Pay off student loan debt. That 6.8% is killer. I was a tard in the sense I paid off my low interest student loans first because they were the smaller victories and smaller dollar amounts. The loan that was at 6.8% was around $10,000 and said I'll take my time to pay that off. Sold the Trans Am paid off $4,000 of it right off that bat. A year later of payments and it was still hovering around the $5200 mark. $1200 in payments and only $800 off the principal? My math may be slightly off but you get the point.
Tackle that E36 M3 hardcore. My wife and I have lived like beggars the past few months to knock out our CC and student loan debt. Aside from a lease payment we are debt free. The best feeling though....student loan being gone. No more seven years of $93.00 a month while the loan collector sits there and makes monies off me. Taking that $93.00/month and investing in my daughters education down the road.
I got lucky with my company though. They match my 401k 100% up to 6%. With increments every year until your fully vested. Even at the bare minimum of 1% right now I've put away a lot. Contemplating bumping that up now that my debt is gone.
Seriously listen to everyone else. You aren't going to see 6.8% return in many other places. Maybe take a step back from some un-needed expenses to really go at that debt aggressively and maybe get it taken care of in 5 years. That way when you take out that loan for your wife's practice A) You aren't compounding your debt. B) If money gets tight you've been living fine the past 5 years while paying that other debt off so it won't seem like such a hardship. C) Still only 1 payment vs. 2.
DirtyBird222 wrote:
Pay off student loan debt. That 6.8% is killer. I was a tard in the sense I paid off my low interest student loans first because they were the smaller victories and smaller dollar amounts. The loan that was at 6.8% was around $10,000 and said I'll take my time to pay that off. Sold the Trans Am paid off $4,000 of it right off that bat. A year later of payments and it was still hovering around the $5200 mark. $1200 in payments and only $800 off the principal? My math may be slightly off but you get the point.
This is one of the (many) things I really don't like about Dave Ramsey, his BS about paying off the smaller debts first. No, hit the big % first numb nutz, that can be some real money.
Adrian_Thompson wrote:
DirtyBird222 wrote:
Pay off student loan debt. That 6.8% is killer. I was a tard in the sense I paid off my low interest student loans first because they were the smaller victories and smaller dollar amounts. The loan that was at 6.8% was around $10,000 and said I'll take my time to pay that off. Sold the Trans Am paid off $4,000 of it right off that bat. A year later of payments and it was still hovering around the $5200 mark. $1200 in payments and only $800 off the principal? My math may be slightly off but you get the point.
This is one of the (many) things I really don't like about Dave Ramsey, his BS about paying off the smaller debts first. No, hit the big % first numb nutz, that can be some real money.
I did that without reading into anything. I was just like "Hey I can knock out 3 payments and only have one." Without really looking down the road. In retrospect if I'm ever in a situation like that again (not going to be) I'd tackle the big numbers first. Take those down while paying down the smaller ones at the same time and you'll have bigger victories as time goes on.
First off- thanks for the advice folks. I think I'll reevaluate our current plan and chat with my wife tonight.
Adrian_Thompson wrote:
The best rule of thumb I've heard is never get more student loan debt than you can realistically earn in your first year out of school. That way it will be a manageable amount. So if you’re going to be a Doc, then ending up with $100k in debt should be manageable...
Unfortunately that's not how going to college works any longer in most cases. Many careers - teaching, law, physician, veterinarian, and ANY grad school - now have tuition and fees that would dwarf a first year salary.
As just one example, physicians from Michigan State University, on average, graduated in 2013 with $200k in debt for in-state tuition. Out of state? $338k.
It's a broken system. There is actually an income-based repayment option that tailors your payment to your income level. Many in IBR will not pay enough to cover their loans, and after 20 or 25 years the balance will be forgiven - aka paid off by the taxpayers. Think there is going to be a reckoning when that day comes?
bastomatic wrote:
Unfortunately that's not how going to college works any longer in most cases. Many careers - teaching, law, physician, veterinarian, and ANY grad school - now have tuition and fees that would dwarf a first year salary.
As just one example, physicians from Michigan State University, on average, graduated in 2013 with $200k in debt for in-state tuition. Out of state? $338k.
It's a broken system. There is actually an income-based repayment option that tailors your payment to your income level. Many in IBR will not pay enough to cover their loans, and after 20 or 25 years the balance will be forgiven - aka paid off by the taxpayers. Think there is going to be a reckoning when that day comes?
Ouch, yes the system is very very broken. Unfortunately it probably means some of these people should be going into medicine or the like. If you stay in state, live at home, or for a post grad degree live with a spouse so one works while the other goes to school, I still think it's feasible for a Doctor to graduate with less than a first year salary in debt. Also the first google hit for Doctors starting salary was this http://www.profilesdatabase.com/resources/2011-2012-physician-salary-survey Thelowest hey showed was $142 with some way more than double that. That's some serious income to throw at debt.
Please note, I wish I could follow my own advice!!! Luckily I was the last generation in the UK to not only get free education, but get paid living expenses by the government too. The UK is rapidly become worse than the US with even state schools being around $15k (USD) per year with lower starting wages and higher taxes.
I am soooo glad I only left school with $7k in debt (which is now paid off).
I would echo the pay off debt first unless employer matches 401k.
If you've never lived without debt it's shocking how freeing it is the first couple of months when you get paid and you get to keep your money. It's literally a life changing thing.
Theres always Rent and Bills.... 
I think the larger student loan problem is going to come from people who studied the Humanities... There just isn't money there anymore, so they are left holding the bill.
I think my generation (25-35) also isn't content just to sit tight and work a crappy job. We're much more willing to sacrifice getting a house or a new car to instead to travel and well...avoid the 9-5 grind.
I know many people my age who aren't saving for a house or a new car, but instead saving for a big vacation or even to move someplace else. They pay down debt while they can, but they are more interested in the next adventure than the next promotion at work.
I also know quite a few people my age who are perfectly content barely making ends meet while paying a mortgage, new car payments, and loan repayment at the minimum and have no interest in moving.
mazdeuce wrote:
If you've never lived without debt it's shocking how freeing it is the first couple of months when you get paid and you get to keep your money. It's literally a life changing thing.
This. just paid off my car last night. this is the second one i've paid off well before its used up or about to be traded in, its a damn nice feeling getting the title in the mail. next up is the wife's car and then working on the mortgage.
Strizzo wrote:
mazdeuce wrote:
If you've never lived without debt it's shocking how freeing it is the first couple of months when you get paid and you get to keep your money. It's literally a life changing thing.
This. just paid off my car last night. this is the second one i've paid off well before its used up or about to be traded in, its a damn nice feeling getting the title in the mail. next up is the wife's car and then working on the mortgage.
You'll get there. When the mortgage falls you'll see rainbows and unicorns for months.
Adrian_Thompson wrote:
This is one of the (many) things I really don't like about Dave Ramsey, his BS about paying off the smaller debts first. No, hit the big % first numb nutz, that can be some real money.
That smallest to largest is a rule of thumb, not a strict rule. He would say to pay off the government first, since they can easily garnish your wages. Family second, since ruining that relationship for money isn't worth the money. And then smallest to largest.
The idea is to get those people who don't see any hope some early victories and to buy in to the concept of success. And generally, if you are heavily pursuing debt elimination, the interest rate will not be a large impact.
Just a guess, but Dave's probably helped more people out of debt. He has rules about using credit cards that are true for 80% (?) of the population, but are presented as for everyone because the rest of us can live without them, even though they could have some advantages.
Just in case it hasn't been said quite enough...Pay off the debt. These days, 7% is practically criminal.
