Former poor kid who has followed guides, but still lost...

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need_help_pls
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Former poor kid who has followed guides, but still lost...

Post by need_help_pls »

Hi everyone, what a great community. I've learned a lot by reading and following the advice here. However, I wanted to reach out for guidance as I feel a little lost despite knowing things such as the proper investment order, etc. In short, as someone who grew up poor, I feel like I'm doing everything wrong when it comes to finances. Basically, I feel like I'm never going to be able to own a home and be a "forever renter."
  • 35F, single but in a long term relationship with a partner who is attending a doctorate program in English. Fully expect to be married. All finances below are in the context of our combined finances.
    Annual income: $200k ($175k my salary + $25k his Ph.D. stipend)
    HCOL - my rent is high but that's by choice because we wanted to live in a nicer part of town
  • Retirement: 
    $150k - I started very late because I was in school for so long. I'm putting away about 20% of gross (includes vested contribution by employer), which just about maxes out my contribution limits 
    $80k - Partner's retirement, which all contributions are fully paused since they're in school full-time
  • Net worth:
    Monthly cash flow - usually about $5000 positive net gain after accounting for all monthly retirement contributions and expenses .As you can see below, it just sits in checking/savings after we gain it each month. I have no idea if this is a good number or not, as I can't find much data on the average amount of what you should end up with each month. I feel like we spend too much monthly.
    Current cash holdings - $95k - I know you're supposed to invest and it's stupid to hang onto this much cash because its value diminishes with inflation, but as someone who grew up poor, I feel more comfortable with a large cash cushion. Plus, I often have to pay medical bills for my ailing parents at a moment's notice because their Medicaid + Medicare doesn't cover everything ($1000 here, $1500 there). They also need to be in an assisted living facility by the end of the year. Car repairs, etc. pop-up too. But maybe this holding doesn't have to be this large?
  • Debts:
    CC debts paid off monthly and is accounted for in the monthly cash flow above
    No car loan - fully paid off old used car
    $200k student loans at about 8% interest - I feel like I'm never, ever going to be able to pay this off, so I plan on holding onto these debts until I die.
Basically, I feel so stressed out about not having enough money and at the same time, being too scared to invest the money that I have. I understand that every flowchart tells you to 1. build an emergency fund, 2. Use employer match for retirement, 3. pay off highest debts, etc., but I feel like I can't really follow this. I don't know how to evolve. Thank you for any advice.
lazynovice
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Re: Former poor kid who has followed guides, but still lost...

Post by lazynovice »

Why can’t you follow the flowchart? You have an EF, you just need to decide how much is enough.

Can you refinance the debt to something with a lower interest rate? Why do you think you can never pay it off?
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C4NT
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Re: Former poor kid who has followed guides, but still lost...

Post by C4NT »

You have 95K in the bank and 5K a month you could throw at the debt.

You should be able to pay it off in less than two years.

Look up Dave Ramsey.

You're fine.
Marseille07
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Re: Former poor kid who has followed guides, but still lost...

Post by Marseille07 »

As other posters said, given the numbers I don't see why you think you can't pay off your debt. This should be the first thing imo, before even thinking of funding retirement accounts.
MindBogler
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Re: Former poor kid who has followed guides, but still lost...

Post by MindBogler »

Nothing else you can do will have the same ROI as paying off that debt. If you have a 401k match, I would invest just enough to get it then plow every available dollar towards that debt.

Edit - Don't completely deplete your emergency fund, but I would take 1/2 and pay down that debt, today.
oldfatguy
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Re: Former poor kid who has followed guides, but still lost...

Post by oldfatguy »

5K a month leftover after all your expenses? You could fully fund another household on that much, as that is more than many people earn.

I'd be throwing a lot of your extra money at that high interest student loan debt, and/or refinancing it.
bloom2708
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Re: Former poor kid who has followed guides, but still lost...

Post by bloom2708 »

C4NT wrote: Thu May 06, 2021 12:56 pm You have 95K in the bank and 5K a month you could throw at the debt.

You should be able to pay it off in less than two years.

Look up Dave Ramsey.

You're fine.
+1

In 1 swoop you could knock nearly 50% off. Keep $5k to $10k for an Emergency Fund until debt is gone. 8% is worth blasting.
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jpelder
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Re: Former poor kid who has followed guides, but still lost...

Post by jpelder »

oldfatguy wrote: Thu May 06, 2021 1:01 pm 5K a month leftover after all your expenses? You could fully fund another household on that much, as that is more than many people earn.

I'd be throwing a lot of your extra money at that high interest student loan debt, and/or refinancing it.
Agree completely. My household take-home pay is barely more than $5000 per month. OP, put that extra $5000 per month toward the loans. You'll have even more once partner finishes their PhD and gets a regular job. You're in a hole, but you can firehose a lot of money at the debt.
sailaway
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Re: Former poor kid who has followed guides, but still lost...

Post by sailaway »

1. Being a forever renter does not necessarily mean you are doing anything wrong financially. In many HCOL in the US, it is currently the best option. Run some rent/buy calculators if in doubt. With a partner working on a PhD in English, I imagine they are expecting to stay in academia, and mobility will be key to them pursuing that. As such, the flexibility of renting could be just the thing. That being said, if owning a home is a goal of yours, that is something you can pin down, quantify and work towards.

2. Refinance your student loans. That rate is ridiculous! If you cannot refinance, reconsider paying it off.

3. $95k represents less than two years of what you say your current savings is. Perhaps you mean that on a good month you put aside $5k, but the known unknowns, like car repairs, pop up and eat into that? If so, average out what those other things have cost you over the last couple of years. What is your actual monthly spend? Once you have identified that, you can work on a plan going forward. Think of your EF in relation to your expenses.

Make sure your parents are taking advantage of local support programs as well as the more well known programs. A good social worker can help protect them and you.
lazynovice
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Re: Former poor kid who has followed guides, but still lost...

Post by lazynovice »

Also, you are not legally responsible for your parents’ medical bills. If they qualify for both Medicare and Medicaid, they are in a position where they should not have to pay very much out of pocket. Look on websites of the hospitals and clinics they visit for Financial Assistance Policies. They should apply using their financial information, not yours. Virtually every hospital offers these and clinics affiliated with these hospitals will as well.

It does not mean you cannot help out occasionally, but make sure they are exhausting other options first.
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Wellfleet
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Re: Former poor kid who has followed guides, but still lost...

Post by Wellfleet »

need_help_pls wrote: Thu May 06, 2021 12:41 pm Hi everyone, what a great community. I've learned a lot by reading and following the advice here. However, I wanted to reach out for guidance as I feel a little lost despite knowing things such as the proper investment order, etc. In short, as someone who grew up poor, I feel like I'm doing everything wrong when it comes to finances. Basically, I feel like I'm never going to be able to own a home and be a "forever renter."
Welcome to the forum. Read up on the Wikis, take it slow and learn. Your not alone.
Ramjet
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Re: Former poor kid who has followed guides, but still lost...

Post by Ramjet »

Refinance your loans to a better rate and contribute 5K extra per month to your loans. You would be able to pay off the 200K in 3.5 years or so. Take your cash holdings and invest half. You will still have an adequate emergency fund left over. You are fine. Make a plan and execute.
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davibi02
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Re: Former poor kid who has followed guides, but still lost...

Post by davibi02 »

Your net take-home is almost as high as my gross! The biggest thing for me was to start a zero-dollar budget. It felt like I got a raise once "every dollar has a job" entered my world. I use an old version of YNAB.

I'm with many others in that I think you should pay your debt down. With your high wage I think it can be done faster than you realize if you hyper focus on it.

I feel like your emergency fund is much too large, but on this note I encourage you to do what you're comfortable with. I would aim for 6mo, maybe a year if you're timid, but 95k seems excessive personally.
Bear906
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Re: Former poor kid who has followed guides, but still lost...

Post by Bear906 »

My goodness, refinance that 8% student loan debt if you can.

Other than that, I think you're doing fine. You have a lot of hard-to-predict expenses popping up, you may get married soon, and your parents are in their twilight years. There's a lot of uncertainty and stress there. Sitting on a pile of cash while you muddle through major life events is hardly a silly thing to do, but perhaps limit it to one year's worth of anticipated expenses, plus your anticipated wedding-related expenses.

Concerned about renting forever? With $5K left over a month, you could have those student loans gone AND a $100K down payment for a home in around 5 years. Surely your household income will have gone up by then, and you'll be in even better shape.
Last edited by Bear906 on Thu May 06, 2021 1:53 pm, edited 1 time in total.
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celia
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Re: Former poor kid who has followed guides, but still lost...

Post by celia »

Dear "Former poor kid", Looking at your shared data and that your parents are still on Medicaid, I think you have done amazing things so far!!! Print out your original post, date it, and look at it every few years and you will definitely see the progress you've made. I think part of your hesitancy to change is from your parents' inability to. Acknowledge that, and that you are not them. You have a good education and your partner does too, which was likely your impetus for change.

I am a trustee of a trust for a relative in another state who is also on Medicaid and Medicare. She and I both grew up in middle class families, but due to her disabilities, she will always need help. Every week or two, I get a request for something that costs money. I will grant it if it is needed for health, but not so much for entertainment purposes. I remind her that the trust has to last a long time (as do your own finances). You also need to be aware of the Medicaid rules in your parents' state. If they have too much income or assets in a year, they may become ineligible for Medicaid, then have to re-apply when their income goes down. For example, if they need glasses, pay the optometry costs directly to the doctor's office instead of giving them cash to pay the bill. (I recently did this by calling in and giving a credit card number. And yes, in her state, Medicaid will pay for a new pair every two years and fix/replace them sooner than that if you being in all the pieces. In our case, "we" are now learning not to leave glasses on sitting or sleeping surfaces. :oops: ) And confirm that your parents received all the stimulus checks they were eligible for.

It makes no sense to put some of the money into investments and maybe get 7% returns while paying 8% on a loan. So focus on paying that off next. Then after you are married and your spouse has a job, you two could agree that the new income stream will first be used to save up for a house.
Last edited by celia on Thu May 06, 2021 2:00 pm, edited 1 time in total.
deltaneutral83
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Re: Former poor kid who has followed guides, but still lost...

Post by deltaneutral83 »

OP, you have a guaranteed 8% rate of return on your student loans. First, I'd try to re finance, next I'd pay them down quickly. Probably a two year situation, certainly not a lifetime with income OP has and cash in the bank currently.
Independent George
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Re: Former poor kid who has followed guides, but still lost...

Post by Independent George »

1. If you want to care for your parents, the best thing you can do is get your own finances in order. Caring for aging parents is hard, and it's even harder if you have to worry about yourself, too.
2. 8% interest on your student loans is high; your very first priority would be to pay those off as soon as possible.
3. There's absolutely no reason why you can't cover your student loans with your income. Without changing anything or touching your cash savings, $5k/month would pay them off in three years. If you use half of your cash (which still leaves $45k for an emergency) and tweak your budget, I would bet you could tackle it maybe 1.5 years.
4. If your job is stable, I'd pay down even more right away. From your numbers, I assume your expenses are maybe $4k per month. Id' leave $15k in savings and put $75k down on your loans, bringing your balance to a much more manageable $125k.
5. Start by writing down all of your monthly expenses (housing, food, utilities, insurance, etc.) in order of largest to smallest. If you don't know, start tracking it next month.
6. Compare that to your pay stubs. If you're paying into a 401k, cut back until you just reach your match limit, and recalculate.
7. The difference between those two numbers is how much additional loan principal you pay off this month.
8. Now think about ways you can realistically reduce your budget. Don't come up with perfect scenarios where you always make the best possible decisions - we are all inherently fallible. But if you go out for lunch every day, what if you brought in a sandwich twice a week instead? What if you spent a little less on personal shopping? Things like that. Start small, aiming for maybe an extra $100 or so, and try that out for a month.
9. Keep track every month, and see where else you can save.
10. Get a white board, put it on your refrigerator, post (a) your remaining loan balance, (b) how much principal you paid this month, and (c) the cumulative total of how much you've paid since you started tracking. You will be horrified at first, but pretty soon you're going to be shocked at not only how much it changes, how much faster it changes every month. You'll find new ways pay down more, just to see those numbers change.

Do all this, and then come back to us in six months and tell us how you feel. From what you've told us, you're in the hardest part, where it looks completely hopeless. The second you start making progress, it feels much better.
ZWorkLess
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Re: Former poor kid who has followed guides, but still lost...

Post by ZWorkLess »

Agreed, you can pay off those student loans. And you SHOULD pay them off as quickly as possible given that huge interest rate.

I would take half your cash holdings and set it aside for emergencies for your comfort. That's plenty.

Then I'd take the other half and make a big payment on your student loans. If they aren't consolidated, you should pay off the highest interest ones first with that big payment.

Then I'd throw that extra 5k every month at the student loans (on top of whatever your normal payment has been). That should get them paid off in full in about 2 years. Any other spare money you have in the next two years, except the money you need to get your full match at your company, should go to these loans. That will wipe them out right quick.

Once your student loans are paid off, you can start throwing all that excess cash into a "taxable" account to save for a down payment on a house.

Follow the advice you're getting in this thread, and you will never be poor again.

My husband and I graduated in 2000 with student loans about where yours are at. With an income 1/3 the size of yours. We paid them off, in full, a couple months ago. It was a long, slow, expensive process, but we did it. His first job out of school 21 years ago, making 5k/mo, our student loan payments were over 2k/mo. We also had two young children. And I wasn't working other than a very few hours (maybe 500/mo). We managed. It was rough. But we managed. Spouse (much higher earning potential) hopped jobs for $$$ (by necessity, obviously) the first few years of his career and then soon bought his own practice, also largely for the (much) higher earning power. (We also threw big chunks of cash at them the couple times we could do that -- paid mine off in full when I inherited some money and my spouse's in full a few months ago when we came into another small windfall. Without those windfalls, we'd have been struggling more the last few years and for several more years to come.) With your income and debt load, you could get there about 2 decades sooner than we did. Just do it. Trust me.
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luminous
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Re: Former poor kid who has followed guides, but still lost...

Post by luminous »

You have gotten some great advice here. I wanted to chime in and say you are doing great! I also grew up poor and now have more money than I ever thought possible. It is okay to want a big emergency fund as a comfort, you will eventually get used to how money comes in and out of your accounts and have more confidence that you have enough.

I agree about the advice to pay off your student loans. It feels like a huge amount, but it is well within your power to pay off. It is an amazing feeling to be debt free.

Again, you are doing great. Keep it up.
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jakehefty17
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Re: Former poor kid who has followed guides, but still lost...

Post by jakehefty17 »

need_help_pls wrote: Thu May 06, 2021 12:41 pm Monthly cash flow - usually about $5000 positive net gain after accounting for all monthly retirement contributions and expenses .As you can see below, it just sits in checking/savings after we gain it each month. I have no idea if this is a good number or not, as I can't find much data on the average amount of what you should end up with each month. I feel like we spend too much monthly.
That's great. You should be looking to optimize your excess cash flow by investing into your debt or other accounts.
Current cash holdings - $95k - I know you're supposed to invest and it's stupid to hang onto this much cash because its value diminishes with inflation, but as someone who grew up poor, I feel more comfortable with a large cash cushion.
Feeling more comfortable with a cushion is fine, but an emergency fund doesn't need to be so large. This is too much cash to be sitting on, ESPECIALLY when your student loan debt is eating you away at an 8% interest rate. Forget inflation, that rate is killer.

Plus, I often have to pay medical bills for my ailing parents at a moment's notice because their Medicaid + Medicare doesn't cover everything ($1000 here, $1500 there). They also need to be in an assisted living facility by the end of the year. Car repairs, etc. pop-up too. But maybe this holding doesn't have to be this large?
You already know what we're going to say. You're holding too much cash. Keep a more reasonable emergency fund for these random expenses that pop up. I understand these feelings, but finances shouldn't be driving any emotions. Do what is practical.

Debts:
CC debts paid off monthly and is accounted for in the monthly cash flow above Great.
No car loan - fully paid off old used car Great.
$200k student loans at about 8% interest - I feel like I'm never, ever going to be able to pay this off, so I plan on holding onto these debts until I die.
Yuck. You can easily pay off this debt with the spare 5k/month you have after monthly expenses. Drop that terrible attitude and do some math. Put 80k of your cash holdings into your student debt tomorrow, save 15k for your "emergency fund". You're left with 120k student debt, which can be paid off in 2 years with your extra cash flow (5k/month). This is an extreme view, but just to show you that it's not so dire that you'll "never, ever going to be able to pay this off". Putting even half of cash holdings towards your debt would be practical, and would get you near 3 years to pay off your debt with excess cash flow. Perhaps best of both worlds?
Basically, I feel so stressed out about not having enough money and at the same time, being too scared to invest the money that I have. I understand that every flowchart tells you to 1. build an emergency fund, 2. Use employer match for retirement, 3. pay off highest debts, etc., but I feel like I can't really follow this. I don't know how to evolve. Thank you for any advice.
Stop stressing. If anything you have too much money (cash anyway). Take a more practical (rather than emotional) approach to your finances. That'd be my advice, because you are doing great otherwise!
I responded to your post in red above! You are doing great but you should teach yourself to remove emotion from your investing. There's a poster on the forum who describes this as pulling a Spock... do what is logical and leave emotion out of decision making. Financial decisions anyway.

It may take a few years of having money to feel comfortable that you have enough. However, with that kind of cash just sitting on the sidelines whilst holding paying high-interest debt doesn't make any sense.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski
dboeger1
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Re: Former poor kid who has followed guides, but still lost...

Post by dboeger1 »

I love the phrase "former poor kid" because I feel like it perfectly describes my state of mind upon entering the workforce in my early 20s. I grew up quite well off until late in middle school, when a family tragedy and lack of insurance pretty much knocked out my father's entire net worth and then some, so I have a somewhat unique perspective as someone who experienced being both wealthy and broke as a kid. It took a huge toll on my mental health, but also my sense of what I was capable of financially. Despite landing a good-paying job out of school in a good industry, I just felt like I was never going to have enough, and my only options were to be slave to the grind for 30+ years, or scrape up enough to move off grid in the middle of nowhere and live like a hermit.

It took years and a healthy dose of good luck to really break that line of thinking. I don't mean to brag, but I made an excellent choice when it came to my spouse :wink: , who started off well below me in earnings but rapidly increased her income to the point that I'm pretty sure she beat me out over the past year, and her trajectory is looking much better than mine. On top of that, I made some classic dumb mistakes that ended up teaching the best lessons I could have learned, like buying a brand new car as soon as I had the money, paying way too much for car insurance, and letting all my cash sit in a brick-and-mortar bank account paying no interest. There I was, making 6 figures straight out of college, and thank goodness I tracked my net worth on mint.com despite not putting in the effort to create a detailed budget, because I noticed one month that my net worth actually went down because I spent more than I made. That immediately sent shivers down my spine, because I thought, "Why the heck would I spend all my time at this job I don't particularly love if my net worth is going to drop?" So I got my butt into gear, aggressively cut expenses, and started searching for information on how to invest. I discovered Bogleheads and Vanguard very early on.

Now, in our late 20s, we're approaching a net worth of $750k with a house we can comfortably afford and a baby on the way, as opposed to roughing it out in the wilderness like I legitimately thought I was going to end up doing. It sounds silly, but I really do believe the "former poor kid" in me was just extremely mentally unhealthy and overly pessimistic. Part of that was just lacking knowledge about how to invest, so like you, I felt like the housing market was always slipping farther beyond my grasp.

Now let's be real, everybody's path is very different and highly sensitive to timing, promotions, etc. My story is not to say you should try to replicate my numbers. You will likely be able to way overshoot mine in a similar time frame because of your higher income, but you may also fall short because of a market correction, a work accident, family health issues, or any number of other unfortunate circumstances. You should learn to not focus too much on where other people are at. I know people who live and breathe by exactly how their peers are doing financially, and I think they're driving themselves crazy, because people's situations, needs, and perhaps most importantly wants are highly variable. Just focus on what you can do, which is to cut expenses, determine an appropriate asset allocation, steadily invest your income, and give your investments time to compound. Eventually, you'll find yourself with enough money to not feel so down in the dumps.
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Re: Former poor kid who has followed guides, but still lost...

Post by Grt2bOutdoors »

deltaneutral83 wrote: Thu May 06, 2021 1:57 pm OP, you have a guaranteed 8% rate of return on your student loans. First, I'd try to re finance, next I'd pay them down quickly. Probably a two year situation, certainly not a lifetime with income OP has and cash in the bank currently.
+1. OP - think of your loan repayment as your taxable fixed income portfolio. I suggest a middle of the road approach. If you are able to refinance your student, then do so. If you can not, but want to earn a guaranteed 8 percent rate of return on your money, then a $2,500 monthly payment will eliminate those loans in exactly 9.58 years or 115 months. While that may seem a long time away from now, time goes by quickly. The remaining amount of monthly savings ought to be directed for mid and long term goals - apartment or house (figure 5 - 7 years from now) and longer term depending on your goals. You will get there and you are making a good income.
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hand
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Re: Former poor kid who has followed guides, but still lost...

Post by hand »

If I was in your situation I'd be conflicted and confused too...

You correctly understand the investment flowchart, but appear to be struggling to define/understand your situation: you expect to be married, but you're not, you want to live in a nice place now, but you want to pay off your debts (and buy a house), as a former poor kid, you may be hard wired to prioritize stability, but want to use your wealth for growth.


A couple things jump out at me:

1) You really ought to think about your own financials in isolation until you're married - pay off your debt, not your partners and make sure you're saving for your retirement. While this may feel disloyal, it is to the benefit of both of you if you do get married, and will protect you If you don't.

2) While you are making good money, it is not enough to do everything you want immediately in a HCOL area - you need to decide what is important to you. Personally, with a late start, I'd prioritize fully contributing to retirement (not just the match), then pay down your portion of the 8% loan - saving for a house can wait until your partner starts earning, and the two have a good view of career paths and what type of house and life you want.
hi_there
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Re: Former poor kid who has followed guides, but still lost...

Post by hi_there »

I would make a detailed budget and reevaluate every category of spending, as well as commit complete effort to paying down the student debt. OP's situation is not inescapable, but there is a ticking clock, given age. I'm not sure if starting a family is a plan in the next 5 years, but there will be much less financial flexibility if that happens.
mikejuss
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Re: Former poor kid who has followed guides, but still lost...

Post by mikejuss »

As painful as it is to say, I would recommend shutting off all contributions to your savings and retirement accounts and crushing your debt. The psychological lift you'll experience afterward will be tremendous. You have time--and many years of increased earnings--ahead of you to focus on home buying and retirement.
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FIREchief
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Re: Former poor kid who has followed guides, but still lost...

Post by FIREchief »

need_help_pls wrote: Thu May 06, 2021 12:41 pm Current cash holdings - $95k - I know you're supposed to invest and it's stupid to hang onto this much cash because its value diminishes with inflation, but as someone who grew up poor, I feel more comfortable with a large cash cushion.

$200k student loans at about 8% interest - I feel like I'm never, ever going to be able to pay this off, so I plan on holding onto these debts until I die.
This makes absolutely no sense whatsoever. You're holding $95K in cash earning negative real rates but plan to hold onto $200K in debt at 8% forever? :oops:
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
stoptothink
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Re: Former poor kid who has followed guides, but still lost...

Post by stoptothink »

FIREchief wrote: Thu May 06, 2021 4:12 pm
need_help_pls wrote: Thu May 06, 2021 12:41 pm Current cash holdings - $95k - I know you're supposed to invest and it's stupid to hang onto this much cash because its value diminishes with inflation, but as someone who grew up poor, I feel more comfortable with a large cash cushion.

$200k student loans at about 8% interest - I feel like I'm never, ever going to be able to pay this off, so I plan on holding onto these debts until I die.
This makes absolutely no sense whatsoever. You're holding $95K in cash earning negative real rates but plan to hold onto $200K in debt at 8% forever? :oops:
It's also a moral dilemma. OP could easily have the debt paid off in a handful of years. Don't be that person who is the feature of a "lenders are evil" article, when you are capable of paying the debt you took on.
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FOGU
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Re: Former poor kid who has followed guides, but still lost...

Post by FOGU »

OP,

Check out this dude who paid off $90k of student debt in 7 months. https://nomoreharvarddebt.com/

You don't have to duplicate all of his extreme measures, but I bet you can implement a bunch of them to one degree or another, and that would set you free in a short time.

But throwing in the towel? ("I'll never pay off these debts so I'll keep them until I die"). That's just nuts, right there.

Your hair is on fire with that debt. Get after it. It is hobbling you financially and psychologically, and it will do so forever until you crush it like an annoying bug. But it doesn't have to. You have the money and the income to knock it out fast.

Start working on changing your mindset. Your past does not have to be your future. Stop thinking in terms of scarcity, and start thinking in terms of prosperity.
Big Dog
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Re: Former poor kid who has followed guides, but still lost...

Post by Big Dog »

8% is rather pricey for ed loans. Have you looked into a refi for a lower rate? (I hope that your partner's program is fully-funded.)
barnaclebob
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Re: Former poor kid who has followed guides, but still lost...

Post by barnaclebob »

If you can't refi the student loans, I'd advise putting 45k of your checking account money and then a good chunk of your monthly money towards the loans. 8% guaranteed return is better than you can get anywhere else.

But otherwise you are doing everything right. Your salary is great now and your monthly savings is great too. But the debt and late start would make most people feel like something is wrong. You should be able to pay down the debt and have a good down payment saved up in 5 years or less.
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cchrissyy
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Re: Former poor kid who has followed guides, but still lost...

Post by cchrissyy »

hand wrote: Thu May 06, 2021 3:03 pm
1) You really ought to think about your own financials in isolation until you're married - pay off your debt, not your partners and make sure you're saving for your retirement. While this may feel disloyal, it is to the benefit of both of you if you do get married, and will protect you If you don't.
Excellent point. OP, are the student loans really yours or are they your partner's?
kelvan80
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Re: Former poor kid who has followed guides, but still lost...

Post by kelvan80 »

Former poor kid here too. Listen to everyone's advice here. These people only want the best for you.

Look up how much of your student loan payment goes to interest each month. How long do you want to continue paying out that much every month? How much money is your $95k earning sitting in a bank languishing. At most I bet it's $35 a month but it may even be less than that. That's what keeping that debt around your neck is costing you. Break free from it. Tackle it. Throw everything you have at it and keep yourself from entering into that kind of bondage again.

Also don't worry about renting. Renting has nothing to do with net worth or if you are financially successful. It's actually very freeing to have something break and being able to just call my landlord. Actually, it's one more reason you can reduce your emergency fund you don't have to worry about major household repairs.
stoptothink
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Re: Former poor kid who has followed guides, but still lost...

Post by stoptothink »

kelvan80 wrote: Thu May 06, 2021 6:02 pm Former poor kid here too. Listen to everyone's advice here. These people only want the best for you.
OP could knock out almost half of it tomorrow and if really focused, it could be totally gone in 2yrs. Knocking it out in 5yrs would be nothing. Growing up poor is no excuse in this matter.
Jablean
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Re: Former poor kid who has followed guides, but still lost...

Post by Jablean »

Make your emergency cash fund $60,000. This is equal to $5000 a month and as others have said is a livable income for a year just on it's own.

Take $25,000 of the remaining cash and put it into an account at Fidelity or Vangaurd. This will be a taxable account and is just the same as the cash account you have in the bank or at your credit union. Buy $5000 of a total stock index fund, and yes for the rest of this year you can keep the remaining $20,000 in cash (ie moneymarket fund). Make sure any earnings in the account are not reinvested - they should be deposited by the firm into your moneymarket fund inside the account.

Take the remaining $10,000 from your cash account and put it ALLL toward your student loan. Pick whichever one has the highest interest. Congratulations! If it was 8% you've just made $800. That's right, you now are $800 dollars richer.

Every month put your extra $5000 toward your student loan and pat yourself on the back for making $400.

Now if you have to spend some of your EF fund then refill it by pulling money out of your Fidelity money market, not by skipping a loan payment.

(Now this plan may not be the most efficient but it's your mindset that needs adjusting right now and this allows you to keep your cash, learn how to invest taxable cash, and make yourself feel Grrrreat by making money just by paying off your loan.)
spammagnet
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Re: Former poor kid who has followed guides, but still lost...

Post by spammagnet »

Do you have disability insurance? If not, get it.
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