Hello, 30 y/o Military with family

[delsolkm14]

Hello everyone, I will try not to make this terribly long, but it is the intro page, so going to try to post as much info here as I can.

I am 30 years old (31 next month), married (DW is 30 also) and have three children ages 18 months to 12 years in the house. I am in the U.S. Army, have almost nine years on Active Duty and four years National Guard before that. My goal is to retire at 20 years, but that is still a far off place, so trying not to count my chickens before they hatch, but all plans are based off that assumption.

Last year I purchased a three bedroom houses on 6 plus acres in Tennessee on a VA loan. I plan on staying in the area for another 3-5 years at a minimum, but the possibility of longer is an option as well. I will probably rent it out if I do get moved instead of selling.

This is me and my wife’s first house, we rented for a year prior and neither of us had much when we moved into that one, so a lot of the CC debt and credit lines are from furnishing and outfitting the house for us and the kids.

Here are our current debts:

Credit cards: $15,000
Other charge accounts: $15,000
Student loans: $7,000
Car loan: $11,000
Mortgage: $160,000

And our current assets;

TSP (Lifecycle 2040): $9,000
USAA Roth IRA: $650
ShareBuilder account (stocks): $4,500
2004 Nissan 350Z and 1966 Mustang project: $16,000

Currently I contribute $330 a month to my TSP and $50 a month to the IRA. I am also putting an additional $180 a month into my TSP as part of a loan repayment that I took out last year to attempt to catch up on some debts when I was getting behind. That has four more years to go, so in essence you could say its $510 a month into it until 2013.

The ShareBuilder account is a temporary thing, $3500 of it is to remodel our bathrooms this winter, so whatever is over that is my extra money I have made and can do with what I want.

I make roughly $5000 a month bring home, but after my mortgage, TSP Loan, Family Dental Insurance, Charity and a $400 a month payment to my mom, I have roughly $2500 a month in spendable income. I have to pay my car note, student loans, and all the credit/charge cards out of that and then have some left for gas and food and other living expenses. It is tight right now, but we manage. My wife does not work a real job, she is a Scentsy Consultant, but as of right now that is just a part-time thing that basically pays for itself, so no income from it. I get a 2.9%-3.4% yearly raise and a 2% raise every other year as well. I will probably not get another promotion (4%-5%) for 4-6 years.

Our goal is to be debt free within two years (minus the mortgage) and live on the cash only system and minimize our dependency on credit cards. If we don’t have the cash for it, we are not getting it. I am selling my 350Z and my motorcycle when I get home. The money from the 350Z is going to pay off the other car note. The motorcycle proceeds will remove a monthly payment on it. I will be purchasing another vehicle, but plan on under $5000 and paying mostly cash.

At tax time, we got back $10,000 last year (went to mostly debt) and should get similar due to my deployment and low taxable income and three children. Not counting on it until we file in five months or so, but it should be another large stone to throw at the debt.

The $400 a month payment to my mom will end in two years, and I will transition that into mutual fund/CD/investment account type of account to start drawing from at age 45-47.

My goal is to retire completely from any job in 15 years. I plan on retiring from the Army at 42, and maybe working a contracting job or something like that until 45-47. As of right now, my goals are to move to Belize or somewhere similar at age 45-47 and not work again. With my retirement from the U.S. Army and money I am planning on putting away, I think it is doable. I have figured up that I could get roughly $3000-$3500 a month from my Army Pension and additional investments until age 59 ½ and then my TSP/IRA payments will kick in and cover me once the other investments run out.

Again, sorry for the long post but I just wanted to get all the info out there and get advice on my situation. I know I could have done better these last few years, but live and learn. I am trying to adjust my habits from living above my means to at my means and then to below my means. My wife is on board with it as living paycheck to paycheck is no fun for any of us in the house.

 

[TooFrugal]

Can your wife get a job that pays more? There seem to be a lot of military wives who write for sites like ehow, infobarrel, hubpages, associated content, etc. The pay isn't fantastic, but it is stuff moms can do from home with kids in the house and if their husbands get transferred since the job is online the job can go with them.

There are also sites like mechanical turk and fiverr to make some extra money while working at home.

 

[delsolkm14]

TooFrugal,

We are hoping that once I am home (deployed) she is going to be able to do more with her current "job" and possibly bring in $200-$400 a month on it. With me being gone, she doesn't have a lot of free time to do everything she would like with it. It is a new venture for her, only been doing it 2 months, so hasn't been able to give it her all.

 

[Bestwifeever]

Welcome to the boards and thanks for your service!

Getting all the money details out on paper is a huge first step toward your goal of being debtfree in two years. I imagine most people would tell you to be sure you have enough in savings for an emergency fund--six months of expenses is typical--and then go after the highest credit cards first.

With three little ones and your first house, it is a busy and expensive time for you and your DW, but fun too.

 

[BigNick]

I imagine most people would tell you to be sure you have enough in savings for an emergency fund--six months of expenses is typical--and then go after the highest credit cards first.

With $15K in credit card debt and the relative security of a military job (at least, compared to many people, and assuming that any downrange deployment is not directly at the combat sharp end), I would be going after the CCs first.

@desolkm14: your plan is achievable, but only if you can clear that $48K of unsecured debt as a top priority. That means throwing every penny of extra income at it; it may mean deferring parts for the Mustang project to get gas for the minivan that's going to replace the 350Z. I guess you're probably paying or rolling up somewhere north of $400/mo in interest right now; that is just paying for bankers to varnish the desks of their boats.

In fact, unless you're expecting 15% out of the S&P in the next 12 months, I'd suggest selling those stocks and paying off 1/3 of the CC debt. The feel-good factor of "having a couple of grand in stocks" should not disguise the fact that you are at the start of an upward slope.

You definitely need to have your wife onside with this, too. She may or may not currently be fully signed up to the "frugal now, retire early" mentality. Particularly if she goes out and gets a "real" job, she may not be too keen to find that 75% of the money is going to pay down debt. (This can be a very touchy issue, not only between you and her, but between you and the person giving the advice; I apologise in advance.)

 

[Sarah in SC]

Thanks as well for your service and welcome to the forum.

I'd recommend you and your wife read one of Dave Ramsey's books like Financial Peace or the Total Money Makeover. That is where we started and it helped us keep up the momentum, especially in the beginning.

We love Belize--where are you thinking about retiring down there?

 

[Rustic23]

I would suggest Dave's books also. However, keep in mind when you are building you emergency funds and such, you are in a little different category than most. You have one of the most secure jobs in the country, dangerous at times, but secure. I would defer retirement savings, for debt pay off. When we were in the Air Force, our emergency fund consisted of enough to fly the family round trip to a funeral. Morbid, yes, and we did have a fund slightly larger. The one thing we did avoid was paying interest! From about the 8 year point on we payed cash for everything but the house.

I am with Ramsey on this point. People just don't realize what interest does to their standard of living. In your case almost 10% of your take home pay goes to interest. That is more than you wife plans to make working. I believe your top priority should be to become debt free! Retirement, kids education and the rest will take care of itself.

Also, check out Nords's new book, well when it is published.

 

[delsolkm14]

Thanks for the replies.

I am going after the CC debt right now, paid off about $5k in the last 6 months with my extra pay from being deployed right now. I should have about another $1,500 before I leave to pay off a couple other smaller balances on cards.

The stocks are just a temporary thing like I said. $3,500 of that is earmarked to remodel our bathrooms. The house we bought was built in the 60s, we remodeled the kitchen, dining room, living room and family room as part of the buyng agreement (old owner paid $9,000 for materials, I did the labor) so the only thing left that is from the 60s is the bathrooms.

My wife is definitely on board, she doesn't spend much at all, I have been the spender of the family. I grew up pretty poor, so when I started to get steady income, I tended to get a lot of the stuff I wanted that never had before. Reelinig that in now, mustang project is definitely on hold until we get the other debt gone.

I am not sure where in Belize, I have never been. I have just been reading on it and it seems like it would be a nice place to go. They have "retirement" communities down there being constructed and a lot of undeveloped land. When I get done working, I want to not work (fish, golf, swim, dive, boat, etc) so that seems like a good place to do it. It may not be Belize, but it will be a similar country or area where I can do nothing and have a lower cost of living and slower/off the grid lifestyle.

 

[Sarah in SC]

Did I understand that you are invested in stocks for a short term financial remodeling goal? Whoa. That money should be in cash.

Again, I'd mention reading more on budgeting and debt reduction, if not Ramsey's books, then certainly review some of the others available, avoiding the get-rich-quick sorts.

Belize can be a wonderful place to visit, but will take considerable adjustments to live there (or anywhere else in the developing world for that matter) permanently. Who knows what it will look like by the time you retire, but for now it is a time-consuming place to build, buy groceries, and get around, according to my friends who are there.

 

[Rustic23]

One of your major benefits from retiring from the military is health care. I don't know what effect the new health care bill will have long term, but I believe retiring in a foreign country is not recommended. You will also have a couple of kids in college. I would suggest you look south to the gulf coast. Buy land now, if possible. We live on a lake in Texas. There are wooded interior lots with all utilities in our area that can be had for less than $10,000. I doubt these will be able to be had at anywhere near this price 10 years from now. While I have not looked I'll bet the same is true for parts of LA, AL, and MS. Northern FL, may be a different story, however, there sure is a lot of forest in that area. All these have a fairly low cost of living.

 

[delsolkm14]

Did I understand that you are invested in stocks for a short term financial remodeling goal? Whoa. That money should be in cash.

Sorta but not really. I put $3500 into the account about 3 months ago to hold onto until Nov/Dec. I don't get back to the states for a few months, so can't remodel until I get back (DIYer) so letting it make me a little money until then. I am up about $750 now, and hope to make another $500-$1000 before I withdraw it. I have been doing research on the stocks I bought, so trying not to loose any of it (which I know is possible, but have stop loss points to make sure i don't loose any of the original $3500).

 

[Sarah in SC]

I would disagree with your strategy. And I would probably put that money toward paying off your debts, not remodeling functional bathrooms. But to each his (or her) own.

 

[delsolkm14]

I agree with you, but when we bought the house, that was one concession i had to have with DW, that we redo the bathrooms within the year.

I am hoping to get them done for under $1500-$2000 (not doing a drastic change in layout, just new stuff and they are small bathrooms so it is feasable) and then applying the remainder to our debt. We have a discount warehouse for tile and bathroom items, so think I can get a good deal on something we like, not neccasarily what we want. Would love to go all out and do a theme bathroom, but reality is, we need to do it for as little as possible.

Gonna check out some of the readiing posted, will kill some time for me over here anyway. Thanks for the advice, and all is always welcome (though I may be a little hard headed in taking it at first).

 

[Joshua]

Welcome to the board! You are a couple years older than me and have clocked some more time toward your retirement than I have, but still, it's always nice to see another military person thinking about the future.

I have a couple of daughters and a wife who does not currently hold a job (beyond being a military spouse and mom - might as well be two full time jobs right there...), so I feel your concerns about trying to balance everything right.

As to your resolution to get your CCs paid off - GO GO GO! *cheer* I'm also trying to kick the credit card habit right now. I hope to have them zeroed out by sometime this spring.

Do you think you'll have much trouble keeping them clear once you get them paid off? I know that one of my problems is partly related to my job - I feel guilty about working so much and being away from my family so much, and I tend to overspend on them in an effort to make it up... but, realistically, most of the stuff I buy is disposable, and it just eats up the money I could be doing something more important with - like giving us a secure financial future!

Josh

 

[delsolkm14]

Honestly, I don't know about the CC staying clear. Plans are yes.... but that doesn't always happen. I only have 3 that are still open that I can use anyway, so once I get them paid, I will only have limits in the range of $5k, so shoudl be ok.

I think once we get them paid off, we should be good to go though. We will have the cash to pay for the items, rather than using the money we make to pay the CCs, then needing to purchase stuff, and not having money, so use the CC to buy it. It is a vicious cycle, but when you are close to pay check to paycheck, one that is a reality.

Credit recovery is a hard thing to happen too. Takes time. I was able to get lots of credit when I was above 700, but as soon as I used it all and got higher balances, it dropped to low 600s, so then during reviews, the cards were closed, so in turn makes it harder to raise your score back up. I fought this once, as about 10 years ago, I had a credit score of only 453, and worked diligently to pay off old debt, get new to improve and worked it up to about 725. Then got married and had to furnish a house and all, and went the quick and easy route. Making life harder now, but at the time, what I needed to do to make sure we had stuff. Sure I could have done with less or different, but live and learn, again.

I have been gone a lot, on my 5th trip, 49th month right now so know how it is to be gone and wanting to make up for it when you are home. I am gonna try to limit it this time, xmas 2 years ago I went a little further than I should have since 1. it was the first xmas as a family and 2. I had just gotten back from overseas.

I am planning on being around here for a while Josh, so feel free to say hi periodically.

 

[Milton]

Based on the information in your posts, it appears that you may well have difficulty achieving your goal of complete retirement in 15 years, unless you pay off all of your debts and substantially increase your investments. That will likely require a significant increase in your joint employment income: so either you will have to qualify for accelerated promotions, or your wife will need to get a real job.

The above is not meant to be judgmental. Many people in the military have traditional marriages in which the wife does not work and stays at home taking care of the children. There is nothing wrong with that, but unless the family is extremely frugal, it's very difficult to raise three children and save for early retirement on only one (modest) income ... especially if one's desired retirement involves "fishing, golfing, swimming, diving, boating, etc.".

P.S. Apparently you typically receive a $10,000 tax refund. That effectively means that you are making the government an interest-free loan. Some might welcome that, as a sort of 'forced saving', but if you have discipline you could put the money to work immediately, paying down your debt. You might want to consider having your tax deductions at source reduced (presumably there is a US equivalent to Form T1213 that you can submit).

 

[delsolkm14]

Milton,

Thanks for the critique. That's what I am posting for.

If everything continures as planned, I will get a monthly retirment check from the US Army of the equivelent of $2050 today, maybe more if I get to the next highest rank. With only wanting to spend $3000 a month from age 45 to 59.5, I would only need to have $180,000 to suplement my income to draw for that time period. ($1000 a month for 180 months).

Starting in 2012, I will be putting an additional $400 a month (old payment to my mother) into some type of account to start drawing off of at 45 (11 years of contributions @ 6% should reslut in about $70k at 42(retire from army), then will deposit all $2000 retirement check into the account until age 45 (I will be working another full time job and not need that retirement check to survive) should add an additional $80k. With me drawing $900-$1,000 in monthly withdrawls, it should get me pretty close to drawing from the TSP/IRA at age 59.5.

I know this is all specualtion at this point, and may be a little dreamy, but thats what we are here for right? Dream the future, then work to make it happen.

Once I am debt free (goal is 24 months) then we can put away more into savings and investments to get us there. Once my daughter is in school, my wife does plan on working a regular job, we just want her to raise our daughter until then. That will also help out.

Again, sometimes this all feels like counting your chickens before they hatch, but there is no way to predict the future, so have to work it under current assumptions.

Also, on the tax thing. I only gave Uncle Sam about $2000 in a loan last year, I just qualified for a lot of credits (no taxable income, 3 kids, student). Not that I totally agree with it, since it does seem unfair that I didn't pay into the system that much, but it is the current system we are under, so I got the cash back. We only got back about $6k the year before last, so its not typical, but with the addition of our daughter, we got a little more back last year.

I am always open to suggestions and stuff, and I have pretty thick skin (from the job I do) so feel free to fire away. If I knew it all, I wouldn't be here posting for advice and commentary.

DTB

 

[delsolkm14]

Well, venturing back here after two years.

Here is an update to my current situation.

Credit cards: $13,000
Other charge accounts: $6,000
Student loans: $15,000
Car loan: $21,000
Mortgage: $153,000

And our current assets;

TSP (Lifecycle 2040): $20,000

I should be receiving a disability from the Army in the near future, but still in the process of filing it, but should be somewhere around $1,800-$2,000 a month.

I just got out of the Army in June. I am going back to school for a couple semesters, then plan on heading overseas working as a contractor. Looking like I should make about $200k-$250k a year, if all works out like is planned.

Plan is to pay off all debt the first year and start paying the house down as well as some in savings just in case. Second year plan is to pay the house off and continue adding to the savings account. If i decide to stay there for a third year, then would be more savings so we could have enough to live comfortably and not work if we wanted to while the kids finish school.

Hope all is well and it sucks I am not as far along as I wanted to be, but the next couple years should be better.

 

[obgyn65]

Welcome to the forum.

 

[RISP]

Welcome back. I couldn't help noticing that your total debt has not decreased since your first post. The open mortgage balance is smaller, but that is compensated by higher dept in other categories. I'd like to reinforce what others said before: Start paying off those parts of your debt with the highest interest rate NOW. Usually that is credit card debt. It makes no sense at all to save for retirement while at the same time paying interest on credit card debt. Your investment returns will most probably not be higher than the interest rate you are paying.

disability from the Army

- does that mean you got hurt? I hope you are OK.

 

[jclarksnakes]

Welcome back to the forum. It seems to me that debt owns you. Debt will keep you from ever reaching FI. You had and still have great intentions to get out of debt based on projected future income but the reality is that life throws us all curves. Instead of focusing on what you are going to make in income to get out of debt you need to focus on not spending money until you actually are out of debt. Thanks for your service.

 

[delsolkm14]

Thanks for the welcome back.

Yes, I guess my overall debt is still around the same. I did pay off two of my accounts, $6000 on one and $3000 on another, but we ended up getting a new car last year due to some issues with the old one. They paid off what we owed plus some, and then we got a newer car. Hated spending more on a car that what we owed, but this car is a lot nicer and fit our needs. * edit* Also, the two accounts I paid off were at 20%+ interest rate and the new car is only 6% rate, so did lower that down

Also, the student loans went up because of this summer semester and will go up another $8k for fall semester. I should get that back in the better paying position I am looking at in Jan/Feb if all works as planned.

I could go overseas right now making $125k a year or so, but with the 6 months I am attending school, I should be able to get a job making at least $175k, but more likely $200k-$250k, hence why I am here in school.

Also, RISP, I didn't get injured per say, but I have some lasting effects from my time in the Army, so I will be compensated for those changes (not PTSD).

 

[RISP]

some lasting effects from my time in the Army [...] (not PTSD).

As I said, I really hope you'll be alright.

Please consider carefully what jclarksnakes said. I'll be blunt: You did not manage to change your spending patterns over the last two years. Your debt is still at the original 208k, and you are still getting car loans. Start living below your means TODAY, or you will never get out of debt, not to mention ER. A chance for a really high income is nice, but there's two sides to this coin: Income and spending. So far, you spent every penny you earned, and then some. What makes you think this will change in the future?

the two accounts I paid off were at 20%+ interest rate and the new car is only 6% rate, so did lower that down

I guess that's somewhat good, but seriously - more than 20% interest? Sweet baby Jesus, is this legal? I'm not even going to calculate what you paid to the bank in the last two years, because that'd be bad for my blood pressure.

BTW, did your wife manage to find a better-paying job in the meantime?

 

[Parr0thead98]

I will echo the above posts...you have to drop your spending. You can rationalize the "good deal" on that new car all you want, but it was a decision contrary to your goals you've posted...period. If you can't live within your income today...and I mean paying cash for everything and still have $$ leftover at the end of the month, then you're going to struggle to not spend your increased income as a contractor.

I know what it's like as you are "looking at" a successful client of Consumer Credit Counseling (no endorsement intended) who dug himself too far into a hole and couldn't get out. Been where you are, done that. I, too, had "plans" for how I would get out from under, but like you now 2 yrs later, that didn't work out.

Gotta stop spending. Get Dave Ramsey's book.

 

[healthyandfun]

Track spending

Thank you for your service to our country and welcome back.

You have gotten some good advice already. Change is hard, but doing things differently is the only way to get different results. Track your spending, every penny. Put it all in writing, a notebook helps or a big chart on the refrigerator. Look for places to reduce spending and direct that $$ to debt. Eliminating the debt and then move on to other goals.

Is your wife on board? Talk about your plans for the family and the future. Together set up a mutual plan to get there. Put a timeline in place. Read the Dave Ramsey book together.

I am a teacher and work with many military families and former military. I have seen some very industrious families tackle debt and some spend and dig a deeper hole. One military wife started a house cleaning business while the kids were in school. Another started a before and after school daycare.
Another ran daytime childcare from her home and is now a successful teacher. One did holiday crafts and word got around and she started selling them. Be creative. One got a job at school to pay off debt, when she left two
years later she told me that they actually owed more than when she started. Good luck and keep us updated.