Need advice on loans and future planning

I would clear your mothers loans out first (so she's not on the hook if you lose your job etc) then punch out yours. It doesn't make sense keeping that money in savings when u have so many loans.

You're already making a lot of smart decisions by not living above your means it seems and paying off credit cards in full every month.

I'd agree that you knock out the high interest rate loan in your mother's name first and then put as much as you can toward one of the other three (making minimal payments on the others) and pay it off and so on until all of them are wiped out.

If you're very job-secure, tap into the savings a bit ($3-5K) and make a substantial dent into that big loan; otherwise $12K for a security net is way too thin and you'd burn through it in 3-4 months if your job went away tomorrow.

Once you have those loans out of the way start a ladder of 3 CDs in 6 month intervals totaling a years worth of expenses. When the first CD matures in 6 months, convert it to an 18 month and then repeat every 6 months. As your expenses change, add/subtract from these CDs; otherwise, forget that they exist.

Next, if you're in an area where you can buy a house, start saving for the 20% downpayment and make sure that you buy something that you can comfortably afford. Push yourself a little if it's a house that you really want, but remember that this is why there are a lot of foreclosures going on now, so be careful. Get a 30-year fixed rate if you can; if you get a short-term adjustable rate, read the fine print and speak with a financial adviser about everything before you sign. Pay anything extra to the mortgage principal as soon as you can and get rid of that debt ASAP.

What are your total monthly expenses?

Do you have any big goals coming up like starting a business, buying a home, etc.?

Quote from Brian1 : What are your total monthly expenses? Do you have any big goals coming up like starting a business, buying a home, etc.?

I would like to buy a home in 3-5 years, once all my loans are done.

$825 Rent
$100 Comcast
$50 Electric Bill
$311 Car Loan
$150 Bike Loan
$100 Insurance
$80 Cell Phone
$500 Student Loans
$300 Fuel
$300 Entertainment
$400 Food + Home Supplies

Should be roughly everything.


That is without credit cards and student loans.

Quote from drozek : I would like to buy a home in 3-5 years, once all my loans are done. $825 Rent $100 Comcast $50 Electric Bill $311 Car Loan $150 Bike Loan $100 Insurance $80 Cell Phone That is without credit cards and student loans.

How much are your total monthly expenses including everything , i.e. food, gasoline, water bill (if applicable), etc.?

Quote from Brian1 : How much are your total monthly expenses including everything , i.e. food, gasoline, water bill (if applicable), etc.?

$825 Rent
$100 Comcast
$50 Electric Bill
$311 Car Loan
$150 Bike Loan
$100 Insurance
$80 Cell Phone
$500 Student Loans
$300 Fuel
$300 Entertainment
$400 Food + Home Supplies

Total: $3116

Should be roughly everything.

Quote from drozek : $825 Rent $100 Comcast $50 Electric Bill $311 Car Loan $150 Bike Loan $100 Insurance $80 Cell Phone $500 Student Loans $300 Fuel $300 Entertainment $400 Food + Home Supplies Total: $3116 Should be roughly everything.

Got it. What is the total credit limit of all your major (not store card) credit cards?

Right around 7K

And how much of that 7K do you use in an average month? Or is all of that rolled into the expenses mentioned above?

some of it, but most of it is work expense stuff, I travel couple times a month so i put flight car hotel all on credit cards, usually use 4-5k a month

Quote from Gobo : You're already making a lot of smart decisions by not living above your means it seems and paying off credit cards in full every month. I'd agree that you knock out the high interest rate loan in your mother's name first and then put as much as you can toward one of the other three (making minimal payments on the others) and pay it off and so on until all of them are wiped out. If you're very job-secure, tap into the savings a bit ($3-5K) and make a substantial dent into that big loan; otherwise $12K for a security net is way too thin and you'd burn through it in 3-4 months if your job went away tomorrow. Once you have those loans out of the way start a ladder of 3 CDs in 6 month intervals totaling a years worth of expenses. When the first CD matures in 6 months, convert it to an 18 month and then repeat every 6 months. As your expenses change, add/subtract from these CDs; otherwise, forget that they exist. Next, if you're in an area where you can buy a house, start saving for the 20% downpayment and make sure that you buy something that you can comfortably afford. Push yourself a little if it's a house that you really want, but remember that this is why there are a lot of foreclosures going on now, so be careful. Get a 30-year fixed rate if you can; if you get a short-term adjustable rate, read the fine print and speak with a financial adviser about everything before you sign. Pay anything extra to the mortgage principal as soon as you can and get rid of that debt ASAP.

I was going to dump the 12K into my mothers loans to get rid of them.

Quote from nizzy1115 : I would clear your mothers loans out first (so she's not on the hook if you lose your job etc) then punch out yours. It doesn't make sense keeping that money in savings when u have so many loans.

Quote from drozek : I was going to dump the 12K into my mothers loans to get rid of them.

I agree, but not because "it's mom".
I agree because it's currently the highest APR loan he has, and it would make sense to pay them off in descending interest order.

Be careful about dumping the entire $12k into loans. You should make sure you have at least 3 months of your income in savings as an emergency fund in case of unexpected emergencies.

While it's excellent that you pay your CCs off every month, you are hitting very close to the monthly limits every month (5k out of 7k = 71.5% Debt to Credit ratio). While in reality your spending and then paying off the amount every month, on a credit report it looks bad. There really is no distinction between that and having a $5k lingering balance on them. If you attempt to get another loan or line of credit, it could have a negative impact on you. You might want to see about getting a CLI to boost your ratio.

I think it's awesome that you are tackling this.

The good news is that you don't have piles of high-interest debt. IMO, any debt under 10% rate is manageable, and any debt under 5% you should strongly consider not paying off early unless you just have no other way to deploy cash. It's the people who have the CC debt at an 18% rate that are getting hosed and have to burn it off quickly.

Anyway, my quick and dirty calculation is that you make ~3700/month in take home pay before commissions. Personally, the way I would tackle your budgeting would be to pretend like that's the only money you have coming in since it's the only dependable money in any given month. If you accurately gave us your expenses, you have 3700-3100-fudge factor of 200 = 400/month in surplus just on your salary. That's pretty good! You're looking at another $5k/year extra on top of the $10k/year extra from commission.

I say you live off of your salary, paying the bills, paying the minimums on loans, etc. Dump the extra 200-400 each month into savings to build up a thick buffer. Any money coming in from commission should be earmarked straight to debt, starting with the high interest stuff. In under a year you will have your mom's 8% loan paid off in full and you can tackle the smaller one next. Keep doing this with the commission until you are debt-free.

Note: I would NOT dump your savings into the loans. If you get hit by a bus/lose your job/whatever, you will still have loans with minimums and bills to pay plus living expenses, and you'll be SOL. Dumping cash into loans does save money, but it's also a gamble on a stable future where you know you'll make the money back over time. You probably would, and I understand that it costs you a little extra in interest to do it this way, but I think that's worth it to know that you have a backstop in case things go wrong. That cushion lets you have peace of mind while you attack the debt.


If getting financially stable as fast as possible is the goal, I would consider selling the bike and buying a bike in a couple years once things are really in good shape. You aren't in bad shape, but it would speed up your move towards a debt-free, worry-free life. I would also consider selling the car to trade into something cheaper. Again, these steps are not REQUIRED, but I would consider that between reducing the car payment to something like $200/mo and eliminating the bike payment, you have $2500/year of savings available to you.

Just some thoughts. Good luck!