Monday, January 31, 2011

Long-Term Plan...

Realistically, it is going to take me about 10 years to repay my student loan debt with all things remaining the same. Meaning, I am single and I remain in the Banking field.

I listen to the Dave Ramsey podcasts and hardly any of the callers have as much unsecured debt as I do and they tend to be married couples with dual income. I have a quarter of a million dollars in student loan and credit card debt and I am currently single so I can tell you that I don't plan to wait 10 years before I start on any of the other Baby Steps. I don't think it's a wise move on my part. So, I am open to suggestions but this is what I am thinking.

Beginning next year:
  • Apply all bonuses to debt repayment.
  • Increase my 401k contributions 1% each year so that by the time I repay the loans, I am also already contributing 10% to my 401k.
  • Begin saving $200/month so that I can contribute towards my 6 month eFund.

Thoughts?

10 comments:

Zuzu said...

I agree with your plan. I don't think you can put off retirement savings until all your debt is gone. Increasing it 1% a year is a great plan and so it using bonus money for debt.

Anonymous said...

I would like to encourage you to use your law skills as a side hustle. There is no reason you can't generate good income on the side. Maybe review wills or small business contract. You can charge less than a big firm and enough to make it worth your time.

Maybe try guru.com or elance.com

Broke by Choice said...

I would imagine that in the next ten years you will get promoted and/or move to a new place of employement with a higher salary, and probably get married.

To assume that you will be in the same place in ten years that you are today is a big stretch.

Similar to anonymous I think you should focus on increasing your income at work or on the side.

You may not feel moving is an option, but what about a roommate. I know you tried it before, but I don't remember why you didn't get one.

Chitown said...

I do believe and expect there will be some change in my lifestyle and situation within the next ten years.

When that happens, I will certainly make adjustments to my debt repayment. In the meantime, I do feel like it's important to make progress under my current circumstances.

My job has morphed into something I don't even recognize. I worked all weekend and I will be working tonight until at least 8pm.

I am not in a position to take on any more responsibility on the side and legal work for sure has expected deadlines which I cannot commit to right now.

When things settle down and I can determine if this is a permanent or temporary spike in work at the Bank, I may look into taking on some side legal work.

Chitown said...

A roommate is not an option.

Anonymous said...

WCB,

I do think that putting a little toward retirement and a little toward emergencies (i.e., unemployment or car repairs) while paying off debt is a good idea.

As a person who has paid off a quarter of a million dollars in debt, I can tell you that things generally improve over time PROVIDED that you live frugally. I kept at the frugal thing (it becomes ingrained after awhile) for many years - and the end came sooner rather than later.

WCB, your situation IS a little bit more extreme, BUT it is not insurmountable. We don't realize how much we can accomplish in a year by focusing on everyday.

It seems as though doing a week by week analysis you have been doing great! You will eventually find more to cut that won't matter to you. It will matter more to be debt-free!

Keep up the good work - focus on keeping what you have rather than working on a side hustle if that is not feasible right now. I suspect you can cut more, you just have to get used to living within your means.

Don't lose heart!

Kris

DreamChaser57 said...

Awwwwwww, WCB, you “sound” a little discouraged and overwhelmed, that’s to be expected. Permit yourself only the occasional indulgence of self-pity. It can derail your truly heroic and intense efforts! I am a long time listener to Dave Ramsey’s podcast as well and the fact is that an overwhelming number of the callers are couples, but most of them have only one income. Also, a lot of them have kids which are very expensive. You’re projecting when you estimate that this will take you ten years. You’re assuming your life will remain stagnant, that your salary will stay the same, and that your efforts will consistently yield the same results over a prescribed period of time. Let all of that go. Just focus exclusively on the next goal, looks like that would be Group P (Federal Sub Loan).
Your idea about raising your retirement contribution 1% annually is smart. I think adding $200 per month to savings is too much too soon. Savings account can be drained and I do not mean for emergencies, I mean when people overspend. Perhaps you can consider just adding $50 a month thru 2011, access your progress and maybe up it to $75 in 2012.
I feel your pain with getting paid monthly. I have never been paid that way before.
Have you read any of the books you were looking to read for the new year.
Keep the faith!

debtmaven said...

I think those are fabulous and smart goals. I heartily agree with the 1% increase in 401K contributions - I'm doing the same thing myself (but I increased mine 2% this year, partially due to the payroll tax cut of 2% in social security taxes. 10 years is a long time to wait, and things will definitely not remain constant in that time (both good and bad). But it sounds like you have a good plan to start, and I'm sure you'll be able to accomodate changes as they occur.

Anonymous said...

You know the effort you have put into trying to get on top of it all are clearly visible to outsiders. As you see your efforts everyday you might not notice how great you are doing (whereas to outsiders who read your blog every so ofter it is clear you are really getting somewhere).

It is true it might take a while to pay off, but you will get some boosts as you go along (e.g. when you get it under $200,000 and you dont see the '2' anymore !!!)

but I think just getting the week to week frugality habit ticking along is the thing as inevitably with time you will see the results !

The $200 challenge the one to stick to ! :)


Using all bonuses on debt sounds good as going to be satisfying to make a big hit every so often

Slowly building up a bigger e-fund might help give a feeling of security after a while. It definitely is more relaxing when you start to have something noticeable there.

the plan looks good

Chitown said...

@ Anon -- I am going to flip (literally) when my student loan debt is less than $200,000!!!