swamp
Community Leader
Don't be a fool. Call me!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,343
|
Post by swamp on Jul 1, 2011 10:30:31 GMT -5
DH and I are both 41 and I want to be debt free by 50.
Here's the plan
Debts:
1. DH's student loan currently owe about $15,000. I pay $1,000 a month minimum, and plan to have it paid off by September 2012. Interest rate is 4.3.
2. DH's truck loan. I have no idea what he owes, but it's about $315 a month for 5 years, and we're about 1.5 years into it and there are about 3.5 years left. Once I pay the student loan off, the money to pay on the student loan will go on the truck loan. Interest rate is 4%.
3. Mortgage. We owe about $177k, 4.5%, about $1600 a month. 15 year loan, 3 years into it. Once the truck is paid, the money will pay down the mortgage.
4. My van: 0% financing on a 6 year loan, so whenever I pay it, I pay it.
We have about $400k in retirement accounts and $50 to $60k in various cash accounts.
The reason I want the house paid off is my kids will be going to college in 12 years, and I want to have a cash flow available and a paid house I can tap into for college expenses. Yes, the kids have college funds.
Thoughts?
|
|
Deleted
Joined: May 14, 2024 21:01:39 GMT -5
Posts: 0
|
Post by Deleted on Jul 1, 2011 10:37:48 GMT -5
What is the life expectancy on the truck and the van? Will you still be driving them in 9 years or do you need to factor future car payments intor your plan?
|
|
swamp
Community Leader
Don't be a fool. Call me!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,343
|
Post by swamp on Jul 1, 2011 10:39:40 GMT -5
What is the life expectancy on the truck and the van? Will you still be driving them in 9 years or do you need to factor future car payments intor your plan? The truck is an '09 Chevy Silverado, and the plan is to keep it at least 10 years, and hope to give it to the kids. The van will probably crap out in a few years because I put about 25k miles a year on it. I will have to factor future car payments in, but we will also probably have the cash to buy one, depends on the interest rates.
|
|
resolution
Junior Associate
Joined: Dec 20, 2010 13:09:56 GMT -5
Posts: 7,001
Mini-Profile Name Color: 305b2b
|
Post by resolution on Jul 1, 2011 11:11:06 GMT -5
Looks like you will be well within your target date if you snowball everything. I am not sure it is a good idea to pay off the house early just to take a home equity loan out in 10 years at what could possibly be a higher rate. How likely are you going to be to take out the home equity loan for college? You may be better off paying off your other debts and then investing the snowball funds. However I have to admit that we are doing the same thing paying our house off earlier than we should.
I think you need a Herbie or something to spice up the thread and get more posts. An 09 Silverado that you are keeping for 10 years just isn't going to cut it.
|
|
|
Post by stl76 on Jul 1, 2011 11:13:15 GMT -5
"I think you need a Herbie or something to spice up the thread and get more posts." Yeah. Who wants to post on a thread where you actually plan to pay off debt? ;D
|
|
phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,409
|
Post by phil5185 on Jul 1, 2011 11:30:07 GMT -5
Thoughts? Yipe! So, to pay off $220,000 of debt in 9 years you plan to pay about $2600/m - ie, $280,000 to service debt over 9 yrs? I would be wanting to add the extra $1000/m to your $450,000 of wealth and grow it to $1,300,000 in 9 yrs. In my world, you don't prepay 4%, 4.3%, 4.5% loans, those are called "keepers".
|
|
stats45
Established Member
Joined: Dec 27, 2010 16:52:12 GMT -5
Posts: 415
|
Post by stats45 on Jul 1, 2011 11:36:49 GMT -5
Why do you need to have such a large amount of cash flow available and home equity for your children's education? Nothing wrong at all with helping, but it seems like you are expecting massive costs.
Do they have their hearts set on particular schools? Why would you assume that they would not receive some merit based assistance to help defer costs?
|
|
skubikky
Senior Member
Joined: Dec 20, 2010 7:37:12 GMT -5
Posts: 3,044
|
Post by skubikky on Jul 1, 2011 11:45:16 GMT -5
Thoughts? Yipe! So, to pay off $220,000 of debt in 9 years you plan to pay about $2600/m - ie, $280,000 to service debt over 9 yrs? I would be wanting to add the extra $1000/m to your $450,000 of wealth and grow it to $1,300,000 in 9 yrs. In my world, you don't prepay 4%, 4.3%, 4.5% loans, those are called "keepers". Swamp...read Phil's advice very carefully. He is absolutely spot on. You can spend the next 12 years building wealth instead of servicing debt with those dollars. Don't squander the opportunity to make that money grow at a greater rate than 4.5%.
|
|
|
Post by Savoir Faire-Demogague in NJ on Jul 1, 2011 11:50:25 GMT -5
The reason I want the house paid off is my kids will be going to college in 12 years, and I want to have a cash flow available and a paid house I can tap into for college expenses. Yes, the kids have college funds.
I agree with Phil also. Instead of pre-paying the mortgage, put the money towards your children's college funds. At the current rate, based on your post, your house will be paid off in just about 12 years anyway, and you should have 10s of thousands in cash/investments.
|
|
Gardening Grandma
Senior Associate
Joined: Dec 20, 2010 13:39:46 GMT -5
Posts: 17,962
|
Post by Gardening Grandma on Jul 1, 2011 12:22:41 GMT -5
Swamp I have to agree with Phil and SF. I'd leave the mortgage as is and pay off everything else.
Here's what I'd suggest: 1) Sept 2012, when the SL is paid off, I'd redirect that $1K either into retirement accounts, or a taxable investment account. 2) Ditto when truck loan is paid off. At this point, you'd be socking away at least $1300/mo. 3) I'd leave this alone. As SF already pointed out, It will be paid offin 12 years anyway (same time the kiddos start college) 4) Same thing for the van. Get it paid off, then sock away whatever yu had been paying on it.
You'll still be debt free in 9 years (12 for the mortgage) and you'll have even more invested.
|
|
skubikky
Senior Member
Joined: Dec 20, 2010 7:37:12 GMT -5
Posts: 3,044
|
Post by skubikky on Jul 1, 2011 12:23:45 GMT -5
Swamp I have to agree with Phil and SF. I'd leave the mortgage as is and pay off everything else. Here's what I'd suggest: 1) Sept 2012, when the SL is paid off, I'd redirect that $1K either into retirement accounts, or a taxable investment account. 2) Ditto when truck loan is paid off. At this point, you'd be socking away at least $1300/mo. 3) I'd leave this alone. As SF already pointed out, It will be paid offin 12 years anyway (same time the kiddos start college) 4) Same thing for the van. Get it paid off, then sock away whatever yu had been paying on it. You'll still be debt free in 9 years (12 for the mortgage) and you'll have even more invested. Well stated
|
|
midjd
Administrator
Your Money Admin
Joined: Dec 18, 2010 14:09:23 GMT -5
Posts: 17,719
|
Post by midjd on Jul 1, 2011 13:17:22 GMT -5
I agree w/Phil, SF, and GG. Debt-free is overrated IMO...I'd rather have $1.3M in assets and $100-200K in debt than $600K in assets and $0 debt.
|
|
Taxman10
Senior Member
Joined: Dec 29, 2010 15:12:43 GMT -5
Posts: 3,455
|
Post by Taxman10 on Jul 1, 2011 13:47:15 GMT -5
If the plan makes you happy, go for it. There is a psychological aspect to paying off a primary residence. To each their own.
|
|
swamp
Community Leader
Don't be a fool. Call me!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,343
|
Post by swamp on Jul 1, 2011 13:50:04 GMT -5
Why do you need to have such a large amount of cash flow available and home equity for your children's education? Nothing wrong at all with helping, but it seems like you are expecting massive costs. Do they have their hearts set on particular schools? Why would you assume that they would not receive some merit based assistance to help defer costs? My kids are 3 and 5, so they only know college as where Andy is going in Toy Story 3. Right now, they want to go where he's going, but they don't know where it is. I expect massive costs because we make pretty good money, and while it would be nice that they get some merit aid (both DH and I got some) I'm not counting on it.
|
|
swamp
Community Leader
Don't be a fool. Call me!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,343
|
Post by swamp on Jul 1, 2011 13:52:47 GMT -5
DH and I are currently maxing out our retirement plans. We could be doing better on the liquid savings. I want to be debt free because I see a certain kind of freedom in not having monthly payments. I don't want to work forever and I don't want to be tied to my business. I would love to go back to prosecuting, but the money isnt' ther.
|
|
Deleted
Joined: May 14, 2024 21:01:39 GMT -5
Posts: 0
|
Post by Deleted on Jul 1, 2011 13:54:05 GMT -5
Tell them Andy is going to 2 years of community college and then a reputable, yet affordable in-state university
|
|
Taxman10
Senior Member
Joined: Dec 29, 2010 15:12:43 GMT -5
Posts: 3,455
|
Post by Taxman10 on Jul 1, 2011 14:04:11 GMT -5
DH and I are currently maxing out our retirement plans. We could be doing better on the liquid savings. I want to be debt free because I see a certain kind of freedom in not having monthly payments. I don't want to work forever and I don't want to be tied to my business. I would love to go back to prosecuting, but the money isnt' ther.
|
|
Taxman10
Senior Member
Joined: Dec 29, 2010 15:12:43 GMT -5
Posts: 3,455
|
Post by Taxman10 on Jul 1, 2011 14:04:27 GMT -5
Tell them Andy is going to 2 years of community college and then a reputable, yet affordable in-state university LOL!!
|
|
swamp
Community Leader
Don't be a fool. Call me!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,343
|
Post by swamp on Jul 1, 2011 14:14:51 GMT -5
Tell them Andy is going to 2 years of community college and then a reputable, yet affordable in-state university I went to a private college for less than it would have cost to do the cc/state college route. I just want to keep my options open. I really think you miss out on some aspects of college by transferring. We'll cross that bridge when we get to it. I just like having options.
|
|
phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,409
|
Post by phil5185 on Jul 1, 2011 14:56:21 GMT -5
Tell them Andy is going to 2 years of community college and then a reputable, yet affordable in-state university CC's are way better than they were only a decade ago - and we are under-utilizing and under-estimating them - too much "keep up the jones" is still involved in the university selection process. DH and I are currently maxing out our retirement plans. Since the invention of retirement plans (only 30 yrs ago) we have a generation that is missing a 'taxable family wealth account' ie, a non-retirement account (& isn't tied to age 59 1/2). So people tend to only fund the 401k/IRA and check the box.
|
|
Deleted
Joined: May 14, 2024 21:01:39 GMT -5
Posts: 0
|
Post by Deleted on Jul 1, 2011 15:00:29 GMT -5
Why pay extra to the student loans and van before the house? The mortgage is the highest rate. Why not cut down to the minimum to the SL and start paying extra to the mortgage.
|
|
midjd
Administrator
Your Money Admin
Joined: Dec 18, 2010 14:09:23 GMT -5
Posts: 17,719
|
Post by midjd on Jul 1, 2011 15:02:29 GMT -5
This does beg the question, what are college costs going to look like in another decade? I'd have to think that the current trend of 2-5% tuition increases per year can't hold up, but who knows. I suspect the 'bubble' will pop soon, though... or at least when tens of thousands of people start having their loans forgiven under the CCRAA around 2020...
|
|
Deleted
Joined: May 14, 2024 21:01:39 GMT -5
Posts: 0
|
Post by Deleted on Jul 1, 2011 15:04:51 GMT -5
This does beg the question, what are college costs going to look like in another decade? I'd have to think that the current trend of 2-5% tuition increases per year can't hold up, but who knows. I suspect the 'bubble' will pop soon, though... or at least when tens of thousands of people start having their loans forgiven under the CCRAA around 2020... 2-5% is private school, public are raising about 8-10% a year.
|
|
zibazinski
Community Leader
Joined: Dec 24, 2010 16:12:50 GMT -5
Posts: 47,869
|
Post by zibazinski on Jul 1, 2011 15:08:46 GMT -5
Don't underestimate the idea that you may be living in a state that offers free or reduced tiution for good grades. I have a girlfriend who wanted her kids to go to college but couldn't begin to afford it. I don't care how much financial aid you get, it is never enough, and she was barely making ends meet as it was. I told her about Florida and she moved to a 2 bedroom apartment with her 2 boys and her girl in a college town right before daughter's senior year. She's a respiratory therapist so she made okay money but 3 kids..... And yes, before anybody slams, she married a loser who left her preggers with the 3rd baby. EVERYONE else knew he was a loser except for her. Typical. You have to attend an entire year before college starts and do 200 hours of "volunteering" to qualify as well as have the gpa. First child goes to UF, the 2 boys go to Santa Fe CC and then transferred to UF. She now has 3 college grads who have no school loans and awesome degrees from an awesome University.
|
|
phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,409
|
Post by phil5185 on Jul 1, 2011 15:33:39 GMT -5
en.wikipedia.org/wiki/File:Catchthegirl.JPGswamp, your avatar reminds me of the Catchthegirl game in Kazakhstan - the girl has the whip in that game. The national $50 coin has that game picture embossed on one side.
|
|
tskeeter
Junior Associate
Joined: Mar 20, 2011 19:37:45 GMT -5
Posts: 6,831
|
Post by tskeeter on Jul 1, 2011 15:48:02 GMT -5
Putting on my "Phil" hat. I wouldn't prepay loans with interest rates less than 5% - 6%. I believe that we have a fairly long period of high inflation in our future. The inflation will push up the return on investments. If you pay off 4.3% loans now, you may be passing up the opportunity to earn 15% - 20% with that money in a few years. (I remember money market accounts paying 17% during the mid - late 70's.)
While I understand the desire to be debt free, these are financial decisions, not emotional decisions. Make smart financial decisions.
As long as you mentioned retirement funds, I don't think you're well ahead of the curve for your age. Especially considering that you've got many years of college expenses in your future. I'd consider squirreling away more in retirement funds now so I could back off on the retirement savings if I needed to during the kids college years.
I'm no expert on financing college educations, but I think I remember reading that retirement funds are excluded from the calculations that determine how much support a family can provide to students. May be something to consider if you do not want to do things that make the kids ineligible for financial aid.
|
|
swamp
Community Leader
Don't be a fool. Call me!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,343
|
Post by swamp on Jul 1, 2011 16:35:04 GMT -5
Why pay extra to the student loans and van before the house? The mortgage is the highest rate. Why not cut down to the minimum to the SL and start paying extra to the mortgage. The mortgage interest is the biggest tax deduction we have.
|
|
swamp
Community Leader
Don't be a fool. Call me!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,343
|
Post by swamp on Jul 1, 2011 16:38:47 GMT -5
Tell them Andy is going to 2 years of community college and then a reputable, yet affordable in-state university CC's are way better than they were only a decade ago - and we are under-utilizing and under-estimating them - too much "keep up the jones" is still involved in the university selection process. DH and I are currently maxing out our retirement plans. Since the invention of retirement plans (only 30 yrs ago) we have a generation that is missing a 'taxable family wealth account' ie, a non-retirement account (& isn't tied to age 59 1/2). So people tend to only fund the 401k/IRA and check the box. Phil, we recently finished extensive renovations to our house which used up our liquid reserves. Then we went to having $1000 a month daycare plus diapers and formula for 2. We're now shedding some of the kid expenses and will ramp up the taxable accounts.
|
|
❤ mollymouser ❤
Senior Associate
Sarcasm is my Superpower
Crazy Cat Lady
Joined: Dec 18, 2010 16:09:58 GMT -5
Posts: 12,858
Today's Mood: Gen X ... so I'm sarcastic and annoyed
Location: Central California
Favorite Drink: Diet Mountain Dew
|
Post by ❤ mollymouser ❤ on Jul 1, 2011 16:55:19 GMT -5
Swamp ... your plan sounds very reasonable.
|
|
Deleted
Joined: May 14, 2024 21:01:39 GMT -5
Posts: 0
|
Post by Deleted on Jul 1, 2011 17:42:47 GMT -5
Swamp, with the deduction, what would your mortgage be?
|
|