Twins Fan wrote:I'm a bit confused at how you're in the 35-38% tax bracket, married/two incomes, no kids yet, I'm guessing a pretty reasonable mortgage payment, a car payment, now other debt, and don't have a whole bunch of extra cash around. Should mean you have a pretty hefty income, no?
Regardless, as to what you posted about... I'm a debt averse type myself and one of the Dave Ramsey things that I like is his "snowball effect". That's where you tackle the smallest balance debt first without worry of the interest rate or "numbers". I did that when I got rid of my debt (cc's, car payments, and such... still have a mortgage) and it was a satisfying way of doing that. A mental boost kind of thing. So, I say knock out the car payment as soon as you can. Then you can decide what to do from there. Maybe split between paying down the mortgage and saving for the baby? Maybe wait one more year before starting to try to have a baby?
My firm has income that is not realized. We put a lot of money into developing the firm and its infrastructure. We paid with loans. Apparently, we did get to deduct the income in the past (which was nice), but now the money that is going to pay the loans cannot be deducted (it was deducted once at the time of purchase). The debt was a good thing in that it has allowed us to grow in a way we would not otherwise be able to grow. Paying almost all of it off in short order was also a good thing. The fact that our taxes are out of whack for a few years is not so good. I am not complaining- without taking on the debt, we would not have all the income to pay it off. That income in the future should continue to grow, allowing for real profit instead of "ghost profit." We are about two years out from that, from my understanding.
Also, 20% of our gross income goes into ROTH 401k accounts (something that has been debated at length on other threads - both percentage and ROTH).
JupiterJones wrote:How much is the car worth? You might be able to sell it and then pay cash for an el-cheapo-mobile.
Unfortunately, I drive a lot. How much is a lot? 35k miles a year. I got a car that was $20,125 (VW Jetta) that was much more enjoyable to drive. My quality of life went way up, but it was a fairly inexpensive new car (in line with a Honda/Toyota). Should I have purchased new? Moot point, since I did it pre-boglehead days. The car is now 3 years old, which is where I would buy used. I plan on driving it for 10-12 years. Since I have three offices around the Metro-Atlanta area, there is no real way to move closer to one (although the upside down mortgage would prevent that anyway).
mlipps wrote:Assuming you're itemizing, your effective rate on the mortgage is close to 4.1275, so the rates are pretty close to the same. With the car already being paid off relatively soon, I'd probably focus on the mortgage & see if you can pay it down enough to refinance, but that does seem pretty far off.
Can you refinance the car? Penfed has consistent offers around 1.99%.
Because my credit has been extended for the above referenced debt for the business, refinance will not work because of debt to income ratio. (They will only consider my salary, not the business proceeds that actually pay the debt (that is almost paid off). This means that until that is paid, re-fi is not going to happen on the car). Good credit, though.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.