April 18, 2012, 9:12 am, Ahh.. Back porch (or balcony) eating out is my favorite! Explosions in the Sky is by far my favorite band! I was always puzzled by the fact that other people my age (I’m in my upper twenties now) always seemed to have a more expensive and trendier wardrobe than me, always had money to spend at the bar, and could afford expensive cars and igadgets and ski trips to Colorado. Look for a place that you could rent out a room or two to friends so that they can pay your mortgage with their rent. Finally, I realized how dumb I was, so before I ever missed a single payment, I went to the “credit consulting” place (what a waste!). If you want to buy something. Nobody is, so what’s the big deal? I see a dollar as 1.5 dollar (which has my unearned ones), so each purchase is calculated, valued and spent. That loan free date is the exact moment you begin saving for your forever house. He never asked for money again. Well, as a result of the forced frugality from living with CC debt, followed by voluntary frugality while paying down debt I found I was now a bona-fide debt-averse frugalista. Happy ending…I turn 55 next month and I will indeed be retiring as of 5/31. I consider my Vangaurd Roth IRA contributions as part of my emergency fund. There are two types of people in this world. After 7 years, you will be an expert at living on half your salary or less. Would you recommend paying off the car payment and student loans before saving for a home down payment and moving? Bought my car new,paid cash and still driving it 23 years later. Another good friend/colleague of mine back when I was an engineer was struggling with credit card debt. Haha! Alright– I respectfully request clarification on the strategy of leveraging cash on hand via line of credit to pay down student debt as mentioned above. I tried counselling him instead, but he continued to make extravagant purchases such as $30 giant omlettes which he called a “good deal” because they had 6 eggs (at a true cost of $0.50). I payed $600 a month for a larger apartment. At this point everything is on autopilot, we’ve done the hard work of cutting expenses and reducing what can’t be cut entirely. It’s OK to do them from dry under pressure. Personally, I never realized that distinction until I had been using YNAB budgeting software for over a year. It’s always good to diversify. The interest rate on the car loan is 3% and the student loans are 4% to 6.8%. For example, when my brother was stuck because he couldn’t afford to pay first and last month’s rent to move closer to his job to a place that was cheaper and wouldn’t require a car, a loan of first and last month’s rent (or to subsidize whatever part he couldn’t afford) could make a difference. Also…as an aside…you have got me walking to work! I also have a disproportionately large share of my assets in real estate since I live in an expensive area and have a (profitable) rental property, so I prefer to have some diversification. Here’s the worst case scenario for me: I get fired from my cushy job and it takes me a long time to find a new one. Lesson learned, and probably cheaper than a lot of life lessons. Most people on this blog would recommend paying it down as aggressively as possible and setting high monthly payments. I’ve made peace with this, it was my fault as much as theirs. Then I set my sights on early retirement. Instead, he's just remarkably adept at living well below his means. LOL. Just start yourself a stash in a Vanguard index fund account that allows withdrawal without penalty at any time. Also, I would strongly recommend not buying unless you can put AT LEAST 20% down (plus closing costs) so that you can avoid paying private mortgage insurance (PMI). If I got a dollar for every time people said “but you need a house payment, what are you going to write off?” Whoever told them you need a house payment to avoid giving the government 2,000 to instead give the bank 10,000 dollars of interest a year should be SHOT! My parents helped us with our house down payment, but (a) they know we’re good for it, and (b) they won’t go broke if we flake out. Generally, bank accounts interest is lower than … Like, +10 if you are completely debt free, +5 if you only have a mortgage, +3 if you only have student loans under 20k, 0 if you have student loans over 20k, -3 if you have car loan, etc. I think I learned most of this Debt Aversion from my parents. How long would it take you to pay off living frugally or becoming a Master Mustache? I think I’ve heard stories that indicate otherwise :-). I know many others who try the drastic process, and fail, and that’s it. Also, I only occasionally tend to donate time to an organizations and charities, but not my money because they are much more wasteful than I am. Then it’s time to bust out a spreadsheet and carry out a few quick calculations. Just thought this might interest some people. EarningAndLearning Anyway, I think it took another two years or so but in October of 2007 I paid off the last of the CC debt. I continue to track every single one of my expenses and set goals. You pay 10,000 in interest to the bank to save ~2800 in taxes paid to the Govt. I guess I just can’t fathom someone your age actually giving a care what their parents think about their finances. Since I realized that will not help me get out of debt in any reasonable time, I went towards bankruptcy. But if you’re already in a ton of credit card debt, having $3000 as a cushion against the water heater dying (or whatever) will save you from just putting that water heater repair on your credit card. I currently have 6 month’s worth of little employees idling about in a savings account, and I’d really like to put them to work. I also agree it has to be a wide combination of factors, and it IS possible to change later in life (for worse or better). When he gets a job (hopefully in the next couple of months) we’ll have a lot more flexibility with that $. “Problems that could be solved with money aren’t really problems.”. For a few years, we gently nudged it. Here we are learning how to rake together much larger sums of money to allow us to live our lives free from mandatory work. Working in standard tech-industry cubicle jobs in various locations throughout the late ’90s and early 2000s, he retired from real work way back in 2005 in order to start a family. 1,000 in the bank as a “baby” emergency fund. Getting rich really is an exponential process, a concept that is hard to grasp until you realize that your money can work harder than you can. Luckily I was unable to get a credit card until my frugality muscles were well developed. I imagine most people will stick with dividend earning stock (I do that a bit too) but the point hods. I just realized I could put the rest of my cushion in my Vanguard account, where my long-term savings is hard at work. As we battled on the Nintendo Wii, the wife came home from working at the part-time second job she had boldly taken to accelerate the paydown of some old personal debts. When you have a goal, there is no waivering, because it will SLOW YOU DOWN!!! Money market fund (High Yield) (insured) savings account. I found one that had a post from one of the authors, containing a table like this: Mortgage: $75,000 @ 4.5% interest Everything worked out fine in the end, since this was an honorable friend, but I still learned something about society’s differing opinions about debt. And borrowing dulls the edge of husbandry.”. Tim Arnold April 18, 2012, 2:01 pm. Also I would love to see someone come up with a “How Mustachian are you?” survey/grade so people can really see where they stand. I like to think of Mr. Money Mustache as an advanced personal finance blog. Mr. Mustache's #1 Fan I have found it incredibly life-changing to buckle down and figure out a means to pay off this debt, no longer do I spend extra money on shopping or extravagant stuff that I will never use! I see no reason to pay it off ahead of schedule, although I certainly could, since even in the mediocre market since 2000 I’ve been averaging 4.7%+ CAGR on my investments, and I don’t expect inflation (and market returns) to stay this low for the entire remainder of the mortgage term. The emergency fund is $3,000. I gave him a four-digit sum (€, not $) and as he was and still is my best friend and I have known him for 25 years, I never really expected to see a penny of it. If your new to the mustachian way of thinking you’ll probably find other excellent tips on the blog that will help you shrink you loans even faster by cutting expenditure further. I don’t talk about my own personal battle with consumer debt and how much I struggled to get out of it, because come on, I am Mr. Effing Money Mustache. February 5, 2014, 6:26 pm. Much as I now live in a balance between freewheeling cash spending and still enjoying an efficient lifestyle. Diets don´t work because yo can start for two weeks and nothing happens. Instead of photo album I used small box that was hand decorated with beads. It’s also sad when people don’t show up to work because they died over the weekend of old age.”. April 18, 2012, 5:34 pm, “I saved thousands of dollars [on the taxes I paid to the Federal Govt] with the mortgage interest deduction this year.”. Why is it going to cost you $14,000 to pay off your debt? We just bought the house less than a year ago, and we managed to pay down 10% of the mortgage. MMM has his financial situation under control, but his circumstances are probably vastly different then a number of the readers. (Don’t bother using that idiom with a person born blind either. Super late to this party (reading through the posts from the beginning), but I thought I should contribute my odd early stash location: I’m not sure too many places would want to hire me if I’m gone every other week and b.) Nurse Frugal But this is an early retirement blog. Mr Money Mustache est l’ami qui dit les vérités cruelles dont le monde vous préserve, en vertu de l’adage « qui aime bien, châtie bien ». http://www.youtube.com/watch?v=4r7wHMg5Yjg The whole point of the money you are losing in interest being money you could spend on fun stuff like at perpetualkid.com is what caught my attention to pay off my debt in the first place. She extended the time before eviction by getting money from various other places, but she was still evicted. The #1 scenario I can think of that would require tapping into an “emergency fund” (or credit fund in this case) would be losing your job, at which point the loan would become immediately due. 2.) Complaints and insults generally won’t make the cut here, but by all means write them on your own blog! My current understanding and situation are as follows: I have a $25k emergency fund in my checking and $79k in student loans (putting extra $800 towards principal monthly). I still have mortgage debts and those are painful even if they are low interest. My father commuted 50 miles each way to work 4 days a week and put in every over time hour he could. Are there more ways to be frugal and still be happy? From pre-k to maybe 1st or second grade, I put all the money I earned into the keep of a cardboard castle I made in school (the pre-K lemonade stand money had been somewhere else I don’t remember up until I built the castle in our medieval times unit.in kindergarten). @MMM you write, “You don’t start a family … There will be plenty of time for these things later, …” I believed that, but it wasn’t true in my case; were there one thing in my life to date I’d have done differently in retrospect, it’s take on debt to be able to pursue infertility treatment or adoption sooner than I did. Patrick Whoa!! April 19, 2012, 11:15 am. Profoundly bad. This allows me to put more money to work in the Roth IRA than I would if I needed the money and get earn a Federal Tax Credit for Saving (though I’m getting close to having too much income for that credit). Why not sell your car, buy one of the many great very affordable second hand automobiles out there and use the remaining cash to pay down that 6.8% loan? DiggingForDividends Once you can pay off the full amount every month, then take advantage of the rewards. Thanks for all the hard work on this blog. Finances I think were a big source of depression for him, so it was a big temptation. I recently finished paying off my government student loan (after putting a concerted effort at it for a year, although only a fraction of what No More Harvard Debt did!). Instead, invest up to the 401(k) match first, because that’s essentially free money. The individual can control the latter of these two FAR better than the former. For more casual sampling, have a look at this complete list of all posts since the beginning of time or download the mobile app. For sure. I’m in Australia and I do have a home loan that I can withdraw from.. April 18, 2012, 5:13 pm. Let’s illustrate what I mean with a few examples: One time, I lent money to a friend so he could pay his university tuition. But it’s normal. We grew up on and off of food stamps, free lunch programs, and eventually reduced lunch as some of us got older. I gave it. Don’t panic. >>Also, you are 27… It’s time to take control of your finances. Any unpredictable expenses that aren’t covered by the bank account can now come straight out of the line of credit! Jared Chmielecki I like your comment about giving time to charities rather than money. In that case, I would definitely recommend paying down the debt yourself as you will get a much greater appreciation for taking responsibility for your finances. If you like a good inspirational anti-debt tale, check out Andthenshesaved.com, Mrs. Money Mustache Love reading your blog. The Masked Investor I resolved the issue causing me concern and got the funds invested and working for me. Paying off $35,000 in 13 months is awesome. Talk till your blue in the face, and get nowhere. But frugality has an instant effect. See more ideas about money mustache, finance, mustache. You either save up till you can pay for it in cash or you don’t buy it. I only make $45K pre-tax… but maybe I can pay this whole thing off this year. For example, I have a 4.0% fixed rate 30-year mortgage on my primary residence. Then keep going. Those dollars are gone forever, and you’ve permanently lowered your ability to consume luxury products, for the rest of your life. I am looking forward to curling up and reading your blog on my not so frugal ipad (but very well loved that we bought by selling old stuff btw). Either way, we are currently doing a thorough (and painstaking) review of our finances to see where we are spending our money and because I need to know exactly what 6 months of expenses amount to. When his emergency passes, I will be directing him to your site where, hopefully, he can learn a little…. Now, if you’re a Mustachian and you have a 2% HELOC that you can draw from if something dire happens, great! THERE IS A CLOUD OF KILLER BEES COVERING EVERY SQUARE INCH OF MY BODY AND STINGING ME CONSTANTLY!!!! This will probably sound terrible but when I needed a new furnace, I “financed” it by first putting it on the company’s “one year, no interest” account. Almost half my paycheck goes to debt and it will still take me 7 years to pay it off. Although given that this is an advanced blog, perhaps such stuff is too far beneath us…, I’m taking on a mortgage (I can own a house fully in <20 years, or I can rent another 30 years and save at the same rate I am now and own the same house after inflation.)…. I could never understand how my co-workers and peers had such nice homes and cars, vacations, the latest gadgets. It has been so long since we left the American consumer lifestyle behind, it seemed really bizarre someone would have so much useless crap and no real investments. 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