HomeDebtBring it on haterz

Bring it on haterz

I still stand by my statement the other day “Personal finance bloggers are a pretty tolerant bunch.” That said, after Dr. Faith shared with me the comments on this Give Me Back My Five Bucks article, I’m learning that personal finance readers, may not be. Krystal bought a new car for $30k and received a verbal beating from several readers. Well, after today, it might be my turn. I welcome the abuse 🙂

I finally have enough money to pay off my student loan…but I have no plans to do so at this point. If you follow my Net Worth updates, you will have noticed I have $5,182 in my checking account and $14,735 in my savings account. Together I have essentially $20,000 liquid. My student loan balance is at $17,867. I could pay off my loan today, and never make another payment to Sallie Mae again. I could, but I wont.

I have had quite the history with Ms. Mae. I started out making double minumum payments, then after some insight from my readers decided to up the ante to at least $1,000 a month. Then just a couple months ago, I got real crazy and decided to throw all of my discretionary income, paying between $1,000 to $2,000, on it each month. It seems that my plans may be changing yet again.

I’m probably going to be decreasing my monthly payment to about $500 each month for the foreseeable future. There are a few reasons I’ve decided to decrease my debt repayments and increase my savings rate.

1) I’m still going through the application process for my dream job and a “final offer” is hopefully not too far away. If I do get the job, then I will be entitled to receive “full” relocation benefits. One of the benefits that comes with this relocation package is aid in purchasing a home (down payment or closing costs). That could be anywhere from $5,000 to $20,000 in free money. The catch is, you only have two years to claim your benefits. That means I could potentially be purchasing a house within three years. I want to build a large cash savings, to give me more flexibility and options, when looking at what house is right for me.

2) I don’t anticipate being single much longer. While there is nothing set in stone with Girl Ninja, I don’t plan to date her for another 4 years. I want to bring a healthy savings account in to the relationship for peace of mind. Having $30K in the bank would make me feel much more at ease.

3) I can always pay off my loan in full with the money I’ve saved. If a year from now I’m not any closer to getting hitched or landing my dream job, I can always pay off my student loan at that time. Sure, I would be paying 7% interest on the $17K over the next year, which would be like throwing away a grand, but I save a crap load of money by, having a roommate, cooking most of my meals, rarely driving, no alcohol, etc. So consider this one of my PERSONAL expenses. You may think I’m crazy for throwing away $80 a month on interest, but people drop far more than that at the bar each month.

4) Most important reason: It’s what I feel like doing right now. I know it may not be the smartest financial decision, but oh well, it’s my choice.

I still plan to pay $500 a month on my student loan, which is more than doubling the minimum payments. Plus, my financial lifestyle is very fluid, so a month from now I could very well be back to hating my loan and paying the sucker off ASAP. I welcome any and all opinions. Am I being a complete moron? What would you do? Although I’m defying Dave Ramsey logic, can you see where I’m coming from? Let me know what you think, good or bad, I have some thick skin 🙂

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  1. Shhhh… I don't go by "Dr Faith" anymore. You're totally blowing my cover dude. 😉

    Honestly, TeacHer has a great post the other day talking about "bad debt" vs "good debt" ( and I really think that the smartest decision you can make is the one for you.

    Now, if you were sitting around with $16,000 in credit card debt at 27% (yes, I just used myself as an analogy), I would probably chastise you for not paying it off before hand.

    But since you're sitting on student loan debt (granted mine is at 5% lower of an interest than yours), I would actually probably do the exact same thing.

    Once this whole credit card debt is gone and I'm stopped focusing my attention to getting rid of consumer debt – I'm going to have to think about the fact that I'll be getting a new job in August 2011. I'll probably need a new car (this we'll see), I will be buying a house when I get this new job. And I'll only have about a year after I pay off my credit card debt to do it.

    So what that means to me, much like it means to you and Girlfriend Ninja, is that I'll need to set aside payment of my 2.25% student loan and focus on saving vigorously for a down payment on a house, and then saving for a car.

    Now this is all theoretical based on the fact that it is two years from now. But it is also ONLY two years from now. So since the debt is "good" debt (okay, good is a bad word, but "tolerable" debt) – I feel just fine about focusing on savings before I start going at the student loan debt hard core like I've done with the credit card.

    Maybe I'm wrong to do it this was, but I have a feeling that for me and my life, this is the best way to do it to keep me out of (the most amount of) future debt. =)

    Whew… I'm so long-winded sometimes….

  2. Sounds like a plan to me. I too could pay off my student loans with the savings I have (and my loans are currently at $27k), but I cherish the peace of mind it brings me. If anything were to happen to me or my job I'll be able to sleep at night knowing I can survive for a year without having to use a single credit card. (Well, that money was originally for my downpayment, but stuff happens…)

    The interest you pay is tax deductible, so at least you have that small reassurance. Plus if you plan on paying $500 I'm sure that includes an extra payment, so you won't be totally giving up on your loan.

    Do what feels right. It's not always strictly about interest and balances. It's not like you're suddenly switching to a new lifestyle of booze and shopping, right?!

  3. Personal Finance is not a one size fits all thing, and I think that can turn it into a problem. Some people hear "all debt is bad" some hear "mortgage or student loan debt is good" and dont know what to do with all the information, so they essentially just chuck it and dont really do anything, because they are fearful of making the wrong decision.
    The great thing about finance is there's no wrong decisions. Sure, there's stupid stuff that you may do with your money at some point, but you can chalk that up to expierence and just move on, remembering not to do it next time.
    Im glad that you're doing what works for you, and good luck with the dream job. Is it going to be in Blue Ball, or someplace even sweeter, like Pumpkin, AL?

  4. I think this is a reasonable plan — I too have student loans and more cash in the bank than the balance. Most of the cash is just an efund too, not even earmarked! But at 0% interest while I'm doing part time school at night, paying down my loan just isn't a priority.

    Sounds like it isn't for you either

  5. The artwork for this post totally made me crack up! Thanks for the morning smile!!

    Isn't half or at least part of the battle having a plan?

  6. I too have enough savings to pay off my student loan but I'm holding off as well (pretty much the same reason you are- only, w/o the relocation benefits).

    Besides, since my interest rate 3.5% and it's tax deductible, I'm not really feeling the pressure to pay it off too early.

  7. I think that is a choice you make. The key here is that you do have the funds to pay off the student loan. If for some reason you don't need the money four years from now you are still going to have the money, and then some. I wouldn't encourage anyone to do something they are uncomfortable with just b/c it is the "cool" thing to do.

  8. I think your decision is a fine one because you HAVE to keep some money in your corner.

    Paying off debts feels great, but what are you really doing when you do that? You are emptying your pockets, going around penniless, so you can say that you don't owe anyone. Not owing anyone is great but you have to look out for #1. This is the whole reason loans were created in the first place – so that someone else can take on some risk (and be renumerated for it in increments, over time) and you can keep some security, e.g. the money in your pocket that you very well may need.

    No one should go around asset-less. It's just not smart. Being debt-free may be a goal for many, but it's not something to attain at the cost of having a penny to your name. That's just my opinion. Others can do what works for them, but being out there without anything to call your own is very risky. Right now you have money and your creditors have just a promise that you'll pay them. You can continue letting them have that promise – and pay them for their inconvenience – and meanwhile enjoy some security.

  9. Revisiting your priorities is a smart thing to do; there is no reason why they can't change. Also, you'd really only be paying 5.7% interest when you factor in the current ING rate right now. 🙂 And if you really wanted to, you could factor in that assistance into the decision, which will probably put you ahead overall.

  10. The notion of 'good' or 'bad' debt is meaningless after the debt has been incurred. At that point, debt is debt, and you owe the money no matter what it was for. It's only before the expenditure that the good/bad part is worth considering.

    I think your plan sounds fine. You're not talking about a large sum of money here so it really doesn't matter that much.

  11. It sounds like you've really though this through – you're right that personal finance is personal – so it's your decision to make.

    I'm trying to map out my 2010 repayment plan for my student loans and it's hard to decide what's more important. Being debt free or having mega savings.

  12. Thank you for blowing her cover! I was still checking the old site everyday waiting for the return! I definitely live under a rock.

    As for $500/month, I am all for it. If this was credit card debt I would feel differently, but if you didn't start saving now you would just be exchanging 'good' student loan debt now for yucky credit card debt from your wedding later.

    – Courtney!… who is now going to go catch up on SS4BC! so much for a productive work day

  13. You IDIOT!!!!!!

    No, I kid. I think this sounds like a great plan. I am pretty curious about this "possible job house benefits" thing. That's pretty sweet… but I'd also be very skeptical and make sure it's a wise investment. Sure it may save you some cash up front, but will it be a good thing in the long run?

    I'm more of the "get rid of debt" perspective myself, but I'm also paying my parents back and it's relatively small so we differ on that end. And as always… soo exciting about #2!!! I confess my heart skipped a beat when you said you won't be single anymore… just waiting for that day to hear "we're engaged." 😉

  14. Sallie is a nasty bitch, and if you don't rough her up, she'll never leave. If anyone deserves a punch in the face, it's her.

    That said, this seems like a good middle ground.

    It didn't work for me because I always found it so hard to feel comfortable. I kept waiting for that magic number, and for me, it was 0. For you, maybe it's more than double payments.

  15. Courtney! So sorry you didn't catch on to my blog change. I tried to let everyone with a blog know that I had switched over when it occurred, but I didn't want to make a post about it on the other blog because of the nuisance of a labmate who found it and decided to send it off to people that he shouldn't have.

    Sorry you fell through the cracks. =(

  16. Keep the cash buddy! I have around 40k in cash and about 22k in student loans. Yes, I could pay it off too but that's not in my financial plans right now.

    You have to do what feels right and works for you.

    It's a low rate loan and you are probably able to deduct the interest.

  17. It's called PERSONAL finance for a reason. You gotta do what works for you.

    Student loans have "reasonable" interest rates and you're saving to buy a home. No better reason not to pay off Sallie now.

  18. As others have said, it's your personal decision what you do with YOUR money. You sound like you've got an actual plan, and you're not merely deciding to slack off on paying off your loans.
    And if you're hoping for this job/house situation (fingers crossed for you!), you could maybe check out the average house prices for the area you'd live, which would give you an idea of how much you'd need for down payments, monthly mortgage payments, and other expenses. That being said, you will need to compare the costs down the road (house, wedding, etc.) with when you'll actually have enough money to pay for it. Just thinking of these random things…

  19. […] ninja presents Bring it on haterz posted at Punch Debt In The […]

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