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URL:  http://boards.fool.com/thank-you-worthmor-this-is-great-see-my-13802740.aspx

Subject:  Re: How did you do it? Date:  11/29/2000  4:19 PM
Author:  AliFool Number:  15414 of 128688

Thank you, WorthMor -- this is great. See my answers below.

Hi AF,
Congratulations on your recent marriage. Best wishes to you as you begin your life together.


Thank you. : )

Ok, I did some math and it looks like you're carrying about $40K between loans, cars, and credit cards. Can I be real frank with you?
<ahem>
Don't even think about buying a house until you've tackled this existing debt. You are waaaaaaay over your heads now. Buying a house will put you deeper. (Ever attend a forced sale of a home of someone who's bankrupt?) Don't go there.


Good point. The only reason I even ask about the house is that considering that we both have advanced degrees and decent salaries for our trouble, the $40K isn't as daunting as it might be. I STILL see your point and we STILL want to pay it down. : )

First, I admire you diligence in saving for retirement. You dont' say how old you are

I am 28 and husband is 35.

but unless your 50 and you plan to retire in 15 years - divert that cash you're funneling into retirement into paying down your debts. Every dollar you are saving for later is off set by the interest compiling on your current debt.

True, but our interest is only at 2.9% for credit card, 6.9% for car, and 8% for student loans. Not bad. And remeber, too, that any money we save in our 401K isn't taxed now -- another potential benefit.

Trust me. I know what its like to have the "American Dream" and buy a house. Been there, done that. But don't enter into this very large responsibility with all your current debt. It's not a matter of getting money together to put down. It's being able to afford the upkeep and maintainence of a house.

Yes, I do know about this. My parents own the home I grew up in.

For example, have you thought beyond the downpayment and closing costs to things like property taxes (due 2x a year!), mortgage insurance, property insurance, every single expense of broken appliances (call a plumber, ask what they charge for an "emergency"), lawn upkeep (hey, if you don't own a mower, you're gonna have to buy one), etc etc. See how important it is to be as debt free as possible before assuming this responsibility? I promise you ALL your time and ALL your extra cash will be consumed by homeownership if you aren't prepared for what's a ahead.

I absolutely AM aware of these things, which is why we don't want to buy "as much house as we can (eventually) afford." We are thinking of a modest 3 br/2 ba house with a small yard.

You need to sit down and do an honest budget. Start by tracking where you money is going - everything - for the next month.

I could go back and do this from our credit card statements (we pay off all current charges each month, in addition to working on husband's past debt). We use very little cash.

Then, get tough with yourselves. Time to drop those "extras" like cable TV,

Cable: don't have it. Refuse to pay $40/month.

phone toys like call waiting,

Not that, either.

all those magazines and newspapers you don't have time to read,

Nope, and nope again. None, except 1 professional journal each.

the extra coffee you buy on your way to work,

Nope. Free coffee at work, or brew at home.

eating out,

HERE is our weakness, but it is in check.

and shopping for fun.

We just don't do that. Thank goodness!

Time to get tough. You'll be amazed at how much money you are spending on all these things. No kidding. Take that cash and stick it on your loans/cards. Get some professional advice if you need it. But make a plan. Work your plan. Perhaps in 2 years you'll be in a position to start earnestly saving for a house.

We have actually done a great job on our own, and I have also consulted a financial planner (free initial consult!) who told me a story about how he and his "hoity-toity" wife bit the bullet and "lived on scrambled eggs" in order to afford the land on which to build their retirement home. I wouldn't say we've gone that far, but I DO shop at the local discount grocery and I almost ALWAYS buy store brands.

Check out the "Living Below Your means' board on fool.com and visit debtfreeliving.com for more tips from others in the same boat. You're not alone.

I frequent the LBYM board -- daily, in fact.

Trust me. It's not the end of the world if you can't "have it all" the firs tyear you're married.

True... we may not have it this year, but we certainly want to plan for it. Right now we are wrapping up the final damage from the wedding and honeymoon. There was our big damage, even though we wouldn't trade it for anything. That money could've gone to debt, but when else were we going to have a honeymoon? It was our choice to spend here, while we cut back in almost all other areas.

We also just bought a new-to-us car for $4K in cash. This is a HUGE triumph, because we ALMOST bought a $16K car and assumed another loan. But I said to husband, "Let's get real!" and we agreed not to do it. We are SO GLAD. Our new-to-us car is GREAT, too -- great deal, low miles, cheap maintenance and insurance. We LOVE it.

So... as the next few months return us to a more "normal" budget (no more wedding-related things!), we will use all extra funds to tackle the debt. THANKS for the inspiration.

--AF

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