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Getting out of debt in MARCH!

post #1 of 68
Thread Starter 

Do you want to get out of debt? Start living on a budget? Be able to start saving? Then this is the thread for you! Some of us use Dave Ramsey's method but please join us even if you're following someone else/your own plan. All are welcome!

 

Here's DR's plan:

Pre-Step 1: Get current on your debts and do a budget
0.1 No new borrowing.
0.2 Talk with spouse and get him/her on the same page as you concerning finances.
0.3 Do a written budget
0.4 Temporarily stop all retirement contributions
0.5 Get current on all the basics (Shelter, Food, Utilities, Basic clothing)
0.6 Amputate "toys" (bikes, boats, ATV's etc) to help snowball
0.7 Cut lifestyle (Cut cable, cell, extras, eating out) and/or get a second job to raise $1000 EF.
0.8 Get current on ALL bills

BS1 $1,000 to start an Emergency Fund
1.1 Chop up/freeze CC's (You have an EF now)
1.2 Get Health insurance NOW if in the US
1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died.
1.4 Amputate cars that you can't pay off within 24 months

BS2 Pay off all debt using the Debt Snowball
2.0 Do the debt snowball, paying all your debts from lowest BALANCE to highest.

BS3 Three to six months of expenses in savings
3.1 Start car replacement fund
3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI.
3.3 Start furniture or other non-essential stuff replacement fund

BS4 Invest 15 percent of household income for retirement

BS5 College funding for children

BS6 Pay off home early

BS7 Build wealth and give! Invest in mutual funds and real estate

Here's the link to Dave Ramsey's website: http://www.daveramsey.com or if you want a good DR discussion forum, http://www.llnoe.com is good but hardcore. Gail vax Oxlade's Til Debt do Us Part is great tv show, very motivating. Her website is: http://gailvazoxlade.com/blog Others like Suze Orman or Mary Hunt, really doesn't matter whose method you use, just start the process to getting out of debt

 

Welcome.gif

post #2 of 68
Thread Starter 

Sorry I'm late posting March's thread...I've been too busy/stressed breaking all the DR rules nono.gif.

 

 

post #3 of 68

Subbing.  We're back to re-establishing our emergency fund since having a few extra expenses after the purchase of our new vehicle.  There were a few maintenance issues we needed to fix, and ate up most of our fund.  My plan is to save $600 a month which is split between our EF and sinking funds.  It is not a good feeling to see the EF so low right now.  EEK!

post #4 of 68

Ooooo! Me!  I seem to join this thread once or twice a year.  Hopefully it will stick this time. 

 

DH and I have about $4000 in an account that we are saving incase he can't work through student teaching next year.  I am hoping to add at least $2000 more to that account by December.  We have $300 in our base emergency fund which should be up to $1000 in April.  Additionally, we will hopefully be able to start making double payments on our car loan, and I am hoping to put an extra $1500 toward that this year.

 

I WOULD be following DR's plan if it weren't for the unknown of DH's student teaching. We are pretty sure he will be able to keep his job, but just drop down some hours while student teaching, but we can't bank on it, so we have to sock away money instead. Hopefully he will be able to work enough to pay the bills and we will be able to apply that savings to the car and get it paid off. 

 

THEN it's student loan payoff time and save up for a house time.  Someday we'll get there...

 

So far this month, I put $15 toward the EF.  Not much, but honestly, it's HARDER to put small amounts in savings than large amounts for us, so it was really huge to actually save that $15 instead of belittling the amount and grabbing a burger for dinner instead.

post #5 of 68

Contrariety, I think you better plan on him not working.  When I student taught, my university had us sign an agreement requiring me (and all other student teachers) not to work during the student teaching period (along with all the things required to do student teaching well).  You should be able to get that information from his department.  I know it seriously sucked for me back then because I had a nice salaried job at the time working as a lab assistant.  Good luck finding out what you will need to do next.

 

AFM, the wash machine won't start.  I think the little electronic panel has shorted out.  I go to push a button to pick a cycle and press start and nothing.  $$$ coming out of EF.  Ugh.

 

Then there is the mortgage escrow shortage of a couple hundred dollars.  I guess the city upped its taxes this last year.  Thankful for our EF, just wishing we didn't have to use it.

post #6 of 68

He has talked about it with some of his advisors, and certainly they don't recommend working full time, but none have mentioned being required NOT to work at all.  We live in a *very* family oriented community where the majority of students have families to support, so I would be surprised about any such requirement.  But I will have him look into it, for sure.  He has three weeks of vacation that he is saving for that time.  Student teaching is 10 weeks, so he can take one vacation day a each week, and two vacation days the other weeks.  He will ideally only be working 3 days a week the whole time, and only two days during the week, so work would (hopefully) have minimal impact on school.  He does have a flexible work schedule so he can stay late at school if he has to.  We'll see.  It's a tricky situation because I can't get another job to support us without quitting my current job, and I work my current job in exchange for a place to live AND it's a job I can keep the kids with me all day so we have no childcare costs.... so we're just keeping our fingers crossed that everything will work out. We are planning to live here until we can save up to buy a house so I would be really really sad if it didn't work out.

 

Oh, man if DH can't work that just sucks SO much!  He has worked his job for 5 years, they have awesome benefits, and who knows if he would be able to find a temp job between student teaching ending and real teaching starting.... assuming he's able to find a teaching position, that is! 

 

I do not like uncertainty!

post #7 of 68

Contrariety, hopefully you can keep your job (because being able to keep your kids with you is priceless!) and your DH is able to work out his during Student Teaching.  When I student taught we had to teach for 16 weeks but 10 weeks were full time instruction but before and after that 10 weeks I taught one class and worked up to teaching all the classes, then weaned off one class at a time until the end of the semester.  I think each state or location is different in their requirements but definitely look into it sooner rather than later.  The unknown in that area might be over the top.  What is your DH training to teach?  I teach high school math, chemistry, and computer science (although right now I just teach math and I am a school counselor).  Keeps me on my toes!

post #8 of 68

Just popping in about the student teaching issue... when I student taught it was 'school' hours plus a bit on either end.  I was doing high school so basically  645-3pm M-F for x amount of weeks.  I was able to work another job, the university didn't make us sign anything and I had plenty of 'planning' time built into my schedule (I only had 3 classes each day, reg teachers had 6) so that helped alot.  However I paired with a mentor from he!! and mentally I was about to break and couldn't handle working a 2nd job.  I could barely handle finishing up ST.   I really got off lucky with time to plan during the school day, not having to stay late, come in super early etc. 

I would count on your DH not being able to work during ST.  ST is very stressful and does not leave time for much else.

post #9 of 68

Hi all, I'd like to join if I could please.

 

DH and I had previously done Gail's "'till debt do us part" and stuck with it until I went on Mat leave (I'm the primary bread-winner in our home).  I REALLY want to get on track and DH and I have been talking about going back on a strict budget again.  I feel that we are fortunate because we don't have consumer debt besides our car.  We own a home and have a low interest rate on our mortgage.  We don't have credit card debt and we aren't behind on any bills, mortgage payments, etc.  However, we do have a line of credit (secured Home Line, so also a relatively low interest rate at 3%) with around $100G on it (the car is on there, some school debt and our major renovation to our house).  We have two mortgages both with low interest rates (2.5% and 2.9% respectively).  I'd like to pay off the line of credit and get working on the mortgages.  At the same time, I know I need to start investing and saving for retirement.  I have an automatic savings plan at work and so I have money going into a registered account there.  I also have a small RRSP, and I have a pension through work but if I change jobs it doesn't go with me.  DH has NO savings at all for retirement and no benefits at his job at all (health, pension, etc.)

 

So, does anyone have any good resources to suggest in terms of how to balance paying down debt with investing for the future?  Or any advice?  This is especially timely as I just received a small bonus at work and am thinking it might be best spent on an RRSP for DH but I am so tempted to just pay down the LOC.

post #10 of 68

nstewart, of course you're welcome!

 

The question you've asked about debt versus investing does not have an easy, straightforward answer. The most common answer you will receive is that you should invest the money and forget about repaying that debt on an accelerated schedule, especially given the low interest rates you have.

 

Personally, I think it's more complicated than that, but even with my anti-debt views I can't say that it's a no-brainer. I am about to begin a long campaign of paying off my mortgage despite all the advice against it, and I feel like making a 5.625% "return" (that's my mortgage rate) is a solid choice. But 3% - I am not completely sure. So instead of giving you any advice, let me just throw out some questions for you to consider:

 

1) If you don't aggressively repay your debt, will you indeed invest that extra money? As opposed to increasing your lifestyle, which is so easy to do? Whatever you choose will be a brilliant move, as long as it's not just expanding your lifestyle and wondering where the money went.

2) Do you feel comfortable that you will be almost guaranteed at least a 3.whatever percent return on your investments? For example, if you've made crappy investment decisions in the past (hey, a lot of people have), you might prefer to stick with an absolute guaranteed 3% "return" via repaying the debt. On the other hand, if you are an investment guru, 3% is probably not too hard to beat. (And that's coming from a person who believes the 10% average return on the stock market is misleading at best).

3) Assuming you put everything into debt repayment, how long will it take you? It's a different prospect to be completely free in, say, 4 years versus 18. If it's a shorter period, I'd be more inclined to do it and be FREEEEE! If it's a longer term, I might be more inclined to hedge my bets.

4) How important is it to you to be debt free? Clearly it's of at least some importance to you or you wouldn't even be thinking about it, but just explore it a bit more. If it's very motivating, I think it's a good move, even at your low rates. Why? Because you will do it faster. Because the rewards are more when you're done (that is, you will really enjoy your security). You will stay motivated and not just drift away and experience Lifestyle Creep. If it's just more of a "wouldn't it be nice if" kind of thing, you might consider investing it instead.

post #11 of 68

You know what, I'm an eejit anyway.

 

DR says: Put 15% of your income into retirement.

Then, are you going to save for your kids' college? If yes, do that too.

Then whatever (if anything) is left over goes to the mortgage.

That's what he says, and I can't argue with it. shrug.gif

 

Supposedly I am a Dave Ramsey guru (odd, isn't it? I just read his book once three years ago, shouldn't make me a guru, but I seem to remember his guidelines so I post on these threads answering such questions) but for some reason the way the question was phrased got me off into a sideline.

post #12 of 68

Sheepish.gif One more post and I'm DONE!!! I swear!!!

 

BACK THE TRUCK UP.

 

1) Do you have a $1000 emergency fund? If no, start here. If yes...

2) Pay off your car note. Then...

3) Save 3-6 months expenses in some very liquid form.

4) Put 15% income into retirement.

5) Save for kiddo's college but I can't tell you how much because I'm not doing it. Thbbbb.

6) Pay off the LOC and mortgage.

7) Enjoy.

post #13 of 68
Quote:
Originally Posted by laohaire View Post

nstewart, of course you're welcome!

 

The question you've asked about debt versus investing does not have an easy, straightforward answer. The most common answer you will receive is that you should invest the money and forget about repaying that debt on an accelerated schedule, especially given the low interest rates you have.

 

Personally, I think it's more complicated than that, but even with my anti-debt views I can't say that it's a no-brainer. I am about to begin a long campaign of paying off my mortgage despite all the advice against it, and I feel like making a 5.625% "return" (that's my mortgage rate) is a solid choice.  I agree, that is a good return.  But 3%, I don't know.  I can probably do better investing than the 3% (following the principles in "The Intelligent Investor" which I am in the process of reading). But 3% - I am not completely sure. So instead of giving you any advice, let me just throw out some questions for you to consider:

 

1) If you don't aggressively repay your debt, will you indeed invest that extra money? As opposed to increasing your lifestyle, which is so easy to do? Whatever you choose will be a brilliant move, as long as it's not just expanding your lifestyle and wondering where the money went.  DH and I are pretty committed to getting "smarter" about money, and my plan is to make either/both automatic so that I don't think about it at all.

2) Do you feel comfortable that you will be almost guaranteed at least a 3.whatever percent return on your investments? For example, if you've made crappy investment decisions in the past (hey, a lot of people have), you might prefer to stick with an absolute guaranteed 3% "return" via repaying the debt. On the other hand, if you are an investment guru, 3% is probably not too hard to beat. (And that's coming from a person who believes the 10% average return on the stock market is misleading at best). I think over a LOONNG term around 6% return is reasonable.  I haven't done much investing before, but I am in the process of doing some learning and am committed to continuing to learn about wise, long term investing and not "speculating" or "trading".

3) Assuming you put everything into debt repayment, how long will it take you? It's a different prospect to be completely free in, say, 4 years versus 18. If it's a shorter period, I'd be more inclined to do it and be FREEEEE! If it's a longer term, I might be more inclined to hedge my bets.  While I don't think 4 years would be do-able 10-12 likely would be unless I put every extra penny towards debt repayment (every yearly bonus, every tax refund, etc.) then maybe 8-10.

4) How important is it to you to be debt free? Clearly it's of at least some importance to you or you wouldn't even be thinking about it, but just explore it a bit more. If it's very motivating, I think it's a good move, even at your low rates. Why? Because you will do it faster. Because the rewards are more when you're done (that is, you will really enjoy your security). You will stay motivated and not just drift away and experience Lifestyle Creep. If it's just more of a "wouldn't it be nice if" kind of thing, you might consider investing it instead. For me, being debt free is all about security.  I know I can make all my payments now, but what if I or DH lost our jobs or couldn't work?  What if interest rates go up?  Money for me generally is about security and being debt free would just make me feel "safe".



 

post #14 of 68
Quote:
Originally Posted by laohaire View Post

 

Sheepish.gif One more post and I'm DONE!!! I swear!!!

 

BACK THE TRUCK UP.

 

1) Do you have a $1000 emergency fund? If no, start here. If yes... We have a couple thousand bucks in a savings account that we've used for emergencies in the past, but it isn't a dedicated "Emergency Fund" (although to be honest we don't use it for anything else, so maybe the answer is "yes"??)

2) Pay off your car note. Then... It's on the LOC, so 3%, but I could committ to getting that "amount" payed off first before anything else

3) Save 3-6 months expenses in some very liquid form. This would give me peace of mind for sure!  Given the low interest rate on the car I might be tempted to do this first just for the peace of mind.

4) Put 15% income into retirement.

5) Save for kiddo's college but I can't tell you how much because I'm not doing it. Thbbbb. My parents gave DS a gift of some $$ to be put in an RESP, so at least I do have that set up for him and the money in the RESP so even if I can't contribute for a few years he has a starting point that will grow over time.

6) Pay off the LOC and mortgage.

7) Enjoy.



Thanks for the advice!!  Being on the "2012 in 2012" thread has made me really accountable and motivated to de-clutter so I'm hopeful that this thread will likewise motivate me to take some action.  Next steps: (1) Build a budget with DH and make debt repayment happen automatically; (2) get caught up and file tax returns for the last 4 years (thank goodness we have a ton of tuition credits and I was on mat leave for a full year, so hopefully we don't OWE money!) uhoh3.gif

 

post #15 of 68

Thanks for the advice about student teaching.  I talked to DH about it and he said he is not required to sign anything, but working is strongly discouraged.  blech.  He's still going to try and work the three days, but the fact is that his employer may not be down with it anyway, so we'll see. 

 

It does make me rethink doubling my car payments for the rest of the year, though. I think I will just sock it away in savings after all.  It could be a very tumultuous year for us so I think I'd feel better having a bigger safety net rather than less time left on my car loan.  I mean, I really think we'll be fine even if he has to quit working, as we should have at LEAST $6000-$7000 stocked away and we will be getting another tax return in the middle of his student teaching.   Our monthly costs right now are about $1200, but I could defer my student loans if we absolutely had to, and could also cancel our cell phones, and I'm sure I could get our food costs down as well. I am also planning to can more than I have ever before and squirrel, squirrel, squirrel food away in the mean time.  We'll see!

 

Thanks for the help, ladies!

 

ETA:  DH will be teaching secondary English/Creative Writing.  He's really excited about it.  He's already had unsolicited  offers of an internship, but unfortunately we can't  afford for him to take the position.  We're hoping there's a job for him at the end of all this, but it seems that education is still pretty volatile in general.  All we can do is prepare in the meantime, I guess.

post #16 of 68

nstewart, since you were talking about RRSP, I figure you are in Canada.  My DH is Canadian and he has some money socked away in an RRSP even though he has immigrated to the U.S.  We stopped contributing to the RRSP because he moved.  For now we are just leaving it alone because we don't know if we will retire in Canada or not, but I digress.  I agree with laohaire on her previous posts.  I am going to expand on the budget and debt snowball.  Once you have a budget that works for you, use a spread sheet to see how long it will really take to pay off your $100K debt.  DH and I have $82K debt and it is going to take 5 years of a debt snowball to get it paid off.  Freeing up those monthly payments that are currently going to your line of credit gives you opportunity to sock away the 3-6 months savings and then put money in retirement.  You want to make sure that all your eggs aren't in one basket for retirement - either through your job or your RRSPs.  What other financial instruments are available to you in Canada to put your retirement money into?  Does your employer match any contributions you make to your RRSPs?  Since DH and I are at the start of our debt snowball, I am only contributing $10 to my retirement plan so that my employer will contribute to it as well.  Once my debt snowball is done in 2017 and DH and I have 3-6 months savings, then we will look at mutual funds and other financial instruments to put our retirement money into.

post #17 of 68

Can I join?

 

I'm currently in BS2 and am going after our citicard with a balance of a little over 10k. We just paid off our minivan last month so this month is our first month with a sizeable snowball. I'm ready to get moving and dh is more than ready to get rid of this debt. DH is paid salary plus commission. The commission varies a lot, it just depends on when customers pay. We can live comfortably on just his salary and the plan is to put all of the commission towards debt. We don't find out what the monthly commission check looks like until the Tuesday before the check arrives and that is always mid month. After looking over everything I should be making a substantial payment this month (over 1k). Hoping this thread gives me the motivation to not fall off the wagon again. 

 

post #18 of 68

Do any of you guys have tips to get DH on board? I'm saving and scrimping but he makes more $$ than I do, and I feel like I'm not getting anywhere. :(

post #19 of 68

Harp about it for five years!  Lol!  DH is still only kind of on board.  He knows its someting we need to do, but just has a hard time committing to it. 

post #20 of 68

I'd like to join in too!  Several years ago we successfully used Dave's Baby steps to get out of debt but shortly thereafter my DH's hours were cut, we ran the CC's up again, and we lost our house. We're in a different house now (with a much lower payment), DH's work has picked up, and we're in great shape to start chipping away at the debt once again. I'd love to be able to actually get to the "put 3-6mos savings away" point this time around! LOL! I'm going to take the next couple of days to look at our budget and discuss with DH and I'll be back to lay out our plan so I can get your opinions. :)

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