Trying to get my priorities in order

Hi YNAB,

I'm a new member, and so far have really enjoyed reading through the threads.

 

Here is my situation:

 

$4,500 in 0% cc debt

$13,000 in high interest 24% cc debt

$10,000 in 401k loan 5% interest

$28,000 in student loans 3-6%

I currently have a lease for $270/month. I can buy the car for $19,500

 

I am coming into $70k here shortly and would like to use the money to get back on track financially. Credit card debt is a rather new thing for my family. 2 years ago we went from a 2 income household to a 1 income household with the birth of my son. Now we have another baby and our spending exceeds our income monthly. 

 

My goal is to pay down debt to allow for greater cash flow monthly, allowing us to pay down the remaining debt and start building wealth, a nest egg, simply stop struggling paycheck to paycheck.

 

I was planing on buying my car off my lease, considering I'm way over mileage, I like the car, and its been reliable thus far. We only have one car for my family and I need it for work so it is important. 

 

My question is should I buy the car for $20k or should I buy it off the lease and then sell it, and buy a less expensive car..... putting more towards paying off debt. 

 

My priority list currently is:

 

1. Obligations: $4k into kids college fund

                                  $8k into emergency fund, currently just a couple hundred $

2. CC debt           $17,500

3. 401k Loan      $10k

4. Car Loan         $19.5k

5. Student Loans $10k

 

This would leave $18k in student loans, but free up $1,000 of monthly income

 

What do you think of this plan would love a couple opinions of what direction you would go in. 

 

Thanks,

Josh

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    • nolesrule
    • YNAB4 Evangelist
    • nolesrule
    • 1 yr ago
    • 1
    • Reported - view

    check that you can actually accelerate the 401k loan payback. It may not be allowed depending on your plan rules. If it's not allowed, then put that money to the student loans.

    I would get all debts paid and contributing the max to retirement accounts prior to adding money to a child's college fund, but that's just me.

    I can't advise on the lease and buyout. I've never leased a car.

    Like 1
      • Lupob6
      • Sky_Blue_Mainframe.4
      • 1 yr ago
      • Reported - view

      nolesrule I called, I can pay back the loan early without penalty. Thanks for the reply.

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  • What would be the cost of finishing out the lease & paying any penalties for going over miles? Could you get a reliable car for that amount less than 19500? How much would you need to get you into a different reliable vehicle if you bought & sold this one?

    Do you have your true expenses funded (including saving for car & home maintenance)? Do you have 3-6 months saved up for income replacement? If not, a chunk of that money should go to these as well.

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    • Lupob6
    • Sky_Blue_Mainframe.4
    • 1 yr ago
    • Reported - view

    Its hard to get an exact number on penalties as its a mileage issue. Minimum over mileage I would estimate in the $2-3k range. 

     

    I'm sure I can get a reliable car for less, and I would love to pay down all debt, just not trying to make poor choices. 

    I am am also not sure what I would get for my car, if I did buy and sell it. I would think It would not be a huge loss, but that is not certain

     

    I currently do not have true expenses funded, or any  income replacement. 

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      • adriana01
      • adriana01
      • 1 yr ago
      • Reported - view

      Lupob6 For the car I think you need more information before you can decide what would be the best option. There's a lot more variables in that than paying off the other debt.

      If it were me, I would want to fund True Expenses and Income Replacement before paying off student loans if I couldn't do both, unless the payments were high & couldn't be lowered by switching to a different payment plan. Of course, the student loan might be something you hate enough to want to be rid of it, & then focus on growing savings once that is done. So long as your plan will deal with those things I think either could work.

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    • MsTJ
    • YNAB has given me back my future
    • Believer_in_YNAb
    • 1 yr ago
    • Reported - view

    Welcome,

    Want to start with congratulating you on your plans for the $70K.  So many people just wait and the next thing they know it's simply gone.  I have done this in the past.  Having a plan is a much better way to go.  

    Today, my focus would be on minimizing required interest payments, and it looks like that is what you have done.  Another $1k per month will come in handy for your next choices.

    Funding some emergency and true expense categories would be my next goal.  

    Regarding the leased car, I'm with nolesrule, never done it so don't have any idea what the best way to go would be.  You seem to have a great handle on what would serve your family best.  Collect all the information you can and then make a choice.

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      • Lupob6
      • Sky_Blue_Mainframe.4
      • 1 yr ago
      • 1
      • Reported - view

      MsTJ Thank you!

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    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 1 yr ago
    • Reported - view

    Is the 401k loan is a double hit for you? At least mine would be. If I did a loan like that, my investments would decrease by to the loan amount (so, 10k isn't growing or shrinking with the market anymore), and I'd be charged the interest. Somewhere in the fine print, I might recoup the interest, but I can't remember exactly how. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      Ben Khaki Storm With 401k loans the interest is deposited into your 401k

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 1 yr ago
      • Reported - view

      nolesrule ok, maybe that was it, but your still missing out of the market (which might be good or bad). 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 1
      • Reported - view

      Ben Khaki Storm no argument from me. I'm not a fan of 401k loans for a number of reasons, including the fact that if you end employment they have to be repaid by the tax filing deadline. 

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