Staying the course with our plan

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oktax
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Staying the course with our plan

Post by oktax » Fri May 12, 2017 7:01 am

Hi all,

My wife and I are in aggressive student loan repayment mode. In the past 16 months, we've cut our loan balance in half (to approximately 72k). Our repayment was delayed, as we unexpectedly welcomed our first baby into the world last fall. Now that things have normalized for the most part, we're back to working our plan. We should be able to get these paid off in a year.

Our plan looks like this: we rent (not own) a house, live a fairly bare bones lifestyle, contribute enough to get the match with our 401ks, and pinch pennies so that every extra cent goes to loan repayment each month. We're fortunate to make decent money (around 175k).

I'm writing mostly to ask for motivation. I know that 2.5 years isn't a long time in the scheme of things, but mostly because of our 4-5 month delay after baby was born, I'm starting to get really antsy about getting these loans paid off and moving on with our lives so that we can start building some net worth.

What motivates you to stay the course with your financial plans? When is it okay to indulge and treat yourself?

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knpstr
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Re: Staying the course with our plan

Post by knpstr » Fri May 12, 2017 7:14 am

oktax wrote:I'm starting to get really antsy about getting these loans paid off and moving on with our lives so that we can start building some net worth.

What motivates you to stay the course with your financial plans? When is it okay to indulge and treat yourself?
I think you have sufficient motivation.
I'd treat yourself once you've paid off the loans in full and save up for whatever that is.

You're building the foundation to build your net worth with getting rid of this debt, so while it may feel like you're spinning your wheels, you're not.

Keep at it!
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

livesoft
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Re: Staying the course with our plan

Post by livesoft » Fri May 12, 2017 7:16 am

oktax wrote: Our repayment was delayed, as we unexpectedly welcomed our first baby into the world last fall.
Congratulations! But I hope you all had at least 5 or 6 months early warning and the baby was not really "unexpectedly welcomed."

We were not able to consider buying a house until our first child was 2.5 years old, but before our 2nd child was born. I can't speak to your motivation because you seem to be doing fine.
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J295
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Re: Staying the course with our plan

Post by J295 » Fri May 12, 2017 7:22 am

You are doing great.
You can't put a price tag on a family/children .... dig in and enjoy ("hard work" but the best kind!).
Keep hitting singles and I suspect you'll be fine, it all just takes time.

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BL
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Re: Staying the course with our plan

Post by BL » Fri May 12, 2017 7:28 am

You are building net worth. The loans are a negative on your net worth.

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KlingKlang
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Re: Staying the course with our plan

Post by KlingKlang » Fri May 12, 2017 7:37 am

Be sure to treat your wife to something that she likes for her first Mothers' Day!

Now that you are a nuclear family be sure that you have an emergency fund, life insurance, and disability insurance. After that just be patient and take everything one step at a time.

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djpeteski
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Re: Staying the course with our plan

Post by djpeteski » Fri May 12, 2017 7:54 am

There is a lot of noise in the media out there, and it is hard to judge what is actual wisdom, and what is foolish. One of those things that seems wise, but actually isn't in your situation is: "buy a house, buy a house, buy a house". Some might suggest that you dislike your wife and your child living a spartan lifestyle and renting. However, you are truly setting yourself up for future success.

The trite saying "the bottom line" comes from accounting and the true measure of your financial success is your bottom line: net worth. I would encourage you to keep track of it monthly, and you will and can derive motivation at the speed and consistency you see that number improving. By keeping good records, you will see dramatic progress.

For my wife and I getting out of debt was the key to skyrocketing our net worth. The year we implemented a similar plan to yours, we grew our net worth that year by more then we had accumulated over the previous 24 years (I was 44 at the time). Our only regrets now, are that we did not start sooner. We assume that if we started this at your age we would be in the 10 millionaire club. Frankly, that is what I think you two are headed for. Please read that again.

During our debt payment program there were times when we were both very discouraged. What you are experiencing is normal. However, these trials are necessary as the lessons you learn are invaluable. When you are on the other side people will inevitably ask you for money citing all sort of financial woes. The wisdom you create now will allow you to make good decisions on how to help people, and for some that might be just helping them develop a budget.

Something I discovered today, and probably holds true for you as well (perhaps more so). If you take our income so far this year and deduct taxes, we have increased our net worth by more than that number. That is pretty freaking amazing. We did this (this year) by not being shy about spending (unlike you two).

Keep up the good work, and you will make it to a 8 figure net worth.

staythecourse
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Re: Staying the course with our plan

Post by staythecourse » Fri May 12, 2017 8:01 am

BL wrote:You are building net worth. The loans are a negative on your net worth.
Bingo.

Money is fungible. If you decided to invest the extra money to pay down the loan at X interest rate vs. investing in fund Y giving a predicted return of Z.

Either way you net worth increases. Not paying X interest rate on the loan is an investment.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

JGoneRiding
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Re: Staying the course with our plan

Post by JGoneRiding » Fri May 12, 2017 9:42 am

To stay motivated I start figuring out and spread sheeting my "next step"

I also rec "slaying the debt dragon" more motivational then financial and more "this is how we did this" then these are the steps you should do in order to be great.

Lobster
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Re: Staying the course with our plan

Post by Lobster » Fri May 12, 2017 10:03 am

Keep it up!
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retire57
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Re: Staying the course with our plan

Post by retire57 » Fri May 12, 2017 11:13 am

What motivated us (especially in the accumulation phase) was watching our investments grow. Duh, right? I mean, really watching them.

For example, the day after dividends were paid out (obviously we were re-investing them), you can bet I was updating our values on Quicken and keeping track of how many more shares we owned. This technique is effective even when the market is down as you are still scooping up shares.

I've never been a collector of things. But shares ... well, that's different!

Congrats! You 1) have a plan and 2) have made admirable progress. Keep coming back to this board - that's motivation in itself!

bloom2708
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Re: Staying the course with our plan

Post by bloom2708 » Fri May 12, 2017 11:18 am

With $175k income, how long do you expect to take to pay off the $72k balance?

Can you live off $100k (pre-tax) and kill them off in 1 year? I would consider stopping retirement contributions for 1 year to get this done. The best motivation is the finish line. Set the finish date. That is the ultimate motivation.

If you have a $20k Emergency Fund, drop it to $5k. Put the $15k on the loans. Sell stuff. Read "The Total Money Makeover" by Dave Ramsey for inspiration.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

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FelixTheCat
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Re: Staying the course with our plan

Post by FelixTheCat » Fri May 12, 2017 11:27 am

oktax wrote:What motivates you to stay the course with your financial plans? When is it okay to indulge and treat yourself?
My motivation is fear based. I have seen too many people lose their jobs or house over the decades. I've read about about people that have no savings, rely on the government or simply do without.

Pay yourself first is my motto. I want the financial freedom to be able to make choices.
Felix is a wonderful, wonderful cat.

Grt2bOutdoors
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Re: Staying the course with our plan

Post by Grt2bOutdoors » Fri May 12, 2017 11:51 am

Indulge? Any time I wish? Why just last night I treated myself to an ice cream cup with not one or two, but three scoops of rich, chocolate ice cream! :happy

Just keep doing what you are doing and you'll see the light at the end of the tunnel soon enough. Don't wish for time to arrive any faster, it just means you are two more years older, savor the time you have with your new baby and your wife. It goes by too quickly.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

czr
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Re: Staying the course with our plan

Post by czr » Fri May 12, 2017 12:00 pm

Listen to Dave Ramsey podcast daily to motivate you and keep you focused on bad debt and to hear about other people's dumb mistakes and him lambasting them. You just need to tune out his advice on investing especially not taking free 401k contributions. Also, keep a spreadsheet and print it out and put it where you can see easily see it that tracks your progress. Good luck to you!

Topic Author
oktax
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Re: Staying the course with our plan

Post by oktax » Fri May 12, 2017 1:34 pm

Lots of great responses, which have helped a lot!
knpstr wrote:
oktax wrote:I'm starting to get really antsy about getting these loans paid off and moving on with our lives so that we can start building some net worth.

What motivates you to stay the course with your financial plans? When is it okay to indulge and treat yourself?
I think you have sufficient motivation.
I'd treat yourself once you've paid off the loans in full and save up for whatever that is.

You're building the foundation to build your net worth with getting rid of this debt, so while it may feel like you're spinning your wheels, you're not.

Keep at it!
Thank you! Yes, we are already planning a nice beach vacation for hopefully summer 2018!
livesoft wrote:
oktax wrote: Our repayment was delayed, as we unexpectedly welcomed our first baby into the world last fall.
Congratulations! But I hope you all had at least 5 or 6 months early warning and the baby was not really "unexpectedly welcomed."

We were not able to consider buying a house until our first child was 2.5 years old, but before our 2nd child was born. I can't speak to your motivation because you seem to be doing fine.
Poor wording on my part. We knew about the baby well before she arrived. We just weren't planning on starting a family until we had built a solid financial foundation. Regardless, we're thrilled to have her! And thank you!
J295 wrote:You are doing great.
You can't put a price tag on a family/children .... dig in and enjoy ("hard work" but the best kind!).
Keep hitting singles and I suspect you'll be fine, it all just takes time.
I appreciate that. That is a great analogy. Sometimes "singles" don't feel like much on a day to day basis, but I suppose you have to crawl before you can walk.
BL wrote:You are building net worth. The loans are a negative on your net worth.
Great point. I suppose I meant to say "see a positive number increase" instead of seeing a negative number decrease. Either way, you are right.
KlingKlang wrote:Be sure to treat your wife to something that she likes for her first Mothers' Day!

Now that you are a nuclear family be sure that you have an emergency fund, life insurance, and disability insurance. After that just be patient and take everything one step at a time.
Thanks. Yes, I've already put everything in place for her for Mother's Day. And we are sitting on around 15k in cash right now. I plan on using it to pay off the loans when we can make one final payment and be done with them. But for the time being, I'm more comfortable having some cash in the event of an emergency. I have a generous life insurance/disability insurance package through my employer. I may consider adding more life insurance after we are finished with debt repayment, but for the time being I think the amount is sufficient. Appreciate your thoughts.
djpeteski wrote:There is a lot of noise in the media out there, and it is hard to judge what is actual wisdom, and what is foolish. One of those things that seems wise, but actually isn't in your situation is: "buy a house, buy a house, buy a house". Some might suggest that you dislike your wife and your child living a spartan lifestyle and renting. However, you are truly setting yourself up for future success.

The trite saying "the bottom line" comes from accounting and the true measure of your financial success is your bottom line: net worth. I would encourage you to keep track of it monthly, and you will and can derive motivation at the speed and consistency you see that number improving. By keeping good records, you will see dramatic progress.

For my wife and I getting out of debt was the key to skyrocketing our net worth. The year we implemented a similar plan to yours, we grew our net worth that year by more then we had accumulated over the previous 24 years (I was 44 at the time). Our only regrets now, are that we did not start sooner. We assume that if we started this at your age we would be in the 10 millionaire club. Frankly, that is what I think you two are headed for. Please read that again.

During our debt payment program there were times when we were both very discouraged. What you are experiencing is normal. However, these trials are necessary as the lessons you learn are invaluable. When you are on the other side people will inevitably ask you for money citing all sort of financial woes. The wisdom you create now will allow you to make good decisions on how to help people, and for some that might be just helping them develop a budget.

Something I discovered today, and probably holds true for you as well (perhaps more so). If you take our income so far this year and deduct taxes, we have increased our net worth by more than that number. That is pretty freaking amazing. We did this (this year) by not being shy about spending (unlike you two).

Keep up the good work, and you will make it to a 8 figure net worth.
Thanks for this. This really resonated with me. Sometimes it's really difficult to see the forest for the trees. I'm 31, and my wife is about to be 30. So we do have a lot of time. It's just easy to get sucked into focusing on our day-to-day progress, which is obviously small and makes me think we're spinning our wheels.

You are correct about learning good financial habits while going through this. The process has taught us about budgeting, and I've been reading as many books on personal finance as I can get my hands on. Once again, I appreciate your thoughts.
staythecourse wrote:
BL wrote:You are building net worth. The loans are a negative on your net worth.
Bingo.

Money is fungible. If you decided to invest the extra money to pay down the loan at X interest rate vs. investing in fund Y giving a predicted return of Z.

Either way you net worth increases. Not paying X interest rate on the loan is an investment.

Good luck.
Very true. Thanks. I suppose I meant that seeing the negative number decrease isn't nearly as satisfying as I imagine seeing a positive number increase would be. Soon enough I guess.
JGoneRiding wrote:To stay motivated I start figuring out and spread sheeting my "next step"

I also rec "slaying the debt dragon" more motivational then financial and more "this is how we did this" then these are the steps you should do in order to be great.
I'll check out this book. Thanks.
Lobster wrote:Keep it up!
Thank you!
retire57 wrote:What motivated us (especially in the accumulation phase) was watching our investments grow. Duh, right? I mean, really watching them.

For example, the day after dividends were paid out (obviously we were re-investing them), you can bet I was updating our values on Quicken and keeping track of how many more shares we owned. This technique is effective even when the market is down as you are still scooping up shares.

I've never been a collector of things. But shares ... well, that's different!

Congrats! You 1) have a plan and 2) have made admirable progress. Keep coming back to this board - that's motivation in itself!
Thanks. And true--I have been tracking our progress on a monthly basis with a spreadsheet.
bloom2708 wrote:With $175k income, how long do you expect to take to pay off the $72k balance?

Can you live off $100k (pre-tax) and kill them off in 1 year? I would consider stopping retirement contributions for 1 year to get this done. The best motivation is the finish line. Set the finish date. That is the ultimate motivation.

If you have a $20k Emergency Fund, drop it to $5k. Put the $15k on the loans. Sell stuff. Read "The Total Money Makeover" by Dave Ramsey for inspiration.
We should be finished with it in about a year. Our expenses have obviously gone up with the new baby. We're sitting on about 15k in cash right now. I want to keep it until we can make one final payment to finish off the loans. I realize we pay extra interest by doing this, but I want to have a nice cushion in the event of an emergency. Total Money Makeover is actually what started us on this path. I appreciate your thoughts.
FelixTheCat wrote:
oktax wrote:What motivates you to stay the course with your financial plans? When is it okay to indulge and treat yourself?
My motivation is fear based. I have seen too many people lose their jobs or house over the decades. I've read about about people that have no savings, rely on the government or simply do without.

Pay yourself first is my motto. I want the financial freedom to be able to make choices.
Appreciate it. Hopefully we're setting ourselves up with good habits while working through this to where with our monthly margin we'll be able to build quickly and catch up after finishing our repayment plan.
Grt2bOutdoors wrote:Indulge? Any time I wish? Why just last night I treated myself to an ice cream cup with not one or two, but three scoops of rich, chocolate ice cream! :happy

Just keep doing what you are doing and you'll see the light at the end of the tunnel soon enough. Don't wish for time to arrive any faster, it just means you are two more years older, savor the time you have with your new baby and your wife. It goes by too quickly.
Thanks. I need to remember this. Life is clearly about more than some numbers. That's a great perspective. We're thrilled to have baby, and she certainly hasn't had to go without. We've just taken advantage of more hand me downs than we might otherwise would have if we had a solid financial base when she arrived. And I'll look into having a third scoop of ice cream tonight!
czr wrote:Listen to Dave Ramsey podcast daily to motivate you and keep you focused on bad debt and to hear about other people's dumb mistakes and him lambasting them. You just need to tune out his advice on investing especially not taking free 401k contributions. Also, keep a spreadsheet and print it out and put it where you can see easily see it that tracks your progress. Good luck to you!
Thanks. Dave's Total Money Makeover book is what really started us on this journey. Agree with you that his advice about investing in general is really off base, and not contributing enough to get an employer match is very silly. I also keep a spreadsheet to track our repayment progress. It does help. Appreciate this.

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knpstr
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Re: Staying the course with our plan

Post by knpstr » Fri May 12, 2017 1:44 pm

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Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

Topic Author
oktax
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Joined: Thu Dec 29, 2016 4:59 pm

Re: Staying the course with our plan

Post by oktax » Sat Apr 27, 2019 10:13 am

Almost two years later, it’s fun to look back at this and provide an update.

In the past two years, we’ve: (1) paid off all student loans, (2) bought a second car (new Camry) at 0% with putting enough down to where the monthly payment is minimal, (3) bought a house with 20% down where we can be for a long time and grow into if we grow our family, and (4) saved a 6 month emergency fund!

It’s funny how perspective changes when dealing with a sizable amount of debt and first starting to make money. Now we’re planning our first vacation in 4 years and figuring out where to best allocate excess monthly income—finally at the point where saving a lot more for retirement makes sense. Thanks, Bogleheads, for all the encouragement and great info!

Regattamom
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Re: Staying the course with our plan

Post by Regattamom » Sun Apr 28, 2019 12:14 am

Well done! Congratulations! And thanks for the update. I love seeing these types of posts.

winterfan
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Re: Staying the course with our plan

Post by winterfan » Sun Apr 28, 2019 7:06 am

Congratulations! That's some awesome progress!

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