Should I pay off my car loans?

[corn18]

Continued progress.

1. cancelled home phone service. We don't use it at all and it cost $50 / month.
2. Refinanced 2 cars at my credit union because they were offering $250 incentive. Same rate, same terms, they just put $250 into my savings account after I make my first payment. That's $500 of "free" money. I am going to pay these 2 off in March, so that's a nice return.

Still debating whether to pay off all 4 cars or just these 2.

Tom

[TheKayla]

Continued progress.

1. cancelled home phone service. We don't use it at all and it cost $50 / month.
2. Refinanced 2 cars at my credit union because they were offering $250 incentive. Same rate, same terms, they just put $250 into my savings account after I make my first payment. That's $500 of "free" money. I am going to pay these 2 off in March, so that's a nice return.

Still debating whether to pay off all 4 cars or just these 2.

Tom

Very nice, every little bit helps, no matter you income level!

Paying off of all the cars is going to be a personal choice only for you, knowing that the decision lies solely on the fact that the other two cars belong to your daughters. Purely financially, it makes more sense to pay them off now if you can, but of course, its up to you if the benefits of helping your daughters learn financial responsibility outweighs the financial benefits, if you have other opportunities to help them do that in that regard, etc.

Because you have the financial resources to hold onto the loans if wanted, I'd say go primarily with your gut on that one.

[corn18]

Had a setback today thanks to Uncle Sam. I know this is whining, but I will go up a tax bracket next year and had to increase my tax withholding each month. That set me back an additional $750 / month. I know that won't get a lot of sympathy, but I am paying $160k in taxes next year. Ouch. At least I have it all accounted for in the budget and I know where I stand.

[disneysteve]

Had a setback today thanks to Uncle Sam. I know this is whining, but I will go up a tax bracket next year and had to increase my tax withholding each month. That set me back an additional $750 / month. I know that won't get a lot of sympathy, but I am paying $160k in taxes next year. Ouch. At least I have it all accounted for in the budget and I know where I stand.

Better to get that nailed down now and not be hit with a big surprise bill and maybe penalties for underpayment.

That happened to me (on a smaller scale) last year when we got a $2,000+ tax bill we weren't expecting. I increased my withholding to try and prevent that from happening again.

[snafu]

I'm delighted that you stuck with this site in spite of your initial view that participants were 'arrogant.' Many of us have overcome bad spending habits, paid off debt and no longer juggle debt. We have a different view of how we spend and save money. Isn't it annoying to realize you've been paying for years for phone service [land line] you don't use?

We're here to help. We make suggestions we genuinely believe are in your best interest. You are free to discuss or ignore them all. I'd like to see you involve your daughters in learning about how to make good financial decisions. They will be managing their income and need to know how to balance income with expenses, the difference between 'needs' and 'wants' and how important it is to have an emergency fund to turn to when things go awry. If they have any employer match for retirement it is FREE money and imperative to participate.

Are you willing to discuss your specific retirement's plan holding? Some of the funds have huge fees that silently, swiftly reduce your value.

[corn18]

Working with the wife and kids to get it right now vs. 40 years from now. My wife is actually reading The Millionaire Next Door.

I was wondering about my 401k and fees. How do you know they are charging fees? I looked through all my transactions over the past year in the 401k and there are no fees. But that got me wondering if the funds themselves are charging me fees within the funds. How would I find that out? I think that would be good to find out as I took the approach of diversifying over 25 different funds. 60/40 stocks and bonds. Bonds were up when the stocks were down. Now the stocks are up and the bonds are down. But overall, it's up a lot this year. But if I am paying hidden fees for all that diversification, I can certainly simplify.

I found a page that shows the gross expense ratio for each fund I am in. Indeed those fees are hidden in the fund itself and not visible in my 401k. The fees range from 0.05% to 1.04% with an average of 0.53%. I am in 29 funds. I need to simplify that.

Tom

[corn18]

Another question. My income next year will bump me from the 35% tax bracket to the 39.6% tax bracket. Should I look at deferring some of my bonus to keep me in the lower tax bracket?

Also, I think I need an accountant. How does one go about finding a good accountant?

Thanks for all the help.

Tom

[LivingAlmostLarge]

No to deferring bonus. Who knows where taxes are going. Better to make more and pay more than make less and owe less

But good job changing the family tree. Your kids may not be so fortunate to make so much so they need to be smart financially earlier. They may not be able to dig themselves out of debt so easily. Glad that the wife is getting on board. Some small cuts now may make big differences later. I too am impressed that you are stuck with the board.

[breathemusic]

Tom,

Some of the discussion in this thread has been about how you can get the family on board and also teach your kids about finances and budgeting, etc. From what you've said so far, it sounds like you manage the details of the money and budgeting and just give your wife and kids some general suggestions like "we need to cut misc spending by 10%." If you're not already doing it, I'd recommend that you actually sit down with the family and walk them through what your current budgets and spreadsheets look like. Let them actually see the numbers and see just how much you guys are all spending on eating out, and "misc" and all the things that you think could be cut back.

For your kids, I'd be up front and tell them how you just pulled yourself out of a massive amount of CC debt due to not managing a budget and talk the whole family through retirement planning and making sure that they understand that it's not just a matter of saying "we make X, so let's not spend over X" but knowing that if you want to be able to have a certain lifestyle in retirement, you now need to be saving Y, so you really need to only be spending X - Y.

Instead of you suggesting/deciding what can be cut from the budget, make this a good exercise for your wife and kids and go through some of those receipts and bills to see what you're spending money on and let them point out what can be cut and what purchases have recently been made that really didn't need to be, so things like that can be cut in the future.

Seeing the details and specifics makes the overall plan/goal more real instead of it just seeming like some abstract idea that husband/dad says we're spending too much so we need to reign it in.

[corn18]

I have to revisit this. My monthly expenses are now to the point where I am break even while maxing my 401k ($17,500) and 2 IRA's ($11k). There is in fact $234 / month excess each month. I will have $90k total liquid savings to play with from the bonus after I get done paying additional taxes to cover the year.

2014 Plan $90k

Payoff 4 cars - $90k
Save car payment to build Efund ($1,832 / month, $16,500 for the year)

2015 Plan $100k

$40,000 E fund (6 months w/ car payments, 8 months without car payments)
$40,000 College fund (need this starting in fall of 2014, so it's late)
$20,000 Car fund

2016 Plan $100k

$100k to savings

I am seriously considering swapping the 2015 plan into 2014. I know there is the "all debt is bad camp", but I have this feeling that doing the 2015 option first (or the efund and college part of it) puts me in a better place overall than paying off the cars first. Carrying the cars for an additional year would cost $2,000 in interest. That's what bugs me. But having that $90k in savings would sure be comforting. I was worried we might spend it if I put it in savings. I know we won't do that now because my family is on board with managing our finances properly.

I guess either way is probably ok.

Appreciate your thoughts.

Tom

[snafu]

Working with the wife and kids to get it right now vs. 40 years from now. My wife is actually reading The Millionaire Next Door.

I was wondering about my 401k and fees. I am paying hidden fees for all that diversification, I can certainly simplify.

I found a page that shows the gross expense ratio for each fund I am in. Indeed those fees are hidden in the fund itself and not visible in my 401k. The fees range from 0.05% to 1.04% with an average of 0.53%. I am in 29 funds. I need to simplify that.

Tom

Are you willing to list the 29 funds to open discussion for the best of your options? You would likely benefit from consolidation while maintaining the diversity you desire.

[corn18]

Are you willing to list the 29 funds to open discussion for the best of your options? You would likely benefit from consolidation while maintaining the diversity you desire.

Absolutely. I did consolidate out of the higher load funds that were duplicates of lower load funds. Will try to get the list up.

[LivingAlmostLarge]

Why do you need $40k in college this fall? I thought that you didn't need it till 2016?

Okay I assume it's for 18 year old decided to go to college. Why is it $40k? What is she going to college for? Does she need her car if she's living on campus? If not what do you think about selling the car?

Do you think your daughter will do well? Fool around? I think I might instead of paying cash for school instead tie it to grades. I would do school loans and if she gets B or C at a minimum then I'd pay for college. If she fails or flunks out or does poorly then I wouldn't pay.

But this is something you have to consider about your child. I am not against paying 100% of college, but I think that paying cash up front and her getting a car is asking for trouble.

I'm leaning still to paying off the cars, but it also depends since you may be selling one car? If you don't sell it why does she need a car at the university?

[corn18]

I don't need it until 2016 so I don't need to put it aside now. Savings is 90% mental and 10% doing.

The 18 yo is moving out on her own. She gets the car free and clear. Along with the gas, insurance, registration and maintenance. This is not going to change no matter what anyone thinks of it. I will continue to seem unreasonable to any sane person on these fora but will NOT budge on this until someone walks a mile in my shoes.

I will stick to the original plan. Like Steve said, it's like buying 4 cars at once.

Tom

[JoeP]

I don't need it until 2016 so I don't need to put it aside now. Savings is 90% mental and 10% doing.

The 18 yo is moving out on her own. She gets the car free and clear. Along with the gas, insurance, registration and maintenance. This is not going to change no matter what anyone thinks of it. I will continue to seem unreasonable to any sane person on these fora but will NOT budge on this until someone walks a mile in my shoes.

I will stick to the original plan. Like Steve said, it's like buying 4 cars at once.

Tom

I'm not sure anyone here is trying to change your mind on this point.