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Wow, all this advice is awesome (and free!). Thanks everyone for taking the time.
I am seeing things differently now. Really, I guess I could pay off both credit cards and still have $3700 in the emergency fund.
Then I could take the $50 currently going toward baby 529 / 401K and put it toward the other debt.
Better to put that monthly $50 toward the student loan, than toward principal on the mortgage?
We don't itemize deductions (at least, TurboTax tells us to take the standard deduction every year).
Believe me, we are eagle-eyed about expenses. Beans = delicious.
I recommend throwing all the extra money at the credit cards first. Mainly because you can't guarantee that you will get a 0% balance transfer in the future. Also, if you pay off the cards quickly, you won't need to even worry about doing a balance transfer and paying a fee. It will make sense to pay the smallest balances first, because you will be eliminating the minimum payment, which increases your monthly cash flow. This helps to pay down the next balance, and also give you more cash flow in a time of struggle. If you lose your job, the student loans can go into deferment if necessary. Not so much the case with the credit cards.
Also forgot to mention, you can deduct student loan interest, even if you don't itemize your deductions. It shouldn't keep you from wanting to pay them off, but can help convince you to pay off the riskier credit card debt first.
My rational is that the money was spent and as the OP said, he is not using the CC anymore, so the debt will not increase. I did not say put more debt on the cards.
As far as the part in bold, why would I not be able to make minimum payments on the cards if I have my savings? As far as passing the buck, you know, if I lost my job for a long time, I would call them up and tell them I'm not paying them anymore and they can either work with me, or have it go to collections. The way things are these days with greedy corporations, credit card companies making it a point to take people for everything they have, medical expenses inflated beyong belief, unemployment where it is and no body giving a crap for the "middle class," yes I have no shame in it now. With so many people getting hand outs on my dime, I can get something back once in a while. It might not be the most popular view, but I'm fed up with always doing the right/moral thing when no one else seems to care.
I understand your frustration with what majority of society does things one way or another. But I can assure you that not everyone is like that. It's cutting against that traditional thought that will bring true reward and success.
I understand your frustration with what majority of society does things one way or another. But I can assure you that not everyone is like that. It's cutting against that traditional thought that will bring true reward and success.
I agree with you and I hope to never be in that situation. However, if by no fault of your own you end up jobless or sick, what are you gonna do?
I think you are actually not in a bad place, financially. You have a decent start on an efund, you've saved some for retirement, and your interest rates are low.
Personally, given the details you have given, I would keep doing what you have been doing. You haven't said what you have left over each month, but have indicated it isn't much, so with your existing income, I'd leave your splits where they are. Keep putting some in savings ($13k is a good start, but for a single income household with a child, you are right, $25k would be much better), save some for retirement (just because you intend to work forever doesn't mean it will necessarily happen that way, which you have acknowledged), and put the rest toward your debts. Honestly, it doesn't even really matter which ones, especially since you aren't talking much extra each month. All the interest rates are low, and the interest on the mortgage and the student loans get a write off. Personally, because of the risk of the credit card rates rising, and the need to transfer to new cards, I'd probably focus on paying those off first, followed by the student loans, and then whatever is left on the mortgage at that point.
If that were all your income, you'd be in a rough place, because paying off those debts could take decades. But you have indicated that you expect your income will soon be increasing drastically, so the question is where to put the extra $15k-$35k per year (estimated after taxes). I'd just accelerate what I said above. If you have an extra $15k next year, I'd put half toward getting your efund closer to where it should be, and the other half toward credit card debt. The next year, finish paying off the credit cards and then throw the rest at the higher interest student loan. If you have $35k extra 3 years from now, as you've indicated you think you might, you should be able to get close to paying off your student loans completely, and being debt free (outside of the mortgage) in just 3 years, with a decent efund, and some retirement savings. So then in year 4, pay off any remaining balance (there shouldn't be much left, if any, when combined with normal monthly payments over the 3 years), and get your efund where you want it. At that point, whether you throw the extra at the mortgage, or at retirement funds, or saving for a replacement vehicle, is up to you. I'd probably do some of each.
Even if you can only come up with an extra $15k/year, the same thing is true, just on a slightly longer scale.
So in short, stop worrying about whether to put $25 against the 401k or the debts or the efund. All 3 are important, so the money isn't being wasted, and if you truly are going to have $15k+/year extra coming in, the balances will drop quickly. You've got just over $60k in non-mortgage debt, which is a lot, but if you really have that $15k+ in extra funds each year, that only equates to 4 years of payments.
I agree with you and I hope to never be in that situation. However, if by no fault of your own you end up jobless or sick, what are you gonna do?
Unfortunately, it's a gamble you take when you go into debt to begin with. I have taken the gamble, and while my credit cards are paid off and cancelled, I still have $30k in student loans to pay off. I am throwing everything at them to have them paid off early next year. I have a small emergency fund at the moment, and it used to be bigger. I used some of it to pay down the loans. The small efund amount scares me into paying that much more on my student loans. I am currently paying $3500 a month on the loans, which would have seemed impossible to me before. But when you wake up one day and realize that you have been living on the edge all your life, it fuels that desire to throw everything at them.
Once the student loans are gone, I will reward myself by majorly beefing up the efund. I will then increase my retirement savings to at least 20% of my income, then rapidly pay off my mortgage. I plan to be completely debt free (including house) before age 30. Of course, anything could happen before I get a chance to beef up my efund. But again, it's a risk I took when I borrowed the money to begin with.
[quote=shaner23;25193500]Unfortunately, it's a gamble you take when you go into debt to begin with. I have taken the gamble, and while my credit cards are paid off and cancelled, I still have $30k in student loans to pay off. I am throwing everything at them to have them paid off early next year. I have a small emergency fund at the moment, and it used to be bigger. I used some of it to pay down the loans. The small efund amount scares me into paying that much more on my student loans. I am currently paying $3500 a month on the loans, which would have seemed impossible to me before. But when you wake up one day and realize that you have been living on the edge all your life, it fuels that desire to throw everything at them.
Once the student loans are gone, I will reward myself by majorly beefing up the efund. I will then increase my retirement savings to at least 20% of my income, then rapidly pay off my mortgage. I plan to be completely debt free (including house) before age 30. Of course, anything could happen before I get a chance to beef up my efund. But again, it's a risk I took when I borrowed the money to begin with.[/quote]
Wow, great! Right now our hinderance is the one income. My GF makes some, but all of it goes to bills now. I'm afraid of putting my extra $$ to bills because we're uncertain with her job situation right now. So, I'm just stashing it now. I could pay off the car today, but I feel better having that cash.
The bolded part is what frustrates me. Everytime we get close on something, something else happens, medical, car expense etc. It's so annoying and frustrating that I've stopped expecting anything to go as we plan. Right now the balances are decreasing, not increasing, so I'm looking at that with optimism, about all I can do right now. Once she starts making the money she should be, then we'll start killing off those balances one by one.
Wow, great! Right now our hinderance is the one income. My GF makes some, but all of it goes to bills now. I'm afraid of putting my extra $$ to bills because we're uncertain with her job situation right now. So, I'm just stashing it now. I could pay off the car today, but I feel better having that cash.
The bolded part is what frustrates me. Everytime we get close on something, something else happens, medical, car expense etc. It's so annoying and frustrating that I've stopped expecting anything to go as we plan. Right now the balances are decreasing, not increasing, so I'm looking at that with optimism, about all I can do right now. Once she starts making the money she should be, then we'll start killing off those balances one by one.
Best of luck trying to knock them out. My only suggestion would be to try and find more income (which you're working on), and to find more ways you can cut. As long as the balances are going down, you are at least moving in the right direction. Many people can't say the same.
Can I ask a serious question for the savers and financially-wise in this thread:
What do you people do to fulfill your lives outside of work?
I ask because while your advice is sage, the picture I get of such strict financial discipline which is advised here (which I approve of) is that you are putting your every last cent into paying off debt and then investing/saving.
I get that... but do y'all live so modestly that you do nothing to make life worth living in the meantime?
I think what is hard for most people is striking the balance between saving for the future and enjoying life now, and doing both within one's financial means.
Can I ask a serious question for the savers and financially-wise in this thread:
What do you people do to fulfill your lives outside of work?
I ask because while your advice is sage, the picture I get of such strict financial discipline which is advised here (which I approve of) is that you are putting your every last cent into paying off debt and then investing/saving.
I get that... but do y'all live so modestly that you do nothing to make life worth living in the meantime?
I think what is hard for most people is striking the balance between saving for the future and enjoying life now, and doing both within one's financial means.
It really depends on how much you make. It's much easier to save a huge chunk of money on a 100k income than a 60k one. I have scaled back my frugality a bit now that we have paid off a ton of debt.
It also depends on what you like to do for fun. Some people like to only do things that cost money. Some people are just as happy going for a hike or camping.
Some say that if you have credit card debt you have no right to put money in 401K. But if you get a match you are a fool if you don't invest up to the match line. Next priority should be emergency fund. If you pay down credit card debt, don't forget they might lower your credit limit, so don't count on being able to use it during an emergency.
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