Every so often on this sub, someone will pop in and mention how they paid off significant amounts of debt. Inevitably, commenters will focus on salary or other favorable areas for that poster that allowed him/her/it to pay that debt off.
I thought that it would be good to give regular updates along that journey, and show what it entails and how budgeting in high income/high debt scenarios looks like. Almost a year ago, I posted our situation, which can be found here.
At the time, our loan balance was $335k (USD).
Here is our current situation:
Income/Assets:
$124k (me)
$61k (her)
$45k Emergency Fund (Based on previous layoff, this is about what we are comfortable with in order to handle a layoff(s) while still paying loans)
Notes: Salaries take effect 4/30/17. Previous salaries were $122k/$60k. Income does not include annual bonus/stock options etc. I prefer to budget using monthly cash flow, and all extra goes straight to loans
Monthly total is ~$9,600 take home (I contribute to 401k and medical/dental/optical insurance)
Key events – Wife has just passed the bar, I am hoping her salary rises to $70-80k but it will never be BigLaw money (wrong school, bad grades)
Debt:
$90k @ 2.99% variable (SoFi #1) 7 year (me)
$185k @ 4.00% fixed (SoFi #2) 7 year (her)
No other debt. No car (we walk to work), no CC balance.
Expenses:
$2400 rent (see original post)
$1750 SoFi loan #1 (mine) @ 2.99% variable 7 years
$2800 SoFi loan (hers) @ 4.00% fixed 7 years
$500 groceries
$40 transportation (we don’t really use this. It’s for the summer, ZipCar/Uber etc)
$50 Utilities
$20 Netflix/Spotify
$130 Entertainment (movies, going out with friends, a nice dinner, etc)
$40 Personal Care (haircuts/dry cleaning)
$100 Shopping (discretionary budget, we normally don’t use it but it is available)
$1750 left over which goes to an AmEx high yield account at 0.9%, then paid into loans every 12 months
In terms of other expenses, we take one large vacation a year, and several other weekend trips. Total for all these combined is about $5-6k including all expenses/food/lodging/transportation.
We are on track now to pay off all loans by April 2020 (35 months from now), with the assumption of dumping $25k every year in March and liquidating our emergency fund April 2020.
If I’ve done the math correctly, excluding loans we are living on a salary of around $60k gross. Some key things we’ve adjusted along the way have been to increase our entertainment budget slightly, and keep in mind that we have less than three years to go for final payoff.
Thoughts?
Submitted April 12, 2017 at 12:12PM by Payitandplayit http://ift.tt/2p67XYY
