Budget/Financial Plan Review

**riverwed070707** · 03-05-2013, 11:55 AM

Your car payments are killing your budget. You spend as much per month on transportation each month as you do on housing ... and that doesn't include registration and maintenance! Guessing the $22k car is fairly new? Why is the interest rate so high? Do you have bad credit? I would look at refinancing the car if you aren't underwater on it. Credit unions are usually a good starting place -- I believe you get an extra discount from PenFed if you're military. I typically find big name banks -- US Bank, Wells Fargo, etc -- to have higher rates than the credit unions and they aren't as easy to work with.

**EODTech87** · 03-05-2013, 12:07 PM

That's why I'm trying to get them paid off now. The Wife's car is brand new, I bought it because I was about to deploy and I didn't want to risk my truck dying on her. I wish I would have just bought a used car instead but I won't make that mistake ever again. I have pretty decent credit(low 700's but had really high usage so that was all I could get financed for. I tried getting financed through PenFed but they said no and USAA wanted like 7-8% because my truck is financed through them as well. Both vehicles are under my name only because my wife's credit is absolutely horrible due to multiple past collections, and a repossession. I believe I'm about $2500 underwater on the wife's car and planned on looking to get it refinanced when I get back in April(Hopefully).

**kork13** · 03-06-2013, 12:22 AM

Jason,
First of all, I want to say I have the deepest respect for you and what you do. My cousin was in EOD for a long time until he died suddenly (stroke) in 2009. I'm in the military as well, and I fully understand what you guys go through sometimes on behalf of the rest of us, so thank you.

As for your finances, you're really not in terrible shape, just some debts to clean up. It's good to see that you're working on paying off the last of your credit card debts, so once those are gone, the rest is cake. Your interest rates are also tolerable, so I wouldn't stress about that. The best way to go would be to focus most of your spare cash toward your wife's car loan, since that's the highest interest rate. That will take about 20-21 months to knock out, but then at that point you'll be able to wipe out your truck loan within 2-3 months, and the last of the student loans within another 2-3 months. All told: you can probably get everything paid off within 2-2.5 years maximum, and most likely even before that... the one good thing about regular and frequent deployments are the financial benefits of the combat-zone tax exclusion, hazardous duty pay, and so forth.

A couple other points to bring up... How much do you have in liquid savings? Even though your job is secure, unplanned expenses (car breakdown, pipes burst in the home, and so on) can easily put you back into debt if you don't have some emergency savings. Normally we recommend 6 months' expenses (about $15k in your case), though you can tailor that as you feel appropriate.

It sounds like you're currently deployed, so are you taking advantage of the Savings Deposit Program right now? If you're not, I would strongly recommend you start using it immediately. You'll earn a guaranteed 10% interest on your savings (up to $10k) while deployed, and for another 3 months after you come back. There's no better deal in the world, honestly.

As for your budget idea for after the debts are gone, I think that's a fantastic plan. In general terms, many of us here will recommend:
- 50% of your budget for needs (home, auto, utilities, and other monthly bills)
- 30% for savings (15% retirement, the rest for short- & mid-term goals)
- 20% for wants (vacations, electronics, etc... the "fun money")
So your plan is very similar to that, which is a great starting point.

**EODTech87** · 03-06-2013, 06:51 AM

Sorry to hear about your cousin.

I currently have $3500 in liquid savings and that is honestly enough for whatever emergencies I might run into.

I didn't take advantage of the Savings Deposit Program because my credit cards were 18%-24% so it made more sense to get those paid off. The credit cards that I still have are Military Star(11%) and Best Buy(0% expires in July) and both will be paid off by the end of June and I only have about a month left on my deployment so there isn't any benefit to enrolling now. I will definitely invest the full 10k at the very beginning of my next deployment.

So I should just put that extra $1000 every month toward the vehicles? That's what I was planning on doing but wanted to see what others had to say about it before I do something that will end up costing me in the long run.

**Bob B.** · 03-06-2013, 06:55 AM

Originally posted by EODTech87 View Post

My wife is ... a SAHM raising our niece.

Jason,

Thank you for your service to our country.

Thank you also for providing care for a family member.

Have you and your wife ever considered becoming licensed foster care providers for your niece. You can probably get assistance from your state through the foster care system. It really depends on what state, but you could figure somewhere in the $300-400 per month range.

Since you're in the military, and presumably move from state to state a lot, that could complicate things a bit. And there is "cost" on your part (going through a six week training program, social workers in and out of your house, paperwork, etc.) Again, depends on your state. But, I'd recommend looking into it if this a long-term commitment to your niece.

**EODTech87** · 03-06-2013, 07:47 AM

My wife is currently trying to become a certified foster parent and I'll be doing the same once I return. However it will be very temporary because we plan on adopting her sometime later this year once her parents rights are terminated. I didn't include that income because of this reason.

**kork13** · 03-06-2013, 07:56 AM

Originally posted by EODTech87 View Post

I currently have $3500 in liquid savings and that is honestly enough for whatever emergencies I might run into.

I didn't take advantage of the Savings Deposit Program because my credit cards were 18%-24% so it made more sense to get those paid off. The credit cards that I still have are Military Star(11%) and Best Buy(0% expires in July) and both will be paid off by the end of June and I only have about a month left on my deployment so there isn't any benefit to enrolling now. I will definitely invest the full 10k at the very beginning of my next deployment.

So I should just put that extra $1000 every month toward the vehicles? That's what I was planning on doing but wanted to see what others had to say about it before I do something that will end up costing me in the long run.

Smart choice on the SDP then considering the interest rates, and sounds good for the future plans. Keep in mind, you can't add the full $10k all at once, they'll only let you add up to your total pay/allowances for the month, so it will likely take 2-3 months to fill it up. But in either case, you definitely want to have the money ready and available, so you might consider starting to save up the cash for that right now so you have it ready for the next deployment...which leads into the next point:

You might consider saving at least $100/mo in liquid savings. Especially with a wife and raising your niece, most people would agree that it's worth keeping a healthy amount in savings just in case. Definitely focus on the car loans and send most of your spare cash to pay those down, but slowly building up your savings can be just as important if something(s) unexpected happens -- somehow when thing go wrong, everything seems to goes wrong all at once... First the car breaks down, then you need to travel for a family emergency, then the washing machine explodes and floods your laundry room. If nothing else, starting to build up your savings over time will put you in a position to have the cash ready for the SDP on your next deployment.

**muexm** · 03-06-2013, 08:56 AM

I would also look into getting rid of the wife's new car and downsizing to a smaller but reliable used vehicle. That $430.00 a month is killing you guys and you don't really need 2 gas guzzlers for a family of 3 people.

**EODTech87** · 03-06-2013, 10:32 AM

I've thought about selling it for a older car but I'm upside down on it by a about $4000. I'll also take about a 8 mpg(We average 36 mpg) hit by going with a older car and we drive it a little over 20k miles a year so that 8-10 mpg makes a difference. I know financially it would make more sense to get rid of it but that's just something I'm not willing to do. I will refinance it though and should be able to get somewhere from 2.5%-3% interest.

kork - That sounds like a good idea. I'll work that into my monthly budget.

Budget/Financial Plan Review