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Checkpoint: My Current Financial Situation
Of course I had to do this – to lay out my current financial situation in general terms. Give me a break, this is a personal finance blog, right? And it is my blog, right? So, I get to lay out where I currently stand. 
I wanted to do this early on in the life of BFN so that I have something to refer back to as times goes by. So here we go…
Where we were when we started to get uncomfortable with debt…
A few years back, my lovely wife and I were just happily (and ignorantly) going along through life doing what everyone does with their finances. We had just moved to a new city and bought a new house and two new cars (one used so just "new to us" but the other was new and leased!). I had some student loans as well and my wife had lots and lots of student loans from her medical school. So, we deferred her loans and paid the minimums on everything else and went on living. We never really were irresponsible with our daily spending though – we paid off the credit card balances each month (although we did routinely jump at "90 day same as cash" deals). We did manage to accelerate and pay off my student loans but then when the lease was up we sold our leased car and bought an even more expensive minivan. By now we had one child and another on the way (hence the minivan) and the expenses that went along with them (like the minivan…and lots of diapers).
Shortly thereafter, we moved across the country and got an even bigger mortgage with $0 down (did you know they give houses to doctors without any down payment whatsoever?) and replaced our SUV with a Honda Civic (a more responsible choice but still purchased with a loan, of course) So, here we were with an even bigger mortgage and even bigger student loans thanks to the wonderful concept of deferment and two car payments. At this point, we had roughly the following debts:
- Mortgage: $1500/month
- Student Loans: $1000/month
- Car 1: $500/month (5 year loan)
- Car 2: $300/month
So this is when we really started to feel uncomfortable with all this debt. And can you blame us, we were spending $800 on car payments and another $1000 on student loan payments – talk about a cash flow crunch! Remember (for all of you saying, "so what, his wife is a doctor"), at this point my wife was still in training, so she was not earning a "doctor" salary. This was the point where, while still not being able to imagine ever getting rid of our student loans, I really started to obsess about getting out of debt (we’re talking even thinking about it in the shower kind of obsession).
Where we are now…
Since that time, we have moved again to a more expensive area so we bought (wait for it..that’s right) an even more expensive house (maybe not the best step for someone starting to become quite obsessed with debt?) So our mortgage payment has gone up significantly. On the other hand, we have dropped the hammer on the rest of the debt and have paid off both car loans and about $70,000 of the student loan debt over the past few years. Again, remember that my wife works part-time, so her salary only went up 20% or so after she completed her training, not the 200%-300% like for some specialties. We mainly accomplished this by selling stuff like our previous house (remember when the housing market was going up?) and cashing in some expensive universal life insurance policies. Actually, when I look back on it now, it just doesn’t seem like we should have been able to get rid of that much debt – I guess it was one of those times where we started down a path and God blessed it.
Currently, two debts remain: a mortgage and a student loan (with about $70,000 left on it). Well, we sorta have a third because my wife received some bonuses when she started working that we would have to pay back if she stopped working before three years have elapsed – we count that as a debt in our net worth calculations.
Where we want to go…
I want to be out of debt. I have wanted to be out of debt for a few years now…and we are getting close to only having the mortgage left. We are currently paying about double the payment on the student loan each month and also saving into a fund that we will use to pay off the remaining balance (since we only have one loan left, the payment is not the $1000 mentioned above). We currently have enough cash to pay off the remaining loan, but I have been nervous to pull the trigger because it would expose our emergency fund and we would not have enough cash to pay back my wife’s contractual obligations if we needed to do so in the near future. [Check back next week for a post on this very subject] We have been doing retirement savings and a little investing, but the majority of our extra cash goes toward this loan.
What have I learned thus far through this journey?
For one thing, I have learned that this is quite true:
The rich rule over the poor, and the borrower is servant to the lender. Proverbs 22:7
My wife and I have been somewhat limited in the choices that we’ve been able to make due to the amount of debt we’ve had and have. For instance, if she wanted to stop working and be a full-time mom, it would be quite difficult to do right now because of the student loan and sizable payment she would have to make to pay back her bonuses. I really want to go into depth on this verse (don’t worry, not right now!) and am looking forward to doing that in a future post.
Of course, the name of this site comes from the following passage:
The LORD will open the heavens, the storehouse of his bounty, to send rain on your land in season and to bless all the work of your hands. You will lend to many nations but will borrow from none. Deuteronomy 28:12
And put that together with this:
"For my thoughts are not your thoughts, neither are your ways my ways," declares the LORD. Isaiah 55:8
I believe that once we shunned the conventional worldly thinking on debt and got serious about eliminating it and desiring God’s blessing of not having to borrow, He blessed us as we started down that path. We are certainly not there yet (our mortgage balance is many times larger than our remaining student loan), but I feel that we are on the right track.
So there you have it…the brief version
Well, that’s the story…briefly (yeah, I can’t believe it either) … where we were, where we are now, and where we want to be in the near future. I really hope to be able to soon say that we are debt free except for the mortgage. When we make it, maybe I’ll call up Dave Ramsey to yell "WE’RE DEBT FREE." Have you ever listened to one of his shows where callers do that? It is incredibly inspiring! I might wait a bit for that, though, because I don’t think it would sound so good to yell "WE’RE DEBT FREE…EXCEPT FOR THE MORTGAGE AND THE CONTRACTUAL OBLIGATIONS WE MIGHT HAVE TO PAY BACK SO WE COUNT THAT AS A DEBT TOO!"
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4 Responses to “Checkpoint: My Current Financial Situation”
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John,
Great post and I commend your bravery for laying out, ‘the path less traveled.’ It seems you and your wife have a plan and are working it effectively. I’m curious though, to hear your thoughts on how retirement savings ranks as a financial priority? I may have missed it, but it seems like your primary focus is debt repayment (which is a very good thing) and your retirement savings is taking a second seat?
I know you mentioned you were doing some retirement savings, how important do you feel that is in the grand scheme of things? And how do the pre-tax and employer advantages (like 401k %-age matches) affect the rankings? Does that make sense?
Thanks,
Tom E
Tom,
I feel that retirement savings is the most important long-term savings priority. I think it should come before saving for college (you can’t get a scholarship for retirement), before prepaying a mortgage, etc. With a company match in a 401k, I think that should funded at least to get the entire match. For us, we currently do some retirement but will do more when the debt is gone. (my wife does 6% and I do 7% in a 401k and I get an 8% match on that (’8′ is not a misprint) – so though not near the max, it is a fairly significant number). We have decided that getting rid of the student loan debt is a very high priority for us – others certainly might disagree.
I don’t think that having a tax advantaged plan or company match should affect whether or not a person saves for retirement – just where they save.
I plan on doing a series in the near future on how I would structure a basic financial plan and will get into much more detail on these topics then.
Thanks for reading and commenting!
Thanks John. I agree with your position about retirement first, college second. And, considering your healthy retirement contributions (8% company match!?!?!…Are you kidding me? I must admit that causes me to covet!), I can see why you are agressively paying down debt. As a household, a 22% annual retirement savings rate is very respectable, especially considering the national average is WAY below that. Perhaps a future blog post?
Great post, it’s interesting to read other people’s financial journeys, where they’ve come from, and where they’re going.
8% match. WOW.. that’s all i can say.
I’ll be staying tuned for more great posts – and see you round plurk!
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