long term plans

iVillage Member
Registered: 08-24-2006
long term plans
9
Tue, 09-25-2012 - 11:56pm
Hi, I haven't posted in a while so here's the basic rundown. I am 33 and recently got married. My H is 36. I have an almost 13 yr old DD who lives with us about 25% of the year. I filed for a chapter seven bankruptcy last year due mainly to medical bills and it was discharged in Feb. I have a private student loan from 14 years ago that is currently in default and with a collection agency. It's around 18k. I also have a federal student loan that is at around 1,500 and in good standing. I recently took out another 13k in both federal and private loans to go back to school for massage, and I have just about three months left before I am finished.

H makes about 35-40k a year before taxes depending on bonuses. I am currently working 30 hrs a week at a nail salon and make 1600-2000 a month take-home depending on the time of year. I give my H 870 a month. This covers rent, all utilities, cell phones for dd and I and health insurance for dd and I. I also pay 300 a month in child support for the nine months that dd is with her dad, and most of the transportstion costs for her visitation, which averages at least 2500 a year. The remainder I use for food, bus fare, any additional school expenses, gifts, haircuts, clothing, etc. We do not have a car. My income pretty much covers all my expenses with a small cushion. All of my student loans are in forbearance until I finish school, exfept the defaulted one. They are pretty much leaving me alone for now. I only heard from them once right after my bankruptcy was discharged.

Once I am done with school and have my license my plan is to get a second job doing massage, keep working at the nail salon as much as I can, and pay off the decaulted loan as quickly as possible. I am also trying to rebuild my credit score which is currently just over 600. I have one credit card with a 500$ limit which I use for a couple things each month and then pay the entire balance every month. The defaulted student loan has dropped off of my report, but the others are on there as well as the bankruptcy. I don't have any other credit.

Payments for the three smaller student loans will be just over 250$ a monthwhen school is over. I am considering just paying off the 1500 one first to get it out of the way, especially if the collection agency for the defaulted loan is still not bothering me. The only reason I wouldn't is because the interest rate is really low, and since it's federal I have a lot of flexibility with payments, but it would be nice to just get it paid off. The defaulted loan will be my next (or first) target, followed by the 5500 private loan I recently took out for school. The last loan, around 7500 is also federal, so I'm not too worried about paying that one off as fast as I can.

I have some other financial goals as well. I will need to budget in about 400 a year for continuing ed requirements and license renewal. I currently have no retirement savings (H has some, around 3-4000 right now) and my employer doesn't offer it. DD will also be finished with high school in less than six years and I currently have only 300$ set aside for her college.

I need to figure out my plan. My goal after school is to gross 5000 a month. About 1000 of that will have to go to taxes, 1800 for my regular expenses, and the remainder can go to debts/savings. I am not sure how long I will realistically be able to keep up that kind of work schedule though. I will do it as long as I have to to pay off the defaulted loan, after that I may have to cut back some.

I am also trying to decide if at some point I want to try to buy a car and/or home. My H is too blind to drive, and I don't know how much I would use it, but it might be nice to have, and a car loan could help my credit score. I don't really know if buying a home would be worth it.or not either. H has no debt and never has. He does not have a credit score. I don't really know how much I should save for dd's college and retirement either. Any help sorting this out would be greatly appreciated.
iVillage Member
Registered: 04-10-2003
Wed, 09-26-2012 - 9:27am
Hi!

Sounds like you have a heck of a lot going on right now :smileyhappy:


When did the loan default? If it's not even showing on your credit report anymore than is it possibly past the limitations (I'm not by any stretch an expert but from what I understand after so many years of inactivity they can't come after you anymore? This may be something to consider looking into because it would eliminate a HUGE chunk of the debt)

If you don't need a car don't buy it. Its a very expensive way to increase your credit score. Even if you pay cash you still have to budget for repairs (could be high with an older car) maintenance (mine is still under warranty and I'm spending around $500 a year on it) parking, gas, insurance etc. Why not just get DH a small CC (like yours) and have him do the same thing you are doing.

As for a home, that's really something that only you can decide. I opted to buy a home, but its also very expensive. I'm trying to pay it off asap s that I don't have to worry about the mortgage and then it's just upkeep!

Finally, I would prioritize retirement over college. Some may disagree with me, but there is not better gift you can give your child then being self sufficent in retirement. I'm going through this with my mom now and I wish to heavens she had put herself before us earlier so that I don't have to worry about her now that she is only 10 years away from retirement with very little saved. If your daughter needs to take out loans to get through school you can always help her with the payments. You can't borrow your retirement.

Just my thoughts :smileyhappy:

Bex -

iVillage Member
Registered: 08-24-2006
Wed, 09-26-2012 - 11:55am
Well, I know your credit score has to do in part with the number and type of credit accounts you have. H applied for a cc with his bank but was denied because of lack of a credit score. I was thinking about adding him as an authorized user on mine.

What are the financial advantages to buying a home? Other than at some point you don't have to make payments anymore? It would probably cost us at least twice as much to buy a comparable condo to the apartment we are renting. I just don't know that it's worth it.

As for the student loan, it defaulted probably six or seven years ago, and the last time I made a payment was four years ago. I was under the impression that because it's a student loan they can basically come after you forever though. That's what my atty said.
iVillage Member
Registered: 04-10-2003
Wed, 09-26-2012 - 12:40pm
I'm sure your atty is correct. I know here in Canada gov't student loans are exempted from BK but I'm not sure about private.

For me the advantage of owning a home is being able to do whatever I want to it. I have 2 dogs and a lot of places won't rent to folks with dogs. It's also asset building. When I am done I will have an asset (what the value will be we can all argue about) but I would like to assume that it will increase a little bit. And, with the rates being so low the costs of owning the home insurance and utilities are not that much more than what I would pay to rent.

Now, for some people renting is the right decision. You don't have to worry about upkeep and maintenance and if the cost of renting is significantly below the cost of owning, putting away the difference make sense too. Really it comes down to your situation and what makes sense for you!

Bex -

iVillage Member
Registered: 05-09-2002
Wed, 09-26-2012 - 6:32pm

Congrats on your recent marriage!  :smileyhappy:

I would be cautious in doing anything just for your FICO score.  I thought mine would be WAY higher now - I am doing better salary wise, we have a mortgage, I have student loans in good status, etc., and I'm not even 700.  It is a tricky game.  

iVillage Member
Registered: 08-24-2006
Thu, 09-27-2012 - 12:00am
Yeah, the more I think about it the less it seems like a good idea. I hate driving, but there are times it would be very convenient to have a car. Still, we'd have to pay another 50 a month just to park at our apt building, gas, maintenence, insurance. And I'd still probably take the bus to work anyway.

How on earth do you figure out how much to save for college and retirement? I mean, I'm sure more is always better, but is there some sort of ballpark based on how long you have left?
Community Leader
Registered: 08-25-2006
Thu, 09-27-2012 - 1:34pm

Good to see you!

I can't help too much with the details, but I would agree with Bex that saving for retirement should come before saving for DD college.  I am guessing that you would want to save a certain percentage of your income.

As far as that old, really large loan, if it is not on your credit report, I would lean towards making that the last debt you pay off.   Although maybe the accruing interest is why you are anxious to pay off.  But gosh, if it is not affecting your score, I would be tempted to wait on that one. 

I don't think home ownership has to be for everyone.  Personally, I am for it.  I like being able to do what I want, when I want, in my own home.  Yes, their are expenses that go along with it, but I would rather spend my money on something that is mine.  Now my sister could care less if she ever owns her own home.  So, to each their own I say! 

I think the car thing depends where you live.  Unless you live in a large city, not having a car can be pretty tough.  Your money may be better spent on cab fare when you can't take public transportation.  Especially if your DH is unable to drive.  Personally, I can't imagine not driving.  But I live in an area with limited public transportation. 

And like someone already said, the FICO score game can be tricky.  It does affect many things, like insurance rates and the ability to rent a home, etc. etc.  And of course, getting any kind of loan.  Nothing wrong with improving your score by always paying on time, and using your CC the way you do, but be careful seeking a purchase only for the reason of improving your score.  If you do, save up the cash first, then see about getting a secured loan of some kind that you know you can pay off. 

Anywho, just my two cents. 

 

Serenity
iVillage Member
Registered: 08-24-2006
Thu, 09-27-2012 - 2:40pm
Yeah, I was considering just setting the money for that student loan aside, and only making payments if they threaten to take me to court. It's been very hard to get any useful info about what they can and can't do at this point. Even my atty didn't seem completely sure. I don't even think it's accruing interest, and if it is, it isn't much. The loan was accelerated when it went into default. I just don't want to think I'm all in the clear, and then years from now get served with a judgement notice. The collection agency it's with, they're real a-holes. I kind of don't want to deal with them unless I really have to.

We live less than a mile from downtown Seattle. We probably will always have to live in the city because of H. He walks to work. I take the bus to work and walk to school. There are times when it's kind of inconvenient, like anytime we are socializing anywhere outside of walking distance from the apartment, because we either have to find a ride home or make sure we leave on time to catch the last bus, which is usually pretty early. Also, if we have to purchase anything heavy we have to take a cab, find a ride, or have it delivered. It kind of sucks sometimes being at the mercy of the bus showing up on time or not, and I hate being late to work because of it, but I suppose that could happen with car troubles as well.

I was thinking of setting aside half of my disposable income for college, and half for retirement until dd starts school. I am not planning to pay for 100% of her school necessarily. I have a 529 plan for her right now. But I was wondering, what if ahe decides to just do a trade school and doesn't use all of it? Could the rest be taken out? Could it be used for my CEUs? So many questions.
Community Leader
Registered: 08-25-2006
Thu, 09-27-2012 - 2:57pm
There is a thread somewhere from several months when I got on my soap box about paying for kids college, especially while in debt. (I must have been PMSing that day)

I also wondered about the 529 and although I think there are restrictions, I believe you can always get your principal back, but you might lose the interest earned. You would have to check though. I am just going off a vauge memory, I really don't know.

As far as a car, I suppose you could do the math and see what makes the most sense for you two. For instance, I would not save any money taking the bus to work and leaving my car at home. And with the cost of a cab here, it is cheaper for me to drive. So it is all relative not only to cost, but your needs.

If I had to walk to a garage to get my car, I would think twice. KWIM?
Serenity
iVillage Member
Registered: 08-24-2006
Thu, 09-27-2012 - 3:11pm
Well, my thoughts are that it would be completely feasable for me to have all my student loans paid off within a couple of years, leaving me some time to save up for dd's school debt free. I don't know if her dad will be contributing anything. It certainly can't be counted on.

I know that I at least want to help her with the costs because I am now going to school for a third time primarily so I can make enough to pay off the loans from my first degree (which wound up having very little value in the working world). My parents chose not to help me with any of my school costs, and it has been extremely hard on me as an adult. It makes me sick to think of all the years I went without to scrape together those payments, only to now owe 50% more than I had originally borrowed. I feel like an indentured servant. Who knows what will happen in the future, but right now private student loan companies have more power to collect than the mafia, and they don't have to give you any help during periods of financial hardship. And there are limits as to how much you can take out in federal loans, so using at least some private loans may be neccessary unless you can pay for some of your expenses up front.