Plan of attack with my debt.

[Dieselrob]

I have been incredibly frivolous with my extra cash, eating out and living large; until I read these books. Richest man in Babylon and Millionaire Next Door. I am now 25 and it really dawned on me how stupid I have been.

My goal is start paying myself 10% of every pay check into savings and following the plans listed in the Richest man in Babylon. Control expenditures, make your money multiply etc etc

I have two main loans, my truck is $6400 remaining at 17%, $270/month and a motorcycle $15,000 at 7% interest $290/month(I love motorcycles to the point I ride almost every day, but I am extremely embarrassed about this loan)

Right now I have zero in savings but I was able to liquidate some assets and will have roughly $2300 put into savings.

Would you nuke the truck loan first, since it has the highest interest and use up all $2300, or should I keep building my savings and just apply a higher minimum payment every month to the truck, then pile the truck payment onto the bike once I own the truck out right?

I make $3000/month after taxes, but it is my goal to be saving the majority of that and adhering to smart wealth building principals, so any help is greatly appreciated

[disneysteve]

my truck is $6400 remaining at 17%, $270/month and a motorcycle $15,000 at 7% interest $290/month

Would you nuke the truck loan first, since it has the highest interest and use up all $2300, or should I keep building my savings and just apply a higher minimum payment every month to the truck, then pile the truck payment onto the bike once I own the truck out right?

You're not going to like my answer.

You earn $3,000/month and are spending 19% of it on vehicle loans. That's killing you. Rule of thumb is for your vehicle loan(s) to not exceed 10% of income for no more than 3 years. You're way over that. If I were in your shoes, I'd be seriously considering selling the bike. I know you love to ride but once you get your finances on more solid ground, you can always buy another one.

That would allow you to put the $2,300 plus $560/month toward the truck (which is at a crazy high interest rate so you want to get that paid off as fast as you possibly can).

[Dieselrob]

You're not going to like my answer.

You earn $3,000/month and are spending 19% of it on vehicle loans. That's killing you. Rule of thumb is for your vehicle loan(s) to not exceed 10% of income for no more than 3 years. You're way over that. If I were in your shoes, I'd be seriously considering selling the bike. I know you love to ride but once you get your finances on more solid ground, you can always buy another one.

That would allow you to put the $2,300 plus $560/month toward the truck (which is at a crazy high interest rate so you want to get that paid off as fast as you possibly can).

Definitely contemplated that. When I spoke with yamaha they explained it as such, its a line of credit.
$15,000 line, you can sell the bike but obviously be on the hook for the remainder, it isn't like a car loan in that you can't sell it until you satisfy the full amount. Sell it just keep paying the remainder sans a bike. Still anything less than 15 is better than nothing. I will definitely look at my options with his.


So if you were in my shoes, apart from working on the bike which I will definitely look into again, the $2300 would skip savings and be immediately applied to the truck loan?

[disneysteve]

So if you were in my shoes, apart from working on the bike which I will definitely look into again, the $2300 would skip savings and be immediately applied to the truck loan?

I would set aside $1,000 as an emergency fund and put the rest to the truck. 17% is nuts. You want to put every penny you can toward that. Can you get a 2nd job or work OT to earn more at least temporarily?

[Dieselrob]

I would set aside $1,000 as an emergency fund and put the rest to the truck. 17% is nuts. You want to put every penny you can toward that. Can you get a 2nd job or work OT to earn more at least temporarily?

Got it.

I am looking at more OT, I am a commercial driver in state so a part time job is a tad harder to pick up. However, I am still looking.

I appreciate all the advice

[LittleMissSplendid]

Hmmm these are your only 2 debts which is good despite the high interest on the truck. Are your regular household expenses fairly low? And its just you, no kids or spouse? Assuming both answers are yes and completely relating to the desire to do things one loves I would take a different approach from disneysteve (although he has given you excellent suggestions). If this were my situation I would:

-take half the $2300 and create an emergency fund now
-take the other half of the $2300 and put it toward the truck loan
-start taking 10% of take home pay and add that to the emergency fund
-if employer offers a retirement account then contribute the minimum to get the full employer match
-after paying regular household expenses put the bulk of the excess money on the truck and pay the minimum on the motorcycle until the truck is paid off (this debt repayment method is called avalanching)
-once the truck is paid off then apply all excess money to the motorcycle until that is paid off
-look for a 2nd job or pick up OT at the first job and apply that extra income to debt repayment

[corn18]

You're not going to like my answer.

You earn $3,000/month and are spending 19% of it on vehicle loans. That's killing you. Rule of thumb is for your vehicle loan(s) to not exceed 10% of income for no more than 3 years. You're way over that. If I were in your shoes, I'd be seriously considering selling the bike. I know you love to ride but once you get your finances on more solid ground, you can always buy another one.

That would allow you to put the $2,300 plus $560/month toward the truck (which is at a crazy high interest rate so you want to get that paid off as fast as you possibly can).

^^^This. Get rid of the bike immediately. The satisfaction you get from being in control of your finances will far outweigh any pleasure you currently get from riding the bike. Ask me how I know.

[disneysteve]

Definitely contemplated that. When I spoke with yamaha they explained it as such, its a line of credit.
$15,000 line, you can sell the bike but obviously be on the hook for the remainder

How mch could you get for the bike? If the remainder is no more than $2,300 you'd be all set.

[doingitallwrong]

I don't think anyone can really give you solid advice without knowing a bit more about your finances. Namely, out of the $3,000 you bring home each month, how much is discretionary? If you were to throw every extra cent at the truck payment, for example, how much per month could you pay?

As it is right now, just paying the minimums, it will take you 45 months to pay off both debts and it will cost you $3,658 in interest.

If you put $1,300 toward the truck right now (saving $1,000 for an emergency fund) and then continue to pay just the minimums, you'll save 3 months and $700 in interest.

(Let's assume from here on out that you're putting $1,300 toward the truck right now.)

Paying $100 extra per month (an avalanche, pay the extra on the truck until it's paid off, and then take the $370 and add it to the motorcycle minimum payment) saves you 11 months and $1,300 in interest (paid off in 34 months with $2,311 interest).

Paying $250 extra per month cuts your payoff time and interest in half, with payoff in 27 months and $1,766 in interest.

If your expenses are super low and you can throw an extra $1,000 per month at your debt, you'll be paid off in 14 months and it will cost you $794 in interest.

So it really depends on how much extra you have each month, and then how much that motorcycle is worth to you. Four years and $3,600? Maybe it's worth selling now and buying another one with cash later. One year and $800? Might be worth hanging on to it.

I tend to side with Little Miss Splendid, there is value in doing things that you love and there's a balance between having a debt-free life and having a life worth living. You don't seem to be struggling to pay your bills, you apparently don't have any credit card debt, your vehicle payments may be 19% of your take-home pay but if those are your only debts that's not too horrible overall. I do agree that if you're offered a 401(k) or similar plan with a match, you should be contributing the amount that gets you the maximum match.

[autoxer]

I'll assume from your username that you are also attached to your truck, but have you considered selling that?

How's your credit? Have you tried to refinance the truck loan to a lower interest rate?

Start tracking all of your spending and you'll discover some things that you can cut that don't feel like a sacrifice. Trim out the wasteful spending that isn't in line with your values and you'll have more cash to throw at the debt.

[JoeP]

Once you figure out how to solve this challenge, I suggest you do a little introspective and try to determine what got you into this situation in the first place. Was it lack of financial knowledge? Was it lack of discipline? Was it caving into advertisements? Envy? Immediate gratification?

Whatever triggers are responsible, take steps to ensure they don't happen again.

[Eagle]

I have been incredibly frivolous with my extra cash, eating out and living large; until I read these books. Richest man in Babylon and Millionaire Next Door. I am now 25 and it really dawned on me how stupid I have been.

My goal is start paying myself 10% of every pay check into savings and following the plans listed in the Richest man in Babylon. Control expenditures, make your money multiply etc etc

I have two main loans, my truck is $6400 remaining at 17%, $270/month and a motorcycle $15,000 at 7% interest $290/month(I love motorcycles to the point I ride almost every day, but I am extremely embarrassed about this loan)

Right now I have zero in savings but I was able to liquidate some assets and will have roughly $2300 put into savings.

Would you nuke the truck loan first, since it has the highest interest and use up all $2300, or should I keep building my savings and just apply a higher minimum payment every month to the truck, then pile the truck payment onto the bike once I own the truck out right?

I make $3000/month after taxes, but it is my goal to be saving the majority of that and adhering to smart wealth building principals, so any help is greatly appreciated

Have you read "Total Money Makeover" by Dave Ramsey?

Sell the motorcycle. Keep $1000 of savings in the bank. You need an emergency fund after all. Are you on a monthly budget? How can you increase your income and at the same time reduce your expenses?

[Dieselrob]

Appreciate all the help.

In response to the motorcycle, its a utilized line of credit, as in the motorcycle cost $15,000 after all was said in done. If I sell the motorcycle, which I am looking into, I am still on the hook for the difference. It's yamaha's factory financing card at 7%. I have no issue on this route as whatever the difference is, is still cheaper than 15k

The truck, it is my pride and joy, I'd rather suffer and pay it off asap and drive it to the wheels fall off, which I plan to do.

Bills, after insurance, health insurance, cell, and other misc I have roughly $1,000 month discretionary. Which leads me to my original post of how I am disgusted with my frivolous spending and plan on paying myself 10% each check and being smarter with my money(no eating out, no more cool this or that etc, debt free is the goal)

I have $2300 incoming from some asset selling, $1,000 is going to emergency and I am full out hitting the truck with the $1300 remaining. Knocking a $6400 loan down to $5100.

Definitely going to take all the advice in this thread and pay off the truck, Avalanche the $270 I pay on the truck onto the bike and getting it paid off in the three year low apr by throwing as much extra as I can.

Again I appreciate all the input, I feel a lot better about my decision to get back on the right path. I was "I need it now kind of a person". I want to be a I'll save and pay cash or I don't buy it kind of person.