A Story About Paying Off Debt and the Obstacles Along the Way

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Why Paying Off Debt Is No Longer Our Top Priority


Now feels like a good time to write a back-to-the-basics post in the spirit of why this blog was created in the first place: to help us track our debt repayment. There have been so many other things to discuss lately - Lola Retreat, new job, goals both big and small - but while I was in LA for the retreat, I was reminded that the people who read this blog on a regular basis are primarily here to watch us get our financial act together. And that's why I keep chugging along with the $76K Project. I want to show people that it's possible to fix your finances even when you're late to the game.


via GIPHY


Taking stock



As a quick review, we started our debt repayment journey back in April of 2017 when we realized that we were constantly overspending and needlessly living paycheck to paycheck, even though we were making a decent income (~$80K per year).

At that time, we were in debt to the tune of more than $76,000, including:

-a car loan ($1,550)
-three credit cards (just over $22,000)
-two student loans (just over $53,000)

Since then, we've paid off the car loan, the credit cards, and one of the student loans. Our total debt is now $37,850 and consists of one remaining student loan.

Other related events over the past 21 months:

-Both Fortysomething and I have changed jobs (I've changed jobs twice - once with a pay increase, once with a pay cut).
-We decided we couldn't afford to buy a house in our HCOL town.
-We moved from a somewhat affordable but noisy apartment to a not-very-affordable but peaceful duplex.
-We opened a savings account and built an emergency fund.
-We started contributing to our retirement accounts.


What's changed with our debt repayment strategy?



When we first started this journey, it was all about paying off debt. We were absolutely obsessed with this goal, and that was a good thing: it helped us obliterate some very bad debt quickly and efficiently.

But now that we've paid off a little more than half of our original balance, our priorities have shifted a bit, and we've been putting more towards retirement and savings.

I've come around to the idea that putting all of your disposable income towards debt is risky business if paying off that debt is going to take longer than a year or so. Sorry, Dave Ramsey.

Let's be honest: a lower student loan balance isn't going to help you pay the bills in the event of a job loss or other expensive emergency. And the likelihood of getting through two, three, four or more years of debt repayment without being smacked in the head by a financial anvil is highly unlikely. You've got to protect yourself. 

Then there's the issue of retirement. We are way behind in that department, and we need to start making up ground now by contributing more of our income to our 401ks, even if that means extending our loan payoff. 

One other thing: you only live once, and you don't know what's going to happen tomorrow. So I'm no longer sold on the idea of living so close to the bone to pay off debt that you don't let yourself enjoy life now.

It's true that there are things we no longer do or purchase. We don't buy books unless we have a gift certificate; we use the library instead. We don't travel internationally (for now). We don't buy furniture or other home goods until it's absolutely necessary (our friends think we have a very minimalistic design aesthetic, but in reality, we just can't justify shelling out the cash to make our home look HGTV-ready). We don't purchase new clothes that often, either; luckily, we live in a town where jeans and sweatshirts are high fashion. In other words, we don't spend our money on things that we don't care about or that don't serve us.


via GIPHY


But we do go out to eat once every two weeks or so because it's something we enjoy doing as a family. We do go on frequent road trips. We do pay quite a bit to live in a place we love. And yeah, I did pay $600 to attend a two-day financial retreat. That was definitely a splurge. Sure, we could cut down on all of this and put that money towards debt, but life would be less fun. We're willing invest (yes, I see it as an investment) in the things we care about and that enrich our lives.

Getting our finances in order has helped us figure out what we truly value.


Where are we at?



Income: When I changed jobs last month, I took a $10K salary cut. That's equivalent to ~$800/month. After taxes and deductions for health insurance, my HSA, and our 401k contributions, we now bring in about $5200/month.

Emergency savings: We're working on building a $10K emergency fund. We're about halfway to that goal. $10K would get us through six months if one of us were to lose our job. Once we reach that goal, we'll move that money into a high-interest savings account to help keep up with inflation. This is our biggest priority right now - all of our "extra" money goes into savings.

HSA: I plan on maxing out my HSA to the full $7,000 this year. HSAs are awesome because (a) you're not taxed on the money you put into them, (b) you're not taxed when you take the money out, as long as you use it for medical expenses (before retirement age), and (c) once you hit a certain balance, you can invest your HSA money and let it grow. It's a freaking good deal. I'm contributing $250 per paycheck to my HSA; my employer will also make a contribution.

401Ks: Both Fortysomething and I have ramped up our retirement savings. He's putting in about 7%, and I'm putting in 10%. We both have employer matches. Our intention is to increase these contributions significantly over the next couple of years. To be honest, it's a little tough to see that money go straight out the door (well, straight into an account I can't touch for yearsssss), but I can no longer ignore a) the importance of compounding interest or b) the tax benefits that come with contributing to a retirement fund.



So where does that leave us with our debt repayment? 



Right now and for the next several months, we're paying only the minimum on the remaining student loan. That's $400/month. Once we top off our emergency fund and finish paying off our $2,500 campground membership, we'll increase it ~$1200/month. If we then proceed to put all of our bonuses and raises towards the student loan, we'll pay it off in approximately two years.

We might do that. We might not. It might take us a little longer, especially if we decide to focus on our 401Ks.

Since starting this blog, I've realized that personal finance is both simple and complicated. It's simple in that it comes down to saving more than you spend and investing in the things you value. It's complicated in that every financial decision comes with its own set of pros and cons, risks and rewards. It's not as straightforward as the financial talking heads on late-night cable TV make it sound.

I've also realized that you really can't apply the same financial strategy to every phase of life and to every situation. If I were 20 years old, with years of compounding potential ahead of me, then yes, I'd take a more "scorched earth" approach to debt repayment. I'd give all of my money to the student loan company and just get it done. But at 40+ years old, we're making up for some lost time, and that means paying off debt can't be the only priority or even the top priority - even though it feels really, really good.

I know some people will disagree. But that's okay! Personal finance is personal. That's why I don't give much advice on this blog: what's appropriate and best for our situation might not apply as well to yours.

I'd love to hear what you think. I'm especially interested to hear from those of you who, like us, are late to the financial game. How are you prioritizing your various financial obligations? What are your biggest challenges?

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My First #LolaRetreat: Highlights and Cost Breakdown

Lola Retreat was held at a giant chapel! JK. This is the Ace Hotel in downtown LA. Pretty swanky spot.

Note: If this post sounds weird, it's because I'm writing it at 11 PM. New job has left me exhausted and lacking in time. Nevertheless, I'm not quitting my blog.

I originally wrote this post on my phone at 30,000 feet while traveling back home from LA, where last weekend I attended my first Lola Retreat. It also happened to be my first-ever financial event and one of my "19 for '19" goals!

What is Lola Retreat? 


Lola Retreat is a financial retreat for women. It consists of 1.5 days (plus an evening happy hour!) of finance-related conversations, panel discussions, and talks. The recent event in LA was the third iteration of Lola; the first two gatherings were held in Portland and New York. The program changes with each retreat. At the LA event, we listened to presentations about mental health and money, paying off debt in an expensive city, navigating the US financial and health care systems as an immigrant, socially conscientious investing, and many other topics.

Lola was a good financial event for me to start with because it was so friendly and cozy (only 50 women in attendance). It was also relatively close to where I live; I had to fly to get there, but it was a short trip. The breakfasts and happy hours were generous, to say the least, and there were plenty of opportunities to talk to the other attendees and get to know one another.

I also had the chance to meet a bunch of extraordinary bloggers, including Michelle from Frugality and Freedom, K. Wright from Money the Wright Way, and of course Melanie, author of Dear Debt Blog, founder of the Lola Retreat, generous food and drink provider, and debt crusher extraordinaire. (Spoiler alert: all of these people are just as insightful, talented, and interesting in person as they are online.)

A chance to go to Lola


I get excited about ALL of the financial retreats and conferences that I read about on Twitter - CentsPositive, FinCon, CampFi, etc. - but until now, I haven’t attended any in part because they're expensive. Ticket prices aside, there’s the cost of the hotel, transportation, and food, all of which add up pretty quickly.

Lola's intrigued me for months, but it’s hard to justify spending money on a nonessential weekend getaway just for myself. I weighed the pros and cons of attending for ages and kept going back and forth on whether I should do it, but what finally put me over the edge was receiving a Lola scholarship. Without it, the ticket price would have been $450, and I probably wouldn’t have gone. (A big huge thank you to the anonymous individual who selected my application and gave me this opportunity.)

Budgeting for Lola


I set a total budget for myself of $600. That's still pricey, but having recently quit my former job, I was able to use part of my vacation payout to offset the total cost.

Here's a breakdown of what I spent:

Lola ticket: $0 

Again, the cost of the ticket was covered by an angelic mystery sponsor; had I not received this scholarship, I wouldn’t have attended. At $450 a pop, the regular ticket price is a bit wallet busting (though now that I've attended, I can see that you get a lot of bang for your buck; Melanie puts an immense amount of thought into the event and makes sure everyone feels taken care of). If you’re thinking about attending Lola in the future but can’t see yourself purchasing the ticket because money’s tight, definitely apply for a scholarship.

Plane ticket: $0 

I had enough Southwest Rapid Rewards points to cover the cost of my plane ticket. Bonus: I didn’t even have to pay the usual $11.20 in taxes, fees, and whatnot because I'd recently upgraded to the SW Priority card and was able to take advantage of the $75 travel credit that comes with the card.

Hotel: $345 

I stayed at the Ace Hotel in downtown LA, which is where the retreat was held. The lovely K. Wright from Money the Wright Way agreed to be my roommate, and we each paid for one night. We could have stayed somewhere else, but every other hotel in the vicinity was comparable in price, and the thought of staying off-site in an unfamiliar neighborhood and having to walk or Uber to the retreat made me feel really anxious (that’s just me... I get anxious in unfamiliar situations). So I decided to pony up.

YES, it was super expensive, and NO, I don’t think the room was worth $299 plus tax.


I mean, check it out: it's basically a minimalistic dorm room with Ikea furniture and a unique layout. But it was clean and comfortable, and the rooftop bar/pool area afforded amazing views of LA.

LA from my bed

Uber: $78 

I Ubered to and from the Burbank airport (fun fact: not only was this my first financial retreat, but it was also my first ridesharing experience!) This was another area where I could have cut costs if I’d really wanted to. Again, though, I wanted to limit the number of anxiety-inducing experiences that I exposed myself to over the course of 48 hours (dealing with airports and meeting new people at an event where I knew nobody pretty much filled my anxiety quotient for the weekend). The Uber was actually $31-$33 each way, but I really liked both drivers and wanted to tip well.

Shuttle: $57 

One of the most annoying things about where I live is that the local airport is tiny; finding affordable flights is a pain in the ass. Plus, Southwest doesn’t fly here. Thus, we usually drive two hours to get to a big airport with plenty of less-expensive options. My partner and kid drove me there, but upon my return, I took a shuttle back home (in a snowstorm, which was interesting).

Food: $51

I was worried about the cost of food because LA is so expensive, but it turned out that I spent very little on meals while at the retreat. The happy hour on night one included more beer than I should have consumed, given that all I'd had to eat were hummus and crackers. Breakfasts on Saturday and Sunday were provided, and they were FEASTS: fruit, eggs, croissants, potatoes, and bagels on the first day, and avocado toast, French toast, and frittatas (and steak for the carnivores) on the second day. At the happy hour on Saturday afternoon, there was so much food left over that I just summoned my inner food vacuum and made a dinner out of quinoa, chickpeas, cheese, cashews, and wine.

I did pay for one meal as well as snacks and coffee at the airport, but that was it.

Total cost: $580

Would I do it again?


Sure, once I recover from this one... which might take a while. It was a whirlwind trip, and I'm exhausted. My bank account's a little tired, too. In all reality, I'll probably wait at least several months before I sign up for another event - in part because of money, and in part because I want to make sure that anything I sign up for in the future is going to be as small, comfortable, and friendly as Lola was. Going to events where I don't know anyone is a major challenge for me. It's not a vacation, and I have to be mentally prepared to go and enjoy.

The next Lola Retreat is this September in Seattle. If you identify as female and want to talk all things money for 48 hours with a bunch of amazing ladies, go forth! Sign up! Enjoy!
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When Taking A Pay Cut Means Overhauling Your Budget


For the past week, I've been neck deep in new job stuff: HR forms, training, meetings, and actual work. Although I hesitate to get too excited this early in the game, I have to say that so far this gig is at least ten thousand times better than my previous three jobs. I don't have to talk on the phone, I don't have to lecture or give presentations, and miraculously, my boss seems to assume that I'm intelligent enough to turn on my computer and change my password without needing a 30-minute tutorial.

Plus, I get to read interesting papers all day long and help other scientists articulate their ideas. Editing is a Type A introvert's dream.

But as I think I've shared before - if not here, at least on Twitter - this job pays $10K less per year than my previous one, and the benefits aren't as good. Thus, we'll have to completely overhaul our budget to accommodate the realities of my new paycheck. (Note: I wrote about debt payoff recalibration last year, too, when my paycheck increased. You can find that post here.)

A deep dive into my new gross vs. take-home salary


At $50K per year, my gross income will be $2083 per semi-monthly paycheck. I'm planning to shovel a substantial portion of that income into insurance, my 401K, and my HSA. 

A few considerations:

-My benefits won't kick in until March. At that point, there will be 20 paydays left in the year.

-For my 401K, my employer will match up to $3K per year (it vests immediately, which is awesome). I want to take advantage of that and contribute $4500 of my salary for a total 2019 401K contribution of $7500.

-I intend to max out my HSA this year. That's another $7000. Between employer contributions and wellness incentives, I'll be responsible for approximately $5000.


via GIPHY

I don't know exactly what my new paycheck will look like, but I used the SmartAsset Federal Paycheck Calculator to get a ballpark estimate:

Gross pay per paycheck: $2083

Taxes + FICA: $235
Health Insurance: $139
401K: $225
HSA: $250

Estimated semi-monthly take-home pay: $1236

The adjusted monthly budget


If I've calculated all of this correctly, our new combined income will be approximately $5460/month, nearly $600/month less than what we were bringing home with my old job. But on the other hand, my student loan is paid off, so that's $200/month that we don't have to worry about anymore! (But on the other hand... our rent is going up by $100/month. Sigh.)

So here's what the tentative new budget looks like:




What does this mean for our debt payoff plan?


Basically, it just means that it's going to take a little longer to eliminate our last student loan, especially because we've reprioritized our goals a bit. 

First, as I mentioned in my 2019 goals post, we've decided to build up our emergency fund to $10K. Between the high cost of living in our town, talk of a possible recession, and my growing mistrust of employers in general, I feel like we need more of a cushion in the event that one of us is jobless for a few months. I hope that won't happen, but I also want to plan for the possibility.

So that's the first step. We should be able to reach this goal by August of this year (unless we end up with a high tax bill... ugh). 

Next, we'd like to get rid of our ~$2500 Thousand Trails loan, which carries a higher interest rate than the student loan. Again, we can take care of that by the end of the summer.

After that, we'll be able to pay $1500/month to Fortysomething's student loan. Taking into account bonuses and side hustle income, that loan will be paid off in 2021.

Have you ever taken a pay cut? How did you adjust your budget to accommodate the change in salary?

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