Can this 24 year-old pay off debt AND fund her roller derby hobby?

magnifying glassLily is a software analyst in her early 20′s, bringing home a net monthly paycheck of around $2,300.

She contributes 3% of her pre-tax income to a 401k, fully matched by her employer. Her health and dental benefits are also covered by her employer.

Lily’s top priorities are:

  • Caring for her Dad, who’s still working, but may not be able to for much longer.
  • Enjoying her hobbies: roller derby, brazilian jiu-jitsu, and yoga.

The Goal

Pay off credit cards, save for a new car, build up her buffer and emergency savings (for herself and dad), and pay off student loans – without giving up her hobbies.

The Budget

Category Budgeted Comments
Pre-YNAB Debt
Chase $200 Balance is $500 at 18%.
Discover $50 Balance is $700 at 0%. Will snowball this when higher rate card is paid off.
Student Loan Payment $265 Around $19,000 total with rates between 5% and 7%.
Charitable $25
Monthly Bills
Rent/Mortgage $551 Downtown loft.
Ting $35
Internet $70 Moving to an apartment with free internet next April.
Electricity $40
Spotify $10
Yoga $40
Jiu-Jitsu $50
Birth Control $30
Roller Derby $30
Betterment $50
Everyday Expenses
Groceries $100 Cat food and litter included.
Fuel $75 My hobbies and work are near to me so why the high number? Currently, I visit a family member a few times a week who will probably not be around much longer.
Spending Money $25
Restaurants $44
Gear for Yoga/Jiu-Jitsu/Roller Derby $40
Vegan Box $20 It’s a snackbox! Who doesn’t love getting a boatload of snacks?
Dry Cleaning $10
Rainy Day Funds
Emergency Fund $20
Vet Visit $20 I have two kitties that need $120 in (non-urgent) tests so I am saving up.
Savings Goals
Lily’s Savings $200 Personal savings balance is $300.
Dad Savings $200 Balance is $1,400. (Lily funds a savings account for her dad to help out in the event he can’t work.)
Buffer $100
Budget Total $2,300

The more I look at Lily’s numbers, the more optimistic I feel. Yes, total debt balances are high, and monthly payments are eating up big chunk of her monthly cash. But if she gets a good snowball rolling on these goals, she’s not many years away from having everything paid off, with money in the bank.

Here’s how I would go after the goals:

1. Funnel all available money to the Buffer.

It’s a point of discussion and confusion among YNABers, but I consider my buffer my emergency fund. Yes, I’m living on last month’s income, but if I really got in a pinch I’d tap the buffer to cover an emergency and go back to living check to check while I rebuilt the buffer.

In any case, I’d advise Lily to fund her buffer as insurance against new credit card debt. As we talked about the other day, I’d get the buffer (emergency fund) to a level that lets her sleep well at night, then move on to attacking the debt.

Lily can fund her buffer with the $190 extra she’s currently sending to Chase, the $20 she’s sending to ‘Emergency Fund’, and the combined $500 going to her savings, Dad’s savings, and ‘Buffer.’ That’s $710, which means she’s roughly three months from a full buffer/one-month emergency fund.

2. Pay off the credit cards.

Having built the buffer, Lily will be two short months away from zeroing out the credit cards (by throwing the whole $710 per month at the debt).

3. Start funding a ‘Car Repair/Replacement’ category at $100 per month.

Lily’s dad has always handled repairs on her 2002 Chevy Cavalier, but she knows it won’t last forever, and she wants to be ready to replace the car when it finally dies. $100 per month isn’t much, but it’s a hedge against using her emergency fund to cover future repairs. If she ends up not having to pay for repairs, the category becomes a hedge against having to finance the new car.

4. Attack the student loans.

With the credit cards at $0, Lily can add the $670 ($710 original snowball + $60 freed up by zeroing credit cards – $100 for the car category) to her $265 minimum student loan payment and be out of debt in around 3 years, 2 months (according to

Having paid off her credit card debt and maintained her buffer/emergency fund, Lily would have nearly $900 per month to add to her emergency fund, car savings, and eventually retirement accounts.


1. Willingness to Borrow

Much of Lily’s credit card debt came after a bad breakup that required her to move into and furnish her own place (pots, pans – the whole deal). Unfortunately, another portion of the debt funded her hobbies.

In our emails, Lily and I talked about how risky it is to elevate non-emergencies to emergency status by paying for them with credit cards. She’s already paid down big chunks of credit card debt, and I’m confident she won’t further bury herself in the future.

2. Dad’s ability to work.

Lily has made herself responsible for her dad in the event he can’t keep working. That could mean having to buy more groceries, pay more rent, possibly cover some medical expenses. Of course, I imagine he’d qualify for some sort of social security/disability income and other government benefits that should offset or cover the costs. In any case, the more cash Lily has on hand, the more easily she and her dad could make that transition.

Lily, I don’t think you’re adding excessive risk to your finances by continuing to fund your hobbies – IF you use the rest of you available funds to really get after your debt and savings goals. Keep up the good work, and be careful with those credit cards!

What is Brian and Janna’s best path to home ownership?

magnifying glassHere we have Brian and Janna. They have a 16 month old child, two dogs, and a desire to buy their first home. Janna is a licensed marriage and family therapist; Brian is a city-employed landscape architect.

Brian recently transitioned from the private sector to his new job with the city, allowing him less travel, lower cost insurance, and a higher salary. Brian currently brings home $1,558 biweekly. He’s listed his health and life insurance premiums in the budget below even thought they’re deducted from payroll, so we’ll add $140 per paycheck back in and call his income $1,698 every two weeks, or right at $3,400 per month. His two extra paychecks per year (because he’s paid biweekly) are available for savings.

To increase his income, Brian would have to change his job title – moving toward management and away from design work, which he loves.

Janna, although licensed, has to complete a certain number of hours in practice before being able operate independent of her mentor (for lack of a better word). She bills her time at an average of $80 per hour, but half of that goes to overhead (rent, insurance, etc associated with the practice) and to her supervising therapist.

She’s also an adjunct professor at her alma mater, teaching an average of one class per semester.

All said and done, Janna nets about $600 per month.

Brian and Janna have no debt – which is why I’m waving my hands at the small difference between my estimate of their monthly income and their average outflows (listed below). It’s obviously all balancing – just not progressing as quickly as they’d like.

They’re living fully “buffered” (Rule 4), and they have a three month emergency fund. Awesome.

The Goal is Home Ownership

Brian and Janna would like to buy a home in the $150,000 to $175,000 range, with 20% down, as quickly as possible. Look over their budget, then help me help them figure out how to get into the house.

The Budget

Category Budgeted Brian’s Notes Mark’s Notes
Charity $500 Brian didn’t specify where this goes.
Savings & Rainy Days
House Downpayment $0 to $400 Goal to buy a house, but funding currently depends on wife’s income.
Christmas $60 Gifts for immediate family only
Term Life Insurance $70 For both of us
Vacation $150 Saving for out of town wedding next summer
Child’s College Fund $0 Would like to fund more
Pension $270
Other $0 to $100 Depends on wife’s income; need to fund more and more consistently
Groceries $500 Eat local and organic when possible
Restaurants $160
Recreational Beverages $50
Rent $625 Landlord pays trash and water
Renter’s Insurance $13
Electricity and Gas $150 Could you switch to CFLs and save here? Adjust to hotter summer temps and cooler winters?
Phone $97 $20 stipend from employer Could you save money with Ting?
Internet $57
Cable $0 No TV (Applause)
Car Gas $200 Any possibility of bike commuting,car pooling, or working from home some of the time?
Car Insurance $88
Car Repairs $50
Car Registration $20
Car Replacement $0 Would like to fund more
Medical Cafeteria Plan $167 I’m not familiar with these. Would it be irresponsible to drop it?
Health Insurance $283
Household Meds $5 to $10
Personal Care Items $0 to $20
Household Items $20 to $100
Clothing $100 Gotta get this down. This is easy money.
Haircuts/Massage/Etc $50 I’d beat up on this category as much as possible.
Kid Stuff $75
Gifts $15
Love Money $30 Flowers for my wife Way to show me up.
Blow Money $20
Education $0 to $10 Professional/personal development
Childcare $300 Part-time nanny; might increase to $750 for full-time preschool in the next 18-24 months
Pets $110 2 dogs – food, meds, vet
Entertainment $0 to $20
Budget Total $4,235 to $4,895

The Ugly Math

The $35,000 down payment goal (20% of $175,000) would take 11.7 years to reach if you freed up $250 per month (and saved the money in a savings account). Which is to say: it’s a big goal that’s going to take a long time without major changes to the finances.

If we factor inflation into the equation, your money will be worth about 30% less in ten years (3% inflation per year), which means you’d need to save up about 30% more to make the equivalent down payment. That takes your required monthly savings up to $325 in order to achieve a 20% down payment on a $175,000 house (inflation-adjusted equivalent) in 10 years.

(Unless you could earn 3% per year on your down payment savings! Maybe Betterment could help.)

So, this gives me two thoughts:

First, I suppose this is why there are programs that allow people to buy homes with less than 20% down. I bought my house back when the world had lost its mind, and I did some wonky 80/20 financing where the 20% was called a “home equity loan.” Terrible loan, terrible interest rate – we’ve covered this all before.

Point is, I’m ignorant about your lower-down payment options. I have a friend who got himself a great loan recently with less than 20% down, and he bought his way out of Private Mortgage Insurance. His break-even on buying out the PMI is something like two years, so as long as he stays in the house a good long time, he’s coming out great without having had to save up the full 20%.

I hope commenters will chime in with their own stories of how they got reasonably priced loans without a full 20% down payment.

Second, I’m all for the 20% down payment. I think you’d find the purchase less stressful if you had such a big chunk to put down. But the numbers are telling us you’ll need to be saving something north of $500 per month to come up with that down payment in, say, 5 – 6 years.

How will you come up with an extra $500+ per month. Same as the rest of us: through increased income and/or reduced expenses.

There’s more upside in Janna’s income than Brian’s, for the time being. If Janna could accelerate her clinical hours and start pocketing a higher percentage of the $80/hr she can bill, I see the family’s income potential shooting up over $100,000 per year. If you take the budget laid out above and change the income to $100k+, it’s not very hard to get to $500/mo in house savings.

Reducing expenses is the trickier, more emotional piece for most of us. I see some places I could cut back in your budget, but that’s me.

The two of you have to come together, decide how much the goal matters to you, and weigh all other purchases against the value of the goal (sort of like we did with Carrie the other week).

With every discretionary category, you have to ask yourselves:

Is that more important to us than getting the house?

In many cases, you’ll say Yes. Some of your expenses will be more important than accelerating the home ownership goal. In other cases, you’ll have to answer the tough No, and push that money toward your down payment category.

I hope the discussion is helpful, and wish you the best with your goal to get into a house!

Update: Brian emailed me this as a follow-up to the post.

“Charity – $500 is 10% of gross and represents an important part of our life. We’ll choose giving over a house.

Christmas – Big family – 15+ including siblings,some with spouses, etc. We budgeted $720, but won’t be spending even close to that since the much larger half of the family decided to forgo gifts and do a secret Santa thing instead. Should be able to roll many hundreds of dollars into savings, and cut this way back in 2014, too.
Dogs – We don’t spend $1200 on the dogs, but we budget that so we have a healthy veterinary category in case something serious happens. We have an emergency fund, but it feels better having a cushion designated for the pets, same as our car repair fund.

Cafeteria Plan – As others said, this is pre-tax money for medical expenses. We estimate conservatively but do use it all. In 2014, a portion of our childcare expense will also be run through this plan; something we didn’t do this year.
Childcare – Little one will attend a part-time preschool next year. $144 per week; comes to about half per hour what we pay now and will give “Jenna” more time to build her practice.
MFT – Great to see feedback from other LMFTs here. The $600 per month is net. We hold back money for taxes and other business expenses like licensing, CEU’s, conference travel, etc. in a separate off-budget account. Those numbers are not reflected in what Mark posted. Starting in January she will be adding a sales component to her job that has the potential to boost her income significantly. She is about half way to the required # of hours, but expects to knock out the other half in 12-18 months based on her new availability. Once she meets the requirements, she will be able to accept more clients and expect a slightly higher percent cut. She will still have overhead expenses for the office space, billing, marketing, etc that is handled by the group practice.
House – Good input from all sides. Kind of hard to hear that some think we can’t ever buy a house, but that’s what it feels like, so it shouldn’t hurt to say it out loud. I appreciate the honesty. A lower price point probably isn’t reasonable based on what I know of our local market. Moving out of town would bring the price down, but add other expenses and possibly reduce quality of life. Something to consider regardless.
We’ll be saving everyone’s comments and reviewing them more in depth over the holidays. Hopefully cuts here and there combined with the income changes will drastically alter the picture and we can cut a few years off Mark’s projections.”

Which of your budget categories would you “sell” for $2 Million?

magnifying glassHere we have “Carrie.”

Carrie’s in her 20′s, recently graduated from college and working in tech marketing in San Francisco.

She bought YNAB during the still-running Black Friday sale and quickly figured out we like to review budgets around here.

Her preface, followed by her budget:

“I’m 24 years old, currently making $64,500 as a marketing coordinator for a tech company. My take-home pay is $1,662 on a biweekly basis.

These are my financial goals:

1. Increase savings to $10k to cover 3 months of expenses. Savings account currently has a buffer of $3,000 and I automatically transfer $200 a month.

2. Upgrade my car. I’m driving a 1998 Ford Mustang with 155,000 miles and I’d like to buy a newer used car within the next year. Right now my parents are paying my car insurance, but I’ll take on that expense with the new car.

3. Pay off my student loan, which was originally $8,113 and is now around $5,500 after a year of making double the minimum payments and applying $1,000 from my tax refund.

4. Increase retirement savings, which is currently 4% of my pay with a company match up to 15%.

5. Start investing in the mutual fund my parents started for me. Balance is about $1,800 and minimum investment is $100/month.

I don’t know how I’m going to be able to afford paying a car loan, car insurance, my student loan, and still having enough for savings and investing! Help!”

The Budget

Credit Card Debt $0 $0
Student Loans $200 $5,500 at 6%. $200 Original was $8,113, started payment Jan 2013, doubling the minimum.
Monthly Bills
Rent $1720 1 bd. apt. in the CA bay area. An astronomical cost but I’m not interested in moving or roommates.
Utilities $50 Includes water, trash, sewage
PG&E $30
Cable/internet $100 Currently doesn’t include HBO, but will probably renew for “Game of Thrones”
Cell Phone $30 Still on parents’ plan
Everyday Expenses
Groceries $100
Restaurants $100
Gas $200 Usually drive 300 miles round-trip once a month to visit family
Health/fitness $100 Pharmacy, fitness classes
Shopping $200 Mostly clothing, some household items
Personal Care $50 Beauty, nails, massage, dry cleaning, etc.
Entertainment $50 Music, movies, magazines, etc.
Gifts $50
Extra spending $100 Had a “cash” category in Mint, but now I’m planning on better monitoring this spending
Health $0 Free through employer plan
Car $0 Only expense parents still paying, but will stop when I buy a new car
AAA $10 $10
Renter’s $20
Savings $200 Current balance is $3,000
TOTAL $3,310 $3310

Carrie, welcome to YNAB. You’re in the right place.

Congratulations on:

  • Finishing school without excessive debt.
  • Having no credit card debt (or other consumer debt).
  • Doubling up on your student loan payments.
  • Having helpful parents (credit where it’s due, right?).

The best I can hope to accomplish with one blog post is to give you some serious food for thought.

You are the rarest of breeds in the United States: very young, very little debt, excellent earnings. If you’ll forgive the analogy: you’re a small car with a big engine.

Check out this math:

Monthly Retirement Contribution Return 30 Year Value 40 Year Value
$500 7% $609,993.61 $1,312,423.01
$500 9% $915,386.47 $2,340,696.25

I don’t give you that table just to prove how skilled I am in the copying and pasting of data from online savings calculators.

I just wanted to show you that you’re in the position to make the most important financial decision of your life without any of the baggage most of us carry.

You can flip one switch (deciding to set aside $500 per month) and be done with the biggest question burdening earners the world over: how will I be able to retire?

Rather than beat up on your individual categories, I’ll ask you to see which of these statements feels most comfortable to you:

I don’t know how I’m going to retire, but thank goodness I didn’t have any roommates in my early 20s.

I don’t know how I’m going to retire, but Game of Thrones was worth every penny.

I don’t know how I’m going to retire, but thank goodness I financed that new car 30 years ago when I already had one that worked.

That may have come across sarcastic or judgmental. It wasn’t. I’m just trying to put words to the harsh, relentless cost of not saving.

I recently had to evaluate a similar statement:

“I don’t know how I’m going to retire, but thank goodness I can do heavy squats in my garage.”

I couldn’t stomach that statement, so the cash I was going to spend on gym equipment went to pay off debt.

So, Carrie, my only advice to you is to walk through your budget and with each category, say, “I’d rather have this thing than $2 million.”

I hope you’ll be smarter than the rest of us. I hope you’ll decide to put a big, fat monthly 401k contribution on auto-pilot and build the rest of your life around your expectation of a comfortable, worry-free retirement.

Which reminds me – my calculations don’t even account for your employer match. For however long you’re with that particular employer – or one similarly generous – $500 is actually $1,000.

Forgive me for mostly ignoring your questions (and categories) to focus on your retirement math.

If you force big retirement savings into your life, then (as Metallica so eloquently put it) nothing else matters.

The Most Expensive Part of this Budget Isn’t the Easiest to See

magnifying glassWith two young children at home, Debbie was feeling stressed and depressed about her long work weeks. So she made the happiness-increasing choice to cut back to part-time work and has loved the extra time with the kids.

Unfortunately, she and Ed are feeling the effects of the lost income. Although they’re budgeting diligently, high student loan payments and expensive car repairs have left them a short on cash. Debbie reached out to ask the community how she and Ed can get ahead in spite of the reduced income.

Debbie works part time earning $1,960 per month take-home. She’s paid bi-weekly, which means two months with an extra paycheck. Ed brings home $3,647 per month after withholding for 401k contributions (5%), taxes, and health insurance premiums.

Ed’s an up-and-comer at his job, and they hope to see a 35% increase in his income in the next five years.

To the budget:

Pre-YNAB Debt Avg. Outflows Notes
Ed Chase $124.05 Leftover from our credit card days; we have paid off over $10,000 in CC debt in the last few years; this card is 0% APR for the next 12 months. Remaining balance is $1,072.
Debbie BOA $0.00
Student Loans Both have graduate degrees. Total outstanding balance of $100,710 at around 6%.
Ed AES $118.00
Debbie AES $257.88
Ed SM $175.00
Debbie SM $212.76
Monthly Bills
Mortgage $1,289.35 Includes home owners insurance and property taxes. Property taxes are $435 per month.
Utilities $538.35 Includes gas heat, electricity, water, sewage, internet, cable, and cell phone; internet and cable = $100/mo. and cell phone = $156/mo. (2 smartphones)
Childcare $354.80 Debbie works ten months of the year.
College Funds $12.50 They were contributing monthly to a 529 plan, have since stopped those payments to prioritize other saving
Everyday Expenses
Groceries $841.39 We joined a CSA this summer (meat and produce); although eating healthy and local is important to us, we found this was just too expensive for us, adding about $180/mo. For June-Oct.
Fuel & Parking $221.53 Two cars- they both commute. Debbie is in transit about two hours per day, Ed about 1 hr, 15 minutes per day.
Spending Money $33.64
Restaurants $61.54
Health $97.45 Rx, Co-pays, etc. Health Insurance is through Ed’s employer. Premium is taken out of his paycheck.
Clothing $145.69
Household Goods $110.25 Paper goods, cleaning products, diapers. Etc.
Lunches $36.06 My husband and I budget one lunch out per week
Entertainment $54.61 Netflix and family outings
Personal Care $43.66 Haircuts and occasional drycleaning
Miscellaneous $56.80
Kids $54.93 Kids outings, school lunch money for my daughter to buy lunch about once/2 weeks
Rainy Day Funds
Emergency Fund $0.00
Car Repairs & Maintenance $424.68 We have two 10 year-old cars- a Toyota Matrix and a Toyota Corolla (paid off :) ). Average outflows are high due to a recent costly repair to one of the cars. They typically budget $50/mo to the category.
Home Maintenance $43.41 I told them this category makes me nervous. They’re in a 74 year-old home with a 15 year-old roof.
Car Insurance $66.00 We save money by paying our car insurance premium once annually – $790
Birthdays $24.23 My daughters’ birthday parties and gifts, and my husband and my shared annual birthday dinner out (our birthdays are 3 days apart)
Christmas $50.00 Just started this fund in July after reading a YNAB post by Jesse about it!
Trips $3.40 Driving trips across the state to visit my family (gas, tolls)
June-August $0.00 To cover Debbie’s two months off of work in the summer
Kids Activities $110.75 Swim lessons, basketball, acting class.
Vacation $118.51
Gifts $87.14
Donations $14.50
Savings Goals
Car Replacement $0.00 Category balance is $0.
Home Remodel $0.00 Category balance is $0.
Buffer $0.00 Buffer balance is $1,100 and they have a $1,000 emergency fund.
Kids Savings Accounts $0.00 Because this money goes through our account when the kids receive monetary gifts for birthdays, etc.
Budget Total $5,782.84

First things first, I’ll congratulate Ed and Debbie for keeping things pretty well managed, even with a $763 per month student loan anchor around their neck.

Next, let’s do the normal quick scan looking for low-hanging fruit* in the budget:

I would take the $1,100 buffer and pay off the last credit card immediately. You still have your $1,000 emergency fund in place, and we need that $124 elsewhere in the budget today.

Cable TV and expensive smart phone plans. I have a deep loathing for both, so I can’t comment impartially on these categories. All I can ask is that you do the math on a) the cost of removing yourself from these contracts, and b) the amount of interest and time you’d save on the student loan debt if you added an extra $100 or so to your payments.

Groceries. You mentioned how participation in the local CSA added about $190 to your bill over the four months used in these average outflows. I’d put that $190 to work elsewhere in your budget.

Clothing. Maybe we caught you in an unusually costly four-month period for clothing purchases. If not, I’d say there’s an easy $50 to $75 to be saved here.

*By low-hanging fruit, I mean “easy to say, maybe not as easy to do.” Ed and Debbie have to figure out where and how they want to cut back, if at all. These are the categories where I’d start looking. 

Potential savings: maybe $400 to $450 per month.

Vulnerabilities in the Budget

The cars. I love that they drive two 10 year-old paid-for Toyotas. Problem is they’re high mileage, and they take a beating in the daily slow-speed commute. There’s risk of more expensive repairs, and my real concern is one (or both) of the cars will just flat out die and they’ll have to finance the replacement.

The house. 74 years old with a 15 year-old roof. It just makes me nervous to see no balance in ‘Home Maintenance’ and very little money flowing into the category. I don’t want the credit cards to be back in play when the home needs this or that and there’s no rainy day money available.

If it were me, I’d take the $400 or so per month in low-hanging fruit and build up a one-month buffer/emergency fund. That would allow them to live on last month’s income and have a little more peace of mind while they attack the debt.

But, even with the one-month buffer in place, I’d still feel like the cars, the commutes, and the house put Ed and Debbie at high risk of new debt. Which is why I gave them some pretty extreme advice.

My Crazy Plan for Reducing Risk and Getting Ahead Faster

Here’s my wild-eyed, hair on fire plan for how Ed and Debbie can remove a lot of their risk, lower their expenses, and speed up their debt elimination:

Sell the house and move to a rental within biking distance of Ed’s job. Debbie finds work within biking distance of the new home (because they feel like Ed’s job has more long-term upside). 

Now, hear me out. Yes, it’s a drastic move. But check it out:

  • The risk of the old house and the old roof go away.
  • The reliance on the old, risky cars goes way down, along with fuel and maintenance costs.
  • Debbie gets back most of the 400+ hours per year she’s spending in transit to her current part-time job. 400 hours per year!
  • Ed gets back most of the 350+ hours (!) per year he’s spending in transit.

Okay, I acknowledge that I’m a little over the top with my anti-commuting attitude, but you have to do the math. Debbie’s effective take-home hourly wage goes from $24.50 to just over $16 when you add in the cost of the drive. That doesn’t even account for the physical/mental/emotional costs of two hours of daily stop-and-go traffic.

I’m not even saying they have to bike commute (although they’d love it). Choosing to live within biking distance is simply the decision to avoid a long commute in the car. Ed works in the suburbs, Debbie tells me, so it’s not like they’re having to move into a dangerous place to make this all work.

Alright, I’m getting long-winded (as usual). Ed, Debbie: think it over. I believe the direct dollar savings of the move would be thousands per year in avoided maintenance on the home and cars. The indirect benefits of not having to commute and spending a lot more time together will blow your mind.

Transitional, Tumultuous Times Take Tight…Budgeting

magnifying glassI wanted the alliteration to work. I wanted it so badly.

Anyway, I’ve been emailing with a guy we’ll call Sam.

Sam lost his job in early 2012. His wife, Flo, was working, but wasn’t earning enough to cover their bills.

Debt happened.

Quoting Sam:

“I had enough in the emergency fund to cover two months of expenses; then we had to turn to family for help.”

Relatives chipped in to cover the mortgage, Flo’s income covered what it could, and the rest went onto credit cards.

Sam was unemployed for six months, and during that time he and Flow accrued about $20,000 in credit card debt.

Wait, huh?

  • Relatives were covering the mortgage.
  • Flo was earning $2,000 per month.

On top of that, they added over $3,000 per month to their credit card balances? How on earth?

Oh, that’s right. I can tell you how they did it because I’ve done exactly the same thing. :)

When Kate and I were transitioning to self employment five years ago, our income went way down for a while (there were a couple of months with no income at all). Because we had no budget to help us understand our true expenses and needs, our spending just sort of did…whatever. By the time our income was back on track, we’d racked up over $15,000 in credit card debt.

Three factors drove our borrowing:

1. A willingness to borrow.

Some people seem unwilling to borrow, no matter the circumstances (major medical emergencies excepted). They don’t borrow, they don’t consider borrowing, and somehow they manage to get by. This is a group I admire, and within a couple of years I may consider myself one of them (I have to further prove my own unwillingness to borrow; it’s only about two years old.)

If you’re willing to borrow, you’re at risk of getting in debt. Yes, I know that seems simplistic, but it’s a concept I wish I’d understood better 15 years ago.

2. The already-mentioned lack of budget.

We spent what we spent. I’m sure none of it seemed frivolous to us. Combined with the willingness to borrow, a lack of budget is dangerous.

3. Life upheaval.

There’s something about turmoil and transition that ramps up spending. Interruptions in your life routine (moving, job change, job loss) seem to trigger something in our brains that says “We need to buy this/spend that right now because we’re in flux. When life calm down, we’ll reign in spending.”

When you put 1, 2, and 3 together – you get Sam and Flo’s situation. They were willing to borrow (just like I was, in case you think I’m on my high horse), they weren’t living with a well-managed budget, and their life went through several big transitions: job loss, a move for a new job, and Flo going back to school.

And here’s the only reason I bring it all up:

After life calmed down (with full employment and settlement in the new city), Sam and Flo have kept borrowing. Even though Sam has identified about $1,000 per month he can put toward debt reduction (awesome), the balances aren’t really shrinking. Once the borrowing habit takes root, you have to work pretty hard to get rid of it.

Sam and I will talk about this (one borrower to another) on the phone in the next couple of days, but here’s the simple solution:

1. Total unwillingness to borrow.

The only way to guarantee the credit card balances won’t grow is to not use them. If you can’t be sure you won’t use them for non-essentials, cut them up.

2. Commitment to follow the budget.

This doesn’t mean you never overspend. YNAB is built to work with overspending where one category covers overages in another. It works amazingly – as long as borrowing to cover the excess is totally off the table.

3. Prepare for future turmoil and upheaval in your life.

It seems not to be enough to just live within your means in terms of your right now expenses. We have to acknowledge unknown, unknowable, guaranteed-to-happen external shocks to the system: job loss, medical issues, and other life transitions.

Sam and Flo will be fine. They YNAB together, and Sam admits that Flo’s much more diligent than he is about sticking to the budget. I take it as a great sign that the admitted weaker budgeter is reaching out to the community for advice.  I’ll update after we’ve had a chance to work through their numbers together.

Fred and Ethel Kindly Request that You Rip Their Budget to Shreds

magnifying glassOne of “Fred’s” last comments to me was “Very excited to get raked over the coals.”

Fred and Ethel have a great household income (Fred’s a computer worker and Ethel stays home with their two young kids), and after discovering budgeting a year ago, they’ve put themselves on a very healthy financial path.

But, having clarified that their unifying financial goal is to have the freedom to “be near, and enjoy family” (ie move to where their kids settle as adults, or live the mobile life and spend time with both kids’ eventual families) they’re wondering what they can do to accelerate.

They’re 35 years-old, looking to be free from the obligation to work by age 50 (both kids will be grown by then).

As a little background, Fred contributes 4% to his 401k, which is matched dollar for dollar by his employer. Health insurance is through the employer as well.

The Budget

Category Budgeted Category Balance Notes
Miscellaneous / Needs Based $400.00 $2,392.78 They have a goal to increase giving while also increasing debt payoff/savings.
Deductible / Automatic $126.00 $0.00
Groceries $500.00 $139.35 Two parents; two kids
Dining Out $500.00 $134.45 Mostly spent on weekly date nights at nice restaurants.
Fuel $380.00 $130.48  One-car family (2011 Ford Explorer).
Repairs/Maintenance (Rainy Day) $120.00 $1,183.08
Car Insurance $64.00 $91.95
Registration $28.00 $140.00
Car Payment $0.00 $0.00 Paid off the car a few months ago, planning to buy another within a year.
Cash – His and Her blow money $380.00 $0.00 Includes $150 for a housekeeper, babysitters, beers out with the guys, splitting dinner bills with friends.
Clothing $130.00 $58.66
Gifts $150.00 $153.99
Household Supplies $250.00 $38.44 Normal house cleaning and paper products, small furniture (items under $500).
Life Insurance $69.00 $0.00
Personal Care $180.00 $14.98 Haircuts, special health foods, supplements, exercise programs and equipment.
Bank Fees $7.00 $12.50
Mortgage – Home $1,390.00 $0.00 Balance is $309,000 at 3.375%
Utilities – Home $272.00 $381.11 Water is their costliest utility. Lots of lawn in a dry climate.
Cellphones $140.00 $0.00
Internet $50.00 $0.00
HO Insurance – Home $71.00 $420.00
Property Tax – Home $433.00 $694.54
Repairs/Maintenance (Rainy Day) $150.00 $292.01
Rental Property Rents for $1,550/mo. Rent raised annually. Property is rented to a friend.
Mortgage – Rental $1,215.00 $0.00 Balance is $159,000 at 3.375%
Minimum Home equity payoff $290.00 $0.00 Balance is $30,000 – this is the focus of the $1,500 per month extra debt payment.
Utilities – Rental $130.00 $55.70
HO Insurance – Rental $51.00 $202.00
Property Tax – Rental $92.00 $92.93
Gardener $60.00 $60.00
Repairs/Maintenance (Rainy Day) $150.00 $650.00
Doctor/Medicine/Vet (Rainy Day) $260.00 $890.00 Dr. co-pays, prescriptions, glasses/contacts, chiro/acupuncture, and vet bills.
Dental (Self Insurance) $135.00 $470.20
Activities – Dance lessons / Piano etc $150.00 $50.00
Miscellaneous – Spontaneous itunes / redbox $58.00 $9.07
Recurring Entertainment – Netflix / Spotify / Others $30.00 $0.00
Travel $250.00 $797.23
Preschool $300.00 $0.00
College Savings $50.00 $0.00
Supplies/Field trips $25.00 $150.44
Savings/Extra Debt Payoff
Home Equity $1,500.00 $0.00
Emergency Fund $0.00 $15,000.00
Budget Total $10,536 – $1,550 (rental income) = $8,986

It’s easy to grab a machete and start hacking away at this budget. Seemingly low-hanging fruit all over the place. My first pass at the budget freed up $825:

  • Save $350 by cutting Eating Out from $500 to $150.
  • Drop the house cleaner and save $150.*
  • Cut $50 from gifts ($100/mo should take care of family and close friends, right?).
  • Cut Household Supplies from $250 to $125.
  • Personal Care from $180 to $100.
  • Get a cheaper cell phone plan and save another $90 to $100.

*Fred works from home most of the time, as does Ethel (stay at home mom). Between the two of them, seems fair to say they can keep the house spotless without paid help.

Yeah – not hard to pull a quick $800 out of their current spending, but maybe that’s not the only – or the best – approach here. Maybe, instead of starting with answers, Fred and Ethel should start with a question:

How can we obtain the same value/happiness/satisfaction from our consumption while spending a lot less money?

This isn’t really a matter of deal-seeking (although getting good deals doesn’t hurt). It’s about starting a conversation where they ask each other what it is about each category that gives them real happiness.

What is it about the expensive meals out they enjoy so much? What’s the root feeling of satisfaction there? How could they replicate that experience while spending a lot less money?

Kate and I have found that we enjoy $12 meals at In n Out Burger almost as much as $60 sushi nights – if we go to In n Out at 3pm when the place is empty. Turns out it’s the quiet conversation that matters most to us.

That’s just one example. The opportunity Fred and Ethel have is to do a little “zero-based thinking” about their finances, putting every expense on the table and forcing every consumption decision to compete with their goal to be free by 50.

I wonder – just wonder – if they could turn that $1,500 accelerator into $2,500 or $3,000.

Fred, Ethel: do the math. If you were getting ahead at a rate of $3,000 per month, how quickly would you have the rental property paid off? And/or your own home? And/or a big chunk in the market to fund your freedom? The numbers are pretty exciting.

Thanks for your willingness to share, and your very cool attitude about getting “ripped to shreds” by the community. :)

Can this young family afford to have dad stay home with the baby while mom works and finishes her graduate degree?

magnifying glassHaley and Ron are wondering if Ron can quit his job. As you’ll see in their budget, almost half his income is eaten up by job-related expenses (that’s one expensive job). The bottom line is this: if Ron quits his job, it costs them about $1,000 per month in take-home pay, but saves them $460 in gas and child care.

Their health insurance comes directly out of Haley’s paycheck, as does her retirement savings. Between her 401k contribution and employer matching, she’s currently saving around 12.5% of her gross income. Not bad for a person in her mid-twenties, but not a number that’s going to allow for early retirement.

Let’s dig into the numbers and see how they can stay within their means while giving up around 1/3 of their income.

Income Take-Home Pay Notes
Hers $2,216.40 Just got a ~5% raise, but more raises not likely.
His $1,000 Considering quitting to stay home with child.
Income Total $3,216.40
Category Budgeted Notes
Needs Needs and Wants are terms Haley used in her emails to me.
Rent $264 Renting from parents, living with two housemates.
Utilities $180 Natural gas, water, electric.
Phone and Internet $159.84 Phone plan shared with her family, subsidizing college-aged siblings.
Miscellaneous $250 This is a black box; she has planned dig in and find out the category specifics.
Gas and Tolls $240 Majority of this cost is due to husband’s job.
Childcare $300 Family member watches child while he and she work.
Grad School Tuition & Expenses $431 Pursuing Master’s Degree that qualifies her for the job she already has.
Insurance $130 Renter’s and auto policies.
Needs Total $1,954.84 $460 stems directly from husband’s $1,000/mo job (child care and transportation expenses).
His Spending $60 Their Goal: $30
Her Spending $88 Their Goal: $30
Babysitter $40
Entertainment $17.30
Restaurants $265 Their Goal: $150
Outings $50
Coffee $75
Beer $128 Their Goal: $60
Wants Total $723.30 Their Goal: $452.30 (37% decrease, $271 in monthly savings)
Gifts and Giving
Gifts $133 Birthdays and holidays for family and close friends.
Sponsor a Child $35
Gifts and Giving Total $168
Budget Total $2,846.14 If husband quit job and they spent goal amount in Wants, Budget total would be $2,846.14 – $271 – $460 = $2,115.14
Emergency Fund Current balance is ~$400.
Car maintenance/replacement Empty, and not being funded.
Life Insurance None that I’m aware of.
Rent She tells me rent would be roughly 3x as much if they decided to get a similar place without housemates.
Student Loan They’re paying cash for her Master’s program, but Haley has around $190 in deferred student loan payments from her undergrad program. When she finishes the grad degree, they’ll have to start making payments again. $190 is a big percentage of their current budget.
Rule 4 Maybe not a vulnerability, but living on last month’s income makes for easier budgeting and increased peace of mind.

My Take

I told Haley in an email that I’m nervous about each of those vulnerabilities. Any medium-sized emergency would have Haley and Ron on credit cards (or more student loans) in no time flat.

Because their earnings are stable, and because so many of their expenses are discretionary, I’d maintain the second income for the next year while attacking discretionary expenses. Fight the “Wants” down to the goal amounts, and also open your minds to saving some money on the cell phone bill, coffee, gifts, and restaurants (taking it even lower than your “goal” amount), and a year from now you could have a $3,000 to $4,000 emergency fund.

At that point Ron could leave his job, improving the family’s quality of life without increasing financial risk. In any case, this is a young family headed in the right direction.

What should Liv do with her extra income?

magnifying glassLiv and her husband have been YNABing since 2010, and they’ve just had the good fortune of a monthly net increase in income of $1,775.50. Liv has a few questions for the YNAB community. Take a look at her budget:

Category 2013 Budgeted Increase from 2012 Notes
Gas, Metro & Tolls $250.00 $30.00 Increase for 2nd car
Groceries $433.33 $32.50 Increased because always overspending in 2012
Toiletries & Cleaning $64.00
Electricity & Gas $200.00
Phone & Internet $122.00 2 cell phones & land line
Water $52.00
Trash $8.93
Restaurants $50.00
Misc $110.00 $15.00 Increased so this category isn’t so tight
Housewares $30.00 $20.00 Used for storage boxes, towels, bedding, small kitchen items, etc and decorating house (bought 2 yrs ago)
Entertainment $5.00
Her – Clothes $25.00
His – Clothes $25.00
Her – Fun Money $0.00 Funded with credit card rewards cash back. ~$125-150 per year, per spouse
His – Fun Money $0.00
Gifts $100.00 All Gifts: Birthday, Anniversary, Christmas, etc
Travel to Home State $41.67 trips to see family (~500 & 700 mi away)
Vacation $83.33
Mortgage $1,576.24
Property Taxes $312.50 $10.42 Increase for 2013
Home Insurance $79.92
Life Insurance $86.00 ~$750k coverage on husband
Car Insurance $144.08 $53.41 Increase for 2nd car
School Loan $123.46
Tithing $975.00 $200.00 10% of gross income (which is up $2,000 per month over 2012)
Doctor, Rx, etc $20.00 This is in addition to what we put aside in Flex Spending – Flex is the conservative estimate. Amounts decreased in 2013 because taking less Rx’s.
Health Items $100.00 Vitamins, supplements, over the counter meds
Home Improvement & Repairs $300.00 $216.67 increased
Furniture & Appliances $75.00 $45.83 increased
Electronics $25.00 $25.00 Started new fund to save, otherwise would have come from Misc
New HVAC $300.00 $300.00 Started new fund to save, otherwise would have come from Home Improvement
Car Repairs & Maintenance $115.00 $31.67 Increase for 2nd car
New Car Fund $0.00 $55.00 Just bought second car.
General Savings $1,000.00 $730.00
Emergency Fund $0.00 Finished saving for it in 2012 – 6 months of expenses, and recently moved it to Betterment.
Betterment – Investing $380.00 $100.00 Shifted $280 from “New Car Fund” (Just bought a new car) and added another $100
TOTAL $7,212.46

Now, Liv’s questions:

1. “Where can we decrease costs? It seems lean to me, but it’s easy to overlook your own ‘splurge’ categories?”

Notes on this question: they just bought their home two years ago, and plan to be in it for the long term. They also consider tithing an untouchable category. They may be starting a family in the not-too-distant future.

2. “What’s the community’s take on how we’ve chosen to allocate the increased income (which we don’t expect to last more than a few years)?”

Notes on this question: Because they don’t expect the income to last, they hope to avoid using any of it to increase lifestyle. Here’s the specific breakdown of how they’ve allocated the new income in the budget:

Amount Beefed-up Category
$200.00 Increased Tithing on increased gross income
$115.08 Increased expenses related to 2nd Car
$77.92 Increased other tight categories
$642.50 Increased Save for Unexpected
$740.00 Increased Savings

Mark’s Take

Just a couple thoughts/questions, then I’ll turn it over to commenters:

1. What are the interest rates and balances on the student loan? What is the net benefit of putting money into Betterment/General Savings rather than paying off the student loan?

2. You want to avoid using the new income for more lifestyle, but you’ve allocated $115.08 + $77.92 to…more lifestyle? The rest is savings, and the tithing goes away when the income is done – but you’re building $193 per month into your lifestyle. What’s the plan there?

3. Why does the new income have to go away? You say it’s going to last a few years – could you not create a situation where the income persisted? You do have a few years to work on it, after all. :)

That’s it from me. Anybody else?

This married father of two wears shorts all winter because he can’t afford pants.

magnifying glassLet’s call him Rob. You might think the post title is meant to mock Rob; it is not. Those are Rob’s words (about having to wear shorts all winter because he can’t afford pants), and I thought that one line did a great job of summarizing his severe cash problems.

Rob made a post in a forum about how he felt like YNAB didn’t really suit his situation or his budgeting style, and challenged a member of the YNAB team to do a better job with his finances than he was doing with plain ol’ Notepad (I believe he’s referring to the Microsoft plain text editor as opposed to actual pen and paper).

Let me give you a portion of Rob’s forum post (although not the part where he talks about ‘shorts all winter’); you’ll see this man knows exactly where his money needs to be and exactly when it needs to be there:

“Right now I have three parts of income this month. Two paychecks and one stipend from my wife’s student loans. This MONEY HAS TO GO THIS MONTH (OCTOBER). Not just to this month, but on VERY SPECIFIC DAYS of the month, or else one check may go through wrong and suddenly five more will bounce. I can’t have that, I have already 965 dollars overdrawn in my bank.

If I follow me schedule on notepad, I will know the exact day and method to make payments to make sure they clear. For example: I do not get my paycheck until 10/4. However, rent is due on 10/1. In order for it to not be marked as late, I either have to drop it off on that date to the landlord, or mail it postmarked by the 1st and get there no later than the 5th. So…using my method, I can actually know that I need to MAIL the check on the 1st, taking it to the post office and making sure they set a delivery option for the 4th since the 4th is a friday and even if they deliver it on the 5th the landlord isn’t open then it won’t get the delivery actually until the next monday the 7th, and will count it late.

So, I know, by my method, when to drop it off and by what means. I also know that the paycheck is not going to be enough to cover my rent, and I still have a couple hundred dollars in bills to pay. So, I have to know that I need to go to the bank, on Friday, the 4th, after my check deposits, and talk to a teller so that the transaction posts immediately and not pending or else it will cause extra OD fees, and withdraw the money needed for the phone payment, groceries, and gas, and other household needs.

Then I leave enough in the bank for the rent check to overdraw me but still clear the bank. I budget in the overdraft fee into my budget and account for it, but it’s a necessary evil to pay bills. I then move that negative to next weeks paycheck, in which I am going to have a bigger check, and will be able to get mostly brought current. By then I will have renewed by covered checking “month” which technically starts on the 20th each month, and gives me two free overdraft fee waivers each month.

So I know that my 18th [of the month] paycheck, I can withdraw what I need to, and then write one or two big checks for the car payment and insurance, and and allow them to overdraft me, and the two overdraft fees would be waived.

Then on 10/22 my wife gets her stipend, and I have to budget in paying my uncle back 700 bucks, while bringing electric to only 30 days behind, and getting the car insurance and phone bill caught up from their past due status. Then budgeting in groceries and gas along with that, along with some household repair items we have been putting off, along with new shoes for the kids, and some patches for my shorts that have a hole in the back.

Now, that is JUST THE TIP OF THE ICEBERG to the complexities of my budget and how I do things.”

I know there are members of our community who’ve struggled through similar cash crunches, so I’m going to let them comment on how they made it work.

I’ll just address the issue of whether YNAB would improve your current workflow. The answer is…probably. If you bought into the YNAB budgeting philosophy and gave it a few months, I think it would simplify your system and reduce your stress. But I don’t need to hard-sell it to you. YNAB’s own founder has often said he’s a fan of any budgeting tool that a) helps a person achieve his/her financial goals, and b) reduces stress and time spent thinking about money.

You might do just fine with your Notepad workflow, with one small change:

Create a bill in your budget called “Buffer.” Pretend that bill is every bit as urgent as the light bill. Allocate $20 or $50 per month to that “bill”, then work whatever number of extra hours you need in order to make sure that one bill gets paid. In a year or two you’ll have $500 to $1,000 saved up in this buffer; you’ll then be able to use it to break this hyper-stressful bill timing and overdraft cycle.

Yes, YNAB would make it easier to create, fund, and track that monthly “bill” called ‘Buffer’, but all that really matters is that it gets paid.

Best of luck to you, and hope you’re able to get ahead of the bills in the near future.

How Jen can add $450,000 to her retirement without taking her dogs out of daycare.

magnifying glass“Jen” is a high school athletic trainer, ten years into her career. She’s loves her two (big) dogs and she’s buying her home. Jen lives on last month’s income, recently paid off a few thousand dollars of credit card balances, has plenty of insurance, and saves about 10% of her take-home income for retirement. She also runs a $200 monthly surplus in her budget.

In other words, Jen is covering her bases. If you were to run Jen’s financial habits out a few decades (knock on wood), you’d likely find a person with a paid-off home and a decent retirement nest egg.

Here’s Jen’s budget:

Category Budgeted Notes
Monthly Bills
Mortgage $1,234 Balance: $133.634.03, Rate: 4.875%
TV/Phone/Internet $246 TV: $107.65, Phone: $89.20, Internet: $42.44. My comments below.
Electric $86
Natural Gas $32
Water $60
Investments $350 Part to Roth IRA, part to other investments.
Disability Insurance $55
Life Insurance $62
Student Loan $130 Balance: $9,614.31, Rate: 3%
Home Security $63 Gives her peace of mind as a single woman, living alone. Long contract, though.
Monthly Bills Total $2,318
Vet $50
Food $32
Daycare $150 Leaves dogs at daycare on her long (7am to midnight) workdays.
Misc $35
Pets Total $267
Transportation Expenses
Truck Payment $300 2010 Chevy Silverado w/ 40,000 miles. Balance: $10,191.17, Rate: 5.89%. Required payment is $222.
Insurance $62
Fuel $230
Maintenance $25 Mark’s comment: this feels low to me.
Tires $0 She just finished paying off a 0% credit card for new tires, freeing up $100/mo.
Registration/Inspection $8
Tolls $3.33
Transportation Expenses Total $628.33
General Expenses
Gardening $0
Home Maintenance $25 Feels a little low to me (as I talked about in yesterday’s post).
Insurance Company $3.50
Costco $4.60
Entertainment $20
Gifts $25
Random $20
Groceries $150
Restaurants $60
Doctor $10 Health insurance through the school district.
Prescriptions $9
General Expenses Total $327.10
Budget Total $3,540.43
Budget Surplus
Take-home Income ~$3,750
Budget Total $3,540.43
Budget Surplus ~$210

I guess we could nit-pick certain aspects of the budget, but I’d rather talk about some basic structures that could really accelerate Jen’s financial progress.

First, let’s talk about the truck.

Jen is a self-described truck person. I can appreciate that; I used to have a 1987 Ford F-150 long-bed named ‘Jolene.’ I miss her dearly.

Being a truck person means dealing with truck-sized costs for maintenance (ie big tires), repairs, insurance, and fuel.

Jen, your total monthly cost on the truck is $628.33. Going to a smaller, cheaper-to-drive vehicle could save you $300 per month (between a lower – or no – payment, reduced gas, and lower insurance costs). $300 per month has a 10-year value of $55,000 (if invested at 8%). Running that $300 per month out 30 years (when I believe you’ll be between 60 and 65), it becomes $450,000. It’s worth considering the power of $300 per month as it applies to your long-term finances. $628 is the cost of the truck, $450,000 is the (possible) benefit of the alternative.

Don’t get me wrong, I’m not saying you have to drive a Geo Metro (do they still make Geo Metros?) for the next thirty years. I’m saying figure out how to keep your vehicle expense below X (you get to choose X), and stuff the rest away into savings.

Next, let’s beat up a little on this cable and phone bill.

Your TV cost is $107 per month. You’re an athletic trainer, so maybe you’re a sports fan and like watching live events. Or maybe you couldn’t care less about live sports, and you love certain shows on premium cable channels. The question you have to ask yourself is: “How can I get roughly the same value for less money?”

Could you drop the full cable package, going to a more basic plan and supplementing with Hulu Plus, Netflix, and maybe $20 per month buying shows from iTunes? I think there’s something in there that could save you another $50 to $80 per month without having to give up much entertainment. It’s worth investigating.

After my experience dumping my expensive smart phone plan, I officially hate seeing people spend money on them. Look at Ting, or T-Mobile, or some other option for getting you phone bill down from $90 to less than $50. Make this decision: I will not spend more than $50 per month on my individual cell phone plan.

(By the way, be on the lookout for a post from Jesse next week on the intriguing approach he’s taken to cutting his cell phone cost.)

Jen, I went after the truck, the cable, and the cell phone because there really wasn’t anything else to nit-pick! You’re doing very well, setting yourself up for a solid financial future. Keep it up!

Oh, and by the way: If you apply your current $200 surplus to the truck loan, then snowball it into the student loan, the Balls of Snow debt elimination calculator tells me you can be debt free in a little under three years. Do that!