I had three goals for 2023 with regards to my family’s cash flow. They were to figure out my monthly savings schedule, figure out how much of my cash flow is going to debt servicing, and lastly, a full audit of my monthly subscriptions. Last month, I finally figured out how much, and as important where am I saving/investing automatically every month. Today I am going to try and figure out what debt I am servicing (and the details thereof).
I am particularly interested/motivated because one of my investment clubs is being liquidated this week and I’d like to purposefully reallocate that money in part to cash savings and the rest to clear up debt. Specifically, I want to bump up my emergency fund a bit as well as my vacation fund, and the rest is going to clear out low-hanging debt payoff amounts that will clear out cash flow (and then use some percentage of that savings to bump up savings/investing).
Long Term Debt
First and foremost, let’s get the easy stuff out of the way, and they are my three long-term debt accounts.
- Main Residence Mortgage – Currently, I am at over $620k with a 30yr fixed mortgage at 2.75%, so for purposes of this post/project it is a non-starter.
- Student Loans – Current balance is about $11k at 2.58% with about 4.5 years left. This note costs me about $225/mo. Feels like I may alter this payback schedule after this little project.
- My Life Insurance Loan – I owe about $18k at a floating rate which I believe is currently at 7% or so (up from 4.5% or so a year ago just like the rest of the debt world). I currently put $1k/mo towards this every month. This will be changed after this project.
Short Term Debt
Figuring out this debt is going to be a much bigger project. There are two categories of debt. The first is cash flow items. Much like the rest of the world, I was drunk on free debt. This has left me with a lot of relatively small accounts that currently feel like death by a thousand cuts with automatic payments happening. The second category is pure debt items that I associate with my net worth, not cash flow.
Cash Flow Items
I never put these items into my net worth calculations because I looked at them as cash flow items. I figured since they were fixed and had lower balances why do they need to be included? However, all of these random payments are starting to annoy me, so I’d like to shut some of them down.
- Wells Fargo Furniture – This is a couch we bought last year at 0% which ends in October. Currently, I am paying about $400/mo towards the debt and there is a balance of about $2,000. This will be paid off.
- Best Buy Account – I bought a dryer last year and took advantage of the 0% financing which has $450 or so left. I am currently paying $100/mo towards the debt. This will be paid off.
- Mom’s Christmas Gift – I bought my mom a google pixel with my brothers and took advantage of the 0% offer. There is about $480 or so left. I am currently paying $25/mo towards the debt. This will be paid off.
- My Phone – Owe about $380 left on my phone, but just easier to clear this up right now and save the $30/mo. This will be paid off.
Cleared up $555/mo ($400+$100+$25+$30) which doesn’t seem like a ton of money but when you think about it in terms of $6,600/yr I feel even better about the project! I am going to take $300 to $400 of this and actively reallocate allowing the rest to just work itself through my checking account.
The above won’t affect my net worth today but will provide me with some sanity in terms of cash flow. The below items won’t affect cash flow but will affect net worth.
- Ancillary Credit Cards – The Wife and I have a few credit cards that are legacy cards but have a few auto payments connected to them so they kind of just sit there. The total debt between the two is about $3,500. They will be paid off in full.
- Amazon Credit Card – Like the rest of the world The Wife uses Amazon a lot. They have a credit card that provides 5% cash back that The Wife then uses around Christmas time. The balance is about $1,800 and this will be paid off in full.
- Main Credit Card for the Family – The balance of this account has really gotten away from me lately. I am going to knock it down from the stratosphere. I am going to pay off $5,000 from the balance.
- 0% Balance Card – A little while ago I was tight on cash because of an accounting error at my firm and transferred some of my balance from the main credit card to a 0% balance transfer. I am going to pay back about $1,000.
Reallocation of Excess
The liquidation provided a few more bucks than what is being allocated above so that will be placed in some of my cash accounts (emergency, vacation and home fund), but as important, I’d like to allocate some of that $6,500 paid out annually. These numbers are increases to my automatic savings outlined in the previous post:
- $10/week extra is getting added to my vacation fund, house fund, and emergency fund ($120/mo)
- An additional $200/mo is going to the 0% Balance Card ($200/mo)
- An additional $25/mo is going to be added to my Student loans
So I allocated $345 of the savings leaving me a few more grand to run through my checking account.