Debt free planning

[Herk7769]

What I did was take a look at what I could reasonably expect to take in a year in retirement (Social Security, Work Pension, and an annual sustainable 401K withdrawal - 3% of principle remaining on January 1st of each year as a single distribution).

Then 3 years before we retired, my wife and I tried to live on that amount for those 3 years.

What this accomplished was:

1) We were able to save a LOT more money than had we lived on salary.
2) We realized that we could never make mortgage payments and stay solvent.
3) We spent a lot more on non-essentials than we realized.
4) Cut to the bone our planned expenses exceeded our projected retirement income.
5) Taking 401k money as a single withdrawal was the right move for us since it forced us to spend it wisely throughout they year and not be tempted to "dip in" for unplanned vacations or splurge expenses.
6) Our world traveler plans went right out the window.

However the extra savings from living frugally for the 3 years prior to retirement came in handy since we had an "off book" cash fund that allowed us to handle unplanned emergencies without raiding the retirement account.

Your mileage may differ.

[gectisme]

Originally Posted by Mdaniels4

And you're assuming it's a college education will be the key to their access. Personally I disagree. But it's your kids. Just don't ask me to subsidize it. Your decision. Your payment.

I don't assume anything anymore, you know the old saying with assume... I do hope it opens their eyes to things they might not otherwise have experienced or learned. And if a side benefit is a good job, that would be icing on the cake.
Also, I would never ask someone else to subsidize my kids. But as it turns out, I am hoping you will be subsidizing them, because I am hoping they all go to West Point I guess I should say I am dreaming they go there.

[rockfordroo]

Originally Posted by Mdaniels4

And you're assuming it's a college education will be the key to their access. Personally I disagree. But it's your kids. Just don't ask me to subsidize it. Your decision. Your payment.

I'd rather my taxes subsidized college for kids than for a lot of other things they're subsidizing!

[bob caldwell]

Like 4 years of partying?....lol

[Cowracer]

Originally Posted by Mdaniels4

Just interjecting from my perspective. Worse thing you can do to yourself, and your kids is to help them through college. Unless of course you have a contract that they'll take care of you in times of need. Read the above. His kids had to work for it. College in itself is not the answer or a guarantee of success. Hell. I'm successful but if I'd been smarter 40 years ago I'd have become a plumber or an electrician as my family was. But at that time college was the dream. Like the flight attendants always say. Make sure you have your oxygen mask on before you help others. Otherwise you're dead and unable to help them either. My parents never let me starve in school. But they paid nothing. I did it and learned quickly to make good choices. I have a buddy that gets his ego stroked by paying his daughters college. Fact is he's not got a pot to do it in, and when she's out, he'll be 52 and have no means to make up his retirement. Hope she buys a huge house for them all to live in.

I disagree. Both my sons are in college. One is working on his MBA and the other is getting his doctorate in Pharmacy. I have and will continue to supply them with as much cash as they ask for in regards to college expenses. It is my duty as a parent.

My oldest (the MBA) has taken advantage of a couple programs that became available when the lead smelter we worked at closed. Coupled with the fact that he works full time making very good money with 3M means that he has not required any funding from us for the last 2 years. The youngest (The Pharmacist) is in the Army reserve, and we have/are paying for his 3rd year. He covered the first two, but finally relented to accept some help when it started to get overwhelming.

Nobody helped me when I went to school. I did 10 hours a day at a factory, and 4 hour every night at school for over 3 years. It was a HUGE struggle (financially, emotionally, marriage, stress, health, etc) that I vowed to prevent my sons from experiencing until my last breath is taken or my last dollar was spent. If the results are that my kids have successful careers and I wind up without a pot to (pee) in, so be it. Its true that a college degree is not a guarantee of success. But these days, the door wont even open without one.

This is in no way 'spoiling' my kids, or making them 'less appreciative' of hard work and earning you own way. This is simply a requirement of being a parent.
Tim

[whj469]

Debt free is what we are and it is possible for others. I have had money, pre-tax, taken out of my paycheck, the max allowed, for many years. I retired on 9-1-16 with a retirement account of about $1,300,000 and SS of $3,400 per month. I am able to take about $5,000 per month without touching the principal. I can live well on those two amounts and being debt free. I live on a small ranch in SE Texas and my real estate taxes are very low.

[Still Kickin]

Originally Posted by Mdaniels4

And you're assuming it's a college education will be the key to their access. Personally I disagree. But it's your kids. Just don't ask me to subsidize it. Your decision. Your payment.

Oh, you're late to the party on "just don't ask me to subsidize it". Current student loan debt outstanding is in excess of ONE TRILLION dollars. Guess whos going to pay a portion of that nut. You guessed it, the taxpayer. What really is frosting on the cake is we are currently short about 5 million skilled trades jobs because the collective, steered the kids to all should go to college mentality . Most of which are majoring in dumb stuff. Just look at the underemployment of our "college graduates" that thought a liberal arts degree was going to get them a good job, NOT.
They started this route when the education numbnuts took shop classes out of high school. Maybe we have recently turned the corner, time will tell.

[bob caldwell]

Let's hope...

[Black]

Originally Posted by rockfordroo

I have no debt.

Well same here !
But I guess this very is badly seen in today's lifestyle.
When I say this to people, they look at me like I'm some sort of alien !
I'm 46, mortgage is paid, 3 grown up girls that I put true college, farm is paid for, new SUV and truck and RV are mine to.
But I had a rough drive early in life...I worked a lot 365 days /year, no vacation for a good 15/20 years.
The past 5/6 years where great though....very satisfying to be debt and stress free.

[tony5oh]

I heard this one from an old guy I knew: APOAYEIYTK. A Portion Of All You Earn Is Yours To Keep. In other words, pay your(future)self first. We're trying to train our daughter to save 10% anytime she receives money (bday, holiday, etc.). It's a struggle. 😁

I had to start over in my 30s after a divorce and was left with $30k of debt. Pay til it hurts, do without, and roll payments together into larger payments as debts are eliminated (snowball).

You will have a much tougher row to hoe if your spouse is not on the same financial page.

If you're lucky enough to get raises, bank them. I've been on the same net pay for several years, with the extra going to savings. This is over and above retirement contributions.

It's all for naught if you can't control impulses. And one serious medical incident can pretty much ruin your plan.

[bob caldwell]

Do it the American way.....live off the plastic!...And when those fill up, get more to pay for the first ones!.... lol

[ependydad]

Originally Posted by bob caldwell

Do it the American way.....live off the plastic!...And when those fill up, get more to pay for the first ones!.... lol

Sadly, that's the habit that I'm trying to cut. It's not intentional- but more we don't like waiting or doing without. Both a recipe for disaster.

So fortunately/unfortunately - it's all common sense and a lot of what I'm hearing I already know (not that I practice it, just that I know it):

• pick one and pay it off; move onto the next and snowball it
• generally avoid plastic
• loans aren't terrible, but be certain of the purchases
• have self control

[Iwannacamp]

I like what I read here about not charging anything you won't have after its paid off... pretty good philosophy in my book. No food, gas, utilities or gifts etc...


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[MillerTime]

Doug, we are graduates of Dave's Financial Peace University, class of spring 2016.
Its tough to face what you spend compared to inflow.
I know others will disagree with me and him, and that's fine!
We don't use credit cards....period. In daves class and in his books, you will learn that you can do the same stuff with debit cards as plastic. We have a second bank that we have an account with and a different brand of card, just in case there is a problem with one bank, so we aren't stranded.

Cash is the best way to go. It hurts to let cash go. Its easier to spend money with a card. There is a study, and consumer's will spend (i don't remember exact amount) a sizable amount more with plastic than cash.

We aren't debt free, but we have payed quite a bit off this year, saved some, bought a few toys and vehicles and payed cash for them. We are hoping to be debt free in 2 more years with exception of the house, which we are trying to sell and down size.
We plan on not financing anything else except the next house when ours sells, and quickly paying that off.

We don't do terribly without, but we don't use cable or satellite, we have a combined phone bill of $120 a month (15 year old doesn't have a phone). We don't really wear name brand clothes, unless wrangler counts! We dont have a yeti, or even a yeti sticker...lol!
We go to the lake with the kids a lot and that saves us a ton compared to normal vacations.

We both payed for our college as we went, with a little help.
I have told my kids that i will help them buy a business or build them one, instead of going to college. I feel that college is a terrible waste of money for so many. I've got a sister that spent over $100k even with scholarships to get a masters, and then work a job that payed $28k a year! Then become a stay at home mom. Terrible waste of money, and even bigger waste if loans were used. Now if they have a plan and college is a need to make that plan happen, im good with that!

I don't care if you get something for 0% intrest or not. If something befalls you and you cant pay for it....its 100% gone along with all your payed in money. There are studies that show that a HUGE percentage of people don't pay stuff off during the 0% intrest phase on credit cards and then are back charged all that intrest too.
Its a huge eye opener to pay attention to the commercials on tv and see how much of them are credit card companies. Pretty sure they aren't paying for those ads by people using their money for free!
Anyways...
Biggest or best things to do....budget, and watch your little expenses.
Good luck!!

Here's a very, very good book to start with!

[CaptnJohn]

Debt is a tool to be used wisely. Interest rates under 3.5% means savings and investments are still growing. Our income is fairly well set, if one passes there will not be a drop of more than 27% which can still permit debt is easily covered and a good life. If both pass, there is much more than enough to pay off all debt and the children to have some to invest. They will have no problems as nearly everything is in a family trust which goes to them without probate. Planning is the key and credit cards are never used. I retired nearly 14 years ago and income is higher now than when we were working. Plan early, but live as all that saving if doing without may not do you any good in the grave.

[bob dirt]

One note about credit cards. We use ours for everything. We get Southwest credit for free plane rides. Have been doing that for a very long time...BUT, we pay the card off every month in full. Never any interest paid.

It works for me

[MillerTime]

Originally Posted by CaptnJohn

Plan early, but live as all that saving if doing without may not do you any good in the grave.

I've heard that alot from people....sad thing is, they are all still alive. (That sounds bad but you get where im coming from)
We hear everyday about people out living their savings or retirement or people that are worried they are going to.

I had some real close neighbors loose their house to foreclosure last year. They bought their house the same month we bought our land, 15 years ago. They never did without, had new cars, several campers etc. But he got sick and couldn't work for a little over a month, and they could never recover. That was about 3 or 4 years ago.
They tried to keep living that lifestyle but ended up loosing their house and both vehicles, and he still works everyday as a truck driver.
You want to know the really sad part....he's 72 or 73 years old. The other thing is my brother and i had offered to buy their cows, tractor and even their place prior to them loosing it. They never sold any of it till after they had been moved out for a month or so.

That wakes you up!!

I'm a long ways from retirement age, but im bound and determined that i don't have a story anything like that. Even if it means giving up a few niceties!

[SKnight]

Originally Posted by MillerTime

I've heard that alot from people....sad thing is, they are all still alive. (That sounds bad but you get where im coming from)
We hear everyday about people out living their savings or retirement or people that are worried they are going to.

I had some real close neighbors loose their house to foreclosure last year. They bought their house the same month we bought our land, 15 years ago. They never did without, had new cars, several campers etc. But he got sick and couldn't work for a little over a month, and they could never recover. That was about 3 or 4 years ago.
They tried to keep living that lifestyle but ended up loosing their house and both vehicles, and he still works everyday as a truck driver.
You want to know the really sad part....he's 72 or 73 years old. The other thing is my brother and i had offered to buy their cows, tractor and even their place prior to them loosing it. They never sold any of it till after they had been moved out for a month or so.

That wakes you up!!

I'm a long ways from retirement age, but im bound and determined that i don't have a story anything like that. Even if it means giving up a few niceties!

That's scary, my account was compromised in October, I let a family member have a debt card to help them out. They helped themselves out alright.

I started out a month behind, now I'm about half a month behind. I'll be fully square again soon, but it's an eye opener for sure.

Get this, between the equity in my home and the vested amount in my 401K I have well over $100K available, but the way hardship laws are written I can't touch a dime of it. I have to be in foreclosure first.

[Mr Havercamp]

Originally Posted by bob dirt

One note about credit cards. We use ours for everything. We get Southwest credit for free plane rides. Have been doing that for a very long time...BUT, we pay the card off every month in full. Never any interest paid.

It works for me

I have been doing the same thing for years but beating the banks at their own game is the key. I have over 300K in Southwest points right now and A list status. We have used over that amount flying around almost free for the last 3 years. Almost every bill we pay go's on the SW card or some other cashback card. Paying off the balance monthly and not letting them make a dime is the way to approach it. Some cards do not like that and they'll let you know by canceling your account.

We financed our 2017 Roo for 5 years at 3.9% at the dealer with a local bank. I made two payments and then paid it off by using my Discover card with a special offer for 0% for a year. It did cost me a small fee. Now it has no lien against it. Right before that offer is up in July I'll move that balance to another account that has an offer that is lower than the original 3.9%, but most likely 0% for a specific period. I make the payment to Discover monthly and throw an additional $500 at the principal and all of it is principle because its 0%. Those payments are made using the Chase Southwest card to get the points, then that cards balance is paid off. The return is much higher than I'd ever get throwing that money I am spending anyway would get in the IRA, a CD, or savings.

Its just a big game and to me its fun to beat them on their own field. It just takes a little work and some math.

What amazes me is when people finance a 20K or even 50K or 60K RV for 10 or 12 years. What a money loser that is but the amount of people that do is staggering. I can see it with a 300K class A but holy cow.

Using other peoples money is a benefit, especially when the other people is a big bank. If you don't have some fun you'll regret that too later down the road. Make a plan and stick to it.

[Cowracer]

Originally Posted by Mr Havercamp

What amazes me is when people finance a 20K or even 50K or 60K RV for 10 or 12 years. What a money loser that is but the amount of people that do is staggering. I can see it with a 300K class A but holy cow.

MamaBear works at a car finance company. They are not your classic "high-risk" lender, but they have incredibly high interest rates (Nearly 30%) APR. And there is no end of the idiots lining up to get loans. They only do loans for cars from dealers that sign up with them. And by dealer, I mean the guy with 8 or 9 used POS cars who rented out a closed gas station for his lot. You know the type. Its a quirk of geography that all their dealers are located in the poorer parts of STL, so the clientele tends to run towards a certain demographic.

The great majority of these people have NO IDEA at all about money. They just know if they sign their name, they get their new ride. More than once she has had to explain why if you borrow $2000 you have to pay back MORE than $2000. It is truly sad how uninformed some of these folks are.

Tim