Money Matters
123bedebtfree
member
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
DEBT!
Hi, i was just browsing the nest and decided to sign up! my name is Ashley and I live in South Carolina! married with two kids! I have been lurking today and decided to ask a question. How many debts do you all have and how soon will they be paid off? are you all using the DR debt snowball plan? how do you feel about having debt in general?
rright now hunbby and i have personal loan, mortgage, and car loan. we make good money and we have had some life happens moments recently and was thinking about getting another loan just to build the bank account back up just because i am inpatient. Then again, i dont want to create anymore debt! what would you all do?
rright now hunbby and i have personal loan, mortgage, and car loan. we make good money and we have had some life happens moments recently and was thinking about getting another loan just to build the bank account back up just because i am inpatient. Then again, i dont want to create anymore debt! what would you all do?
Re: DEBT!
I do not understand what you mean about taking a loan to build your savings - you'll just be paying more in interest for the psychological satisfaction of seeing cash in the bank? Life happens and that's why you have the savings accounts - it's a cycle of saving, "oh crap I can't believe that happened and now that account is drained" and then saving back up again. I would only take a loan if you had a second emergency right after one that drained your reserves and you were desperate.
We actually just finished paying off a significant amount of student loans this past month ($39,500). We still have a car loan and our mortgage. However, we refinanced to a 20 year mortgage to save on having a lower interest rate and faster pay off.
I track our debt using ReadyforZero.com. It is great to connect accounts, see balances, track payments and explore different payback options.
I don't know what you mean by taking out a loan to build up your savings, but please do not take out debt to build savings. That is not a good idea at all because you will have to pay that back.
I would suggest starting small, build up an emergency savings account of at least $1,000 and then build to 3-6 months of expenses.
I don't understand what you're talking about here...and if you're serious about Dave Ramsey and the baby steps then this is completely antithetical to that. No, you should NOT take out another loan in order to feel like you have "more". You don't have more money, you're just more in DEBT.
Do you have an emergency fund? Start there, Dave recommends $1,000 and then get started on snowballing your debt. Smallest amount to largest.
Our only debt right now is our mortgage and one car loan for the used vehicle we just purchased to replace my husbands old & unsafe SUV. Our first payment is due in the middle of October and we plan on paying more than the minimum payment from the start to get it paid off early.
Please don't take out a loan so you have money in the bank! You may have the money in a bank account but that money (plus interest) will be getting sent right back to the bank to pay off the loan.
When you say "life happens" are you talking about smallish expenses like replacing tires or a small appliance or are you talking about major expenses like replacing the furnace or roof?
Most of us on this board are big fans of having an emergency fund available, even if it is just $1,000 to start. This gives us peace of mind that if an unexpected expense comes up we have some money available to take care of it without getting into debt or stressing about it.
If you are comfortable doing so, if you post your monthly income and your current expenses/budget we can help you find ways where you can re-prioritize your money so you can feel more comfortable about your finances and a plan for repaying your debt.
We live, eat, and breathe Dave Ramsey's principals. We're on BS7 and have zero debt. It's amazing! We've also lead the Financial Peace University in our church and are gearing up to offer it again this winter.
So of course I'm going to say yes to doing his plan. If you haven't already, look to see if there is a FPU class in your area. I would recommend that first. If there is not, then buy his book Total Money Makeover. That gives you step by step instructions on how to do his plan. I also always recommend to listen to his radio show or podcasts. You can do so online or through the app.
The plan is very aggressive and that is most definitely debateable. However, it is a solid plan and forces you to have focused intensity at 1 goal at a time. This helped keep us moving forward and being aggressive with our debt because we would get little wins along the way.
TTC since 1/13 DX:PCOS 5/13 (long, anovulatory cycles)
Clomid 50mg 9/13 = BFP! EDD 6/7/14 M/C 5w6d Found 11/4/13
1/14 PCOS / Gluten Free Diet to hopefully regulate my system.
Chemical Pregnancy 03/14
Surprise BFP 6/14, Beta #1: 126 Beta #2: 340 Stick baby, stick! EDD 2/17/15
Riley Elaine born 2/16/15
TTC 2.0 6/15
Chemical Pregnancy 9/15
Chemical Pregnancy 6/16
BFP 9/16 EDD 6/3/17
Beta #1: 145 Beta #2: 376 Beta #3: 2,225 Beta #4: 4,548
www.5yearstonever.blogspot.com
Welcome, Ashley! I'm Jenny, live in New Orleans, and am married with no kids (and no plans for such!).
My only debt is two mortgages and my Home Equity Line of Credit (HELOC). I also have balances on three credit cards, but they are all 0% interest. I'll have them paid off before the 0% drops off.
I'm a little unusual in that I invest in real estate (rentals) to increase my monthly income. As such, I am not debt adverse at all, IF I am leveraging it to increase my income and gain a fantastic ROI (Return on Investment).
At this point, I'm focusing on building my rental portfolio to achieve a $5,000/month net cash flow. Once I hit that goal, than I will start paying off some of the mortgages. I continually pay down my HELOC with whatever excess funds I have, but then those are the funds I use for my next deal, and the balance goes up again.
Like the other PPs have said, don't take out a personal loan to bulk up your savings. Even for people with good credit, personal loan interest rates are typically high.
If I were in your shoes, this would be my game plan. Though I'm not saying this is the only right answer:
If your current savings/emergency fund is so low it is making you all nervous, I'd suggest dropping down to minimum payments, just for now, on your loans and build your e-fund back up to a comfortable level.
Are you all putting money away for your retirement? Don't pull back on those funds to increase your e-fund. Keep them where they are (for now).
Once you're e-fund is at least at a more comfortable level, then start paying off the personal loan you all currently have first (assuming it is higher interest than the car loan). Then work on the car loan...unless it is a really low interest rate anyway and then I wouldn't bother, unless it bugged me.
Once you are debt-free, except your mortgage, max. out your retirement contributions. If you are at a place where you are already doing that, then start paying the mortgage principal down.
Caveat, I'm coming from a place where I could care less about paying off the mortgage for my personal residence. That is the cheapest money anyone will ever find. Generally speaking, you can take that same money and do much better with it in a relatively safe investment, like bonds/mutual funds/blue chip stocks.
That is why I put it last on the list above. With that said, I think just about everyone should own a paid-off home before they retire. And I could certainly see where there would be a lot of personal satisfaction in paying off one's mortgage. So, while not my cup of tea, there is certainly nothing wrong with paying some extra principal off and/or putting "paying off the mortgage" higher up the ladder.
We also have a mortgage, which I have 0 intention of paying off early because our rate is really good.
No car loans and definitely no credit card debt.
Debt also doesn't bother me, and I do some debt leveraging for our investments now and then.
I'm not much of a DR fan at all - I disagree with him on a lot of things, and I think his strategies are not very good for wealth building. Also, a lot of people seem to have trouble seeing past his brand and actually number crunching using their own figures. All that being said, what you are describing about taking out a loan just to fund a bank account is totally the opposite of what he would recommend, and in this instance I would be in total agreement with him. You are thinking about borrowing money, paying interest, just to have the money sit in a bank account somewhere earning 0.01% interest and losing value at 1-2% per year due to inflation? This doesn't make sense to me at all.
But, do NOT pull out a loan just to build up your savings. As others have mentioned, just work on rebuilding your emergency fund. DR's idea of starting with $1,000 is a good one. Then, once you get there, you can decide on the next goal. I personally think some other gurus' advices about having 6 months saved up is so daunting, especially when you're starting from scratch and trying to pay off debt, so a smaller goal is more achievable. If some emergency pops up that you need cash for and you don't have it, then you can decide then what to do. If at that point, that means putting it on a credit card or getting a loan then, then so be it. But taking out debt just to sit there for a "what if" seems really silly.
To the OP, a few areas where a lot of us find savings without cutting out line items are we look for lower insurance rates (cars, homes, whatever policies you have) for equal coverage, try to negotiate your cable bill down or see if you can get access to the shows you watch for a lower rate (Hulu Plus, Netflix, etc.) and programmable thermostats to save on energy costs.
I'm also a big fan of budgeting and we use a free app called GoodBudget (a virtual envelope system) to help us track our expenses. This really helps us know where our money is going, including into savings/retirement, without overspending because we forgot about a large purchase early in the month.
Please stick around and join in! You will find that we sometimes disagree on topics but it is always with respect of the other person's viewpoint. Some here are big Dave Ramsey fans and some are not, some are totally against all debt and some are good with debt leveraging when you can get a good rate, but at the end of the day we are all here to help each other come up with the best strategy to make the most of your money and decrease debt.
Also, we rarely get the crazy-pants posts like you often see on reddit/personalfinance (though I admit, I read those for entertainment during my lunch break).
H and I tend to save in lump sums here and there through the year. For example, I am paid biweekly and get 2 "extra" pay checks each year. I also get a cell phone reimbursement twice a year that is meant to cover 6 months' worth of bills, and I get mileage reimbursement every 1-2 months when traveling for work. We bank all of those things because they feel like "found" money. We don't actively save each paycheck, but we do transfer anything we haven't spent at the end of the month to savings. This gives us pretty good flexibility when we have a spendier month.
Another thing that helps is sinking funds. If you know you have bills that recur every quarter, 6 months, or annually, divide that payment up into monthly installments and save monthly so that it doesn't blow up your budget when the bill becomes due. H and I do this for everything from life insurance, annual vet bills, Costco membership, dues for professional organizations, and charitable giving for annual fundraisers. During the first year it's not perfect, but after 1 year of this you will always have that money in place.
We also have a separate sinking fund for gifts and another one for clothing, because we noticed those things started blowing up our budget, especially around wedding season and holiday sales. Since moving to sinking funds we find that shopping for gifts and clothes no longer challenge our budget, and we don't feel guilty for spending that money since it is earmarked.
Another way to save is to withhold more in taxes and force a refund each year. I'm not a huge fan of this method because by doing this you are giving the government an interest-free loan. However, if you tend to raid savings accounts, this is a way to send money to a safe place where you literally cannot access it until you file your tax return.
We use the sinking fund to pay for satellite radio (annual expense we are getting ready to cancel), lawn care/landscaping (a few larger payments a year) and a few more random annual expenses like our Costco membership.
Our car insurance has it's own sinking fund combined with a "car maintenance fund".
Sometimes we will cash flow the expense, like a $20 mulch purchase, but I do like having the sinking fund available for those purchases that are too small to have their own line in our budget but sometimes too big to cash flow.
The other thing is that we really only shop for clothes a few times per year, so it usually amounts to hundreds of dollars at a time, especially when we have to buy/replace suits. Our bigger shopping sprees were really straining our cash flow before moving to sinking funds.
For the annual dues sinking fund, we really just use it for large-ticket items. Most things under $100 I cash flow. But anything over $100 gets added to the fund. The reason we finally went to this method is two-fold. First, we have about $3,000/year in board dues/donations that we pay in single lump sums during July-September. That also happens to be when our life insurance premiums are due, and it's right after our car taxes are due. That much money that fast is not something we can easily cash flow. Second, before we did the sinking fund I found I was skipping important things just because they cost $100 and I didn't want to spend the money - vet appointments, eye appointments, going to the dermatologist, etc. Now we don't skip any of them.
I don't have much that I spend on, but I love spending a good chunk of money 2-3 times/year on decorations for the house. It's nice to have that sinking fund so I can let it build and then spend money on a nice painting I like and not feel guilty.
We also use sinking funds for insurance, property taxes, car renewals, as well as the 1/4 of a cow we buy once a year and a whole pig.
I just use a spreadsheet to keep track of it.
TTC since 1/13 DX:PCOS 5/13 (long, anovulatory cycles)
Clomid 50mg 9/13 = BFP! EDD 6/7/14 M/C 5w6d Found 11/4/13
1/14 PCOS / Gluten Free Diet to hopefully regulate my system.
Chemical Pregnancy 03/14
Surprise BFP 6/14, Beta #1: 126 Beta #2: 340 Stick baby, stick! EDD 2/17/15
Riley Elaine born 2/16/15
TTC 2.0 6/15
Chemical Pregnancy 9/15
Chemical Pregnancy 6/16
BFP 9/16 EDD 6/3/17
Beta #1: 145 Beta #2: 376 Beta #3: 2,225 Beta #4: 4,548
www.5yearstonever.blogspot.com
However, I don't see his car modifications as something we should spend money on, and he doesn't see my desire to decorate our home as something we should spend money on. So this is how we both get what we want without it breaking our monthly budget and with there being a cap on the amount spent.
TTC since 1/13 DX:PCOS 5/13 (long, anovulatory cycles)
Clomid 50mg 9/13 = BFP! EDD 6/7/14 M/C 5w6d Found 11/4/13
1/14 PCOS / Gluten Free Diet to hopefully regulate my system.
Chemical Pregnancy 03/14
Surprise BFP 6/14, Beta #1: 126 Beta #2: 340 Stick baby, stick! EDD 2/17/15
Riley Elaine born 2/16/15
TTC 2.0 6/15
Chemical Pregnancy 9/15
Chemical Pregnancy 6/16
BFP 9/16 EDD 6/3/17
Beta #1: 145 Beta #2: 376 Beta #3: 2,225 Beta #4: 4,548
www.5yearstonever.blogspot.com
Haha! As I was reading your first paragraph, but before I got to the second one, I was exactly thinking, "Hmph, well I'm sure Brij thinks all the money you spend on your project cars is a little silly."
It's all about compromise!
Oh yes, 100% stupid to me.
Not going to lie though, I absolutely love having designated money to decorate our house. I go in spurts when I spend it, but when I do I usually spend a good chunk of it. Decorated our new family room last year and it cost me $600. In our regular budget my H would have shit his pants. But because I have that sinking fund he asked me how much it cost, I told him, and he just rolled his eyes and said he hopes I get joy out of it. I sure do buddy.
TTC since 1/13 DX:PCOS 5/13 (long, anovulatory cycles)
Clomid 50mg 9/13 = BFP! EDD 6/7/14 M/C 5w6d Found 11/4/13
1/14 PCOS / Gluten Free Diet to hopefully regulate my system.
Chemical Pregnancy 03/14
Surprise BFP 6/14, Beta #1: 126 Beta #2: 340 Stick baby, stick! EDD 2/17/15
Riley Elaine born 2/16/15
TTC 2.0 6/15
Chemical Pregnancy 9/15
Chemical Pregnancy 6/16
BFP 9/16 EDD 6/3/17
Beta #1: 145 Beta #2: 376 Beta #3: 2,225 Beta #4: 4,548
www.5yearstonever.blogspot.com
Just the other day lightening struck and I couldn't get our garage doors opened. DH finally was able to get mine working but we are still struggling to get his working - He is going to try and fix it this week. We did call Sears yesterday to have a guy come out and look at it but are going to see if DH can fix it first. They had mentioned they have a program for a home warranty for $60/month. with that you pay the $60/month and an additional $60 for the tech to come out and fix any appliance or HVAC issue you are having and that's covered. DH wanted to do it but I'm so dang cheap I said "no way". I would have never thought there'd be a day where I'm cheaper than he is about $$.
Also, there is usually a ton of fine print regarding regular service calls, maintenance and having a lot of paperwork proof that certain things were or were not done.
Byt the time you pay $60 a month for the warranty for a few years you probably could have just paid for the fix to begin with.
And yeah, I had a home warranty on my first house. The heater for the house was in the 30 year old range, and kept breaking. The warranty company covered it, but charged a trip charge every time, I think it was like $75 or something like that. The HVAC guy who kept coming to fix it told me that he had to keep repairing it, and he couldn't replace it under the warranty unless it was absolutely unfixable. It also took them a few days to come out each time, and this was in the winter (thankfully in CA so not THAT cold, but still cold enough to need a heater). So, it still saved money since I'm sure the repairs were costing more than the trip charge, but it was a huge pain, and me and my pets were FREEZING. There was a gas wall heater in the family room so I would use that, and the gas bill was like $400 one month because of it.
Agree with the other PPs about home warranties. I personally have never had one of those policies, but I looked into it and most of what I read about was lengthy waits for service and exorbitant service fees. In fact, a friend/coworker had one and his stove broke.
First visit was for the tech to see "what was wrong". $75 co-pay and took over a week for someone to come out. Tech ordered the part and returned 10 days later to replace it. That was a SECOND $75. For the same problem. $150 and 3 weeks before their stove was fixed.
Also, $60/month is expensive. We could have renewed ours for $450/yr. That's $37/month. We told them where they could shove it and self insure.
Just for reference. If you install it yourself, the opener I just put in costs $244 and it's one of the more expensive ones. You could have 3 of them for $60/month over a year.