Am I on the right track?

[MonkeyMama]

I figured debt is just a part of life. Who can start out at 23 in a full time job and wait 15 years to pay cash for a house and rent all that time? I get some people can live bare bones in regards to all aspects of their life. I can in most places, like no eating out, same clothes for years, coupons, frugal in many places but boating and decent cars are my hobbies. So that's one place I'm willing to compromise.

Who said anything about living bare bones? We have $0 non-mortgage debt. We pay about $950/month for a really nice home though. Because we put a lot down and have good credit and have a much lower interest rate. We are efficient like that, which means generally paying less to have more.

The rest of the debts we don't have, so that frees up $1,557 per month. There is nothing bare bones about that. $1,557 x 12 months = $18,684 per year. x 5 years = $93,420 saved over 5 years. If your only other financial priority is toys, well, that will buy you some toys! You can make whatever financial priorities you want with a debt-free budget. I'd argue it wouldn't be bare bones.

I am just trying to share another way to look at it. You do unfortunately have to dig yourself out first before you get the benefit of the "no debt payments". That's the hard part, but eventually you coast down the other side of the hill.

Oh, and also check out Ting for cell phone service. We pay $30/month for our cell service.

[autoxer]

That is an excellent point MonkeyMama! You can still live a lavish lifestyle without debt. Ultimately that will allow you to get even more for your money, when you don't have to pay the banks interest, you just need to practice some delayed gratification when your goals include larger purchases.

[rffanat1c]

I suppose my instant gratification personality is one of my pitfalls. Only recently have my views on paying interest have changed and this discussion has helped. I'm not doing college savings for my daughter because I don't know if my four year old is going so I'm just saving her some money instead.

I'll look into cricket but no iPhone is a bit of an issue. I'm well aware other phones do the exact same thing but I've never cared for droid based phones.

I hope one day to be able to pay cash for a car, but obviously I've got around $200k to go in debt first. Maybe it's the people I'm around that makes me feel like I'm doing good. I've got a coworker refinancing his $400k home again just to get some cash out and he's about ready to retire.

I have a pension that is partly for retirement. It's safe now as I work in the public sector and it's protected.

[FLA]

I went to Apple, got $200 for my old phone, bought a 6s and took it to Cricket. I would not give up my iPhone unless I had to financially.

Have you run the numbers on that pension to see if you can really live on using just one retirement vehicle? Plus, as of 2013 only 18% of workers still had a defined benefit pension. You sound young, I would not bet on that pension still being there as it is now when you retire. Sure, you won't lose what you have vested in it but it is a fair bet to say it will probably be frozen sometime in the coming years.

I had a defined benefit pension for 20 yrs with yearly statements showing me how much I would get per month if I stayed with the company. At 20 yrs, it was frozen, after all those years, it was only worth a measly 42k or $350 a month at age 65. Luckily, I never counted that pension in my retirement savings. However, many of my peers counted on that pension to be enough when combined with Social Security and now they are trying to play catch up by finally funding their 403Bs. I wouldn't want to be in their shoes.

I would run those numbers and if it were me, I'd be looking at additional retirement vehicles and funding them.

[Jluke]

I'm not doing college savings for my daughter because I don't know if my four year old is going so I'm just saving her some money instead.

Consider a ROTH IRA then, if you qualify. If she goes to school, you can use this money towards her college (contributions can be withdrawn any time - certain rules apply). Earnings cannot be taken out prior to 59 or so (check me on that).

If she doesn't, more money for you to enjoy.

I'll look into cricket but no iPhone is a bit of an issue. I'm well aware other phones do the exact same thing but I've never cared for droid based phones.

iPhones are available on their website. You may be able to bring your own iPhone to their service.

[rffanat1c]

Pension would be $4,125 a month after taxes. I work for a municipality not a company. And that's at age 53 after 30 years on the job. I'm 34 now. Also will have yearly 2% increases for life.

I do qualify for a Roth but have been attacking debt first and don't like the idea of waiting 6 years after retirement to collect if.

Looking into cricket now. Unlimited data through att has been why I've stayed

[MonkeyMama]

I'll look into cricket but no iPhone is a bit of an issue. I'm well aware other phones do the exact same thing but I've never cared for droid based phones.

Check out Ting too. You may be able to take your iPhone over there. They have a link to see if you can just bring over your phone:

https://ting.com/byod

If you check out their rates just keep in mind that you only pay for what you use. So if you use tons of data one month and nothing the next month then your bill will vary accordingly. Their customer service is really good.

[rffanat1c]

Cricket would only save me $35/month with my dad on my plan. He only accounts for $10 now but that goes up to $35 on cricket. My data usage puts ting over $233 a month

[MonkeyMama]

Cricket would only save me $35/month with my dad on my plan. He only accounts for $10 now but that goes up to $35 on cricket. My data usage puts ting over $233 a month

Is there any reason you need so much data? If so, then it is what it is. T Mobile might also be worth looking into.

[rffanat1c]

I could probably cut back, just general use. I'll look into again when my contract is up in 1.5 years.

[Goldy]

I don't think you are in as good of shape as you think you are. The good news is most of your debt is in modest amounts. The bad news is you have a lot of it and it's not something you can fix overnight.

Generally attacking the highest interest rate is the best so I would attack the personal loan and then the 7% student loan. Then you can snowball that freed up money to the next loan and they will start to dissapear.

I would recommend contributing to a Roth. You can always pull out your contributions even before 59.5 but any gains need to stay until 59.5. I have just seen too many people not save for retirement and rely on pensions only to see them change and become far less effective.

[rffanat1c]

Well I suppose some of this is about perspective and each person's own values about how bad or good off they think they are. Despite having $200k in debt, I feel great about my position. My total debt is less than a lot of people's mortgages. Also I have plenty of money left over each month to put into savings and have a credit score of 805. And after this personal loan is paid off, I have no credit card or credit line debt.

I used my credit line to handle two expenses that I didn't want to empty my cash reserves with. I'd rather have liquid cash on hand if I can help it and manage the payment. I understand this is giving money to the bank but sometimes I'm ok with that.

[Jluke]

Well I suppose some of this is about perspective and each person's own values about how bad or good off they think they are. Despite having $200k in debt, I feel great about my position. My total debt is less than a lot of people's mortgages.

Really can't compare mortgage debt to debt on depreciating assets.

To the regulars on here, this reminds me a little of the tomhole thread on paying off cars (smaller scale of course).

[rffanat1c]

I see what you are saying about comparing the two debts. I am not disagreeing with your view point but fact is that's where I'm at and can only move forward from here. Can't turn back the clock and do it over.

As of right now, I'd consider my house an asset that did depreciate severely. A $60k loss in value of a market change is hardly a good thing. In the end I'll have paid over $150k for something worth $70k right now. In the 8 years since the market took a dump, my home value went from $60k to $70k. Hope I'm wrong, but I don't see it cresting the $130k I paid for it ever again.

[PhilDanley]

Always Run The Numbers!

Rff:

I've run both the ladder payoff (highest interest rate to lowest rate) and the snowball payoff (lowest balance to highest balance), assuming you could afford to throw an extra $500 per month at your non-mortgage debts. Based upon this analysis, you will save $1489 by using the snowball method.

Snowball pays everything off in 55 months at total payments of $112,569.

Ladder pays everything off in 56 months at total payments of $114,058.

In your scenario, using the ladder, your $1900 Stafford loan and your $13,900 auto loan don't pay off early; they run their normal amortization. This is because your boat loan gets the extra principal payments during the sequence. So you lose some firepower which extends you an extra month.

If you were willing to throw some your savings at this then you could really speed this up! Good luck with whatever you decide to do.