Month 53: Why 1984 won’t be like 1984

It is now 1984. It appears IBM wants it all. Apple is perceived to be the only hope to offer IBM a run for its money. Dealers, initially welcoming IBM with open arms, now fear an IBM-dominated and controlled future. They are increasingly and desperately turning back to Apple as the only force that can ensure their future freedom.

Oh wait… Not that 1984, but $1,984. As in my student loan balance. That’s about what my computer, a MacBook Pro cost when I purchased it in early 2014. This is a moment to celebrate. Why? For the first time ever my student loan is below $2,000. Progress my friends, it’s all about progress.

What about Retirement? $18,223 in my 401k and $362 in my Betterment Roth IRA. So $18,585 total. Credit cards? Credit card balance is around $1400. Each paycheck I make a $700-800 payment toward that with plans to increase once student loans are gone.

Now what about the car???  Current payoff is $29,169.81 at 1.9%. That’s down from $1997.39 from $31,167.20. I have another payment coming up in a week which will drop it below $29k.

Not being content with where I am today, I started to do a little bit of job searching. Interviewed with a local employment agency for a contract gig. The position sounded interesting and I think would be a step forward in my career. However I don’t think they would be able to match my benefits aside from medical and dental. 160 hours of vacation, essentially unlimited sick time, paid holidays, 5% retirement matching… As a contractor, you need to plan for all of those things.

It’s important to look at the big picture when making big moves like working for another company. Can’t afford to leave money on the table. I’ve been following a little bit of Alex Becker‘s work, read his book 10 Pillars of Wealth where he talks a lot about working for yourself and the benefits of a cash flow business. I also am in the middle of Scott Alan Turner‘s 99 Minute Millionaire ebook along with The Procrastinator’s Handbook – Mastering the Art of Doing It Now by Rita Emmett.

My last point and this is a big one. Don’t stop. Live is a marathon, not a sprint. Just because you had a setback or 5 doesn’t mean you let that break you and give up. From 2009-2011 I went a year without a regular FT job, not qualifying for unemployment and over $42k in student loan debt. I was down, depressed and unsure my future. Today I am on more solid footing. Not balling by any means but I’m way better off than those dark days.

Applying my own advice to different areas of my life, learning from experts to save time, minimize frustration and see results.Hope to share more with you on that soon.

Month 52 – Navient $2,479, Retirement – $17,912

Sorry if these updates are getting boring. I’m making progress still. Down to $2,479 from $15,402 just one year ago and $2,970 one month ago.

month52updateMy retirement is steadily growing. 401k is finally vested after 3 years and up to $17,654. My Betterment account is up to $258.

Other than that I did get a raise even though it was less than I was hoping for. Still need to keep looking for more jobs but not trying to get crazy stressed about that. Kind of question whether to put so much effort into a search when it’s not mandatory.

Speaking to the big elephant in the room. This blog… is called Debt Free 32 – One Man’s Mission to get rid of $45159.35 of debt. The 32 part is because I planned do to this by age of 32. Today is my birthday… I’m 33 now, not 32. A couple months short of my goal, but still making great progress since the start of this blog. Over $45k in payments. Under $2,500 left on the student loan. Worst case this sucker will be gone by December. Best case – October. Then I can celebrate and reflect.

Wrong Path?

This post I decided to dedicate to the topic of people in my life making poor financial decisions.

Situation 1

One of my friends recently moved from out of state to the DFW area. She has been looking for work for the past few months. Thanks to her connections, she will likely be getting a well paying job within the next few months. The couple took out a 401(k) loan that they plan to pay back over the next few months. Without the 401(k) money as a resource they would be on seriously shaky financial ground. Flash forward to today, they just moved into a luxury apartment for the rent is $1300 dollars per month (my apt is a comparable size, in a slightly less desirable location but still 5 minutes away and $773). Eventually they plan on purchasing a house, but today she doesn’t have a job and for all intents and purposes he doesn’t have a job.

A few years ago they owned a home in another state that went through a short sale because of the downturn in the real estate market. For as long as I’ve known them the husband has not had a full-time job to help support his wife, instead he chose to pursue his passion for theology which doesn’t really pay well and he earns nothing from. I think most people would have a come to Jesus moment where they would work a job that is not ideal but helps their family hit their financial goals. This has not been the case.

The wife is also providing financial assistance to her parents and brother. My guess is this has amounted to over $100k over the past decade. It’s very noble that she’s cares so much about her family, but I don’t think she is concerned enough about herself.

It’s not my place to cast judgment on my friends, but I wish I was able to impart wisdom on them. They haven’t realized it now but I think they’re setting themselves up for financial failure in the long run. looking at the power of compounding, the importance of having a sizable nest egg and not living beyond your means, They’re failing on multiple counts. On the bright side I think she will be back on target in the next 2-3 years. I have tried to help the husband with finding a job but haven’t been so successful at that. He doesn’t seem very motivated and I can’t force someone to be driven. Sure I believe in the power of faith but also that god allows us to help ourselves.

Situation 2

One of my other friends recently confided in me she has over $120,000 dollars in student loan debt. At what interest rates you might ask? Between 5-9%. Currently she is on the income-based repayment plan, commonly referred to as IBR. She quit her stressful corporate job and instead works as a babysitter. Although she’s well paid for what she does, she’s making minimum payments on her loans while interest accrues. Combined she and her husband grossed over $100k last year. Gross vs net though, two very different things.

Let’s look at a compounding. Starting out with a $120k balance and paying $300/mo. I don’t know exactly how much she pays but it’s probably less than that. I used this calculator so no idea how accurate the numbers really are.
Year 1 : $127,505
Year 2 : $135,713
Year 3 : $144,692
Year 4 : $154,512
Year 5 : $165,254
Year 6 : $177,004
Year 7 : $189,856
Year 8 : $203,914
Year 9 : $219,290
Year 10 : $236,109

Luckily in her case she is set to inherit 2 houses in the US and another in another country. Down to road she could sell those and be student free. Not everyone has this luxury and what does that leave her with? An underfunded retirement plan, no real estate and probably some hefty tax bills. She’s given up hope and is just paying what she can for now.

My father died with serious debt. Over $50k as I recall, mostly from medical expenses. I wasn’t blessed with a silver spoon in my mouth. I’m not perfect. I love my friends and family and wish the best for them. Seeing my father poor from the age of 2 up until I was 20 left a lasting impression on me. He didn’t have any much control over his situation, due to his renal failure. As long as I am able to I’m gonna fight damn hard to learn from all of this. To do otherwise would just be plain ignorant Life is more than money, but a few poor decisions can haunt us for a lifetime.

Getting Out Of Debt – Automation

One of the videos that really inspired me.  It’s kind of like massive weight loss, no one thinks you can do it until after you have done it.  I’m still wondering how the pieces are going to come together with my salary being what it is.  There are a lot of options here, but regardless I’m going to put a huge dent in this baby.

Breaking the math down without including interest…

250.00 a year x 52 weeks = 13000
My tax return has historically been above 1000/yr, so add another $20 each week to that.

14000*3=42000. That’s not including any bonuses I get or raises along the way.  A couple grand short of the goal, but surprisingly close.  It’s a high percentage of my income, which I may have to adjust at some point.  Going with it for now.  I’m running lean next few months, with a minimal emergency fund, student loan payments on-hold until my credit card is 0 again.  Also saving for this June townhouse downpayment ($400 of $2000 saved so far), $72 in my other bank accounts until I’m paid.  I have over $10k of available credit if I needed to access it, but to me that isn’t even an option.  It’s good to see there is light at the end of the tunnel.  I will post less over the next few days than I have been, but like anything else this is still shiny and new starting out.