In today's "Budget With Me" exercise, we're going through "JH's" budget info.
They have a $48k income (pre-tax) and $137k in consumer debt ($580k total debt)..
Their main goal is to:
"Knock out all the Debt or a vast majority of it Before closing on the house... or Consolidate all the higher interest CCs using 401k loan and then nail out the debt ASAP... The problem I think is that if I pull a 401k loan it will reduce my income with will effect my home loan. Plus there is no such thing as paying off a 401k with larger payments you have to either let the automatic payments run their course or pay it all back at once."
As you'll see, this is going to be a challenging one.
In my experience, this is a full blown emergency!
"Future Pacing" is an exercise we walk through with our students where we run some numbers on how much debt they need to pay down annually in order to reach their stated goal.
Here's what it looks like with $137k in debt:
This exercise is all about "breaking things down to the ridiculous" to help the visualize how much real effort is going to be required to accomplish their goals. From here, it's much easier to start pacing yourself in a way that's both aggressive while simultaneously sustainable.
These numbers can also be broken down further into monthly targets as well.
From there we can also figure out what needs to be:
1. Addressed in the budget (i.e. reduce, cut, substituted for)
2. Sold (i.e. scour the garage, attic, basement storage unit for items that can be liquidated to help put toward debt).
3. Earned (i.e. extra work projects, overtime, side-hustles, starting an online business, etc.)
I use an amazing budgeting software called "You Need A Budget" or "YNAB" in this series. It's totally not necessary for you to use that particular platform, but I will tell you that 100% of our students that have adopted it get much quicker and more accurate results by using YNAB.
Again to submit your information for the "Budget With Me" series go to: https://www.zerodebtcoach.com/budgetwithme
Now, if this decision process is something you struggle with and you constantly feel isolated about, I’ve got some great news for you and it’s free.
Our private Facebook group, ZeroDebtTribe. It’s a group of like minded people that are all somewhere along this P2P/debt-elimination/on their way to FI continuum. So click the image above and apply to join us. :)
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All that said, let's keep on building your financial acumen and make this your best year yet!
Thanks so much for reading and we’ll see you in the next video post!