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RySk8er30
New Member
Cash: $ 0.65
Posts: 3
Joined: 11 Mar 2005
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| School/Wedding/Moving Debt |
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Hi,
As many of you know, student debt is rising rapidly. I recently read an article which stated the average graduate debt was 30000 (in 2002) and the average undergraduate debt was 12000 (in 2002). With that being said I am somewhat concerned about my family's debt. I am currently engaged to my lovely fiance and we have a wonderful three year old son. We are both 20 years old and are attending school. I work and she stays home with my son. Here is what I have come up with as far as fiances...
- Current Personal Debt -
6000 - School Loans
4000 - Credit Cards
10000 - Debt
- Future Debt -
15000 - Wedding
10000 - Contributions
5000 - Wedding Debt
1500 - Moving Expenses (from NY to CA)
12000 - Wife's Graduate Degree
6000 - My Graduate Degree
18000 - Graduate Debt
34500 - Total Debt
She won't budge on the wedding cost, so don't bother saying that. We are definately moving to CA as there are many more opportunities out there for my field (IT). We both plan on becoming professors, so once we get settled I think the money situation won't be that bad. I understand that CA is a very expensive place to live (200 - 400k houses), but we have always wanted to move (and why not move while we're young).
I just wanted to see if anyone has any financial advice for us. Thank you for all your help.
RySk8er30
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Fri Mar 11, 2005 3:10 pm |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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Taking your information from the top:
I'd say you should do whatever is necessary to eliminate the credit card debt. If that means taking on some overtime, or a part-time job, or finding ways to reduce the rest of your household expenses in order to make bigger payments toward it, you should do what you can in this area.
The student loans, since you're still adding to this debt with grad school and the like, and also since today's rates on those loans are pretty low, don't leap out as a debt that needs prepayment at this time.
You refer to the wedding expense as "Wedding Debt". Maybe you should think about trying to save up the money (at least as much as possible) before undertaking that expense. That way it doesn't become debt, it's just an expense. I realize that sometimes things are not entirely within our control, and if you already have a date set and the like, this may not be possible. You said that your wife won't budge on the cost of the wedding - but will she consider doing her part to reduce the costs or increase your savings toward this expense? It's a thought, anyway.
With more college costs in your future, have you talked your situation over with a financial advisor? There is a good list of Certified College Planning Specialists (CCPS) available at www.savingforcollege.com, along with a host of good information for you. A little time and money spent planning this out may save you a substantial amount in the long run.
Hope this helps -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Fri Mar 11, 2005 4:00 pm |
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RySk8er30
New Member
Cash: $ 0.65
Posts: 3
Joined: 11 Mar 2005
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Thanks for the information. Is my future debt (35k) a big amount considering my situation?
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Fri Mar 11, 2005 4:08 pm |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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Unsecured debt in that amount is a big issue. The point being, you've got this debt built up, but virtually nothing to show for it, with the exception of your degrees and a couple of left-hand rings.  Without an emergency fund or home equity to fall back on, this is the way personal bankruptcy gets started. It is in your best interest to do your best to reduce or eliminate all debt that is not secured and stay current on your expenses.
Now, having the level of student debt that you're projecting (~$24k after grad school) shouldn't be a big deal, as this is long-term debt. As I indicated before, the rate on this debt should be very small, as well. Since this debt is being created with the intent of increasing your income, it makes good sense to incur the debt.
If this was mortgage debt, with a home value somewhere north of the debt amount, it wouldn't be a big issue at all.
Take care -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Fri Mar 11, 2005 4:17 pm |
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RySk8er30
New Member
Cash: $ 0.65
Posts: 3
Joined: 11 Mar 2005
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Would all of my debt be unsecured, or just the non-school (25.5k) debt?
What percent of income do you suggest goes towards rent (not bills)? I currently make 30k and spend 22.6% ($470/Mo) for rent. When we move to CA, it seems like everything is much more expensive. A one bedroom apt cost around $800. I read another article which stated 50% of people living in San Diego spend more than 50% of their income on rent. We have been looking at houses to rent and found some for $1500. Community College Professors start at around 40k there so our income would be around 80k. Based on my 22.6% we would be able to afford the $1500/Mo house.
Do you have any advice on this?
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Fri Mar 11, 2005 4:54 pm |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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A couple of rules of thumb that you might find helpful:
1) have an emergency fund of 3-6 months' household expenses set aside
2) save at least 10% of your take-home pay, in retirement or other savings accounts. Over time, as your income increases, you should increase this percentage to maximize your retirement savings options. You may find this impossible at first, but soon enough you get used to it, and the benefits pile up quickly.
3) overall housing expense should be less than 1/3 of your take-home income. With this in mind, your ~22% figure is well within reason. That doesn't mean that you should increase the cost of your housing to a 33% level - keep your expenses reasonable and in line with your needs.
Hope this helps -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Fri Mar 11, 2005 5:26 pm |
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