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Hey new guy, my story (an interesting case study)

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Hey new guy, my story (an interesting case study)  Reply with quote  

Hey guys and gals,

I am here to lay it on the table and see where the community would guide me.

Pretend you are me, what is your first step?


I am:

31 years old, unemployed, BS in Mechanical Engineering
40k in student loan debt (6%)
3k in credit card debt (20% apr)
married, 1 (brand new!) baby girl
terrible internet presence
have been terrible with money up until now but now I am awake!!!
now I am extremely frugal and great with managing money
611 credit score

What would you do? Which direction would you point yourself if you were in the same shoes and super-determined to get out of debt and become wealthy?

My longer term goal is to get into Real Estate investing, maybe grab a couple of rental properties.

But my short term goal is to get out of debt within 3 years and have 0 outstanding debt.

Thoughts, discuss, any input is welcome!!

Thanks for having me in the community!

Post Thu Feb 18, 2016 7:55 pm
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Oldguy was an Engineer by trade so I'm assuming he'd be able to suggest some ideas for your career path. To me it seems like it would be a very marketable degree. The point is step one for you should be fulltime employment in your field, the salary range in the US is 49k too 100k. To me this is more important then investing right now. You have bills to pay and a mouth to feed.

Good luck and write us back when your employed and have stable income.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Thu Feb 18, 2016 9:59 pm
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Senior Member

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Mech Eng, Strength training, paying student loans off, travel (one day)

"great with money - and 611 score" don't dovetail, lol.

What have you done since school - are you a fresh-out? Or have you been engineering for a few years? Congratulations on the baby girl!

I was in the Space, Missile, Defense industry. Worked on the Apollo project for many years, spacecraft systems, missile systems, smart bomb safe & arm logistics, etc. Lots of Defense Contractors, NASA, Spaceflight, etc - Raytheon, Lockheed, Boeing, Texas Instruments, Alliant Tech, General Dynamics, General Electric, Jet Propulsion Lab, Sandia Labs, Livermore - and 100s more.
Are you locked into NJ or are you willing to move for good jobs/good industry?

You can check them out by State, City, Zip, size, products.

As for your goals of "get out of debt" and buy real estate - dig into that deeper. Eg, debt is a powerful financial tool, it is the engine of most companies. And there is 'dumb' consumer debt, Dave Ramsey debt that youngsters fall into, over-buy cars, shoes, purses, eating out - and pay toxic interest rates and huge overdrafts.

Consider the debt "tool". Say that you worked hard and saved up $40,000 in 2 years - would it be smart to direct it to payoff the 6% student loan? Maybe. Or maybe it would be better to put it into your 401k. At $18,000/yr plus a 3% match about $40k into the fund. At 11%/yr (the historic market average) for 30 years that is $885,000. Ie, it might be better to keep the student loan, retain the use of your $40k, and grow it into almost a million.

Rentals. I was a landlord for 40 years, 4 rental houses. Whenever a rental house gained equity, I refi'd it and took out the equity - I invested the equity at 11%/yr each time. The houses made money, sole the last one for $170k (cost $45k in 1982, it earned about $300,000 in rent). But the seed money from that house, at 11%/yr, made quite a bit more. Ie, I used the loans as tools for building wealth. I've often thought that my math skills served me twice - (1) the ability to earn a great living, and (2) the ability to leverage those earnings into wealth for my DW and daughters.

Travel. Maybe you can tie that to your work. I was sent on approx one business trip per month, in 35 yrs that is over 300 airplane rides. By retirement, a 'vacation' for me was NOT having to travel. (But your DW will probably like to be taken on a few trips over the next few decades.)

A couple numbers.
1. Lump Sum F=1.11^30 = 23. (That's the power of compounding at 11%/yr for 30 yrs.)
2. Incremental investing. $5000/yr invested at 11%/yr for 30 yrs = $1,100,000
You can factor those two equations to arrive at your goals, eg, if you want $2.2M, you double the $5000/yr.
Post Fri Feb 19, 2016 12:18 am
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Oldguy is smart. Listen to him.

Other job ideas, if you haven't been doing engineering. We are always looking for operators at the nuclear power plant. There are some very grueling exams, but with the engineering degree you can qualify to be a senior reactor operator pretty quickly. It's fantastic hands on work if you can deal with crazy hours and the occational run of night shifts.

There are litterally millions of engineering jobs open if you're willing to move around. Check out roadtechs.com if you will consider relocating.
Post Sat Feb 20, 2016 1:26 am
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Kimberlie Broe
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Engineering is an impressive degree. Are you currently employed? If yes, I hope it's full time. If not, you should get a full time job. It's great that you're aware that you need to pay off your debt in the least amount of time -- can't argue with that but before investing, you should first think of saving and budgeting your current income to buy only the stuff that are necessary and pay for things that you need. Curb the wants and concentrate on the essential.
Post Mon Feb 22, 2016 10:24 am
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I think you are in a position where you didn't let yourself get too bad.

That said, focus on the debt and focus on getting a full time job. Worry about the investing later on with things like real estate. There are some exceptions to this guidance though.

Here's what I would do if I were you:

1. Would be extremely aggressive in getting a new FT job.
2. Would refinance my student loans, there are dozens of banks that are eager to help you here. Get into some fixed rates at around 2-4%. With your score, that should be do able.
3. Oldguy brings up a good point about your 401k. I would actually recommend saving some of the money that you make to put into the 401k, get a ROTH IRA started too. You're one of those lucky people that can still put money into a ROTH.

4. START PAYING DOWN THE DEBT!! Not only is it money that will tie you up, but mentally, it is extremely daunting. You won't fully have the motivation you need until you start paying that down. Get rid of the credit card debt and try. If you are in a good position in the future, you should always avoid debt that can reach numbers like 20% APR.

Real estate always sounds great. If you are educated on the subject, then fantastic. But if you aren't, be careful. I would hate to see you do all this planning towards getting everything back on track only to get caught up in a terrible deal. There are other ways to safely invest too.

That's my short term focus if I were you.

Great job in being smart about getting on top of this. Keep it up and you will be in the clear in no time. You have kids to worry about now so be smart.
Post Sun Feb 28, 2016 2:55 am
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