44 y.o. with a ways to go and seeking YOUR wisdom

[airforce1]

Hi everyone,

I am fortunate to have found this forum with the help of Doug Nord. Thanks Doug!

About me: I am a 44 yo Air Force Military Officer working as a healthcare provider with a stay at home wife and 2 children, 7 yo daughter and 4 yo son.

Retirement plan: I plan on retiring from the military in 6 yrs but will continue to work as a healthcare provider until ~ 65.

Retirement savings so far:

TSP $162K
Roth IRA $32K
529 $17K
Savings $10K

Debts:
Credit card $15K @ 5% (please slap me for this)
Personal line of credit $19K @ 10% APR (please slap me for this)
Car loan $6K @ 2.95%

Monthly expenses: $6500 (I just found this on my USAA expense calculator). I will be tacking this high value very soon to lower expenses.

Post retirement income (gross):
Yearly pension will be $48K
Post military career annual income will be ~ $100K

Military benefits: Military will pay 36 months for child's college tuition but I am realistic about additional expenses for raising kids into my twilight years.

Decision point: I am currently located in Guam and in a short term housing lease but looking to buy our first home to reside in but eventually use it as rental income property. VA Mortgage payment will be ~ $2.3K/month. Average home cost is ~ $450K but the upside is dual military families can pay up to $4.4K per month and I can either invest in the difference or pay off the mortgage early (15 yrs vs. 30 yrs). So if I buy, rental income can push money into our house and increase equity up to $52K a year (gross). Another upside is property taxes are dirt cheap in Guam and run ~ $1.1K annually and I feel this might be an opportunity to buy that I won't find stateside. Low taxes and high monthly rental rates appears to be a high percentage method to increasing our net worth. What do you think?

Or should we continue paying down debt and begin saving for a downpayment for a future house?

Lastly, without going into a controversial political discussion about guns, i do have some rare firearms that are worth about $12K. For firearm owners here, would it be better invested in reducing my debt load or should I hang onto them? The same goes for a vintage watch I have worth about $6K. Unload or keep? If you have to ask all guns and watches have slowly appreciated quite nicely in the last 2-3 yrs or so.

Anyways, that is my current financial life in a nutshell. I am eager to hear from your offers of sage advice.

Thanks!

 

[soupcxan]

Personally I would unload the collectibles and kill the debt @ 10% unless you have some special sentimental attachment to them (e.g. inherited from a relative).

But the answer somewhat depends on what your current income is versus your $6,600 monthly expenses, and how much fat could be cut from the $6,600.

 

[airforce1]

Personally I would unload the collectibles and kill the debt @ 10% unless you have some special sentimental attachment to them (e.g. inherited from a relative).

But the answer somewhat depends on what your current income is versus your $6,600 monthly expenses, and how much fat could be cut from the $6,600.

Hi Soup,

Roger that.

Current monthly income is as follows (gross):
base pay $7200
bonus $400
housing $2600
cost of living allowance $1900
Total:$12100

Living expenses:
Rent $3000 (includes utilities)
Private school $1000
Credit card/car/loan payments $2425

Roth IRA contribution $1.5K

This is what I have so far but will come back here and edit the expenses once I'm able to number crunch a little bit more.

 

[mystang52]

Your gross pay is nearly double your expenses. I suspect there may be some more slack in your net income. If so, at minimum I suggest all of that slack be applied to paying down the personal line of credit and then to the credit card debt. I agree with Soupcan to sell those collectibles to further reduce that debt.
It's a liberating feeling to be unencumbered by debt.

 

[Jack_Pine]

If they truly are rare I would hold on to them. the market for truly collectible firearms has steadily increased over the last 15 years or so.

 

[rodi]

Are you putting all spending on the credit cards? If not your budget is missing things like food, sundries, misc spending money.

You also list gross income - but don't show your taxes. I think I've heard that allowances aren't taxed - but base pay should be.

You said to slap you about the debt - consider yourself slapped. Now that we're done with that lets look for an accurate picture of your spending. A lot is going to service debt, but I suspect you're still spending on other stuff that can be trimmed as well.

If it were me, I'd snowball paying off the debt first, then as that got paid off, apply that monthly income towards savings.

As far as whether you should buy a house that will become a rental.... How long will you be stationed in Guam? Are you prepared to manage a rental remotely? Do you have a plan for lost rent when tenants get reassigned - who will do the maintenance? Who will screen tenants? Landlording isn't for everyone. I live in a military town - I have friends who have been successful converting their primary to a rental (and then back again when they retire) and friends who were less successful and ended up selling at a loss after a series of bad tenants. (And yes - they rented to other military).

 

[stepford]

While I have no particular interest in guns I don't see any big reason why you need to sell yours. $12K is not that big a component of your savings and if the ownership of some special antique gives you pleasure commensurate with this figure than why not? The question really is, if you sell will you always be wishing you hadn't - until you end up repurchasing for way more than you sold for in the first place? (I've seen it happen with other collectibles).

A much bigger issue would be one's spend rate. If gun collecting were a major passion that took up several $K per year then that could have a much bigger effect on retirement plans and I might advise differently.

 

[nash031]

I was in a situation where I owned a condo in Charleston, SC and was moving to San Diego for my next duty station. I opted to sell my place at a small loss rather than manage a rental across the country. I can't imagine doing that from the mainland all the way out in Guam. Just be sure to really look at the math and the numbers to make sure it'd be profitable once all things are considered (mortgage, taxes, property management fees, routine and other repairs, 1-2mos average annual vacancy), otherwise that's a big headache. Not for me, personally. With a $2300 mortgage payment before considering taxes, a 10% management fee, etc. you're probably looking at a hefty rent ($3500 or more by quick head math) you'd have to charge to make it profitable.

I'd focus on burning down your debt immediately and maybe even before your IRA/TSP contributions. That's debatable as you lose the ability to contribute for those years but you're not going to make 10% in your IRA or TSP, so you've got to kill that LOC yesterday, then work on the CC.

IMO, until you're out of high-rate debt you don't have any business taking on a VA mortgage in Guam... but that's just my opinion.

As to the guns, that's a personal question. Personally, I'd sell the valuables and get out of debt (and stay there), but I have no attachment to those things!

 

[ExFlyBoy5]

Hi everyone,

I am fortunate to have found this forum with the help of Doug Nord. Thanks Doug!

About me: I am a 44 yo Air Force Military Officer working as a healthcare provider with a stay at home wife and 2 children, 7 yo daughter and 4 yo son.

Retirement plan: I plan on retiring from the military in 6 yrs but will continue to work as a healthcare provider until ~ 65.

Retirement savings so far:

TSP $162K
Roth IRA $32K
529 $17K
Savings $10K

Debts:
Credit card $15K @ 5% (please slap me for this)
Personal line of credit $19K @ 10% APR (please slap me for this)
Car loan $6K @ 2.95%

Monthly expenses: $6500 (I just found this on my USAA expense calculator). I will be tacking this high value very soon to lower expenses.

Post retirement income (gross):
Yearly pension will be $48K
Post military career annual income will be ~ $100K

Military benefits: Military will pay 36 months for child's college tuition but I am realistic about additional expenses for raising kids into my twilight years.

Decision point: I am currently located in Guam and in a short term housing lease but looking to buy our first home to reside in but eventually use it as rental income property. VA Mortgage payment will be ~ $2.3K/month. Average home cost is ~ $450K but the upside is dual military families can pay up to $4.4K per month and I can either invest in the difference or pay off the mortgage early (15 yrs vs. 30 yrs). So if I buy, rental income can push money into our house and increase equity up to $52K a year (gross). Another upside is property taxes are dirt cheap in Guam and run ~ $1.1K annually and I feel this might be an opportunity to buy that I won't find stateside. Low taxes and high monthly rental rates appears to be a high percentage method to increasing our net worth. What do you think?

Or should we continue paying down debt and begin saving for a downpayment for a future house?

Lastly, without going into a controversial political discussion about guns, i do have some rare firearms that are worth about $12K. For firearm owners here, would it be better invested in reducing my debt load or should I hang onto them? The same goes for a vintage watch I have worth about $6K. Unload or keep? If you have to ask all guns and watches have slowly appreciated quite nicely in the last 2-3 yrs or so.

Anyways, that is my current financial life in a nutshell. I am eager to hear from your offers of sage advice.

Thanks!

There is some good info here but I'm going to recommend you take a look at Mr. Money Mustache. You are a need of a good butt whooping and MMM is the man to do it. Folks here are way too nice to tell you that you need to make some changes in a very blunt way.

Sent from my mobile device so please excuse grammatical errors.

 

[Nords]

Hi everyone,

I am fortunate to have found this forum with the help of Doug Nord. Thanks Doug!

You're welcome! It's good to have another servicemember here.

About the collectibles: the older I get, the less I enjoy taking care of stuff. If the firearms and watch bring you joy then keep them as long as it's fun. Sell them as soon as they're a hassle to take care of.

For the rest of the posters: AF1 and I have already discussed the issues with buying a home on active duty. You know my opinion on that.

 

[growerVon]

Welcome, Airforce1! I like your option to pay down debt & save for a future down payment.

 

[Car-Guy]

From what I can see, I don't why you don't just pay off all your debt asap. Unless there is a reason you haven't shared. You are making more than enough money. I've never been a big fan of debt and I was about your age when I became debt free. That's also when the cash really started to pile up. Coincidental?

I think if your plans work out "as planned" then you should be in pretty good shape by the time you are 65. However, with a young family and 20+ years to go until you are 65, lot's of "stuff" can happen to make you adjust your plans. Hopefully all good stuff.

I'm probably bias, but with regards to your collectible guns, "if" they are really collectibles, with real value today, and in good shape and working order, then I'd keep them, especially if you like guns. Collectible guns in good condition as well as most "quality" firearms seem to always be in demand and as others have said, they have enjoyed some really good appreciation for many years. Even most common "but quality" firearms if maintained, have held or appreciated in value in recent years. Cheap and/or junk will always be cheap and/or junk.

Of course no one knows what the future holds for any collectibles.

 

[pb4uski]

Welcome, you're off to a good start.

First, set a goal of paying off the personal line of credit and credit card debt in 12-18 months. Second, get Quicken Deluxe or higher, put your assets and loans on it, use the Lifetime Planner to see how your plan works and use Quicken going forward to track your finances (income, expenses, investment returns, etc.)

My off-the-cuff sense is that once you do all that you may figure out that you don't need to work until you are 65.

On the collectibles, if you keep them keep them because they give you joy not because you think they are a great investment.

 

[EpicRider]

Welcome to the group airforce1 and you have already received some great advice. Two comments for you to consider:

1. (Marines Relocating forces to Guam....) Your housing / rental purchase might be a better long term option due to the recently approved decision to shift some permanent Marine Corps personnel to Guam. I know this has been discussed for at least a few years and I assume you are tracking this plan...but for the wider audience, it might be another factor to influence some advice for the "rental option". A few details from a recent press release on this plan...

It's official: The Navy has signed off on a plan to move 5,000 Marines and 1,300 family members from Okinawa, Japan, to the island of Guam.

The Navy Department released its Record of Decision Aug. 29 for relocating the Marines and their family members to the U.S. territory in the western Pacific.

It's a smaller force than what the Marine Corps first proposed in 2009 when it wanted to send 8,600 Marines, 9,000 dependents and 1,900 government workers to Guam by 2020. That would have put a full brigade-size force on the island.

2. (General purpose TSP loan....) Evaluate option of taking a TSP "General purpose" loan to pay off all current debt. Obviously some pros/cons with this option, but a quick review of the TSP loan guidelines references a 2% rate for a General purpose loan from your account. In current market conditions this might be a better use of your TSP funds compared to your debt rates of 2.95/5/10%.

Best of luck to you and enjoy the rest of your Guam tour....I hope you are taking advantage of the local diving.

Semper Fi.