Author Archives: LvD

Our Debt

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This is probably going to be one of the scariest posts I'll write on here.  Debt is such a taboo topic of discussion in the country.  And here I am, for the first time, about to lay it all out in the open.  Don't worry, I received my wife's blessing before I posted this.  She is also LifevsDebt's new Senior Editor.  She received this position because of her awesome ability to point out my fallacies!  Love you Mrs LvD!  Now that I've procrastinated a bit, time to delve into the horrors that are our debt!

$246,971.67

That is not a typo.  $246,971.67.  That is the current value of our debt.  I'm finding myself taking pause as I write this number out.  It's staggering, sobering, and scary.  Probably even more frightening is that it is very typical.  There's a mortgage, two car payments, Mrs. LvD's student loans, a loan for some home repairs, a loan for solar, and a financed phone.  These are things most adult's have.  Of course, everyone's situation is different and unique to them.  But I don't think our household is some outlier.

Our Debt, Broken Down

I've read plenty of opinions that state that a mortgage is not a debt.  Or, at the least, a bad debt.  I do not believe that for one second.  You can only consider a mortgage an asset if you can sell it whenever you need cash.  Most people aren't buying a home so they can turn around and sell them to make money.  They're buying them to live in and lay down roots.  Our mortgage is at $114,341.66, four years into a 30 year loan.

Our two car loans are worth $18,282.68 for mine and $15,693.08 for hers.  Mrs. LvD's loan was more out of necessity.  She did have a reasonable loan on an affordable car.  But, the week of our wedding, she had an accident during a snow storm and totaled her car.  We both agreed that she should get a larger SUV that we could grow into as a family.  We have two dogs and are planning on having kids.  She has also wrecked every car she's owned, so I wanted her to have something safe (please don't beat me for telling everyone this, love you!).

My car was a mix of a want and need.  I had my previous car for 8 years and was starting to nickel and dime it.  I was considering getting a practical and fuel efficient Prius.  But then I found an awesome deal on a used 2019 Chevy Bolt EV.  Having just put solar on my home, this was a no brainer for me.  I convinced myself this was a a good purchase.  Honestly, I have no regrets.  Not. Sorry.

While inspecting the roof for the solar I found that it was letting water seep through.  I wasn't really surprised at this.  My home inspector told me before I bought the home that the roof had maybe 5 years left in it.  5 years later I had to replace the roof.   We also took the opportunity to do some other exterior work and replace the sliding glass door.  This cost is currently at $26,332.03.  This is my least favorite debt.  The solar loan is at $16,738.23.  This debt should pay itself off.  With the savings on the electric bill and NJ's strong SREC program, I am completely okay with this debt.

I financed my phone at 0% interest for 24 months.  It has $773.75 left on it.  The last debt is the Mrs. student loans.  She bounced around a couple universities and changed majors a few times before finally finishing her  degree.  Her student loan is currently at the tune of $52,347.61.  I know this debt is a sore spot for her.  Don't worry babe, it'll be worth it.  Have faith!

Repayment Plan

As I outlined in my budget post, we're taking this month to focus on our emergency fund.  If we are able to stick to the budget we laid out this month then next month the goal is to start paying $1000, extra, to our debt.  Once we get into April we'll figure out if this is feasible.  There are several different methods out there for repaying debt and all of them have their perks.  The beauty of personal finance is that it's personal.  You're free to use whatever method that works best for you.  The two more popular methods are the debt avalanche and debt snowball methods.

Both methods have you paying the minimum payment on all of your debts, except for one.  You pay as much as possible every month to that one debt until it is paid off.  Once paid off, you take the amount you were paying towards that debt plus that debts minimum monthly payment and add it all towards your next debt.  Rinse and repeat until your're out of debt.

The debt avalanche method has you focus on your largest interest rate first, regardless of balance.   The idea is that paying off your highest interest rates first will save you more money over time.  The debt snowball method has you paying off your smallest debts first.  This method really focuses on the small victories and building up that momentum to pay off your largest bills.

Personally, I prefer a combination of these two methods.  I like to have my small victories.  It feels great when you see progress being made.  So our two smallest debts will be paid off first, regardless of interest rates.  Once we knock out these smaller debts, then I'll prioritize the larger debts by interest.  There will be an exception made for the solar loan.  That's going to be the second to last loan paid off since it is basically paying itself off.

Details

I'll categorize my current debts into small, and large debts.  Small debts are anything under $2500.  Large debts are everything over $2500.  There's no rhyme or reason to this.  It just feels right to me.  This is the order in which I want to pay these off:

My Phone
Wife's Small Student Loan
Wife's Car Loan
Roof / Renovation loan
Wife's Student Loans
My Car Loan
Solar loan
Mortgage

It doesn't make sense to hold onto the two small loans.  They'll both be paid off within four months.  I decided to do my wife's car next.  Not only is it the next lowest balance, but it will also give us the most cash flow when paid off.  This will give us some flexibility if we need to adjust our budget in the future.

At 7%, the roof loan has the highest interest rate out of all of the loans.  Once this is gone it will be a huge sigh of relief.  My wife's student loans seem massive.  But, compounding all the combined monthly payments of all the previous debts together should make quick work of them.  She is also looking into refinancing her larger rate loans. My car will be next and hopefully, after this one, we never have an auto loan again.  At least, that's the plan.

As okay as I am with the solar loan, it is still a debt.  It just means I'll get to enjoy that cleaner energy even more so once it's paid off.

We are in the process of refinancing our mortgage.  I found a rate of 2.37% interest for a 15 year mortgage!   This would cut 1.62% off of our current rate.  This would mean more of our payments would be going towards the principle and not to interest.  It would allow us to pay off our mortgage that much faster compared to the 30 year mortgage.

Summary

In all, I'm estimating that this would take 7 1/2 to 8 years to complete.  When I put this plan together I didn't worry about being too exact with my math.  Life is going to make sure to throw a couple wrenches in our plan.  We need to be flexible.  If I can pay everything off in 10 years, I will be thrilled!  Or, maybe, this blog blows up in the best way possible and we can pay everything off by this time next year.  Who knows?

The Budget

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The Budget

We did it!  My wife and I finally sat down, together, and hashed out the budget.  It was a good, candid, conversation about the reality of our finances.  We looked over last months spending (Dear God, it was bad.  We spent more than we made!), forecast what we needed to spend money on this month, and set what we feel are reasonable limits.  This month we decided to save extra in our emergency fund.  And we even planned meals for the next week.  I'd say it was a very productive hour.

I'm not going to be going to be covering my loans and utilities in too much detail this post.  They are all at a fixed rate and I have enough to cover them.  They won't be changing any time soon unless I can pay them off.  There will be a post coming up soon that will cover all our debts and how we plan on repaying them.  What I am going to be covering are the variable expenses and savings.

Budget

Our budget is broken down into three main parts to try and keep it simple.  Income.  Spending.  Savings.

Income

For the most part our income is pretty steady.  The primary job's income is pretty fixed.  I also collect a drill(Air National Guard) check once a month.  We're rounding my wife's income when we do our budget. She works in retail so her income fluctuates a little bit with how many hours she's given.   Thankfully, her hours are fairly steady.  My wife also babysits occasionally.  This is a bonus income and it will go towards our savings goals.  For our budget we are assuming that we each get paid twice in a month.  Those, magical, two time a year we will have that extra pay in a month? That is tentatively going to debt repayment.  Fun, I know.  But, for now, it must be done.  So our income breaks down like this:

Me: Civilian pay - $3,659.70/mo
Drill pay - $400.62/mo
Wife: $2,000.00/mo
Total - $6,060.32‬

Spending

Our spending categories are probably very typical.  We have loans, utilities, and all of the other variable spending a normal household has.  Our variable spending is broken down into 6 categories.  Groceries. Dining Out. Gas. Dogs. Medical. Recreational.  This is how our spending for the month of March should break down:

Loans - $2,716.19
Utilities - $532.05
Groceries - $450.00
Gas - $350.00
Dogs - $175.00
Recreation - $150.00
Medical - $60.00
Dining Out - $50.00
Total - $4,483.24

Savings

We haven't been doing a bad job with our savings.  5% of my pay is deducted for my TSP(like a 401k) with a 5% match.  We also contribute to a individual taxable account and a savings account (emergency fund) through Betterment.  Also, we have what I call revolving savings categories. These are things that you pay for at different times throughout the year.  For us, these categories are:  car maintenance, home repair/upgrades, vacations, hobby/fun stuff, and clothes/gifts.  Each category gets $50 a month for a total of $250.

Usually we throw at least an extra $400/mo to paying down debt. But, this month, we decided to focus on boosting our emergency fund.  I decided to do this because my wife needs to experience how to save.  I started to save for our emergency fund and revolving savings before we were married.  The rate at which we saved for these items has remained unchanged since before we were married.  My wife has never had to think about these savings.  She didn't have to focus on saving.  If she wanted something, she got it.  I like to think that's how she got me, ha!

My suggestion was that we aggressively save $1000 for our emergency fund.  She was a little confused by this suggestion because she knows we have over $3000 saved right now.  So I explained to her what I just explained to you.  To my surprise, she took to this pretty willingly.  If we stick to our budget we should be able to handle this goal pretty easily this month.  This is how this months savings should break down:

Betterment ITA - $100
Emergency Fund - $100
Revolving Savings - $250
Bonus E-Fund - $1000
Total - $1450

The Bottom Line

Our budget is actually quite a generous one.  With what I've laid out we should have an extra $127.08 left over.  As a further incentive for her, we decided anything saved beyond the $1000 for the E-Fund can be put into our home repair fund.  We have plenty of projects she would love to have finished.  Though if we succeed it'll mean I'll have less time to write.  Sigh, the things we do to keep our loved ones and our wallets happy!  In early April I plan on writing the follow up piece to this.  Hopefully I can say that we hit all of our savings and spending goals!  Wish us luck!

Welcome To Life vs Debt

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I welcome you to my blog, Life vs Debt.  Sometimes you get to a point in life when you realize that the path you're heading down isn't the path that you want to be on.  That if you continue down this path you don't believe you will be happy with what you've done, the legacy you've left behind.  Some may call it a mid life crisis.  But, dammit, I'm only 32!  I'm definitely feeling some sort of way though.  I've decided I needed a change and this is the medium I've chosen to document that change.  Hopefully, ten years from now, I'll go back and read this first post and be happy with what I've achieved.

Now my life isn't all doom and gloom.  I have quite a bit going on for me.  I'm very happily married.  My wife and I have two dog children so far and are wanting to expand our family.  As I type this my youngest pup just came in to give me a quick lick on my hand and is now demanding some attention.  Where's his rope at...  Alright, I'm back after a quick play time.  The pup is now contently chewing on his rope.  As I was saying, life isn't all bad.  I am the proud payer of a mortgage though the property needs/needed plenty of work.  And I have a great job, with the ability to move up, despite my lack of college degree.   Not bad at all.

The Negatives

So what could I not be happy with?  Well, for starters, even though I do have a great job I don't love what I do.  I completely understand most people are in job they don't love and make it work.  It doesn't mean I have to be happy about it though!  Especially now that I found something that I am passionate about.  Over the last couple years I've found that I love the world of personal finance.  But as I search for ways to make a living off of it I've realized I can't really go too far without a degree.  Especially if I don't want to take a 50% pay cut right off the bat.  It's absolutely frustrating finally finding a field that you want to work in and having so many obstacles in your way!

The fact that I've fallen in love with personal finance makes the next aspect of my life that I'm not happy with seem like a nice big joke.  My household's finances are a mess.  Despite my best efforts to pay off debts and curb spending new debts, that are even bigger then the previous debts, keep popping up.  Last year I paid off nearly $20,000 in debt but also added roughly $60,000 more to the pile!  With all of this new debt my wife and I are now spending more every month then we make and cutting back is proving to be surprisingly hard.  Telling your wife "no" to anything is never easy for me and makes me feel guilty.

My Choices

As I look at it I have two options from here on out.  Fight or Flight.  Dammit I'm a fighter and I will fight for the things that I want.  What do I want?  Obviously I want to change everything that I mentioned above that I'm not happy with.  The only path that leads to achieving all of these things is Financial Independence.  Setting and sticking to a budget will allow us to pay down debt.  Paying down debt will, hopefully, allow me to make a career change.  In order to be qualified to make that career change I have applied and been accepted to a local university to get my degree.  There's lots of work that needs to be done and accountability and motivation is key to achieving success.

Accountability and motivation are  a big reason for this blog.  I want to lay bare everything about my finances and life to you.  Being honest will help keep me accountable.  I'll also be using this as a place to showcase the projects that I've done/am doing to my house.  Really, anything that falls under the life category I want to write about.  So, the major focus of this blog is Financial Independence with a sprinkling of a wide array of topics.  Hopefully you will give me support and, maybe, even guidance in my journey.  Follow me on twitter and say hi!  I'd love to hear from you.  Once again, I welcome you to Life vs Debt.