Monday, August 25, 2008

The Numbers ($42,398.64 Est)

So I'm going to give the numbers here, since I think it will be useful. I'm going to try to keep the current total debt in the titles of the posts, because it's interesting to see the mindset change as you go along. The current number is estimated, since I don't know exactly how much she's borrowed for student loans, but I have a fairly good ballpark from her. We will tackle these in this order.

Card #1: $3942.62

This card belongs to Nikki's mother, but Nikki had it for "emergencies" in college. I had one of those, too, and it's funny how many emergencies you have in college when you have no concept of money. We are paying this one off because we have a moral obligation to do so. She spent the money, we have to pay for it.

Card #2: $4456.02

This one is Nikki's card. It's from the same bank as the other one, and her mother is an "authorized user" on the account. She got this one so that she could "build her credit," and we see where that got us. Never thought getting a credit score would cost so much, did you?

Replacement Vehicle: $4000.00

Okay so this isn't an outstanding debt, it's a category. Nikki drives a beat up 180,000 mile Ford. I'd put her in an $800 car if she'd let me, but I had to lose this battle to win the war. She hates her car, and for good reason, but that's a story for another time.

Student Loans: $30,000.00--ish

I'm not sure of the exact figure, but it's very close to that. Keep in mind that she was on full scholarship for undergrad, and had an assistantship for grad school. Most of the money went to living expenses, not school. She went to a state school for undergrad and grad school, drove a paid for car, and had a job. Still, somehow she needed $30,000 more (and in addition to the $12,000 she had in credit cards a year ago) for the last 2 years of school.

This brings us to $42,398.64

Which happens to be almost exactly the number I had when I graduated, at 24, with my master's. I say that so that people don't get me wrong. I may at some times seem critical of my wife's debt. I don't do that to be critical of her, because that would be stupid. She didn't know any better, and neither did I. I make these points to challenge your way of thinking, and to remind myself that

Breakthrough ($42,000 Est)

So it's August. Almost September, even.

Nikki and I got married on June 14th, and yesterday she had a breakthrough on this getting-out-of-debt-with-gazelle-intensity thing. While we were dating, I always had this feeling in the back of my mind that while she agreed in theory, she wan't too keen on the in practice part. This was bolstered by her reluctance after we got married to actually start. Hence it being almost September and we haven't started.

But that's not to say I haven't made progress, even with the reluctance of a spouse. We have a little over $10,000 in a money market and we've been paying on the 2 cards. She stopped using them a little over a year ago after we had a huge fight about her credit cards (neither one of us knew if we would still be together the following morning). For my birthday a couple of months later I got plastic confetti made from her store cards :D

Anyway, back to yesterday. I'm not entirely sure why, but Nikki started to look at houses on a local MLS website. We aren't going to buy a house until we're debt free and have a 20% down payment and about $10,000 in an emergency fund. Obviously, this is going to be a ways away.

She was looking at houses in the $180,000 range, and I was thinking we were going to go with something in the $150,000 range. I had been saying to her that we would buy a house in about 2 years, and she thought I meant a $180,000 house. We cleared up that little bit of confusion, and she says, "So how long will it take for us to get the bigger house?"

She was completely floored by the answer--39 months.

I have this wonderful little google spreadsheet that calculates all that for me. Since I have already spent several years living on a budget and only paying cash for things, I am very good at predicting expenses and calculating the timelines. Of course, the 39 month figure has lots of assumptions, one being that she's going to get a job making $30k/year before taxes, which may or may not happen. It also assumes neither of us gets a raise (or loses a job--I write mortgage software so it's a distinct possibility), and it doesn't take into account the interest we're paying on the outstanding debt.

But she doesn't care about that. All she heard was "It's going to take over three years from when we start before we can buy a $180,000 house."

She had an epiphany right there. I saw the light bulb come on. It was amazing. I've been waiting about 18 months for that. Immediately she wanted to know what would happen if I got a job making $10,000 a year more. What if I got a second job as an adjunct professor at the local community college? What if she got a second job selling formal wear on weekends? What if we cut down on this? Or that? What if....

It was wonderful. About an hour later she was asking about how the plan works with getting cars, if we had to pay off the house before going on vacation, and what about retirement? It was the first time she was asking me with a sense of understanding instead of a sense of "why is he punishing me."