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what to do first?
hello. i am always lurking on here and have taken advantage of other people's tips and budget info. happy to say we are credit card debt free! we do however have student loans and car payments and are currently renting and will be for who knows how long. i have decided to go back to school for nursing. husband and i have already planned our budget and are going to live on his salary alone for the next 17 months (length of my program). what i'm more concerned and excited about is what should we pay off or save up for once i'm done school. combined together we will have probably $100,000 in student loan debt and car payments (bad i know....). after college i have determined roughly what i would be making based on avg salaries for my area and friends in the field and what they've told me. we know we want to enjoy life and be debt free, go on vacations, start a family, buy/build a home, etc just not sure which order to do all of this in. we've decided on a baby fund of a certain amount separate from our general savings. the problem is we want to start a family sooner than later but we do not and cannot imagine having that much student loan debt with the addition of a baby. i'm thinking about splitting up my paychecks into quarters and have a little bit go into each category being savings, loans, vacations, and baby fund. or if we should just save for a year and pay off half of the student loan debt and move on from there. i guess i'm just looking for some feedback or opinions of what other people have done or what is considered to be the smart or right thing to do. i know everyone has a different $$$ for what should be in their savings but do you just have 1 large savings that everything is pulled out of like hosue d.p., baby fund, vaca fund, paying down debts, etc. or are you specifically setting up certain $$$ amounts with each category. hopefully this makes sense and TIA!
Re: what to do first?
In general, I regret not starting to pay back my loans, even just $20 a week, while in school. I was dealing well with my CC debt, but my loans are at 6.8% so that would have made a big difference. For savings, in school I didn't put away much except for our wedding (bad, I know). I similarly regret not putting some tiny amount towards my retirement.
Now, we have our e-fund set and fund my Roth IRA, "short term savings" (includes travel and car repair "envelopes") and long-term savings (down payment). In a spendy week, the short-term savings contribution gets cut back. In your case I might make separate accounts for your e-fund and baby fund, but depending in how much time is left on the loans you might consider paying off the cars before starting the baby fund. Would it be feasible to pay your cars off while you're in school?
I am also new here, so I hope it's okay that I'm answering your post. I will tell you what we did, although with your large amount of student loan debt it may not make sense for you. We set up a monthly budget and came up with a total amount of extra money that we could put towards loans and savings (we factored in the minimum payments on loans into our monthly budget). From this, we split it out into different categories: student loans, auto loans, saving for house and general savings (including e-fund). I knew I wanted to put $XX amount into savings each month until I reached a 6 month e-fund, so the remainder went towards our loans (at the time we didn't start saving for a house, but I do recommend that you do this if you can). We personally paid off our student loans first because they had higher interest rates and then the auto loan. The balances of both loans were about the same. Once the auto loan was paid off, we started putting everything into savings.
Since your student loan balance is so high, I would work to pay off your auto loans first. You can always pay extra to both but pay down more aggressively on the auto loan. Remember that student loan debt isn't necessarily considered a "bad" debt.
I have different savings accounts for different things - house improvement savings, vehicle savings, vacation, etc. I think if you know how much money you have allocated to something, you are less likely to spend money you don't have.
Hope this helps somewhat!
my program is 17 months and i'm not planning on working unless my schedule allows for it and its not too tough! so we've budgeted for just his income as the provider. the job outlook currently is pretty good and hopefully stays that way. i really want to pay off all the student loan debt which with pure discipline and my husbands OT (which is never a guarantee) it could be done in 2 years but i've also got baby fever bad haha. paying off our cars is not an option at this point, i've thought about going down to 1 car which would save us a decent amount of money to put towards more savings but with dh schedule working 24 hours and at different stations its not practical. i always struggle too with knowing how much our e-fund should be as everyone has a different opinion and then i know friends who have just a general savings that they pull everything out of but i'm not sure that would work for us. i like seeing the spreadsheets adn budgets and things separated out but then to designate how muchi n each category is a big questions.
part of me wants to pay off student loan debt before a baby or a house but dh thinks as long as we have a plan as to when its paid off with large contributions not just monthly payments we can go ahead with vacations, house, baby, etc. but it just makes me uneasy but i also don't want to put off having a baby too long (just my personal preference)
Everyone feels very different about these priorities, so I'm sure you'll hear a variety of opinions. What works for everyone may not work for you, it depends on your budget bottom line and what you feel comfortable with.
Really what you'll need to do is plan a budget. You do not HAVE to pay of your student debt before having a baby, as long as you can comfortably afford the payments (along with your other expenses). For us, we would not consider TTC before having a 6 month emergency fund plus enough to easily cover the initial costs + medical expenses of having a baby ON TOP of that emergency fund. For us to be able to live the lifestyle we would like to after having kids (I'll be a SAHM), we needed to get rid of the monthly student loan payment, so we got extremely aggressive in paying those off.
The reality is for most (us included) is that you'll have to sacrafice something. If we waited another 5 years to TTC, we could probably do things like vacations, go out to eat, buy nicer cars, replace our hand-me-down furniture, remodel our super old kitchen, etc. However we decided those things were not as important to us as starting a familysooner, so we will sacrafice those things. We probably will not be going on many nice vacations, or throwing big children's birthday parties, have the nicest house on the block, etc. But that's okay. We can't have it ALL at our age, so we decided our priorities. We have the rest of our lives to go on vacations and buy furniture, we don't have the rest of our lives to start a family.
I think this was discussed on a thread recently, but we keep all our emergency fund/savings in one account. Previously when we were saving for a house down payment we did open an separate mutual fund for that, and we might do that in the future if we start aggressively saving towards something else.
And I do need to stress the importance of starting your retirement savings now. When looking at the bottom line and knowing you have to cut things from the budget, it would be easy for retirement contributions to be a "sacrafice". But do not do it. Contributing to your retirement in your 20s or 30s is enormously important, so please add that into your budget.
Our e-fund currently has enough for four months of essential payments if we both lost our jobs at the same time. In reality, of course, we could put our loans in forebearance if that happened, but I did include them in there. We see our e-fund as for MAJOR emergencies only-car repairs and other routine-but-annoying expenses would come from other accounts. Others view it differently.
For now I would add extra to your car payments and SL payments.(bonuses, tax returns etc can help with the savings as well as debt repayment - don't spend them!)
You can still take a vacation - but do it on a more low key level.
Set a line item in your budget for entertainment (includes eating out) as this can easily balloon out of control.
We operate out of several banks with accounts for different purposes (local bank, local credit union and online bank)
For now I would add extra to your car payments and SL payments.(bonuses, tax returns etc can help with the savings as well as debt repayment - don't spend them!)
You can still take a vacation - but do it on a more low key level.
Set a line item in your budget for entertainment (includes eating out) as this can easily balloon out of control.
We operate out of several banks with accounts for different purposes (local bank, local credit union and online bank)