How is it possible to save and get out of debt?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
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ltuxl
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How is it possible to save and get out of debt?

Post by ltuxl » Mon Apr 23, 2012 11:25 am

Greetings Bogleheads,

I have a question that I am not sure can be answered with the exception of the obvious - stop spending - suggestion so consider this food for thought and feel free to add your two cents!

Scenario:
My plan of action to get out of debt and eventually become financially independent includes:
- never run a balance on my credit cards
- conquering student loans (highest interest rate first)
- saving only the money my company gives me for 401k (5%ish) without putting in any of my own until the high interest rate student loans (6%+) are taken care of.
- maintaining my emergency fund
After student loans are taken care of I will max out my 401k contribution at 17k, and begin to pay off my house at an accelerated rate all the while living a boglehead lifestyle (below my means with proper asset allocation).

My confusion comes in with necessary purchases that are super expensive. I have been kicking butt on my student loans (paid off over 20k in 2011) and have maintained what I have determined a reasonable emergency fund without running a balance on my credit cards. I just bought a house which wiped out the emergency fund. I am still paying off student loans at a good rate but in order to refill my emergency fund I have been paying less. Once the emergency fund is restored I will be paying what I once was (minus the mortgage payment) on the student loans however as I stated earlier I just purchased a house. Looking ahead years from now the student loans will have been paid off but the house will still be there.

While attempting to conquer the aforementioned debt I realize that I need to purchase an engagement ring, a new car in a few years (provided this one meets the life expectancy of 250k+ miles), and a few other expensive purchases. I am only in my 20's so I consider what knowledge I have now regarding finances a gift but I can't help but realize this up hill battle with money and debt.

Again this is just a food for thought post but I would like to see what others think about my situation and others like it.

Thanks in advance Bogleheads!!

TUX
- Mr. Tux

bungalow10
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Re: How is it possible to save and get out of debt?

Post by bungalow10 » Mon Apr 23, 2012 11:39 am

Engagement rings and cars don't have to be expensive. My observation (I'm a woman) is that women who strong desire (or demand) the big rocks tend to want even more expensive things later. This is a generalization, but it holds pretty true with former and current coworkers. I also think people spend less money on the purchase price of cars when they pay cash. It's easy to buy all the bells-and-whistles when they are only $25 extra/month, but a lot harder when you have to write a check for $4k more.

What I would do...

1. Put a small amount aside for a little e-fund. You have a house, so you should probably have $2k sitting in an account for an emergency. A HELOC works too, if you have one.

2. Pay of student loans ASAP. Be very aggressive, set a goal you don't think you can attain and then do it.

3. Max out 401k and Roth.

4. Establish the big emergency fund - ~six months of living expenses. You may want to save for car and ring before this, but really think hard about what you want to spend here.

5. Pay off house.
An elephant for a dime is only a good deal if you need an elephant and have a dime.

Colorado13
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Re: How is it possible to save and get out of debt?

Post by Colorado13 » Mon Apr 23, 2012 1:04 pm

The recipient of the engagement ring should pay a portion of the mortgage and other expenses, thus enabling you both to save and get out of debt. :happy

More seriously, be sure your future spouse is aware of your debt reduction plan and is willing to make the necessary sacrifices to support the plan. You need to start thinking like a couple and include future spouse on financial decisions. Maybe you did obtain input, but buying a house/incurring significant debt without the future spouse's input may not be the best approach. You should be on the same page with your partner as much as possible regarding finances. If you're not on the same page, have discussions about how your priorities differ, so that you can agree to disagree. These forums include many examples of the implications of doing otherwise...

Best wishes.

stoptothink
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Re: How is it possible to save and get out of debt?

Post by stoptothink » Mon Apr 23, 2012 1:18 pm

bungalow10 wrote: My observation (I'm a woman) is that women who strong desire (or demand) the big rocks tend to want even more expensive things later. This is a generalization, but it holds pretty true with former and current coworkers.
+1. Been there, done that. New vehicles, and especially engagment rings, do not have to be huge expenses.

staythecourse
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Re: How is it possible to save and get out of debt?

Post by staythecourse » Mon Apr 23, 2012 1:48 pm

This is going to sound harsh, but why did you buy a house if your goals were to pay off your current debt, save for the future, and plan for some upcoming liabilities as well (i.e. ring and car)??

I would say the biggest key to success in investing and finance is to have a well thought long term plan. It would seem from the above you are going to have difficulty doing "everything" unless your income increases or via windfall.

Just do the best you can and would stress PLAN things out before committing any money to a new liability.

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

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rdmayo21
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Re: How is it possible to save and get out of debt?

Post by rdmayo21 » Mon Apr 23, 2012 1:56 pm

staythecourse wrote:This is going to sound harsh, but why did you buy a house if your goals were to pay off your current debt, save for the future, and plan for some upcoming liabilities as well (i.e. ring and car)??

I would say the biggest key to success in investing and finance is to have a well thought long term plan. It would seem from the above you are going to have difficulty doing "everything" unless your income increases or via windfall.

Just do the best you can and would stress PLAN things out before committing any money to a new liability.

Good luck.
This. Also, it'd probably be beneficial for you to max out a Roth IRA before the 401k.

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tetractys
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Re: How is it possible to save and get out of debt?

Post by tetractys » Mon Apr 23, 2012 1:57 pm

I think your doing a good job going in the right direction. One step at a time; time's on your side... and all that. Moving from negative to positive is saving IMO, and you might say that includes paying down debt. -- Tet

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Re: How is it possible to save and get out of debt?

Post by 3CT_Paddler » Mon Apr 23, 2012 2:06 pm

Start listening to Dave Ramsey. You have done some good things so far (like paying down student loan debt and having an emergency fund). The key is don't live like everyone else "appears" to be living. Nothing wrong with a quality $6-8k used car with just under 100k miles. Nothing wrong with renting cheaply and not eating out often.

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Clearly_Irrational
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Re: How is it possible to save and get out of debt?

Post by Clearly_Irrational » Mon Apr 23, 2012 3:00 pm

ltuxl wrote:While attempting to conquer the aforementioned debt I realize that I need to purchase an engagement ring
Check out black diamonds, they look awesome and they're significantly cheaper.

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Sally
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Re: How is it possible to save and get out of debt?

Post by Sally » Mon Apr 23, 2012 3:01 pm

I have a different perspective than many posters on this site regarding home ownership, and to some degree, market timing, as well as when and how to become debt-free. So with that said, I would do the following:

1. Max out tax deferred accounts because you can only add a limited amount per year, and as your income increases (presumably considering your age), you can pay off student loans more as your income increases. You can’t go back and add to past year’s tax deferral limits.
2. Don’t regret your house purchase. While the housing market has suffered (severely) since 2005, historically it has increased over long periods and you probably purchased at a very good time re housing prices. Buy when in a buyer’s vice seller’s market, and it appears you have done that. (In fact, if I were 20 years younger, I would be investing in rentals!—also contrary to most posters b/c they say rentals are too much work—but depending on where you purchase and how you rent, they can (and have for us) paid for themselves while increasing in value significantly (we rented them for 15-30 years prior to selling).
3. Yes, never carry credit card debt unless it is a true emergency (e.g., medical or transportation for work emergency).
4. Create budget for absolute essentials at minimal amounts without floating the purchases (mortgage, taxes, and utilities) and stick to it
5. Yes, budget (high) for and stick to the budget of paying off your student loans.
6. Anything left over goes towards “goal savings” and non-essentials. Cars and rings don’t have to be the most expensive—just safe. (Hmmmm, read into that what you will re the ring! Lol)

My husband and I were in your exact situation at one point in our lives--we started out with nothing except student loan debt. We purchased a house right out of school with nothing down (VA loan) that strained our budget (and it was cheapest house (2 bdrm, 1 bath) in a safe neighborhood with good schools). I did the grocery shopping (cause I used coupons, and my spouse wasn’t quite used to real budgeting) buying only the cheapest meats, etc. –good in stews and soups, and crockpot recipes, and planted a good size garden in our small (city) yard. We did buy (invest in) a freezer so that we could limit our purchases to items only when on sale, freeze what we grew in the garden, and so that we could prepare dishes on weekends for the workweek. We also brown-bagged everyday. We didn’t buy things like cable tv or other non-essentials until we could afford them after taking care of items 1 through 5.

Priorities for non-essentials were established. My husband insisted that a ring was at the top of the non-essential list even before purchasing better, more expensive (higher quality) meats and grocery items. My “original” engagement ring was a piece of yarn (in my favorite color)—we both laughed and it has made for great story telling. The second came at year 1, then year 5, then year 25….I kind’of liked it that way—hmmm, wonder why~! We paid cash for our used cars (so some were rusty looking clunkers, but they were safe and ran) and changed the oil ourselves. We did all housework/maintenance/improvements that we were capable of doing or learning. As our incomes increased we loosened up, but always lived within our income, taking on debt only when purchasing additional houses. Most importantly, we always had fun along the way and never felt like we were missing out even though we definitely did not start out living like most of the other attorneys we knew.

NOTE: In the interest of full-disclosure: We did not follow # 1 to the extent that we later wished we had, opting to pay off debt first.

Hope this helps...
Sally

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Duckie
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Re: How is it possible to save and get out of debt?

Post by Duckie » Mon Apr 23, 2012 3:06 pm

Contribute the max to a Roth IRA. Since you can always withdraw your contributions (but not earnings) without taxes or penalties, you could consider it a backup emergency fund for awhile.

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Skinut
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Re: How is it possible to save and get out of debt?

Post by Skinut » Mon Apr 23, 2012 3:45 pm

Colorado13 wrote:The recipient of the engagement ring should pay a portion of the mortgage and other expenses, thus enabling you both to save and get out of debt. :happy

More seriously, be sure your future spouse is aware of your debt reduction plan and is willing to make the necessary sacrifices to support the plan. You need to start thinking like a couple and include future spouse on financial decisions. Maybe you did obtain input, but buying a house/incurring significant debt without the future spouse's input may not be the best approach. You should be on the same page with your partner as much as possible regarding finances. If you're not on the same page, have discussions about how your priorities differ, so that you can agree to disagree. These forums include many examples of the implications of doing otherwise...

Best wishes.

This is spot on, I would read the above, then re-read it, then have your future spouse read it about 30 times, get her to agree to what you talked about in writing :wink: , you get the idea....

Being on the same page for future financial planning is critical, I've been fortunate to have a spouse who is on board and also seen what happens when a spouse does not share the same views.

Good luck! :sharebeer

ilmartello
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Re: How is it possible to save and get out of debt?

Post by ilmartello » Mon Apr 23, 2012 4:00 pm

Here's a good way to save money, although none of us are saints.

Stop eating out (it's not healthy anyway) and stop smoking cigarettes (if you do).

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hand
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Re: How is it possible to save and get out of debt?

Post by hand » Mon Apr 23, 2012 4:04 pm

Take an honest look at your job / salary prospects.

If you have a reasonable expectation of significant increased wages in the future and / or a working spouse (and truly have the self discipline to live below your means), seriously consider prioritizing tax deferred savings over debt repayment. This space is extremely valuable over the long-run it seems a shame to let it go unused year after year.

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Sally
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Re: How is it possible to save and get out of debt?

Post by Sally » Mon Apr 23, 2012 4:37 pm

[/quote]Re HAND:
If you have a reasonable expectation of significant increased wages in the future and / or a working spouse (and truly have the self discipline to live below your means), seriously consider prioritizing tax deferred savings over debt repayment. This space is extremely valuable over the long-run it seems a shame to let it go unused year after year.
hand
He zeroed in on what I was trying to relate!

YES

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Clearly_Irrational
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Re: How is it possible to save and get out of debt?

Post by Clearly_Irrational » Mon Apr 23, 2012 4:40 pm

Sally wrote:Re HAND:
If you have a reasonable expectation of significant increased wages in the future and / or a working spouse (and truly have the self discipline to live below your means), seriously consider prioritizing tax deferred savings over debt repayment. This space is extremely valuable over the long-run it seems a shame to let it go unused year after year.
hand
He zeroed in on what I was trying to relate!

YES
I understand the strategy, but using that method you're relying on your wage forecast being correct. Personally I'd take the guaranteed return on the debt repayment.

tim1999
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Re: How is it possible to save and get out of debt?

Post by tim1999 » Mon Apr 23, 2012 6:59 pm

My advice is to be careful not to get into a habit of buying all sorts new furniture ($$) and knick-knack decor stuff for the house until your financial situation improves. It might be hard to resist your future spouse on this.

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VictoriaF
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Re: How is it possible to save and get out of debt?

Post by VictoriaF » Mon Apr 23, 2012 7:02 pm

Skinut wrote:
Colorado13 wrote:The recipient of the engagement ring should pay a portion of the mortgage and other expenses, thus enabling you both to save and get out of debt. :happy

More seriously, be sure your future spouse is aware of your debt reduction plan and is willing to make the necessary sacrifices to support the plan. You need to start thinking like a couple and include future spouse on financial decisions. Maybe you did obtain input, but buying a house/incurring significant debt without the future spouse's input may not be the best approach. You should be on the same page with your partner as much as possible regarding finances. If you're not on the same page, have discussions about how your priorities differ, so that you can agree to disagree. These forums include many examples of the implications of doing otherwise...

Best wishes.

This is spot on, I would read the above, then re-read it, then have your future spouse read it about 30 times, get her to agree to what you talked about in writing :wink: , you get the idea....

Being on the same page for future financial planning is critical, I've been fortunate to have a spouse who is on board and also seen what happens when a spouse does not share the same views.

Good luck! :sharebeer
We need a poll "What is more important a spouse or a Roth IRA?"

Victoria
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Toons
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Re: How is it possible to save and get out of debt?

Post by Toons » Mon Apr 23, 2012 7:06 pm

It is all about distinguishing between wants and needs.
My wife and I exchanged 35 dollar wedding bands when we got married,but bought more expensive
rings for each other when we could afford them(pay cash)
New Car???Think used.
live on a tight budget (beneath your means)
:happy :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

sport
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Re: How is it possible to save and get out of debt?

Post by sport » Mon Apr 23, 2012 7:18 pm

ltuxl wrote: After student loans are taken care of I will max out my 401k contribution at 17k, and begin to pay off my house at an accelerated rate all the while living a boglehead lifestyle (below my means with proper asset allocation).
You may wish to reconsider your plan to pay off the house at an accelerated rate for the following reasons:
1. Since you just bought the house, the interest rate should be very low. During the 30 years scheduled for the mortgage, it is likely that interest rates will be significantly higher at some point. If/when this occurs, you will be very happy to have this debt and will want to pay it off as slowly as possible.
2. If you pay off the loan on schedule, you get to pay it with inflated dollars.
3. As you get older, it is likely that your income will be higher, thus making the loan payments a smaller portion of your budget.
4. If you pay the debt on schedule, you can use the extra money to max out 401k and IRA contributions. You will also have more more money to spend on discretionary spending. Remember to enjoy life.

Jeff

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Re: How is it possible to save and get out of debt?

Post by vesalius » Mon Apr 23, 2012 7:32 pm

Duckie wrote:Contribute the max to a Roth IRA. Since you can always withdraw your contributions (but not earnings) without taxes or penalties, you could consider it a backup emergency fund for awhile.
Do this. for the time being consider your yearly ROTH contributions as your e-fund. Then you can fully fund the ROTH, for the moment stop funding a separate e-fund and continue aggressively paying down the student loans. Once the student loans are payed off or you marry a rich, financially independent spouse, go ahead and get the separate e-fund going again.

Seabeck
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Re: How is it possible to save and get out of debt?

Post by Seabeck » Mon Apr 23, 2012 10:35 pm

Your rings don't have to cost a lot. In fact, they can be downright cheap. Seven years ago my wife and I got married and then had our wedding rings tattooed on. We spent $164.32.

Of course, it behooves you to ensure that you're building your marriage on a solid Foundation or you may end up chipping in for laser surgery at a later date.

ks289
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Re: How is it possible to save and get out of debt?

Post by ks289 » Tue Apr 24, 2012 9:15 am

ltuxl wrote:the obvious - stop spending -

necessary purchases that are super expensive.
Juxtaposing these two statements indicates that certain discretionary spending is important to you - this is true (to a varying extent) for all of us. Clearly saving and paying off debt are equally/more important to you as well so your financial savvy will serve you well.

Being reaslitic/honest about your true spending habits (engagement ring now, wedding/honeymoon costs later, kids down the road, college tuition, and so on and so on) and factoring that into your estimates/emergency fund is what will allow you to better attain those goals.

---
I am NOT a big GET OUT OF DEBT FIRST fan for the relatively lower (particularly tax deductible) interest, when comparing
probability of achieving a higher return with saving/long term investing. Doesn't mean you can't hedge/diversify by coming up with a split you are comfortable with, but you've got DECADES AHEAD of you to invest and beat those low single digit rates.

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Random Musings
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Re: How is it possible to save and get out of debt?

Post by Random Musings » Tue Apr 24, 2012 9:53 am

Everything in moderation.

Don't try to keep up with the Jones's. 'Cause they probably have debt issues too.

RM
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SamB
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Re: How is it possible to save and get out of debt?

Post by SamB » Tue Apr 24, 2012 10:31 am

You mentioned buying a house. I do not know if you are a "do-it-yourself" type, but that has been my way of saving money, especially in my 20's and 30's. I am 65 now and I would say one of the best investments I ever made was buying a set of tools to work on my car when I was 20. When I bought my first home I continued buying tools and learned how to do nearly all of the plumbing and electrical not to mention a fair amount of remodeling. I laid hardwood flooring when I was in my 30's after we bought our present house. If I added it all up it amounted to a substantial savings in labor costs. Rarely were the cost of tools an issue, even when they were used rarely. I think I paid $175 for a floor nailer, but saved several thousand dollars when I laid my floors.

If you have to call a plumber to replace a washer, or even a faucet, an electrician to replace a fixture, or a landscaper to spread some mulch your savings rate is really going to suffer.

Of course if you are working 80 hours a week, and have a job paying several hundred thousand, then you better stick to what you do best and even hire a housekeeper.

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greg24
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Re: How is it possible to save and get out of debt?

Post by greg24 » Tue Apr 24, 2012 11:18 am

ltuxl, it sounds like you are doing well. Keep it up.

guitarguy
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Re: How is it possible to save and get out of debt?

Post by guitarguy » Tue Apr 24, 2012 11:40 am

You know it's funny, 2 years ago this thread applied to me almost 100%. We had so many things coming up, had just bought a house, a pile of student loans, old cars, etc. Now, coming up on our 2 year wedding anniversary we have accomplished so many goals and are continuing to work on others, all with lots of help and advice from all my fellow Bogleheads! :)

My first piece of advice is to make a good plan and stick to it. I actually do this at the beginning of each calendar year myself. For example, last year was a "start saving and debt reduction" year. We paid off $10k (EXTRA) in student loans while maxing our Roth IRA. This year we're saving like crazy for a nice new (used) car and also for a nice patio addition to our back yard this summer.

Some big things you didn't even mention are home improvements and projects (trust me there will be some!), paying for your actual wedding (unless you have rich in-laws :moneybag :moneybag ), saving for vacations, having kids down the road, etc. Plan for these things as far in advance as you can, but always remember, you'll have to adapt at some point!! :wink:

And one thing to remember too, my only piece of sort of anti-Boglehead advice, is to not let saving for retirement and paying down debt 100% consume your life. Set a few dollars aside each month and take a vacation once or twice a year...even if it's just a weekend getaway. Have a fun hobby and don't be afraid to spend a few dollars on it. When you do home improvements and things like that, go for things that really improve your quality of life. For example this year with us and our patio...we're shelling out quite a bit of money for a new patio, new fence, adding outdoor lighting etc. Would I like to just stack that money away for a 2nd car next year or pay down an extra chunk of student loans? Yeah. But going on 4 years in our house without a patio or deck in our back yard and not being able to entertain back there and stuff, the money will be well spent and worth it. I guess what I'm trying to say is don't completely forego all the fun in your life. You're only young once!! :sharebeer

The fact is, being on this website, starting retirement planning this far in advance, having a good grasp of finances in our 20s, we have a great head start on doing very well in life. Just keep it up as best you can!

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BigD53
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Re: How is it possible to save and get out of debt?

Post by BigD53 » Tue Apr 24, 2012 12:07 pm

First, congratulations. You've accomplished a lot at such a young age. Even though the education debt is frustrating and expensive, obviously your future should be much brighter with that college degree(s).

I would politely suggest that you consider delaying the marriage, until such time you have your personal debt and college loans paid. There is nothing worse (and more stressful!) than having lots of debt in a new marriage. People who tend to marry so young, seem to just run up more bills and bigger and bigger debt. Frankly, I don't understand why young couples feel like they need to rush to the alter! Get settled in your house. Pay off bills. Have your savings plans in place. Make sure your 401K or IRA is being funded. (And your girlfriend should be doing the same!)

There is absolutely nothing weird or wrong with waiting until your 30s (or even 40s for some people) to make a marriage commitment. Have patience! Take your time. And be certain that you find a mature, practical, financially responsible women who is not a "spender", or in a big hurry to rush into things. Make sure she shares your same thoughts and values concerning money!

I tell the same things to my nephews and nieces. You're only in your 20s! You got tons of time ahead of you. Go into your future with as little stress as possible. >>Just some thoughts from an old guy. Good luck.

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Re: How is it possible to save and get out of debt?

Post by Mudpuppy » Tue Apr 24, 2012 12:11 pm

I'll just add one thing to all of the good comments above: don't fall into the trap of societal pressure (and now is probably the best time to make sure your girlfriend also isn't under the sway of societal pressures before you marry her). For example, it's purely societal pressure that says an engagement ring has to be a new diamond worth xyz of your income. Not only might this be fiscally un-prudent, but it's also not the most humane option given the issues surrounding diamond mining (do a web search for blood diamonds). There's nothing wrong with an antique ring or used ring. You might even ask both your family and her family if there's an heirloom ring that you could use, as the sentimental value will make it all the more precious. As a woman myself, I would never want a new ring with a "blood diamond" when there are so many good antiques and used rings out there to choose from.

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ltuxl
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Re: How is it possible to save and get out of debt?

Post by ltuxl » Tue Apr 24, 2012 12:50 pm

Thanks for all of the advice/input everyone.

I posed the question for a variety of reasons but there is one large financial purchase that I want. I want a nice sports car. When I say nice sports car that can be interpreted in a variety of ways. To some people a nice sports car is a Camaro SS or a Mustang GT or maybe even a 370Z. I however am looking for a higher end German made sports car - a Porsche 911 (probably not base model)... I know with student loans, an engagement/wedding on the horizon within the next 5 years, a house, saving for retirement, and other financial items this car seems like a dream. That being said, if I made a list of things that I want out of life this car is in my top 3 things I want (other two are not financially related). I am super passionate about cars and in an attempt to save for retirement and set myself up to be able to own a 911 some day I am making sacrifices now...

In an attempt to get my girlfriend on the same page when it comes to financial thinking I explained this to her and showed her that there is a reason I don't spend a lot of money on clothes (although I want to) or unnecessary household items (extra tv's, surround sound). I also explained that I drive a base model chevy and am paying down debt without running a credit card balance because I have certain financial goals. Reaching financial independence is definitely one of those goals but the purchase of this car is another. Whether or not I will ever be able to comfortably purchase (and whether or not I do purchase this car) this car is hard to determine at this stage in my life however I am making financial sacrifices to increase my changes of being able to do so. I fear my girlfriend and I are not on the same page and we both handle money very very differently. If that remains the case I fear my dream of an 911 is just that... a dream.

I am thinking about asking her to read 'Rich Dad Poor Dad' or 'The Millionaire Nextdoor' in order to see where I am coming from... As of right now she does not have a job (other than finishing up her degree and working on campus a few hours a week) but I think it will benefit both of us to read (reread for me) one or both of those books.

Thoughts?
- Mr. Tux

vesalius
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Re: How is it possible to save and get out of debt?

Post by vesalius » Tue Apr 24, 2012 1:12 pm

I would venture to say that there are not a lot of women, or men for that matter, that would happily go through years of real financial sacrifice so that their spouse might have the ability to buy a 6 figure sports car.

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greg24
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Re: How is it possible to save and get out of debt?

Post by greg24 » Tue Apr 24, 2012 1:35 pm

vesalius wrote:I would venture to say that there are not a lot of women, or men for that matter, that would happily go through years of real financial sacrifice so that their spouse might have the ability to buy a 6 figure sports car.
Yeah, that changes everything. Living a frugal lifestyle so you can buy yourself a REALLY expensive car is gonna be hard for anyone to swallow.

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Re: How is it possible to save and get out of debt?

Post by Mudpuppy » Tue Apr 24, 2012 1:41 pm

First thought, being a student is a full-time job and not one that should be so readily dismissed in one's significant other unless he/she has been a student for a decade and is not progressing towards a degree and career. Given your age, I assume this is not the case. Let her build her own career after finishing her education before negating her fiscal worth to the couple as a whole by saying she doesn't have a job.

Second thought, dreams are nice, but remember that many times your goals will change as life progresses. Rather than setting your mind ironfastly on one type of sports car, see how you can prudently pursue your passion for cars right now. Maybe join local clubs where you can help out other members with restoring classic sports cars. Or see if the local speedway has nights where they let the public use the track. You could attend and talk to other sports car owners and enthusiasts. Ask the Porsche, Mustang, etc owners how much it costs to keep the motors purring like a kitten. Not only would this give you a current outlet for your passions, it'll also let you see the more mundane, yet important, aspects of sports car ownership like maintenance. Only then can you determine if this is a realistic future fiscal goal or a dream.

Third thought, talk to your girlfriend about where you are coming from instead of asking her to read some books. You're asking her to sacrifice a lot for you. What about her dreams? Are those part of your plan as well? If you cannot adequately express your motivations and desires to your significant other, and adequately compromise in consideration of her motivations and desires as well, that might be a sign that you haven't really got a plan in place yet and you need to work on that first. I would suggest working on it together by first determining each of your individual dreams, then your dreams as a couple, then which ones would be fiscally realistic as goals and how you could obtain those goals.

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Re: How is it possible to save and get out of debt?

Post by Random Musings » Tue Apr 24, 2012 2:40 pm

ltuxl wrote:I am thinking about asking her to read 'Rich Dad Poor Dad' or 'The Millionaire Nextdoor' in order to see where I am coming from... As of right now she does not have a job (other than finishing up her degree and working on campus a few hours a week) but I think it will benefit both of us to read (reread for me) one or both of those books.

Thoughts?
I don't think "The Millionaire Next Door" has a Porsche 911 sitting on their driveway. If they do, most likely a used one with a lot of sweat equity in it.

This smacks of "do as I say, not as I do". As you said, there will be a benefit if you re-read those books.

RM
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Re: How is it possible to save and get out of debt?

Post by 3CT_Paddler » Tue Apr 24, 2012 3:11 pm

vesalius wrote:I would venture to say that there are not a lot of women, or men for that matter, that would happily go through years of real financial sacrifice so that their spouse might have the ability to buy a 6 figure sports car.
+1. I think your car goals are incompatible with starting a family/marriage in your 20's. What is more important to you? Your girlfriend or a rapidly depreciating, expensive to maintain, six figure sports car? Picture you and your wife three years down the road... your wife is doing bag lunches and spending minimally on clothes so that you can afford a Porsche... does that not seem like a major source of conflict? It would be one thing if you actually had that kind of cash to burn...

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Re: How is it possible to save and get out of debt?

Post by BuckyBadger » Tue Apr 24, 2012 3:27 pm

Wow.

I also think that it's going to be hard to convince your girlfriend to live the frugal life so that you can save up for (and then, I suppose, go into debt for, unless you plan on saving up the whole cost of the new car in the next few years) an insanely expensive car. That's a pretty hard sell.

But on the other hand, it'll save you the expense of the engagement ring.

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Re: How is it possible to save and get out of debt?

Post by mmmodem » Tue Apr 24, 2012 3:30 pm

ltuxl wrote:I am thinking about asking her to read 'Rich Dad Poor Dad' or 'The Millionaire Nextdoor' in order to see where I am coming from... As of right now she does not have a job (other than finishing up her degree and working on campus a few hours a week) but I think it will benefit both of us to read (reread for me) one or both of those books.

Thoughts?
I don't think you should have her read 'The Millionaire Nextdoor' if your goal is to have her approve your sports car dream. I haven't read it but doesn't that book talk about how the millionaire next door is driving a beat up old car but has a million in the bank?

DW wants an Audi and I want to get it for her. Why? Number one reason and most important: we will be able to afford it. Number two is she doesn't have a closet full of shoes. She doesn't have fancy clothes. Besides her wedding ring, she has only one other piece of jewelry of value and that's because my mom gave it to her. Her sister bought her a nice coat and she's only worn it a handful of times because she's afraid of getting it dirty. She prefers to wear her plain ratty old jacket instead. I think that jacket was the reason her sister got her something nice.

That's the type of person DW is so I will gladly brown bag to work. I will continue to use this lousy work-issued Blackberry instead of getting the lastest smartphone. My two year old laptop will become 3 years old and beyond I hope. We don't have cable TV and subscribe to the slowest broadband speed. My wedding ring is sterling silver <$100.

So, if you can afford it. I say go for it. And by afford it, I mean write a check for the full amount and not deplete your emergency fund or retirement accounts. DW knows we can't do that right now for her Audi and she'll continue to drive her economy car for another couple of years until we can afford. Her joy is driving a nice car. My joy is seeing her happy and chicken wings. It works out.

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Re: How is it possible to save and get out of debt?

Post by campy2010 » Tue Apr 24, 2012 7:15 pm

So, you have $60k in student loan debt, some of which was at 9% the last time you posted about it. Instead of keeping expenses low to pay down debt, you decided to buy a house at age 24. Now, you want to buy a Porsche? I have to admit that I haven't read "Rich Dad Poor Dad" or the "Millionaire Next Door", but I doubt their take-away message would somehow convince your fiance that you should buy a $50k+ car.

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Re: How is it possible to save and get out of debt?

Post by tyrion » Tue Apr 24, 2012 7:41 pm

If you want a 911 you need to be more than a good saver, you need to be a good earner. Want to convince your girlfriend to let you have a 911 (non-base model to boot)? Tie it to your income. If you make 200k/year, you might be able to afford it if you have reasonable expenses elsewhere. If you make 50k/year, you will not be able to afford it regardless of what else you do.

Turn your lofty dreams into motivation. Get an advanced degree. Start a business on the side. You're not going to get there by buying fewer clothes.

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Re: How is it possible to save and get out of debt?

Post by porcupine » Tue Apr 24, 2012 8:07 pm

VictoriaF wrote:[...]We need a poll "What is more important a spouse or a Roth IRA?"

Victoria
Only on Bogleheads ...!!!! :wink:

- Porcupine

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Re: How is it possible to save and get out of debt?

Post by Dave76 » Tue Apr 24, 2012 8:22 pm

Why not compromise and get a Porsche 944?

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Re: How is it possible to save and get out of debt?

Post by epilnk » Tue Apr 24, 2012 8:42 pm

greg24 wrote:
vesalius wrote:I would venture to say that there are not a lot of women, or men for that matter, that would happily go through years of real financial sacrifice so that their spouse might have the ability to buy a 6 figure sports car.
Yeah, that changes everything. Living a frugal lifestyle so you can buy yourself a REALLY expensive car is gonna be hard for anyone to swallow.
Ouch. Sorry dude, you've got a problem. Your list of "necessary" purchases (house, engagement ring, new car) followed by this - listed as a primary life goal - means that no frugal girl is likely to be happy with you. There's nothing wrong with having such a goal, mind you. Especially if you are willing to wait until you can truly afford it. But hearing you say, "this is why I save" might be a bit much for any girl to stomach before getting a lecture on her own spending habits.

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Re: How is it possible to save and get out of debt?

Post by ltuxl » Tue Apr 24, 2012 8:45 pm

I think in order to paint a more clear picture I should clarify a few things.

1. My passion for cars is something I don't expect many people to understand.
2. I don't regret buying a house especially in this market.
3. I come from what I consider a faded blue collar family and realize the benefit of saving for the future.
4. I realize and have talked to her about her dreams and wants.
5. Realizing that this may not be what she wants, I would be willing to forgo vacations, expensive clothes, eating out, and other material luxuries in order to afford the car. Here is where a happy medium may be necessary...
6. As long as I hav estudent loans or a mortgage the car will remain a dream.
7. I don't want her to read the books just so we can live a frugal lifestyle and I get the 911
8. I have thought about starting up a business on the side, I am currently four classes from my masters degree and have started studying for a certification that will lead to a nice pay raise...

My reasoning for wanting to read either rich dad poor dad or the millionaire next door with her is to encourage certain financial concepts that escape her right now such as a budget. The last thing I want to do is paint her in a bad light but she comes from a more fortunate family. Whereas if I lose my job or fall under hard times I have no one to rely on financially. She however has a bit of a safety net with her family. Reading the book(s) together can inspire the necessary conversations for us to have in order for both of us to get what we want. Or at least realize what is and is not realistic. I did a bad job of articulating this in my previous post :?

Before my uncle had me read rich dad poor dad I went out and bought a brand new car right off the lot after receiving my first promotion. I was buying expensive wine and scotch (what I considered expensive at the time), new clothes, shoes, watches, video games and the like because my financial knowledge was lacking. I had no concept of what what necessary to reach financial independence. Had I read the book before I went from 20k to 40k a year I would have kept the same car and paid off student loans with the additional money and not made unnecessary purchases. I know very few people who are brought up in a household where basic financial concepts and ways of living financially responsible (such as those located in the books I mentioned) are taught. It is for this reason that I think reading the books are a good idea.

Thanks again for the input/advice.
- Mr. Tux

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Re: How is it possible to save and get out of debt?

Post by BuckyBadger » Tue Apr 24, 2012 9:31 pm

ltuxl wrote:5. Realizing that this may not be what she wants, I would be willing to forgo vacations, expensive clothes, eating out, and other material luxuries in order to afford the car. Here is where a happy medium may be necessary...
Mkay, but you realize that SHE will therefore be giving up vacations, expensive clothes, eating out, and other material luxuries, so that YOU can drive a porsche?

Look, I'm the first one to tell people that one person can have a more expensive hobby than the other. I spend many thousands of dollars on horseback riding every year, and my husband has no such spending. BUT and this is a big BUT -- BUT, we do not compromise on anything that he wants to do when it comes to purchases or experiences. If he wants something expensive that we can't afford with my level of spending, i cut back on my level of spending.

So I think there is a difference there. If you could buy the car without impacting your standard of living, I'd say go ahead. Knock yourself out. But you're talking about living well below your means -- and asking her to do so as well -- so that you can buy yourself one thing. A material thing. Something that she apparently has no interest in.

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Re: How is it possible to save and get out of debt?

Post by stoptothink » Tue Apr 24, 2012 9:42 pm

Dave76 wrote:Why not compromise and get a Porsche 944?
I was thinking more 914.

By the sounds of this thread this buying of a Porsche wouldn't be remotely realistic for a long time, like decades into the future. If you can find a girl willing to live below her means for years so you can someday drive a ridiculously expensive car, hold on to her because she is one of a kind. Kind of a threw a wrench in the whole thread by bringing up the Porsche. You are wondering how it is possible to save and get out of debt...well it isn't if your goal is to buy a Porsche.

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Re: How is it possible to save and get out of debt?

Post by market timer » Tue Apr 24, 2012 9:52 pm

How about creating two savings accounts, one for your Porsche and another one with equal contributions for your wife's indulgences? That seems fair to me.

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Re: How is it possible to save and get out of debt?

Post by tyrion » Tue Apr 24, 2012 10:07 pm

market timer wrote:How about creating two savings accounts, one for your Porsche and another one with equal contributions for your wife's indulgences? That seems fair to me.
Perhaps she will use her share of savings to indulge in "vacations, expensive clothes, eating out, and other material luxuries..."

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Re: How is it possible to save and get out of debt?

Post by 3CT_Paddler » Tue Apr 24, 2012 10:22 pm

There is a reason, most on this thread are urging caution after the Porsche comment.

I think until your income is north of $200k, this is a purchase that will put you at odds with your wife... even if she is a salt of the earth person.

"No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other."

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Re: How is it possible to save and get out of debt?

Post by NorCalDad » Tue Apr 24, 2012 10:47 pm

I had the same initial cringe as others when I read the 911 comment, but I think the OP is not different from many younger people who dream of certain things. I applaud him for at least being honest in a place where many people do not share the same goals.

And I think he may grow out of it. It's interesting what getting married, buying a house and having kids will do to someone. I know it changed my priorities. I haven't had a new car since I bought one two years after college, and that was over a decade ago. I remember when I bought it, I obsessed over it and thought it was such a huge deal. At the time, I never would have thought I'd be driving the same car in my 30s with a car seat installed in the back. We can afford to buy a luxury car with cash now, but we have other priorities that mean a whole lot more to us - retirement, kid's education and a better house.

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Re: How is it possible to save and get out of debt?

Post by scrabbler1 » Tue Apr 24, 2012 11:18 pm

Tux, here is what I did in my early working years when I was in my mid-20s. This was back in the mid-1980s.

I made sure I never had more than one of the "big 3" of debt: that is, student loans, car loan, and a mortgage. First, I paid off my student loans before I bought my co-op apartment a few years later. Next, I paid cash for my first car. It was a pretty basic car without most of the common options a car had. If I bought a more expensive car, I would have had to take out a loan for at least some of the purchase price. Six years later, I would trade it in and buy a better car, as I had much more money to afford one with more typical options. Of course I never had any credit card debt, paying balances in full each month. And I still managed to take a small vacation every year.

In those early years, I did not max out my 401(k)'s employer match right away but I do not regret that because I used that extra money to pay off the student loans, pay cash for the first car, and for the down payment and closing costs on the apartment while maintaining some minimal level of an emergency fund. After I bought the apartment, I upped the 401(k) to max out the employer match. My pay was rising rapidly back then, as pay raises were much higher than they are today or even in much of the 1990s.

These moves in the 1980s set the foundation for me to pay off the mortgage in 1998 after only 9 years. I had built up enough savings by 1992 to not only go through a refi of the mortgage but to also buy that better (but not a Porsche) car I had wanted for a while. The refi saved me $200 a month which was very helpful in developing a portfolio of investments in time for the late 1990s boom.

It appears that we share some similarities in our priorities but there are also many big differences. I hope you found this helpful. :)

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