Here’s some of my overwhelming debt numbers!
Condo debt (2014 – 2016) – $225k mortgage=42% of after tax income; mortgage, condo fee, taxes 58% of after tax income (sold this burden!)
Student Debt – Now over $100k ($30k undergrad, $70k grad) (this is my last semester so time to tackle this!)
Car Debt – $16k (down from $22k!!!!!)
Credit Card Debt – $1500 – $2000 a month (manageable, but I spend too much!)
Yikes!
So, today I wanted to talk about my journey through debt. The numbers above are pretty scary huh? But I’m no different than anyone else, just trying to figure out how to pay these dreadful bills day by day.
Let’s talk a little about me. Hope you can learn from my mistakes!
I’m a Mechanical Engineer by day, MBA student by night, who trades stocks on the side, and has a side hustle with this blog! I guess I’m a busy man!
But my point is I’m no different than any of you, just going through this journey, trapped by debt.
The Condo Debt – 2014
So here’s me, 25, in 2014, moving out for the first time! I saved up and got my own condo!
A pretty big milestone, huh! I was pretty excited.
So here’s where I went wrong. My down payment was low, like 2% of the price low! Bring on the PMI Insurance.
My mortgage alone was 38% of my pay (after taxes) and 25% before tax, so I was within the 28% rule, but I still felt outside my budget.
As you can tell I was in over my head with that brand new condo. I spent way too much of my budget on that place. 58% (after tax) or about $2200 a month on a mortgage, condo fee, and taxes. How can a bank let me get into that situation? More importantly myself!
Ever heard the term house poor? Yeah, that was me.
And don’t get me started on condo fees! Paying those and coming home to an unplowed driveway, not being able to drive up! UGH!
Long story short I sold that in 2016 and made some money. I got a roommate to cut the mortgage down to a new rent of $900. Talk about savings!
Now owning a home at 25 may not be where everyone is at, but I just want to help those in similar situations! Anyone buying a home really!
Here’s my advice. Don’t go to the top of your budget even if the bank allows it, they’re there to make money. Really plan out your finances and budget and see if it makes sense!
My home debts here were huge! Moral of the story, live within your means!
And don’t feel the need to be like your peers. If everyone you know is buying homes don’t feel you need to jump on too! Make sure it fits the budget!
The Student Debt – 2011 & 2018
**For those thinking about going to Grad school see if an employer will cover any or 100%!**
So here’s me in 2011 graduating undergrad with ~$30k in debt and soon to graduate in 2018 with another ~$70k in debt! Yay Grad school!
College is the american dream right!?!
As long as I can land a good paying job with this MBA it is, otherwise the return on investment (ROI) wasn’t worth it!
Student debt is something we all struggle with. I’ve racked up enough to be almost a small house! I got out of undergrad with a manageable amount, but grad school is going to kill me with $70k more!
Here’s my plan going forward:
I’m going to tackle this with the debt avalanche method. But a refinance isn’t out of the picture either. If you looking to refinance, check out my other article. https://samthesaver.com/2018/08/25/tackle-those-loans/
That article also goes over the debt avalanche method too.
Here’s what I’m in for. If I can pay extra, and go after one loan at a time I’ll pay it down fast and pay less interest!
You have options just like me! Make a plan and stick to it, you’ll be thanking me in a few years when your debt free.
This is my main burden and my biggest focus!
If I pay the minimum on all but one loan and kick in extra, ill be on the right track!
I can put a few hundred towards one loan (principal and interest) and make the total about $1400/month and pay interest only on the others.
Looking at all this is really overwhelming!
I have been in the camp that saves for retirement, emergency funds, and all that first. My debt is next on the plate!
I’m Looking to trim my spending and pay down debt fast! While also planning for the future.
Moral of the story here is not again, not get in over your head! I could have gotten a job with a new employer that would pay 100% of Grad school if I stayed there 5 years.
There are always options!
Other great options are scholarships! Apply to a ton of those bad boys!
Car Debt – 2017
So here’s me in 2017, the used 2008 Saab I bought is giving me lots of issues at 100k miles. Tons of electrical issues, engine trouble, gas tank issues, you name it! Thank god for emergency funds!
So I got fed up with this and went out and got a new car. More debt, yay.
I chose debt over repair bills, but maybe there were better options. Like a reliable used car.
But here I am. So now I have about $16k in car loans, down from $22k! I got a Honda since it was reliable, unlike my Saab. Currently paying a little extra to this to pay it off faster, my only saving grace, lol.
Currently paying $500/month to this, (a little extra) even though I don’t have to. I’ll be done in no time!
Again here there are always options. I could have fixed my Saab, but that thing had lots of electrical issues. And a used car in the $5k to $10k range could still have been an option! I should have gone this route.
Don’t feel you need the newest anything! Sinking funds are a good option to avoid debt.
Credit Card Debt – Monthly!
My credit card debt is manageable at about $1500 a month. I must say I spend too much and am working on that!
All the eating out adds up. I need to tell myself, and my girlfriend, I have food at home!
But at the same time don’t spend $0 on fun stuff and be miserable! 15% of income is a reasonable expense for fun items!
Always pay this on time! Mine is on auto pay!
Hopefully this helps you on your debt journey as well.
Reach out if you want to know more details!
finance, yahoo finance, google finance, financial freedom,
xx
