Car

An Epiphany! How I plan to be debt free by Halloween

Truth time: Since I paid off my student loans, I’ve felt like a bit of a debt destruction fraud.

I slayed my student loans, yes, but I’ve had a car loan for the last 2.5 years.  I’ve justified the loan for two reasons. 1) I didn’t have the cash flow or the savings to buy the car when I needed to make the decision. Taking out a loan was my safe option living where I live, working where I work. 2) I was okay with the concept because the interest rate is incredibly low. 1%. I could easily justify putting my money elsewhere when my savings account was earning what my loan was charging me.

I’ve accepted that decision and I’m okay with it.

Today, I face a different decision. Hubs has leased his car for the last 3 years. He likes the car and we plan to keep it. If we follow the same path as last time, we’d take out a loan for the balance, the interest rate is still good and we’d ride that for the next 3 years.

But what if we did something different?

Since I got my car, I’ve been setting aside, $50/month to cover car expenses. My car is still relatively new, and we haven’t had to use this money. The account grows every month.

On top of that, we have an emergency fund. We’ve never had to use the money in this account. We’ve had it for years and the money sits there. We save a large portion of our take home pay and in that time, we’ve never had to touch this money. We’ve been able to cash flow any expenses that come. *Knock on wood*

What if we used this money to pay cash for Hubs’ car?

Between the two accounts as the accounts sit today, I’m $1500 short of being able to pay cash to cover the cost of the car and the estimated taxes and fees. I have 2 months to save and next month is a 3 paycheck month. That seems incredibly doable.

Then his car would be paid for, and my loan would be done in October.

Here is where things get extra exciting. My last scheduled payment is October. With just a little bit of effort, my favorite birthday milestone is only 3 weeks earlier. Debt free by my 31st birthday? HECK YES! (minus the mortgage of course!)

SWEET! Right?

The biggest down side of this plan is that it would leave us cash poor in the short term. Potentially, “I don’t even want to look at my bank account” cash poor. I’m a little nervous about the cash levels, but we still have a good buffer in our checking. I wouldn’t have my emergency fund and my car fund would be $0. But if we do this, we’ll have an extra $200 to save immediately plus an additional $400 in October. I can use that surplus to fill up the Emergency Fund back to a safer level. In addition, I’ll continue to put aside $50/month for car expenses.

This feels like the best thing to do right now.  I haven’t felt this excited about a financial plan in a long time.

Debt free is to be the way to be. Right?

Am I missing anything? Please poke holes in my plan.

Advertisements

Why I’m forgiving myself after my car accident.

On the morning of February 3, I got in a car accident on my way to work. I was leaving my parking garage and the apartment plow guy backed into my car. I’m okay, he’s okay. But my poor little car suffered over $3000 worth of damage. The whole front right corner is completely smashed in. Kaboom.

Then came the hassle.

Dealing with insurance is no fun. Thankfully, the other guy’s insurance took responsibility for the damage within a day, but I’m impatient.  There was extra pressure because my accident came on the morning after a major snow storm. My area gets a lot of snow. When we get big snow storms, there are a ton of wrecks. Snow must be too slippery for us to learn how to drive in it properly.

After a big storm, it is incredibly difficult to get your car fixed in a reasonable amount of time. Sometimes the delay to get your car back can be more than a month. It’s not good. I added a ton of unnecessary stress to myself worrying about whether or not I’d be able to get my car into the shop before the wait got incredibly long. * Worry Number 1*

I drove my beat up little car to the repair shop to have it assessed. It was a stressful drive! Every time I went over a bump or turned the wheel, there were extra noises coming from that corner of the vehicle. Stuff was rubbing that shouldn’t have been. *Worry Number 2*

Thankfully I got to the shop safely and met with all the people I needed to see. When I was with the repair guy, we did a walk around. He noticed that my back bumper had been rear ended and had license plate marks on it. He threw out a quick repair estimate of $400. This had nothing to do with my current accident so this repair would have been entirely out of my pocket book. *Worry Number 3*

Worry Number 3 was too much for me. Yes, I was okay. There were no injuries from the accident and the car was going to be repaired at no cost to me. I even had a rental car being delivered to me. All I could think about was Worry Number 3.

After he told me about this, I immediately began beating myself up about it. I was in an accident, what I thought was last summer, and again it wasn’t my fault. I was the front car in a 4 car rear-end extravaganza. The driver’s insurance company took complete liability and I could have had my car repaired at no cost to me.

But I did nothing.

I got the notices in the mail and the phone calls from the insurance company but I didn’t take action. I had no idea how much the damage was, but it was a little scratch and my car was functionally perfectly okay. I didn’t want to bother with getting the repairs, and apparently I didn’t want to bother with pocketing the money if I didn’t want to get the car repaired.

From 8:30am when I found spoke to the repair guy to roughly 11:30am, I felt like a worthless piece of nothing. Here I had something to do about that old accident and I didn’t do anything about it. The case had been opened and shut and there was no opportunity to get it covered now. I missed the window.

I even made my sister send me a slide show of my favorite dog to help me feel better. I love that dog so much. It helped, but it didn’t make me snap out of it.

What finally made me snap out of it was when I actually figured out when the accident was. I initially thought it was last summer, but nope that doesn’t make any sense. Summer before that maybe? No. I checked my handy Instagram feed (which is how I keep track of all my important life events) and it was 129 weeks ago or 2.5 years.

What was happening 2.5 years ago? I was in the middle of studying for the bar exam. I took the bar exam and I couldn’t find a job. Even worse, my mental health was at an all time low. Of all my adult life, I was at my lowest functioning level from June 2013 to December 2013. Right when I needed to make decisions about my car accident.

Realizing this, I immediately snapped out of my current funk. I can’t be mad at late 2013 Kate for missing this. She was barely getting by. Basic tasks were a struggle. Navigating my first car accident repair was too much for 2013 Kate. Losing out on $400 is okay because I wasn’t in a spot to handle it then.

This is all to say, please don’t beat yourself up about what happened in the past. I lost a morning to it, and I’m sure I’ll lose other time to the self destructive behavior.

Do the best you can with what you have.

You may miss out on an opportunity but that’s okay. Try to remember everything else that was going on around you at that time. In my case, all I initially saw was the missed car repair. But looking back now, I’m not sure I could have done anything different at the time.

Sometimes you have to let go of a $400 car repair to keep everything moving. No sense spending any more time thinking about it.

Mental health issues are a real thing. I’m happy to be in a good place right now, but who knows how long that will last. If you are struggling, please reach out: To family, friends, professionals or a random internet stranger like me.

January 2016 Net Worth Update

January went by quick. It went by so quick, I thought I had already posted this. Whoops! Late or on time, I don’t want to miss a month!

If there was a theme to the month, it would be gifts, but not in the traditional sense.

First, my sweet baby puppy doggie celebrated his 12th birthday at the beginning of the month. He’s the sweetest little boy and he fills my heart with joy. As my gift to you, here’s a picture of the little angel.

Loungin' with the blanket I made him

Second, I got the best gift I’ve received in as long as I can remember. Someone at work anonymously gave me the screenplay for Good Will Hunting. The movie is one of my favorites. I can’t recall speaking to anyone about my love for GWH, but I’m excited to read it! Fun fact: I spent an impromptu weekend in Boston in 2010 and finding THE bench was near the top of my to do list!.

Finally, I got 2 gifts for my retirement! My employer 401k match hit my account this month AND I gave myself the gift of a richer retirement. January marked the beginning of my time as a 401k maxer. It has been a bit of an adjustment getting used to the smaller paychecks, but that’s a price I’m willing to pay. The money would have been saved anyway, so the only place I may fall short is the House Fund, but that’s a fair trade off.

Let’s get into it!

[flashback]

January 2015: I owed $6,340 on my student loans, knocking a whole $9,568 off my student loans by cashing out my original house fund.

January 2014: I started my job!! Woot! Fun fact: The high temperature on my first day of work was -27F or -32C. Yikes!

Screen Shot 2016-02-12 at 8.07.55 PM

Assets!

Retirement: $27,098 (+2,465)  January was a big month for my retirement! I MAXED MY 401k!! Even though the markets have continued their march to the sea, but I had help from increased 401k contributions and … drum roll please… My first 401k match!!  I have never been more excited for a few thousand dollars. With increased contributions and a boost from the match, I officially have $10,000 in my 401k. 

I also am officially vested in my company’s pension plan. I won’t be counting that amount here, but I have a tiny cash balance pension and that is fantastic!

Taxable: $8,269 (NC) No change but we know how the market is going. 

Auto Value: $12,699 (+$1,269)  I made a small mistake in my December numbers. I somehow forgot that my car was an EX and calculated the update as an LX. This makes me feel a lot better about my artificial $1600 drop in December. With this adjustment, my drop was only $331. 

House Fund: $19,155 (+2,146) January was an excellent beginning to 2016 house saving. After several months of sub-2000 saving months, I’m loving that this is over $2k again! It was also nice to make a big dent in Thing 2.

Round Two Progress: (What is Round Two? check here!)

  • Baby Saver: $2125 
  • Middle Saver: $7953 (Loan value: $5828) ✔
  • Thing 1: $16,453 (Loan value: $8500) 
  • Things 2: $24,953 (Loan value: $8500) >>In Progress<<
    • JOY! $19,155 saved, $5,798 to go!
  • Big Momma: $45,330 (Loan value: $20,377)

HSA: $5,474 (-29)  I’m all caught up with my medical bills! Hooray! With that bill paid and an invested HSA riding the market, I am down by a little month. January was an exciting time because after 5 months, I finally was able to re-check the box to automatically sweep my contributions from my savings account to the investment account. This is exciting. 

Car Fund: $401 (+50) Another month down and I didn’t take any money from this account. I call that a win! 

Liabilities!

Student Loan: $0! Happy 10 months student loan free to me!

Car Loan: $8,347 (-$376)  Slow and steady wins this race. 

Overall:

  • Net worth: $64,719. Up $6,277 from last month. 

WOWSERS!! What a month! I had a few tail winds helping this SIX THOUSAND dollar increase this month. House Funds and 401k matches and a falsely calculated car value got me here! However it happened, this is a hell of a wave into 2016.