Intro and Personal Finance Advice

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
Goznellus
Posts: 17
Joined: Tue Jan 29, 2019 4:03 pm

Intro and Personal Finance Advice

Post by Goznellus »

Hello Bogleheads. I just created an account a few days ago and have been lurking around. I finally decided to introduce myself and ask for some advice regarding my personal finance situation. So I'll start!

My Fiancé and I make a moderate income (I think). Together, we bring in about $56,000/year after taxes. We are actually getting married next Sunday. I am newly employed in insurance. I've worked for an independent agency since March 2018. My Fiancé works for the state of NJ. Below I will list out our current financial situation. All of the below numbers are a rough estimate but are pretty accurate:

Age: We both just turned 28 years old.
State: We are currently living in NJ and do not plan on moving.

Rough combine income after taxes (monthly): $4,800-$5,200.
Monthly Expenses: About $3,600
Emergency Fund: $1,000. About to use $500 because of a recent car accident.

Debts/Loans: Total amount of debt: About $99,000.
-Student Loans: $65,000
-Interest rates range from 3%-6.8%
-2 Cars (both financed): $24,000 Combine
-Interest rates are 4% and 5%
-Credit Card Debt (spread across 4 cards): $10,000
-Interest rates range from 14%-25%
The monthly expenses I calculated include the minimum payments for all debts/loans. Most of our credit card debt is due to our wedding.

Side-Hustles:
-We have 2 side-hustles currently. One generated us around $6,000 in 2018. I just started the second and I've only generated around $500 profit in the last 2 months (I did not include these into our income. We used all of this to put toward the wedding).

Investments: Total amount: About $22,000 invested.
-Vanguard Roth IRA: $1,450 - It's a life cycle fund that I started about 2 years ago.
-2nd Vanguard Roth IRA: $10,000 - this is a rollover from my previous job's 401K. I rolled the funds into a 60/20/20 split of VTI/VXUS/BND respectively.
-Fiance's 403b: $1,500
-Fiance's Pension so far: $8,500.

Questions:
-Our debts far outweigh our investments. What do you believe is the best course of action for us to take? My thought is to pay-off our high-interest debts first (credit cards). We're getting about $3,000 back in taxes this year combine. We are going to knockout the 25% interest card completely with this. Then we will start on the second with snowballing the minimum payment from the first card.
-Once out credit cards are paid off, we will snowball all those payments into one of our cars. then repeat with the second.
-Next, I will refinance the student loans and keep snowballing.
-My question is, where does investing fit into our attack on debt? Should we switch to a 50/50 split? After the credits cards are paid off, use 50% of the snowballing toward debt repayment and the other 50% toward investing?
-Also, is it a waste to have the life cycle fund and the 60/20/20 split? I've never actually looked into that.

All in all, it feels great getting all of this out. Being fortunate enough to have found this forum is awesome, and I very much look forward to reading the responses. I hope I included enough information. I'm sure I forgot to add a lot of things and will definitely have more questions.

Thanks again!

2/5/2019 Update: I just smacked one credit card with a $2,642 payment. That felt great!
Last edited by Goznellus on Tue Feb 05, 2019 3:16 pm, edited 1 time in total.
bigtex
Posts: 342
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Re: Intro and Personal Finance Advice

Post by bigtex »

I’m responding to this so you will get more comments.
bigtex
Posts: 342
Joined: Fri Jan 26, 2018 10:34 am

Re: Intro and Personal Finance Advice

Post by bigtex »

Goznellus wrote: Fri Feb 01, 2019 4:52 pm Hello Bogleheads. I just created an account a few days ago and have been lurking around. I finally decided to introduce myself and ask for some advice regarding my personal finance situation. So I'll start!

My Fiancé and I make a moderate income (I think). Together, we bring in about $56,000/year after taxes. We are actually getting married next Sunday. I am newly employed in insurance. I've worked for an independent agency since March 2018. My Fiancé works for the state of NJ. Below I will list out our current financial situation. All of the below numbers are a rough estimate but are pretty accurate:

Age: We both just turned 28 years old.
State: We are currently living in NJ and do not plan on moving.

Rough combine income after taxes (monthly): $4,800-$5,200.
Monthly Expenses: About $3,600
Emergency Fund: $1,000. About to use $500 because of a recent car accident.

Debts/Loans: Total amount of debt: About $99,000.
-Student Loans: $65,000
-Interest rates range from 3%-6.8%
-2 Cars (both financed): $24,000 Combine
-Interest rates are 4% and 5%
-Credit Card Debt (spread across 4 cards): $10,000
-Interest rates range from 14%-25%
The monthly expenses I calculated include the minimum payments for all debts/loans. Most of our credit card debt is due to our wedding.

Side-Hustles:
-We have 2 side-hustles currently. One generated us around $6,000 in 2018. I just started the second and I've only generated around $500 profit in the last 2 months (I did not include these into our income. We used all of this to put toward the wedding).

Investments: Total amount: About $22,000 invested.
-Vanguard Roth IRA: $1,450 - It's a life cycle fund that I started about 2 years ago.
-2nd Vanguard Roth IRA: $10,000 - this is a rollover from my previous job's 401K. I rolled the funds into a 60/20/20 split of VTI/VXUS/BND respectively.
-Fiance's 403b: $1,500
-Fiance's Pension so far: $8,500.

Questions:
-Our debts far outweigh our investments. What do you believe is the best course of action for us to take? My thought is to pay-off our high-interest debts first (credit cards). We're getting about $3,000 back in taxes this year combine. We are going to knockout the 25% interest card completely with this. Then we will start on the second with snowballing the minimum payment from the first card.
-Once out credit cards are paid off, we will snowball all those payments into one of our cars. then repeat with the second.
-Next, I will refinance the student loans and keep snowballing.
-My question is, where does investing fit into our attack on debt? Should we switch to a 50/50 split? After the credits cards are paid off, use 50% of the snowballing toward debt repayment and the other 50% toward investing?
-Also, is it a waste to have the life cycle fund and the 60/20/20 split? I've never actually looked into that.

All in all, it feels great getting all of this out. Being fortunate enough to have found this forum is awesome, and I very much look forward to reading the responses. I hope I included enough information. I'm sure I forgot to add a lot of things and will definitely have more questions.

Thanks again!
How much are the $24k cars worth? $24k of loans for cars on$56k income is a bit rich. If you could save up enough to buy two $5k cars for cash, I would do that.
Golf maniac
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Re: Intro and Personal Finance Advice

Post by Golf maniac »

First thing is set a firm budget. Know where every dollar goes. You need to get rid of credit card debt ASAP. If you can’t control using them cut them up. Treat them like the poison they are to you. The interest rates will kill you. By staying on budget you should generate $1000 to $1500 per month to go to credit cards. Pay off the smallest balance first and work you way up. Not enough info on your cars as to whether it makes sense to sell them but taking all the money and paying off cars is a good strategy. After that take a breath, reassess where your at and build an emergency fund of at least 6 months of expenses. By this time you should have a good handle on where your money is going. Then get rid of student loans as fast as possible. You need financial freedom and now you are chained headed to a marriage.

On investments, personally I believe you should always fund retirement matching by your employer. That is a 100% return immediately. I wouldn’t pass that up at your age because in 30 years it will be a large amount. I would also suggest reading one of Dave Ramsey’s books. He can be pretty radical but if you follow his advice you can be out of debt and breath a lot easier. Good luck on your marriage and your journey.
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warowits
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Re: Intro and Personal Finance Advice

Post by warowits »

I would focus everything on debt until you don't have any interest rates above about 5.5%. Just make sure you aren't missing any matching money through work. Once those credit cards are paid off I would cut them up (maybe even before they are paid off). Carrying a balance on a credit card needs to be fixed before you begin investing generally speaking.

The good news is you're in the right place. When I first found the Bogleheads I was financially illiterate and didn't even realize it. Reading the forums has helped me eliminate debt, increase savings, avoid huge financial mistakes and get a significant raise.
HomeStretch
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Re: Intro and Personal Finance Advice

Post by HomeStretch »

Congratulations on your upcoming marriage!

Build your emergency fund and pay off credit cards. See if you can get a 0% credit card and transfer current high-interest credit balances to the 0% card.
dash1s
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Re: Intro and Personal Finance Advice

Post by dash1s »

Insurance positions usually have commissions baked into the payouts. Does the 56k post-tax have a certain level of commissions in the forecast?
JGoneRiding
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Re: Intro and Personal Finance Advice

Post by JGoneRiding »

In my opinion you have asked the question to late. You spent 16k on a wedding when you together don't even make 60k? And at some point racked up fairly significant college debt for low paying jobs that most likely didn't require college in the first place?

For comparison I made 110k the year we got married and spent about 3k in the wedding including the dress. (Our venue cost $25) I did have student loan debt about your level but for a decent paying career.

So my first advice is to focus on how you get ahead and maybe that involves being willing to move .

After that every penny should go to credit card debt and you should live with the most basic if furniture and eat rice and beans until that is gone.

Repeat to every one you know "we are so broke" debt like this is a huge source of marital strive you need to get rid of it asap while you are still in love or you will be the couple paying for a divorce before the wedding is all paid off.
Topic Author
Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

Thanks to all responses and all the well wishes for our upcoming marriage!

Bigtex:
Thanks for the bump! It got me some responses. The 24K in cars is actually about 22K. I know it doesn't change a lot but I looked at both cars loans today and i have about 12K to pay off and she has about 10K left. As far as getting rid of these, I am not too sure how it works if I'm thinking of turning the car back in. I began financing my car about a year and 3 months ago. My fiancé financed hers about 2 years ago. We should have been more mindful with the prices.

Golf Maniac:
I made a monthly expense spreadsheet this week. I have been working on cancelling subscriptions (we had 3, now down to 1 that were all $10/month) and lowering bills as much as I can. We were paying $197/month in car insurance. I switch carriers and now we're paying $115/month combine. I switched phone plans from $114/month to $90/month. My plan is to use the difference we're now saving to pay toward debt. We're about to pay off one of the credit cards with a $3600 balance next week. That would leave us with about $6400 left in credit cards.
Regarding investments: I do not get an employer match. I just have the 2 vanguards funds. Should I be putting a certain percentage in these while paying debt? My fiancé has her pension and 403b. I believe she puts 2% into the 403b without a company match. I have D. Ramsey's total money makeover and that is where I got the ideas of snowballing.


Warowits:
Thanks! I'm glad I found this forum. I like the idea of cutting out all debts over 5.5%. My mindset leans more toward your thoughts. Leave my vanguard funds alone until we pay off everything over 5.5%. I just never had a good % to go by. But 5.5 sounds pretty good. Once I have those paid off, build up an emergency fund of 6 months. Does anyone disagree with this?

dash1s:
You are correct, I did include this. My commissions will get higher and higher (hopefully) every month. I know I'll never get rich here. I work under someone as a producer and have been building my book. The agency will generally receive 10% commission on any policy. The owner keeps 60% and I keep 40%. So it will take me a little while to start earning good commission checks.

JGoneRiding:
I respect your opinion a lot. At this point, it is what it is. That's why I came here seeking advice in the first place. I want myself and my fiancé to begin our marriage with strong financial principles to live by, so we never get ourselves in a position like this again.

Thanks to everyone and I am excited to see more input. It is all appreciated.
Golf maniac
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Re: Intro and Personal Finance Advice

Post by Golf maniac »

If no employer match on retirement I would snowball credit cards and then car payments before contributing to retirement. Then I would save for emergency fund of at least 6 months. Then start funding retirement and getting rid of student debt. After student debt is gone you will be able to significantly increase retirement savings. If you get a raise always take 50% of raise and put it in retirement or taxable investments. That is paying yourself in 30 years.

Always look for places to cut spending and put that money immediately to debt payments. You will be amazed at how much you can cut in expenses. You have made a great start in reducing expenses! I made well into the 6 figures before I retired and still took my lunch to work each day. Cars always lasted 10 years or longer. Always live well below your means. If you do these things now there won’t be a need to cut back later. It is all about establishing a mindset. You can do it, it just takes some discipline to establish good financial habits.

Good luck!
Olemiss540
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Re: Intro and Personal Finance Advice

Post by Olemiss540 »

IMO take in the information in Dave Ramsey total money makeover and work the plan. Come back here once the debt is gone!

Dont try to rush investing. Your investment plan is only as good as your financial footing.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
Topic Author
Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

After thinking for a bit and reading the posts in this thread, I have decided to stop sending money to Vanguard all together until all loans/debts over 5.5% interest are paid off. I believe this will help us get our footing with paying down some of this. After that, we will save 6 months of living expenses in an emergency fund. Then investing will start up again.

By the way, I just made a payment of $2,642 toward our credit card with the highest interest rate. That felt great!

Thanks again guys!
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8foot7
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Re: Intro and Personal Finance Advice

Post by 8foot7 »

Just a quick +1 for stopping funding a non-matching retirement account in favor of paying off all debt at interest rates >=10%.
I would also seriously, seriously look at dumping at least one of the cars and paying cash for something in the 5k-8k range. You don't have particularly good rates on your car loan (2% and under are one thing), but perhaps more importantly than the rate, you've spent too much on cars for your combined income. (My wife and I combined make almost five times what you make but I drive a 16 year old, $6,000 car because it is paid off and meets my needs. I say that not to brag but to show you that your car says very little about your earning potential or lifestyle.)
Topic Author
Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

8foot7 wrote: Tue Feb 05, 2019 12:20 pm Just a quick +1 for stopping funding a non-matching retirement account in favor of paying off all debt at interest rates >=10%.
I would also seriously, seriously look at dumping at least one of the cars and paying cash for something in the 5k-8k range. You don't have particularly good rates on your car loan (2% and under are one thing), but perhaps more importantly than the rate, you've spent too much on cars for your combined income. (My wife and I combined make almost five times what you make but I drive a 16 year old, $6,000 car because it is paid off and meets my needs. I say that not to brag but to show you that your car says very little about your earning potential or lifestyle.)
Thanks for the input. How exactly does that work if I financed my car? My interest rate is higher than my wife's by roughly 1%. I put $2,000 down and still owe about $12,000. Wife owes $10K. By dumping it, you mean basically just hand in the keys? I am unsure how that works.
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8foot7
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Re: Intro and Personal Finance Advice

Post by 8foot7 »

Goznellus wrote: Tue Feb 05, 2019 3:14 pm

Thanks for the input. How exactly does that work if I financed my car? My interest rate is higher than my wife's by roughly 1%. I put $2,000 down and still owe about $12,000. Wife owes $10K. By dumping it, you mean basically just hand in the keys? I am unsure how that works.
No, you sell the car to another party and then use the proceeds to pay off the loan. If there is a CarMax near you, take one of your cars by for a free appraisal (takes about 30 minutes, give or take). They'll give you a fair offer, although it'll be a bit of a lowball, so you'll kind of understand what the car is worth. If you want to take them up on their offer, they'll handle everything for you and either cut you a check for the difference between what they're paying and what you owe, or you can pay them the difference between what you owe and their offer if you have negative equity. Then you will be back at square one with no vehicle and no loan. Now pay cash for a more affordable car.

You can also choose not to accept the CarMax offer and try to sell your car privately on Autotrader, Craigslist, etc. Since you have a loan on the car this will turn a lot of private buyers off -- you probably don't have the title because your lender has it, so you can't convey the title to the purchaser until the loan is paid off, so the private buyer would have to either give you the money and have faith you'll pay the loan off, or pay the loan off directly with the lender and give you any difference, etc.
teamDE
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Re: Intro and Personal Finance Advice

Post by teamDE »

Goznellus wrote: Tue Feb 05, 2019 3:14 pm
8foot7 wrote: Tue Feb 05, 2019 12:20 pm Just a quick +1 for stopping funding a non-matching retirement account in favor of paying off all debt at interest rates >=10%.
I would also seriously, seriously look at dumping at least one of the cars and paying cash for something in the 5k-8k range. You don't have particularly good rates on your car loan (2% and under are one thing), but perhaps more importantly than the rate, you've spent too much on cars for your combined income. (My wife and I combined make almost five times what you make but I drive a 16 year old, $6,000 car because it is paid off and meets my needs. I say that not to brag but to show you that your car says very little about your earning potential or lifestyle.)
Thanks for the input. How exactly does that work if I financed my car? My interest rate is higher than my wife's by roughly 1%. I put $2,000 down and still owe about $12,000. Wife owes $10K. By dumping it, you mean basically just hand in the keys? I am unsure how that works.
First congrats on starting off married life on the right foot. Acknowledging an issue, asking for help, executing the plan. (funny how often this strategy will pay off all through life. Its amazing how many people can't do it.). Feels good, eh?

Regarding the car loan, assuming you're not leasing, you sell the car for $$$. You take $$$ to the bank, pay off the loan, and put what's left toward a cheaper car. If you're upside down on the loan, that means your the car is worth less than you owe and you'd have to pay additional money to pay off the loan. Hopefully that's not the case, but it is fairly common for a newer car because new cars depreciate so quickly the first year or two. Using KBB or NADA, what's your car worth?
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BL
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Re: Intro and Personal Finance Advice

Post by BL »

Just in case you haven't heard (I am surprised so many haven't), never use a credit card that is not paid off. You will immediately be charged that high interest from date of purchase, so you will only dig in deeper. There may be exceptions, but I am not aware of any. So put them in an empty milk carton, cover with water, and freeze in your freezer. That is next best to cutting them up. When paid off, never charge (borrow) more than you can pay off immediately.

By working together, you can come up with many ideas that will avoid spending. Make it a fun challenge, and develop habits that will enable you to secure your future (and your present.) Brown bagging is only one.
pasadena
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Re: Intro and Personal Finance Advice

Post by pasadena »

So you've made big progress in a week. Congrats on that (and the wedding). Can you summarize your current situation, after cutting all these expenses and paying one CC off?

It'd be helpful if you could give details on your remaining cards and loans (balance due, interest rate and minimum payment for each).

Anyway, great job. I think once you've paid off the rest of the CC you'll be just fine - as long as you don't buy any more things on credit that you can't afford to pay off immediately.

Have you looked at getting one new CC with a 0% APR on transfers?
bayview
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Re: Intro and Personal Finance Advice

Post by bayview »

OP, congrats to you and your beloved on your upcoming marriage!

I think you’ve already gotten this in bits and pieces, but here’s my take:

Much of your CC debt and your car loan debt is due to one thing: allowing yourselves to be played by marketers.

The wedding industry has become particularly obnoxious. It doesn’t cost anywhere near $10k to get married; have a civil ceremony instead. Or if religious, stand up in front of a local member of the clergy with two friends by your side. For afters, invite your best friends to bring their best sausage ball recipes, while you supply the beer. Tell lots of dumb jokes, take pictures, and play bad 70’s music while everyone has fun. This is YOUR wedding, not that of your CC companies.

As for the car loans, yes, you got a bit too enthusiastic. If you are struggling to meet your monthly bills (cash flow problem), look at the one less used, sell it, and replace with an early-2000’s Toyato or Honda. It’s just a ride, not a Proclamation of Status.

This is all pretty much water under the bridge by now, and honestly, it’s not that bad as one-time events. You can certainly recover from this in a year or so. But here’s your takeaway:

- Pay yourself first. Why would you want to inflate the balance sheets of a business that doesn’t give a damn about you? Do whatever you can to improve your net worth by paying down debt and sharply reducing new debt, most likely starting with the rides.

As a married couple, the two of you will be starting a new economic entit/unit, one that results from a lot of research, some significant time arguing with front line personnel, You get to be the boss.

- Be very, very (very very very very) cynical about what advertising/marketers are telling you you must have. They don’t give a rar’s patootie about you and your current economic position. Their sole job in life is to separate you and your new wife’s income from the two of you and move it into their own pockets. Stop letting them do that, and in the future, regard every financial proposition under the same light: what are they making off of you?
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
Topic Author
Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

8foot7 and DanEmmy:
Okay, I understand this a bit better now. I believe it would make sense to try this but I believe I may have negative equity. I just entered my car into KBB and TrueCar and it seems its value is around $8,000-$10,000. I still owe roughly $12,000. Also something I may want to take into consideration is that my car is a gas guzzler. It's terrible on gas. I will probably save quite a bit in gas money alone by selling it and buying something more fuel efficient.

BL:
This is a fantastic idea. The saddest part about your statement is that we completely understand this. We just let our wedding take over our credit card usage. This was not smart and we realize this. We will not be making this mistake again after we dig ourselves out of this hole.

All others I will respond to tonight as I will need a bit more time to respond to Pasadena. Thanks to all!
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8foot7
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Re: Intro and Personal Finance Advice

Post by 8foot7 »

Goznellus wrote: Wed Feb 06, 2019 12:09 pm 8foot7 and DanEmmy:
Okay, I understand this a bit better now. I believe it would make sense to try this but I believe I may have negative equity. I just entered my car into KBB and TrueCar and it seems its value is around $8,000-$10,000. I still owe roughly $12,000. Also something I may want to take into consideration is that my car is a gas guzzler. It's terrible on gas. I will probably save quite a bit in gas money alone by selling it and buying something more fuel efficient.

BL:
This is a fantastic idea. The saddest part about your statement is that we completely understand this. We just let our wedding take over our credit card usage. This was not smart and we realize this. We will not be making this mistake again after we dig ourselves out of this hole.

All others I will respond to tonight as I will need a bit more time to respond to Pasadena. Thanks to all!
In your situation I'd still try to scrape up 1-2k to get out of a negative equity situation. If it would take more than that, then considering you'd also need some cash to go buy a replacement car, then I'd hold tight--you're kind of stuck in those cars for a bit. (This is why car loans can be real bad; when you need to get rid of them, you can't.) Keep checking the value of the vehicle every six months; it will continue to decline, but the rate will level off and your payments to principal each month will help. You might also think about sticking another $50 on each payment (be sure to designate it as a principal payment, or your lender will otherwise just apply it to the next monthly amount due) just to help dig out of the car loan hole a little more quickly. When you can get rid of it for 1k-2k out of pocket I'd seriously seriously think about doing it.

Maybe your other car isn't upside down?

I just looked back up at your original post and now I'm a little confused - it seems like you have an excess of $1,200-1,600 a month in income? If that's truly the case then I'd take care of at least one of these cars between now and May 1.

For example

February - save $1,500
March - save $1,500
April - save $1,500
May 1 - apply $1,500 to negative equity, sell the car, and buy a $3,000 beater.

Lather, rinse, repeat for your other car in May, June, July, and by August 1, you'll have paid off $24,000 in car debt and have two paid-for cars to keep you going, and you've added back those two car payments into your monthly cash flow which could then be sent to your cards and then student loans. After all, if you're going to pay off $24,000 over time, wouldn't you rather pay off $24,000 of the $65k in student loans?

It's OK to hold off on the credit card debt, in my view, for a couple of months in order to eliminate $10-12k of 5% car debt and get you driving something paid off that will also improve your cash flow and ability to pay everything else off...
g2morrow
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Re: Intro and Personal Finance Advice

Post by g2morrow »

There's a lot going on here. First, congratulations. Second, go listen to Dave Ramsey. Third, once you get to the investing party of Dave Ramsey, stop and come back here. Good luck!
Nissanzx1
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Re: Intro and Personal Finance Advice

Post by Nissanzx1 »

g2morrow wrote: Wed Feb 06, 2019 1:09 pm There's a lot going on here. First, congratulations. Second, go listen to Dave Ramsey. Third, once you get to the investing party of Dave Ramsey, stop and come back here. Good luck!

This is great advice. Spot on.

OP you are paying attention and you know the numbers- that’s all good. You have significant consumer debt at your income level so something like working Dave Ramsey’s plan will help you prioritize.

I went through a very similar debt to income situation a few years ago and it seemed too large a hill to climb, but it isn’t/wasn’t. You just have to learn to get control and say NO. No to new debt, no to eating out, no to vacations, no to the new toy, etc. Eat the elephant one bite at a time. It’s time to get a plan together to rid yourself of these middle class traps.

Good Luck! I assure you it can be done. PS- I’d sell those cars today. No car made I care about enough to borrow money on.
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BlueSkies
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Re: Intro and Personal Finance Advice

Post by BlueSkies »

You are smart to start getting rid of your debt. First things first. Lots of good advice here on budgeting. Thinking within a budget and paying yourself first are also good. Perhaps get to the point where savings and being under budget are joys. Then invest steadily and simply.
Good luck.
Grandma Sylva
https://grandmasinvestingforbeginners.blog/
Topic Author
Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

In this post, I will update our current bills for the month and list out our exact debts and interest rates:

Bills:

Rent: $1200/month
My car: $251/month
Fiance car: $365/month
Student Loans: $375/month (this was just raised from $320/month)
Auto Insurance for both cars: $115/month (was $200/month) +$85 saved
Internet: $85/month (Going to call and get this lowered to $60/month)
Phone bill: $95/month (was $115/month) +$20 saved
Gas bill: $75-$90/month during winter months
Electric: $30-$40/month (working on conserving here)
Gym: $43/month (Going to ask if we can combine our accounts. We pay this as two separate members)
Fuel for cars: $225-$250/month (commuting to work for both of us)
CC minimum payments combine: Around $120/month
Groceries: $350/month (we really need to look at this and figure out ways to save)
"Fun money": $480/month. Lately, I feel like most of this went to the wedding. But we are thinking 10% of monthly take home pay should possibly go here. We would use this for random trips to the grocery that aren't budgeted, bottle of wine here and there, etc... We never go out drinking and that type of thing.
*I'm sure I may be leaving something out but I think I accounted for everything.

Total: $3,880-$3,900.
Income: $4796-$5200 (depending on my commission checks)



Debts: $97,339 Total

My car: $12,502/Rate: 5.4%
Started paying ($14,500) 10/23/2017.

Fiance's car: $10,529.75/Rate: 4:1%
Started paying: ($20,932.93) 11/20/2015

Credit card 1: $1,060.23--Rate is 25.24%. Still going to pay about $500 of our state tax return toward this when we receive it.
Credit card 2: $5,121.18--Rate: 21.24%
Credit card 3: $2,748.14/Rate: $2,748.14--Rate: 16.24%

Student Loans: $65,379.73/Rate:
Split into 2 accounts.
-One is for $10,894.40. 2 Loans on this account are FFEL Unsubsidized Stanford. First is $7,664.31 at 6.55% fixed. Second is $3,230.08 at 5.35% fixed.
-Second is for $54,485.33. There are 13 separate loans on this account and they’re a mix of direct subsidized and I subsidized Stanford loans. Range from 6.55% down to 3.15% interest rates. I do not fully understand these. However, I did set up my payments so that if I overpay, the money exceeding my minimum payment will go toward the principal of the loan with the highest interest rate.

Somehow I’m paid ahead by $176 on the $54,000 loan.
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ICMoney
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Re: Intro and Personal Finance Advice

Post by ICMoney »

Maybe consider figuring out the amount of money you've contributed to the first Roth IRA (not the rollover one), withdrawing that amount, and using it to pay off credit card debt? There should be no tax consequence of withdrawing Roth contributions. The rollover one would cause some tax consequences so best to leave that one alone.
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JupiterJones
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Re: Intro and Personal Finance Advice

Post by JupiterJones »

Goznellus wrote: Fri Feb 01, 2019 4:52 pm We're getting about $3,000 back in taxes this year combined.
If this is something that you expect to usually be the case (that is, it's not due to one-time credits or unusual deductions), then you and/or your wife should talk to your HR departments and adjust the amounts withheld from your paychecks.

Every paycheck you guys get has a certain amount withheld from it to "pre-pay" your tax bill for that year. The only reason you're getting a refund of $3,000 is because you pre-paid too much last year! It's not extra or free money... it was your money in the first place, that you've basically been loaning to the government all year long.

By adjusting your withholding, you'd have $250 a month extra to use toward paying down your debts now. Better than letting it sit in a zero-interest-bearing government account while your own debts accrue interest over all those months.

P.S. Congrats and best wishes on the marriage! :sharebeer
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

ICMoney wrote: Thu Feb 07, 2019 9:55 am Maybe consider figuring out the amount of money you've contributed to the first Roth IRA (not the rollover one), withdrawing that amount, and using it to pay off credit card debt? There should be no tax consequence of withdrawing Roth contributions. The rollover one would cause some tax consequences so best to leave that one alone.
I actually have not thought about doing this but I am not against it. Maybe a quick call to Vanguard will help. I only have about $1500 in that ROTH, but that would definitely help.

JuniperJones:
How will this change once we are married? I know we will have to file differently (or do we?). I need to learn more about tax withholdings and figure out what we should put on our documents.
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ICMoney
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Re: Intro and Personal Finance Advice

Post by ICMoney »

Goznellus wrote: Thu Feb 07, 2019 11:48 am
ICMoney wrote: Thu Feb 07, 2019 9:55 am Maybe consider figuring out the amount of money you've contributed to the first Roth IRA (not the rollover one), withdrawing that amount, and using it to pay off credit card debt? There should be no tax consequence of withdrawing Roth contributions. The rollover one would cause some tax consequences so best to leave that one alone.
I actually have not thought about doing this but I am not against it. Maybe a quick call to Vanguard will help. I only have about $1500 in that ROTH, but that would definitely help.
It should be quick for Vanguard (or you) to figure out how much in your Roth is contributions vs. earnings. On Vanguard's website, you should be able to sort the transaction history by type since your account opening date, and just add up how many are contributions. Maybe save a copy of this transaction history for documentation for your 2019 taxes, and then you can sell the total amount of your contributions from the Roth tax free. You could even do this today and the funds may be in your bank account by Monday...
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

ICMoney wrote: Thu Feb 07, 2019 12:52 pm
Goznellus wrote: Thu Feb 07, 2019 11:48 am
ICMoney wrote: Thu Feb 07, 2019 9:55 am Maybe consider figuring out the amount of money you've contributed to the first Roth IRA (not the rollover one), withdrawing that amount, and using it to pay off credit card debt? There should be no tax consequence of withdrawing Roth contributions. The rollover one would cause some tax consequences so best to leave that one alone.
I actually have not thought about doing this but I am not against it. Maybe a quick call to Vanguard will help. I only have about $1500 in that ROTH, but that would definitely help.
It should be quick for Vanguard (or you) to figure out how much in your Roth is contributions vs. earnings. On Vanguard's website, you should be able to sort the transaction history by type since your account opening date, and just add up how many are contributions. Maybe save a copy of this transaction history for documentation for your 2019 taxes, and then you can sell the total amount of your contributions from the Roth tax free. You could even do this today and the funds may be in your bank account by Monday...
This is a great idea. I am going to do this. That roth is a life cycle fund. Would you suggest I open anew one later on or just continue to funnel money into the rollover account once I start investing again? I rolled the funds into a 60/20/20 split of VTI/VXUS/BND
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Re: Intro and Personal Finance Advice

Post by ICMoney »

Goznellus wrote: Thu Feb 07, 2019 2:11 pm
ICMoney wrote: Thu Feb 07, 2019 12:52 pm
Goznellus wrote: Thu Feb 07, 2019 11:48 am
ICMoney wrote: Thu Feb 07, 2019 9:55 am Maybe consider figuring out the amount of money you've contributed to the first Roth IRA (not the rollover one), withdrawing that amount, and using it to pay off credit card debt? There should be no tax consequence of withdrawing Roth contributions. The rollover one would cause some tax consequences so best to leave that one alone.
I actually have not thought about doing this but I am not against it. Maybe a quick call to Vanguard will help. I only have about $1500 in that ROTH, but that would definitely help.
It should be quick for Vanguard (or you) to figure out how much in your Roth is contributions vs. earnings. On Vanguard's website, you should be able to sort the transaction history by type since your account opening date, and just add up how many are contributions. Maybe save a copy of this transaction history for documentation for your 2019 taxes, and then you can sell the total amount of your contributions from the Roth tax free. You could even do this today and the funds may be in your bank account by Monday...
This is a great idea. I am going to do this. That roth is a life cycle fund. Would you suggest I open anew one later on or just continue to funnel money into the rollover account once I start investing again? I rolled the funds into a 60/20/20 split of VTI/VXUS/BND
You might be able to combine both Roth IRAs into one to make it easier, but I am not an expert on that so hopefully another poster can confirm that approach. That seems easier to me at least, so then you don't end up with a small Roth that has just a couple hundred dollars in it...
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

That’s a good idea. However, I may just withdraw it all to throw at a credit card. And then just have to rollover account to contribute toward at a later date
RetiredNewbie
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Re: Intro and Personal Finance Advice

Post by RetiredNewbie »

This group is priceless. The most important thing I learned here is that the Boglehead philosophy is useless if someone doesn't have any financial self-control. Such people would be better served by listening to Dave Ramsey, and follow Dave's advice to cut up all their credit cards immediately; instead of just paying them off every month and raking in the rewards cash like I learned to do here. I had to learn the wisdom of self-control before any of the knowledge gained here would do me any good. The book that opened my eyes about financial self-control was also the easiest read of all the financial books I read after finding this group. I highly recommend reading "The Richest Man in Babylon" by George S. Clason, followed soon thereafter by "The Bogleheads' Guide to Investing".
Last edited by RetiredNewbie on Sat Feb 09, 2019 3:24 pm, edited 1 time in total.
Your attitude about risk changes significantly when the bear begins to maul you.
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

Thanks for the input. I actually have the richest man In Babylon on audiobook. I haven’t listened to it yet, but will. I haven’t heard of bobble heads though. I will check it out. Thank you!
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

Bump for anymore input. I posted all my interest rates/debts to see which ones are the worst
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JupiterJones
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Re: Intro and Personal Finance Advice

Post by JupiterJones »

Goznellus wrote: Thu Feb 07, 2019 11:48 am JuniperJones:
How will this change once we are married? I know we will have to file differently (or do we?). I need to learn more about tax withholdings and figure out what we should put on our documents.
It depends. There might be either a "marriage penalty" or a "marriage bonus", depending on what each of you make. That is, the tax bill of the two of you, filing a joint return, may be higher or lower than the combined total you were both paying before when filing single.

The way to do it correctly is to actually complete a "pretend" return, based on your anticipated incomes (and deductions, if any) for 2019. You can use off-the-shelf tax software or websites for this, or crunch the numbers yourself in a spreadsheet (which is what I do, although you have to be willing to really geek out on how taxes are calculated). You could also consult a tax professional to calculate this for you, although that's going to cost some dough of course. Then, once you have your total taxes estimated, see how much of that will be covered by you and your wife's current withholding. Adjust up or down accordingly.

The other way to do it is to contact your HR departments to have them update your withholdings based on being married, and let the chips fall where they may. You might still wind up owing a bit, or getting a refund, but it should be in the ballpark at least. Then you can adjust next year.

If you're looking for a good book on this sort of thing, I recommend Mike Piper's "Taxes Made Simple": https://obliviousinvestor.com/investing ... 8-edition/
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JupiterJones
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Re: Intro and Personal Finance Advice

Post by JupiterJones »

Goznellus wrote: Thu Feb 14, 2019 3:52 pm Bump for anymore input. I posted all my interest rates/debts to see which ones are the worst
You'll get a lot of different opinions on payoff order, but here are my thoughts, for what it's worth:

If your goal is get out of debt as quickly as possible and pay as little interest as possible while you're doing it, then you just need to list everything in order of interest rate, largest to smallest, and attack them in that order. Minimum payments on everything but the highest-interest rate, and throw every spare penny you can scrape up at the highest one until it's done. Repeat until debt-free.

However the above goal is not necessarily the best one for you to focus on.

Another popular way to order your debts is in order of remaining balance, smallest to largest. You pay the minimum on everything but the smallest debt, and you throw everything you've go on the smallest until it's gone. Then move on to the next-smallest debt, and so on. (Dave Ramsey calls this the "Snowball Method".)

This is usually not as efficient in terms of time and interest costs. But it has two advantages:

First, you get more immediate and more frequent "wins" as your debts get knocked out one-by-one. There's a motivational aspect to this that, given the long haul you're in for, can be the difference between success and failure.

Second (and, for me, more importantly), it more quickly increases discretionary cash flow. That is, your money is "freed up" faster this way. In the case of an emergency, such as job loss, the fewer bills you're "on the hook for", the better off you'll be. The snowball method gives you a bigger margin-of-safety.

You can crunch the numbers for both methods and see how much more time and interest the Snowball will take. The difference is often smaller than people think.

In the end though, it's not the payoff order that gets you out of debt. it's the focused and determined discipline of making those extra payments. If you want to run a marathon, you can agonize over what shoes to buy or what flavor Gatorade to drink... but what matters most is just getting out there and doing the work.

:sharebeer
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

Thanks, that helps. We’ve already paid off about 50% of our credit card debts since starting this topic. Thanks everyone!
deltaneutral83
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Re: Intro and Personal Finance Advice

Post by deltaneutral83 »

Identify the behaviors that led to consumer debt and eliminate them. This is not a math nerd conversation which some of us on here have been since the day we were born so we don't always identify with folks who have had behavioral issues with money. The credit card debt should be treated like a house fire. All the other math conversations and strategies are in the future when the consumer debt is cleaned up and behaviors are changed permanently.
Silverado
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Re: Intro and Personal Finance Advice

Post by Silverado »

Goznellus wrote: Sat Mar 02, 2019 5:41 pm Thanks, that helps. We’ve already paid off about 50% of our credit card debts since starting this topic. Thanks everyone!
Excellent! Stay focused.

Don't forget to come back and ask investment questions in another couple months when all CC are paid. There will be a balance with the loans, and using this time to keep reading and learning will pay off later.

Congrats again on your progress. Keep it up.
NYCguy
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Re: Intro and Personal Finance Advice

Post by NYCguy »

deltaneutral83 wrote: Sat Mar 02, 2019 6:13 pm Identify the behaviors that led to consumer debt and eliminate them. This is not a math nerd conversation which some of us on here have been since the day we were born so we don't always identify with folks who have had behavioral issues with money. The credit card debt should be treated like a house fire. All the other math conversations and strategies are in the future when the consumer debt is cleaned up and behaviors are changed permanently.
+1

The credit card debt is a house fire and you should organize your financial life so you never carry credit card balances or have car payments again.

At this point the rest is just financial noise. When the credit cards and the auto loan problems are solved and the behavior is stabilized we can then focus on the student loans and investment choices.

You have enough income to solve the problem. The key for the long run is behavior.
If your out-go is greater than your income, your upkeep will be your DOWNFALL.
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Re: Intro and Personal Finance Advice

Post by JGoneRiding »

Goznellus wrote: Thu Feb 07, 2019 9:24 am In this post, I will update our current bills for the month and list out our exact debts and interest rates:

Bills:

Rent: $1200/month
My car: $251/month
Fiance car: $365/month
Student Loans: $375/month (this was just raised from $320/month)
Auto Insurance for both cars: $115/month (was $200/month) +$85 saved
Internet: $85/month (Going to call and get this lowered to $60/month)
Phone bill: $95/month (was $115/month) +$20 saved
Gas bill: $75-$90/month during winter months
Electric: $30-$40/month (working on conserving here)
Gym: $43/month (Going to ask if we can combine our accounts. We pay this as two separate members)
Fuel for cars: $225-$250/month (commuting to work for both of us)
CC minimum payments combine: Around $120/month
Groceries: $350/month (we really need to look at this and figure out ways to save)
"Fun money": $480/month. Lately, I feel like most of this went to the wedding. But we are thinking 10% of monthly take home pay should possibly go here. We would use this for random trips to the grocery that aren't budgeted, bottle of wine here and there, etc... We never go out drinking and that type of thing.
*I'm sure I may be leaving something out but I think I accounted for everything.

Total: $3,880-$3,900.
Income: $4796-$5200 (depending on my commission checks)



Debts: $97,339 Total

My car: $12,502/Rate: 5.4%
Started paying ($14,500) 10/23/2017.

Fiance's car: $10,529.75/Rate: 4:1%
Started paying: ($20,932.93) 11/20/2015

Credit card 1: $1,060.23--Rate is 25.24%. Still going to pay about $500 of our state tax return toward this when we receive it.
Credit card 2: $5,121.18--Rate: 21.24%
Credit card 3: $2,748.14/Rate: $2,748.14--Rate: 16.24%

Student Loans: $65,379.73/Rate:
Split into 2 accounts.
-One is for $10,894.40. 2 Loans on this account are FFEL Unsubsidized Stanford. First is $7,664.31 at 6.55% fixed. Second is $3,230.08 at 5.35% fixed.
-Second is for $54,485.33. There are 13 separate loans on this account and they’re a mix of direct subsidized and I subsidized Stanford loans. Range from 6.55% down to 3.15% interest rates. I do not fully understand these. However, I did set up my payments so that if I overpay, the money exceeding my minimum payment will go toward the principal of the loan with the highest interest rate.

Somehow I’m paid ahead by $176 on the $54,000 loan.
I know I was a little harsh the first time. Hoping a kick in the pants now when you are young and life is fresh and you love each other will keep you from being the poster that came on here with SAHM and 2 kids and a house he can't afford and 40k in debt and really flat no way out!!

Looking at the new numbers: I would let the cars hang for a little while (3 to 6 months) because they are going to be hard to deal with (fyi you can sell a car with a lien to a private party it just takes some coordination, they can even get a loan for themselves to do it. Short version is they would write a check to you and the lien holder)

I would focus on the credit cards via size simply because the rates aren't enough different to matter long term. Pay off the one card next month. Then cancel it. Wait 1 month and get a card with 0% balance transfer (if the others aren't chase the chase slate card is a good one, bank of America has some too) transfer some to this card from card 3 but this is also the card you want to use for daily purchases.

Throw everything at card 3. Then card 2. If you are focused you can be credit card debt free by fall. Then I would save up and reaccess your car.
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

JGoneRiding wrote: Sat Mar 02, 2019 8:04 pm
I know I was a little harsh the first time. Hoping a kick in the pants now when you are young and life is fresh and you love each other will keep you from being the poster that came on here with SAHM and 2 kids and a house he can't afford and 40k in debt and really flat no way out!!

Looking at the new numbers: I would let the cars hang for a little while (3 to 6 months) because they are going to be hard to deal with (fyi you can sell a car with a lien to a private party it just takes some coordination, they can even get a loan for themselves to do it. Short version is they would write a check to you and the lien holder)

I would focus on the credit cards via size simply because the rates aren't enough different to matter long term. Pay off the one card next month. Then cancel it. Wait 1 month and get a card with 0% balance transfer (if the others aren't chase the chase slate card is a good one, bank of America has some too) transfer some to this card from card 3 but this is also the card you want to use for daily purchases.

Throw everything at card 3. Then card 2. If you are focused you can be credit card debt free by fall. Then I would save up and reaccess your car.
We've been scraping together every possible cent to throw at the remaining credit cards. We started with over $10,000. Today (3/6/19), the balance stands at roughly $4600 across all CC debt. Our side hustles are helping and we used some cash we got from the wedding. We're getting closer every day. Also throwing 10% of both our paychecks as soon as we get paid. Every cent of my commissions are going to CCs as well. It's amazing how focus can really get things done.

When these are a $0, I will be reassessing the car situation. You all have helped a lot with that. Thanks again and I will update soon!
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JupiterJones
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Re: Intro and Personal Finance Advice

Post by JupiterJones »

Thanks for the update! Glad to hear of your success so far.
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BlackStrat
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Re: Intro and Personal Finance Advice

Post by BlackStrat »

First of all don't kick yourself on how you got here. This is the transition point in time where you're going to get out of debt and build wealth to prepare for your retirement.

Definitely focus on getting out of debt asap.

Read Taylor Larimore's "Bogleheads Guide to Investing".

Talk with your wife and develop a financial plan you both buy into.

Congratulations on finding this site - recognition that you need to change your ways is the first step to solving things. Before you know it, you'll be debt-free and on your way to fiscal freedom.

Good luck!
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Re: Intro and Personal Finance Advice

Post by Elsebet »

I am so grateful that you are here and working on your debt issue. When I was your age I made a lot of financial mistakes too but found my footing and am in good shape now at 42. if people sound harsh here they probably made similar mistakes and are just trying to give you some "tough love" so you don't make the same mistake in the future.

The hardest part is often admitting you have a problem, so you are over the worst hurdle!

I look forward to seeing you update this thread with your debt reduction and forthcoming investment questions. :)
"...the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man..." ~Seneca
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Goznellus
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Re: Intro and Personal Finance Advice

Post by Goznellus »

Good afternoon everyone!

I have an update. When I first started this thread, we had over $10,000 in credit card debt, spread across 4 credit cards. I am very excited to say that we are now down to the last credit card, with the remaining balance being exactly $2,500. We should get this paid off very quickly. We just eliminated a $150 monthly expense as of yesterday. So this will help pay that down quite a bit.

It feels great and I just wanted to post an update. Have a great weekend!
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Re: Intro and Personal Finance Advice

Post by barnaclebob »

Awesome. Keep going.
Thegame14
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Re: Intro and Personal Finance Advice

Post by Thegame14 »

I would first make sure you contribute to get company matches on 401K, then I would build up the emergency fund to 3 months expenses for now, but look to later build that up to at least 6 months to one year expenses, but 3 months for now, then the rest goes towards paying off debt either first tackling high interest rate debt or if they are similar rates, knock out the small ones to build momentum and to free up cashflow for other debts.
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JupiterJones
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Re: Intro and Personal Finance Advice

Post by JupiterJones »

Goznellus wrote: Fri Apr 05, 2019 12:49 pm I have an update. When I first started this thread, we had over $10,000 in credit card debt, spread across 4 credit cards. I am very excited to say that we are now down to the last credit card, with the remaining balance being exactly $2,500. We should get this paid off very quickly. We just eliminated a $150 monthly expense as of yesterday.
Holy Moly! You're doing great! :sharebeer
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