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CREDIT REBUILD PROJECT LOG

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p-
Valued Contributor

Re: Going Debt-Free; is it possible?


p- wrote: Below are some steps we hope to take to make a serious change in our cash flow and completely eliminate debt.

  

1. Sell the truck. 

2. Pay off the credit card with cash flow, including the truck payment. 

3. Pay off the car in less than a year using the credit card payment amount and the truck payment.

4. Remodel the new house using only savings and cash flow, no new debt.

5. Refi out of the FHA loan with PMI and into a conventional fifteen year without adding anything to the loan balance.

6. Pay off the house in ten years.

7. Max 401k and Roth accounts for both of us every year.

8. Buy our first rental home.


Pay off the Credit Card.  There was a time in my life when $6,500 on a credit card would have been an irrecoverable financial tragedy.  Now it's 26% of the card, and only 6.9% of my total available credit.  Without the truck payment and the other mortgage, it will be gone in a matter of a couple of months.  We have the savings to pay it off, but are trying to leave that money untouched except for the remodel.  Thankfully, because I run all expenses, gas, and some work expenses through the card, I seem to be turning it over often enough to avoid interest charges.  So, the 1k per month from the old mortgage plus the 650 per month from the truck will go to the card, along with another 250 a week we're scraping together.  

 

Maybe I'll clean out the garage and put some things on eBay to accelerate things.

Message 411 of 450
805orbust
Valued Contributor

Re: Going Debt-Free; is it possible?

So this is the third time I've read through this thread and although I've thanked you before, again, accept my thanks. My wife and I have never carried a lot of debt, however I can appreciate the value of your approach to planning and controlling spending. Phenomenal idea. Was that something that hit you after you got some progress behind you, or was it all part of the plan?

 

Give me your opinion, we've got a super low interest rate car loan, on a car that was priced well below our ability to afford, 5% utilization max at any given time on CC'ds, we pay in full every month and are planning to purchase a home in 2 years. Would you augment retirement savings, or allocate a maximum amount of our money to our down payment?  We also want to buy an income property...perhaps do that first? I'm trying to strategize on how best to use a possible FHA setup for 2 of them, as we can purchase individually. Thanks again for the inspiration, it's allowed me to accelerate our climb by many times. :-)



Message 412 of 450
p-
Valued Contributor

Re: Going Debt-Free; is it possible?


805orbust wrote:... I can appreciate the value of your approach to planning and controlling spending...was it all part of the plan? 

Thanks for the kind words.  To be honest, I'm making this up as I go.  I understood that spending money on interest was wasteful, but it really hit home when we were paying the two mortgages.  I had to budget every dollar, and in doing that I realized how much of what we earned was spent servicing debt.  It was sickening.  Nearly 50% of our take home at one point was going to some sort of debt payment, whether mortgage, car, or credit card.  It really made me ask myself if the lifestyle debt was worth it, or if I'd rather spend the money on other things.


... Would you augment retirement savings, or allocate a maximum amount of our money to our down payment? We also want to buy an income property...perhaps do that first? I'm trying to strategize on how best to use a possible FHA setup for 2 of them, as we can purchase individually.

First off, I found out when buying my second house that you can't have two FHA loans, and that FHA loans require owner occupancy.  Luckily we refinanced our first home with Penfed and were able to qualify for an FHA loan for our new one.  But it's kind of a crappy deal.  Besides all of the extra hurdles, you end up paying so much in mortgage insurance that you really have to refi out as soon as possible.  We're planning to remodel our new home using money from the old one, and then refi into a shorter term, lower interest loan.  If you have the room in your income, definitely save up so that you don't have to do FHA.

 

As far as retirement savings goes, both Wifey and I have been putting away 401k money to get the employer match.  That doubles the money immediately, so it's insane not to grab it, no matter what.  We also, a few years ago, started a Roth account.  I'd prioritize that over other savings until you are maxing it, mainly because you can always take some back out.  It's important to note, though, that there are time restrictions on withdrawal, and you could end up with a tax liability if you take it out too early or take out earnings.  Talk to a tax guy before you get too far into that.  

We are struggling with that same income property question.  Last week a good possible rental came on the market, and we very nearly spent our remodel money on it, but chickened out.  As much as we'd like to take that next step, we think that we need to get our other stuff in order first.  That's why I have that at the bottom of our list.  A year from now when the remodel is done, the car loan is done,and we have refinanced into a fifteen year loan, we're going to pick it back up again.  The most important thing is structuring it so that we can handle the payments if our tennant flakes, without an undue financial stress.  Ideally a year from now we would be maxing retirement savings and getting into our first rental.  Hopefully it works out that way.

 

Good luck!

Message 413 of 450
p-
Valued Contributor

Re: Going Debt-Free; is it possible?


1. Sell the truck. 

2. Pay off the credit card. BAL = 6,500

3. Pay off the car. 

4. Remodel the new house with no new debt.  

5. Refi to a fifteen year fixed.

6. Pay off the house in ten years.

7. Max 401k and Roth account contributions.

8. Buy our first rental home.


I haven't made much progress on the credit card yet, just down from 8k to 6,500 as previously noted.  We've managed not to touch the savings yet, though, and cash flow the early expenses getting ready for the remodel.  

 

We are also foolishly taking some family vacation time in July, but are being as stingy as possible.  Luckily we live in California, so there are some nice destinations wiithin driving distance.  Instead of a week, we are going to spend three days at the beach.  Accommodations are covered and we didn't add to the CC balance, and we are hoping to cook most of our meals.  If I come back next month with a higher CC balance you know what happened.  :-D

Message 414 of 450
Anonymous
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Re: CREDIT REBUILD PROJECT LOG

Read it from beginning to end and I loved it! So inspiring!! This was a great idea to log your adventures in credit rebuilding and gives us all hope! Thank you for sharing! It truly is awesome.... And a great read!!! I'm feeling energized to complete my own journey now and I see that it can happen!
Message 415 of 450
805orbust
Valued Contributor

Re: Going Debt-Free; is it possible?


@p- wrote:

805orbust wrote:... I can appreciate the value of your approach to planning and controlling spending...was it all part of the plan? 

Thanks for the kind words.  To be honest, I'm making this up as I go.  I understood that spending money on interest was wasteful, but it really hit home when we were paying the two mortgages. 

 

The most important thing is structuring it so that we can handle the payments if our tennant flakes, without an undue financial stress.



Ridiculously sound advice... its amazing how much we can benefit from another brain on this stuff.  I believe the best rental properties still have a 5% vacancy rate iirc.  Good words all, thanks again for them.  Think we'll be chicken for a little while as well.  I'd like to garden for a year or so and work on the Mrs and her obedience when it comes to her Utilization :-)

 

Thanks again, this community is a beautiful thing.

 

 



Message 416 of 450
Anonymous
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Re: Chase Disney Card - A new personal record!

The Force Is Strong With This One

Message 417 of 450
805orbust
Valued Contributor

Re: CREDIT REBUILD PROJECT LOG

Hah! You aint lying my friend. :-)


Message 418 of 450
Vegas4Play
Valued Contributor

Re: CREDIT REBUILD PROJECT LOG

I started a log but can't seem to find it

Fico 8's TU 756/ EQ 754/ EX 743- 8/2020// AAoA 5.7 years // Lines August 2020 = 619k Personal - Business 61k // Inquiries 6 TU - 0 Exp - 0 Eq.
Message 419 of 450
p-
Valued Contributor

Re: Going Debt-Free; is it possible?


1. Sell the truck. 

2. Pay off the credit card. BAL now 5,000

3. Pay off the car. 

4. Remodel the new house with no new debt.  

5. Refi to a fifteen year fixed.

6. Pay off the house in ten years.

7. Max 401k and Roth account contributions.

8. Buy our first rental home.


We're getting there.  Down to $5,030.41 on the credit card as of today, and turned over the balance with home improvement stuff, so no interest charges yet.  We ended up splitting the vacation time between some days at the beach and some home improvement work.  

 

I'm starting to eyeball the junk in the garage, wondering if eBay would net some cash to pay this faster.  Hmmm....

Message 420 of 450
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