    Here are the steps :

    1. List down your debts. Trace the roots how the debts are accumulated.

    2. Determine your plan and actions how to get out of debt. Let us say you want to increase your increase your income.

    3. Commitment

    Possibly you can start with going back to the roots of debts and commit not to do it again.

    Leave a comment:

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