Debt repayment order

[LivingAlmostLarge]

I might add I know a family who is single income and they believe in paying off debt but have a $10k EF to cover a couple months of bills in case they ever lose the income. I don't know either way is right or wrong.

[Jluke]

I'm a big fan of Dave Ramsey, and he helps me stay motivated on some things, I'll admit that. However, I do not agree with him on every point.

+1 on everything written by goodsteward in his post; just shortened the quote.

I just want to add that I would imagine the audience that Ramsey is speaking to has debt with interest rates at 10%, 15%, 20%... so they have no business having a large emergency fund.

If they have an emergency, using a credit card would probably equal out to the rate of the previous debt.

In your case, you may end up having to use credit/loan at a rate higher than your existing loans.

All in due time.

My EF is 35k. no mortgage, one car loan. no other debt. just waiting for 2017 to contribute to my roth from this EF.

[scfr]

Depending on what the results are after you run your tax numbers, I do think maybe you could pay off the loan. It doesn't sound like you'd need to run up a balance on your credit cards if you ran in to an emergency.

And remember that it doesn't have to be an all or nothing situation. You could pay down just part of it.

[rutgers07]

Thanks for all of the feedback. We have pretty good cash flow which is further boosted by the fact I can pick really as much overtime at work as I want. In a pinch I would just work more. I think I may take half of the EF and pay off the rest of the 8k balance when it gets down to 5 which can probably happen in another month or 2.

[rutgers07]

Now that we're pretty well settled in our home, it's time for the wife and I to really figure out how we want to pay back our debts. Here is the run down (balances are approximates since I don't have the info right in front of me):

Student Loans:
1 - $2500 @6.9% (64/month)
2 - $16,000 @6.9% (185/month)
3 - $50,000 @5% (in deferment but will be about $400/month)

Car - $14000 @1.9% (376/month)

Mortgage - $202,0000@3.675 (1591 including escrow and PMI/month)

Income - DW is at $4416/month gross
Job one puts me at $3125/month (with about another steady $1,000 with OT)
Job two I can pull in around $1000-$1500 depending on how much I want to work
Gross monthly is about $8541 at minimum with up near $10,000 if need be. DW's job is new but should be very stable as are both of mine.

Update:
Student Loan 1 is long gone (already updated on that previously)
Student Loan 2 is down to $7265
Student Loan 3 was reconsolidated and is now broken up into:
$17,500 @ 2.9% and 35688 @ 6.625 - These 2 totals are greater than SL 3 was since I provided an incorrect amount initially
Car is down to 13576 (almost mistakenly only put 14,000 at first, should have been around $15,000

Debt obligation is down from ~$84,000 to $74,029. (A bit misleading as my parents gifted us $5,000 but still knocked out $5,000).

EF is up to 10k, extra cash reserves is at ~3k. I received almost a $4,000 raise and DW will be getting another 4% bringing us home another $2,100 a year.

In the midst of this, another $300 at the vet with other various unexpected expenses. All in all, doing pretty okay.

[rutgers07]

And another update:
There goes the $7265 student loan.

[LivingAlmostLarge]

congratulations!

[scfr]

Well done!

[rutgers07]

Update:
Student Loan 1 is long gone (already updated on that previously)
Student Loan 2 is down to $7265
Student Loan 3 was reconsolidated and is now broken up into:
$17,500 @ 2.9% and 35688 @ 6.625 - These 2 totals are greater than SL 3 was since I provided an incorrect amount initially
Car is down to 13576 (almost mistakenly only put 14,000 at first, should have been around $15,000

Debt obligation is down from ~$84,000 to $74,029. (A bit misleading as my parents gifted us $5,000 but still knocked out $5,000).

EF is up to 10k, extra cash reserves is at ~3k. I received almost a $4,000 raise and DW will be getting another 4% bringing us home another $2,100 a year.

In the midst of this, another $300 at the vet with other various unexpected expenses. All in all, doing pretty okay.

It's nice posting updates, even for me to just see the progress we've made.
New student loan updates
$35,688 --> $31,500
$17,500 --> $17,400

Car
$13,576 --> $12900

Cash on Hand
~$7,200 (maybe more depending on how large my check is)

In the mean time, we've cash flowed another 1k dog dental surgery and $460 for our new pup's obedience class. We've also upped our 401k contributions to 10% for my peace of mind. It's nice to see that growing at double the rate now.

It's nice to see knocking down one loan by 4k in two months. Admittedly, this should have been more but with the holidays and pet care related issues cash went pretty quickly. We'd really like to be finished with the $30k+ student loan in 10-12 months which should be entirely doable.

[james.hendrickson]

Rutgers,

Great job with your personal finances. A lot of the country has problems with debt, so its nice to see someone who is doing a great job digging themselves out of their negative situation.

[Nutria]

We've also upped our 401k contributions to 10% for my peace of mind.

It's nice to see knocking down one loan by 4k in two months.

Admittedly, this should have been more but with the holidays and pet care related issues cash went pretty quickly.

Create a "Christmas Club" account that you fund in equal amounts every month. It helps with cash flow management.

[rutgers07]

Create a "Christmas Club" account that you fund in equal amounts every month. It helps with cash flow management.

That's a great idea. It feels like we have a million and one accounts but it plays well enough with my personality that it doesn't bother me. We have a good estimate of what we spend per Christmas. Thanks.

Our big goal is to be able to knock off that large student loan to start donating too. We feel like we make way too much to not be giving any of it away.

[rutgers07]

Rutgers,

Great job with your personal finances. A lot of the country has problems with debt, so its nice to see someone who is doing a great job digging themselves out of their negative situation.

Thanks James. I've always been debt aversive and but DW was not growing up. It's ironic that she grew up somewhat poor and the mentality was not to save every penny but to actually spend everything because they didn't always know when the next paycheck would come. They'd live everyday as their last and she unfortunately adopted that mentality into her mid 20's. Thankfully that's improved significantly.

[LivingAlmostLarge]

Amazing congratulations.

[rutgers07]

New student loan updates
$31,500 --> $29,000
$17,400 --> 17,300

Car
$12900 --> $10,040

Cash on Hand
~$6,000

Very slow moving the mark the past few months. We've had a lot of expenses come our way but the biggest change is that for the past two months I significantly cut back at both jobs since I was feeling really burnt and my mood had gone to ****. That's all changed and I'm feeling much better and back to doing overtime with better balance.

This month was the first real month DW and I sat down and took a look at our income and expenses. Things are much tighter than they seem because we make such good money. We became so dependent on my OT and 2nd job income that we hit a wall without that this past two months but never really adjusted our spending. It was great to have an agreed upon "fun" budget per month ($100) that lets us do as we please without the stress of spending money we truly don't have. Once this dog surgery is over, I'm hopeful we can get right back to it and continue to crush it.