Overwhelming Personal Finance

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
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ltuxl
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Joined: Mon Jun 20, 2011 11:48 am

Overwhelming Personal Finance

Post by ltuxl »

My Situation
Age: mid 20's
Debt: 30k in student loans <+7%; 200k in mortgage @ 3.9% (paying PMI); 9k car debt @ 0%
Net Worth: mid 5 figures
Retirement: 401k/Roth - low cost index funds/bonds (95/5)- mid 5 figures

Girlfriends Situation
Age: mid 20's
Debt: 110k in medical school loans @ <=7%
Net Worth: Negative 100k
Retirement: $0

Concerns/Feeling Overwhelmed
I think about future expenditures and I start to get overwhelmed. While I realize that my situation is better than some my age, I think about my current situation in addition to wedding costs, vacation, kids (day care, education, other), eventual new house, having to work until I'm 60+ years old to achieve financial independence, and lastly the unexpected (emergency fund).

I read books like The Millionaire Next Door, Intelligent Investor, and Rich Dad Poor Dad (among others) and I know that living below my means while investing in low cost index funds with the appropriate asset allocation based on my risk tolerance is the way to go but I still feel overwhelmed.

My Main Financial Goal
Becoming financially independent while also living life - not while living an extreme lifestyle (i.e. riding a bike and eating Ramen noodles)

My Plan
- Max out my 401k and Roth for 2014 and every year after.
- Pay off my student loans with extra cash flow by mid 2015.
- Pay minimum on my car until it is paid off (0%) and keep it until the wheels fall off.
- Pay off girlfriends student loans using her entire salary (when she gets a job after school) and my cash flow that I was using to pay off my loans. The loans should be gone in full between 2017 and 2018.
- Begin maxing her 401k and Roth.
- Begin contributing to a taxable account (provided that an HSA or other tax advantaged account isnt available) for additional retirement, vacations, childs education (will look into 529 when the time comes).
- Make extra payments on mortgage.

Questions
How can I not feel overwhelmed? Does/did anyone have a similar situation and feel the same way?
Does anyone have tips for financial anxiety? I think about money every day and I read forums, blogs, and books very often.
Would you advise a part time job or some other source of income to pay down debt faster?
Does anyone have tips or suggestions on how I can tweek my plan to reach my goals faster.
- Mr. Tux
Quickfoot
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Re: Overwhelming Personal Finance

Post by Quickfoot »

Put a plan in place and then quit reading forums, blogs and books about money so often until your stress level decreases. Anytime someone is overwhelmed by anything the correct course of action is to back away and let the stress level decrease.

Since your car is 0% (if it is truly 0%) don't stress too much about paying it off early. If you can afford the payments you'd probably be better off investing the extra money because you'll earn a return on it and you get zero return for paying off zero interest debt.

Be careful how much you do for a girlfriend, they have a nasty habit of becoming ex girlfriends and then going out of your way to help her financially will lead to regret (ask me how I know). You could consult with her to help her make a financial plan of her own but until you are married you should keep your finances separate, her debt is not your debt or ultimately your problem.

As far as stress just relax, live below your means and work at paying off your debt. You've dug yourself a hole (it isn't a huge hole but it is a hole) and it will take some time to get out of. Set a reasonable budget, allow entertainment and other fun things in your budget, and then stick to it.

My wife and I have gone through 2 custody battles (at the same time) and also had considerable debt. Over 18 months we've paid off nearly all our debt (now have only a 7% debt to income ratio, soon to be 5%). It was stressful for a while but we are happy with our situation now, even when we were paying off debt I still took her on dates, and we still went on weekend getaways (divorces are very expensive, so once you do get married make sure invest some money in your relationship and keep your spouse happy :)).
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Bogle101
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Re: Overwhelming Personal Finance

Post by Bogle101 »

You're stressing out because you are jamming a life's worth of expenses into your current timeframe. Also, I would be careful about contributing your money directly to your gf's loans. You're not even married yet.
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stoptothink
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Re: Overwhelming Personal Finance

Post by stoptothink »

Quickfoot wrote:P

Be careful how much you do for a girlfriend, they have a nasty habit of becoming ex girlfriends and then going out of your way to help her financially will lead to regret (ask me how I know). You could consult with her to help her make a financial plan of her own but until you are married you should keep your finances separate, her debt is not your debt or ultimately your problem.
This. Until you are married (and proceed with caution, even then, I was in literally the exact same position and paid the price), do not worry about or co-mingle your GFs financial situation with yours. You appear to be in a better situation than most of your peers, continue on the course.
Andyrunner
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Re: Overwhelming Personal Finance

Post by Andyrunner »

First of all, she is just your girlfriend. Until your married, keep it all seperate, sounds like your planning on marrying, but until it is a done deal, keep it seperate. Things could get messy if things change.

How can I not feel overwhelmed? Does/did anyone have a similar situation and feel the same way?

Yes, but also realize that your income will probably increase as you get older, so as expenses might increase, your income will increase as well. Also remember your young with no kids and you sounds like you are in a good seat. Once you have the debts paid off, you will have a large amount of cashflow for the increased costs in the future.

Does anyone have tips for financial anxiety? I think about money every day and I read forums, blogs, and books very often.

Stop looking at forums, blogs, and personal finance books every day. When your not working, do stuff thats fun and entertaining to you. Read other types of books, focus on hobbies etc. I know I have a stable plan (its not the best, but its a darn good one) so I don't look at it or question it every day. Also since your young and single go out have an over priced beer at a bar with friends or something, you will be wishing you did more later in life, balance yourself between planning for tomorrow and enjoying today. Honestly reading this forum does get me worried about my finances, but I keep reminding myself that I have a good plan.

Would you advise a part time job or some other source of income to pay down debt faster?

If you can do it without hurting your relationship or overstressing yourself sure, just make sure its a fun one, your main job is for the income, this one should be a side hobby or something. Before kids, I should have gotten a part time job at a running store, get discounted shoes and enjoy my hobby? Hell yeah!

Does anyone have tips or suggestions on how I can tweek my plan to reach my goals faster.

Honestly your actually doing really well. Also your young you have 20+ years of working ahead of you to be financially independent.
technovelist
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Re: Overwhelming Personal Finance

Post by technovelist »

Agree on not joining finances until you are married. The track record of such arrangements is not very good.
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JupiterJones
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Re: Overwhelming Personal Finance

Post by JupiterJones »

ltuxl wrote: How can I not feel overwhelmed? Does/did anyone have a similar situation and feel the same way?
Does anyone have tips for financial anxiety? I think about money every day and I read forums, blogs, and books very often.
Perfectly normal to be freaked out. I'd be freaked out too. :D But once you get a handle on your debt and start making progress toward getting rid of it, you'll feel a lot better.
Would you advise a part time job or some other source of income to pay down debt faster?
Yeah, that's probably what I'd do.
Does anyone have tips or suggestions on how I can tweek my plan to reach my goals faster.
Check out Dave Ramsey's website. Ignore the investing advice, but the "get out of debt and get your finances in shape" advice is quite good, IMNSHO.

And add me to chorus of people telling to hold off on paying your girlfriend's debts until they become your wife's debts. :D
"Stay on target! Stay on target!"
nash031
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Re: Overwhelming Personal Finance

Post by nash031 »

I'll echo what someone else said: don't worry about HER finances until they become YOURS. As someone who was engaged once before I got married (and thank GOD I didn't get married the first time!!), it's not worth fretting over. Can you think about and have an idea of what you would do? Sure. But don't execute anything yet - enjoy your wedding and honeymoon when the time comes, then sit down with your wife and make sure you're on the same page.

As for the rest, all I can say is this: in your mid-20s, the fact that you understand savings and investment and how overwhelming it can be is a GOOD thing. Most people your age (heck, many my age (mid-30s)) aren't even concerned with it and think it just works itself out, or don't know how much to save and what to do with it. You've got a good plan (have you written it out? I recommend that for sure as you're more likely to stick to it).

Just focus on building your savings and sticking to your AA. Ignore the market, ignore the noise, and increase your savings as your earnings increase. I started really saving when I was 23. I set some milestones I wanted to hit at 25, 30, 35, 40, 45, etc. Now, at age 36, just by sticking to my plan and continuing to increase my savings as able, I'm where I wanted to be at age 40 in terms of savings AND I have about $300k in equity in a house (which I hadn't necessarily planned on).

Compounding is a wonderful thing, and by starting in your 20s, you're going to be WAY better off than many, and I'll bet you'll see you will hit FI much sooner than you think. I'm on track for FI by age 43, and that possibility never entered my mind in my 20s.

Good luck!
doug4523
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Re: Overwhelming Personal Finance

Post by doug4523 »

Quick response to the question of whether someone felt the same way...

I was slightly overwhelmed when I realized that I would be graduating with $120,000 in student loans and marrying into another $220,000.

Long story short... my wife and I went from -$250,000 some 5 years ago to +$180,000 as of today on a combined salary of what your girlfriend will make (an average doctor's pay). We do live below our means, but also don't do anything extreme. We have a $400,000 house, pay for daycare, go to the caribbean/hawaii, etc. We max out both our 403(b)'s, and Roth IRA's for the last 3 years. Some minor saving in addition to that.

It can be done. Track your progress, that is what has helped me be happy with our plan. Good luck.
campy2010
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Re: Overwhelming Personal Finance

Post by campy2010 »

I remember your post from 2 years ago and posted it below so you can compare and reflect on your progress. I think you're doing GREAT. Don't stress to much; it just takes time to reach those milestone. Good luck.

http://www.bogleheads.org/forum/viewtop ... 6#p1088766
Old Numbers:
"Savings:
(old company) 401k: $4400
(new company) 401k: $10000
Roth IRA: $3900
Savings account: $21000

Debt – payments are estimated to nearest $10 (per mon./total)
Student Loan1: $170/$19000
Student Loan2: $60/$4430
Student Loan3: $370/$25300
Student Loan4: $60/$5130
Student Loan5: $120/$12600
Student Loan6: $170/$14200

My goal is to pay off as much student loan debt before moving out so that I am able to afford all of my bills and still contribute to my 401k, Roth IRA, and savings account. I am not sure if it is best for me to pay the minimum on each and knock out the highest interest rates (each loan has a different interest rate) or if I should pay off the small ones first and then work on the larger loans…"
Last edited by campy2010 on Wed Oct 16, 2013 4:15 pm, edited 1 time in total.
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gardemanger
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Re: Overwhelming Personal Finance

Post by gardemanger »

But don't execute anything yet - enjoy your wedding and honeymoon when the time comes, then sit down with your wife and make sure you're on the same page.
Errr... I would think that being on the same page with prospective spouse ought to come BEFORE the wedding.

It doesn't do either of you any favors to have you be in charge of solving both your financial issues. I have seen too many people rendered helpless by the loss of the spouse who used to "take care of everything" -- whether by divorce, death, or incapacity. The helplessness is not just lack of specific knowledge of how to handle finances; there's also an element of "learned helplessness." It really gets on my guts to hear a fully grown adult say some variation of "But I never learned how to do this stuff!" Even if one partner mostly handles the finances, the other one needs to know what's going on and participate in the decisions.

It might just help decrease your anxiety if you and your partner are working together on your financial decisions. While you're not married or long-term committed, they should still be separate decisions, but in those areas where your finances do intersect (I presume you are living together at least) you do still have to make joint decisions, and you can discuss and advise each other on your separate choices. This might help you decide if you really are aligned on long-term goals and philosophy and would have a good basis for a marriage and a closer financial partnership.
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ltuxl
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Re: Overwhelming Personal Finance

Post by ltuxl »

I remember your post from 2 years ago and posted it below so you can compare and reflect on your progress.
That old post was nice to see. I have tripled my retirement savings, removed high cost mutual funds and replaced them with low cost index funds/bonds, and eliminated three out of six of my student loans (highest interest rate first). I think because it took two years for that to happen that it didn't really feel like I had made much progress. My spreadsheets reflect those changes but perhaps I will feel better about my situation when my 2014 spreadsheets have less boxes for student loan payments and an increasing portfolio.
Check out Dave Ramsey's website.
I have watched a few of his videos on YouTube and I have seen him on television. While I'm sure there is something to gain from his advice on finances, I'm not entirely sure that I agree with the $1000 emergency fund or the snowball approach for debt reduction that he recommends. The emergency fund is a relative thing but if I'm not mistaken he also suggests to pay down the lowest debt balance first in order to increase cash flow and have a 'good feeling' about paying off a debt in full. That said, most of his '29 Ways to Leap Out of Debt' are worthwhile suggestions.


As always, thanks to everyone for the tips/suggestions.
- Mr. Tux
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prudent
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Re: Overwhelming Personal Finance

Post by prudent »

Stress is bad. I echo the previous comments on two main fronts (1) step back so your stress level goes down; and (2) no mixing of finances until after marriage (planning for the future is fine though).

You are only looking at costs and ignoring the human capital in the equation. At your age, your human capital (earning power) is your greatest asset. Don't take it for granted, but don't ignore it either. You also have the power of compound interest in your favor for many years to come.
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midareff
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Re: Overwhelming Personal Finance

Post by midareff »

Try and remember you eat the 1 ton or the 20 ton elephant in the room the same way, one bite at a time.

#1. Set up and set aside an adequate emergency fund.

#2. The 7% debt has to go first.

#3. After the 7% debt is gone you can start to use excess cash for savings/investing and paying other debts.

#4. Have an ate the who elephant party.

BTW.. very important prospective spouse is on the same page wholeheartedly before she becomes that four letter word... LOL... wife.
nash031
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Re: Overwhelming Personal Finance

Post by nash031 »

gardemanger wrote:
But don't execute anything yet - enjoy your wedding and honeymoon when the time comes, then sit down with your wife and make sure you're on the same page.
Errr... I would think that being on the same page with prospective spouse ought to come BEFORE the wedding.
Definitely. Re-reading, I realize that I miswrote. Absolutely discuss your financial strategy/thoughts/philosophy BEFORE getting married. I just wouldn't ACT on it until the knot is officially tied (i.e. directing your earnings to her loans, combining accounts, etc.).

Just to be clear, I think one of the most important things a couple must discuss and agree on is their financial philosophy. My wife and I are aligned 98% (she is, in fact, even more frugal than I am), and it has saved us countless arguments that other newly married couples I've been exposed to have had in the last 2+ years.

In my office of five, two of us consider ourselves in line with our spouses financially. The other three constantly complain about financial woes with their wives.
nwrolla
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Re: Overwhelming Personal Finance

Post by nwrolla »

I am in a very similar situation except my wife and I have been married a few years. As others said, come up with a plan to repay debt and stick to it. And try not to obsess over not investing a large amount of money every year. I had to take a break from this forum for a while because I got stuck in the mentality of I should be making more / saving more. But it didn't line up with my debt strategy so I had to refocus. That line of thought can be extremely discouraging especially when it seems like there is no end to the pit.
Also I would advise against not combining finances until your married and on the same page (financial agreement hopefully comes before marriage ).

Good luck with everything!
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ryuns
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Re: Overwhelming Personal Finance

Post by ryuns »

ltuxl wrote: not while living an extreme lifestyle (i.e. riding a bike and eating Ramen noodles)
I didn't realize bicycling was part of an extreme lifestyle. Perhaps your outlook, wherein your two options are either "on track to financial independence" or "OMG I might have to start riding a bicycle!!!" isn't ideal for reducing stress. :)
An inconvenience is only an adventure wrongly considered; an adventure is an inconvenience rightly considered. -- GK Chesterton
MathWizard
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Re: Overwhelming Personal Finance

Post by MathWizard »

Yes, work on the debt, don't go wild on buying things, and hopefully have pre-marital counseling sessions.
(I didn't think we needed them, but the minister required them. I've got to track him down and thank him!)

Don't stress out though. Life is a marathon not a sprint.


I'm 31 year married, dirt poor at the beginning, we paid for wedding, parents couldn't help with college, lived in
mobile homes for first 17 years of mariage.
Bought a house 14 years ago while still paying on student loans and
was stressing about helping kids pay for college, our total net worth was about $50K,
this was before the recessions of 2001, 2003, and 2008.
Vacations were to visit parents. Staying in a hotel, even in an emergency, was a luxury.

How 14 years changes things:
Net Worth now 10x greater
We've taken the kids on vacations nearly every year,
my wife and I have visited Europe twice,
both kids in college and we're paying 1/2 their cost out of current income
house will be paid off soon after the youngest graduates.

I'll be financially independent at 61, but will probably work until 65 or 67 to have more funds for travel in retirement.
(Health insurance is a huge expense before 65.)

Don't concentrate on negatives. Your combined income will certainly dwarf ours.
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