Budgeting

[cddolphin]

26 minutes ago, dtait93 said:

if my interest free period ends with a balance of $200 at a rate of 25% then next month I will owe $250?

Your interested is charged monthly but it's calculated yearly. So that 25% rate is for the year. So 25% of $200 is $50 you are correct, but the second month would be $204.17. ($50 divided by 12 months).

So if you have 25% interest on a $5,000 balance, after the first month of interest was charged your balance would be $5,104.17 (increase of $104.17), then the second month it would be $5,210.51, etc.

 

You can knock out $5,000 in 14 months between two people without too much problem. Both of you would have to create $180 per month in space. That's like a cup of coffee and a croissant per day, about $6. Easy peasy. Then you'll basically have gotten an interest-free loan.

[dtait93]

1 hour ago, cddolphin said:

Your interested is charged monthly but it's calculated yearly. So that 25% rate is for the year. So 25% of $200 is $50 you are correct, but the second month would be $204.17. ($50 divided by 12 months).

So if you have 25% interest on a $5,000 balance, after the first month of interest was charged your balance would be $5,104.17 (increase of $104.17), then the second month it would be $5,210.51, etc.

 

You can knock out $5,000 in 14 months between two people without too much problem. Both of you would have to create $180 per month in space. That's like a cup of coffee and a croissant per day, about $6. Easy peasy. Then you'll basically have gotten an interest-free loan.

Thanks, would you mind helping me understand the math a little more? I understand it would be $1250/12=$104.17, but how did you get from $5104.17 to $5210.51 once the second month hit? There's an additional $2.17 on top of the $104.17 from the first to second month what am I missing?

[cddolphin]

Just now, dtait93 said:

There's an additional $2.17 on top of the $104.17 from the first to second month what am I missing?

Yup. Because your balance went up from one month to the next. Maybe I shouldn't have said it's calculated yearly. It would have been more accurate to say the 25% interest is meant to be interpreted as annual interest.

So 25% interest yearly comes out to 2.08% interest monthly. So since your balance went up a bit from one month to the next, so does the interest you are charged.

[dtait93]

Just now, cddolphin said:

Yup. Because your balance went up from one month to the next. Maybe I shouldn't have said it's calculated yearly. It would have been more accurate to say the 25% interest is meant to be interpreted as annual interest.

So 25% interest yearly comes out to 2.08% interest monthly. So since your balance went up a bit from one month to the next, so does the interest you are charged.

Gotcha. Thanks I appreciate it

[ramssuperbowl99]

This might not be the right thread, but whatever. 

I have a pretty small family, and most of my family members in my generation don't want kids, including me. The one cousin I have who does want kids right now (and at most there could be 2 more cousins who want kids) has a life that is a complete financial crap show. Private school to become a teacher, bought a house with basically nothing down, big wedding, the whole deal. They're never going to have any money, but just had their first kid, and want 3. Being blunt here, their kid is going to be financing college. Since there's no real chance of having 15 kids come out of the woodwork, I could probably contribute at a meaningful level (not just $100 per birthday type thing). 

Financially, a 529 is the way to go. I'm not as worried about setting one up as I am about how people would approach the personal side of this. I don't want to insult my cousin, but I'd also like to show this kid that there's a different path forward than the debt-filled life she's going to grow up in.

Anybody have a situation like this? 

 

[MWil23]

10 minutes ago, ramssuperbowl99 said:

This might not be the right thread, but whatever. 

I have a pretty small family, and most of my family members in my generation don't want kids, including me. The one cousin I have who does want kids right now (and at most there could be 2 more cousins who want kids) has a life that is a complete financial crap show. Private school to become a teacher, bought a house with basically nothing down, big wedding, the whole deal. They're never going to have any money, but just had their first kid, and want 3. Being blunt here, their kid is going to be financing college. Since there's no real chance of having 15 kids come out of the woodwork, I could probably contribute at a meaningful level (not just $100 per birthday type thing). 

Financially, a 529 is the way to go. I'm not as worried about setting one up as I am about how people would approach the personal side of this. I don't want to insult my cousin, but I'd also like to show this kid that there's a different path forward than the debt-filled life she's going to grow up in.

Anybody have a situation like this? 

 

I can more or less speak to being the "cousin" in this scenario, but with a few major caveats:

1. My wife and I both attended a private school to become teachers. However, we both received academic scholarships, I received an athletic scholarship, and my mom worked at the institution, meaning that I got half tuition. Between the two of us, we got our BA and Masters with about $51,000 in debt. While that sucks, it was at least proportional to our income/anticipated income. My wife worked 3 different jobs while attending school. When we got married, the first thing we did is to pay off her student loan debt. Over the next two years, we aggressively paid off 100% of our debt. It sucked living in a 1 bedroom 500 square foot apartment, but we have no regrets. We then saved up a lot of money (we live off of one income) and put a 20% down payment on a house to avoid PMI. A year or two later, we refinanced to a 15 year mortgage, which is arguably the best financial decision we've ever made.

2. My wife is currently pregnant with #3 (and we're going to be done once that child is born healthy). We are both 31 years old, and looking at financing 3 kids through college. I'll also be blunt: We will be in a position to where our house is paid off before our kids enroll in college. We will be able to pay for most of their education, but we will require them to pay a certain amount to us in order to teach them the value of their education/the value of money. We've actually decided against a 529 and are instead investing in mutual funds, so that we can do whatever we want with the money, because I'll have to pay for 2 weddings (2 girls), etc. We like the flexibility that we get. We can still pull money from that account if we choose, and we both have "guaranteed" teacher STRS pensions that we pay into. Worst case scenario, we use the money that would be going to our mortgage each month and cut the college a check. If they walk out of college with $20K in debt, they'll figure it out just like we did and they'll be better for it IMO (we may agree to disagree, but that's my philosophy, as I'll already have helped them with 80% of their education).

3. If I were in your position, I'd consider helping out as well, but you may want to talk about this with your cousin first, as they may have certain beliefs/feelings about it and feel like their toes got stepped on. If you don't care about their feelings, I actually 100% understand that. She/He will be 18 when they enroll in college and probably won't turn down a nice education financed for them.

Long story short, I guess that I'd say whatever path they choose, they DO have an alternative to the debt filled life they've been shown. My long story is just to show someone who went through something similar but has come out on the other side and is looking at a completely different future, even though I'm a teacher and went to a private school, and I'll have 3 kids to show for it. It's all about some basic Budgeting 101, and I'm glad that we've made these decisions.

I hope this makes sense and in no way am I trying to hijack the threat or over-empathize.

[ramssuperbowl99]

They have at least $150k of student loan debt with no ability to get them forgiven and bought a $350k house on a combined salaries of maybe $100k with no significant upward potential. They also financed a huge wedding (at least $40k), have new cars, had previous debt from trips in college (though that may have been wrapped up in the student loans, but it wasn't going to Mexico for spring break, it was a 2 week European vacation).

This isn't a case where they are secretly buckling down to support their lifestyle or nailing a budget. They've openly talked about how they'll be paying down their student loans for 20 years and their house long beyond that.

7 minutes ago, MWil23 said:

3. If I were in your position, I'd consider helping out as well, but you may want to talk about this with your cousin first, as they may have certain beliefs/feelings about it and feel like their toes got stepped on. If you don't care about their feelings, I actually 100% understand that. She/He will be 18 when they enroll in college and probably won't turn down a nice education financed for them.

This is what I'm worried about. I do care about their feelings and don't want it to look like it's me passive-aggressively disapproving of their financial life. And it would be completely unfair of me to their kid to dangle 5 figures in front of them at 18 in exchange for her parent's pride.

My major problem with this is that once I bring the subject up, I can't un-ring the bell. And I'm worried that based on how public they've been about their debts, they'll take any sign of help as pity.

[MWil23]

10 minutes ago, ramssuperbowl99 said:

They have at least $150k of student loan debt with no ability to get them forgiven and bought a $350k house on a combined salaries of maybe $100k with no significant upward potential.

This is the type of stuff that drives me nuts. PROPORTIONAL DEBT people! When doctors take out that type of a loan, they'll make it back. When teachers do it, it's crazy. Throw in a crazy house payment, and they've really strapped themselves down. I talk about this with my outgoing students all the time.

My wife and I spent $128K on our house, redid the kitchen, the bathroom, re-painted it, and now it's worth about $160K on the low end (Zillow and others). Chances are we'll move in the next 5 years, but that 15 year mortgage is hammering money off of our principle, giving us a lot more in the future to put towards a down payment. Basically now we don't even have to worry about saving MORE money, as these equity payments are doing that themselves.

10 minutes ago, ramssuperbowl99 said:

They also financed a huge wedding (at least $40k), have new cars, had previous debt from trips in college (though that may have been wrapped up in the student loans, but it wasn't going to Mexico for spring break, it was a 2 week European vacation).

No words.

10 minutes ago, ramssuperbowl99 said:

This isn't a case where they are secretly buckling down to support their lifestyle or nailing a budget. They've openly talked about how they'll be paying down their student loans for 20 years and their house long beyond that.

I wish I could say that I felt bad, but actions have consequences.

10 minutes ago, ramssuperbowl99 said:

This is what I'm worried about. I do care about their feelings and don't want it to look like it's me passive-aggressively disapproving of their financial life. And it would be completely unfair of me to their kid to dangle 5 figures in front of them at 18 in exchange for her parent's pride.

Could you always start one now, and in a few years approach them and say that you and your wife have decided not to have kids and would love to help them out if they're willing? If they say no, you could either:

1. Hold your peace and not help their kid(s) out

2. Hold your peace and help their kid(s) out when they're 18, hoping that they'll change their mind OR deal with that relationship conflict when it comes

10 minutes ago, ramssuperbowl99 said:

My major problem with this is that once I bring the subject up, I can't un-ring the bell. And I'm worried that based on how public they've been about their debts, they'll take any sign of help as pity.

No doubt! I would also say that if they've been so public about their debts, they shouldn't be angry when people approach them. THEY are the ones that have made this public, so what's the point in bringing it up?

JMHO

[cddolphin]

28 minutes ago, ramssuperbowl99 said:

And it would be completely unfair of me to their kid to dangle 5 figures in front of them at 18 in exchange for her parent's pride.

Why feel the need to save separately? Couldn't you just lump the extra cash with your other savings and address how to help them further on.

You don't know if they'd want college or what kind of college system we'll even have in 18 years.

[ramssuperbowl99]

16 minutes ago, MWil23 said:

Could you always start one now, and in a few years approach them and say that you and your wife have decided not to have kids and would love to help them out if they're willing? If they say no, you could either:

1. Hold your peace and not help their kid(s) out

2. Hold your peace and help their kid(s) out when they're 18, hoping that they'll change their mind OR deal with that relationship conflict when it comes

No doubt! I would also say that if they've been so public about their debts, they shouldn't be angry when people approach them. THEY are the ones that have made this public, so what's the point in bringing it up?

JMHO

Yeah man, it's brutal. They rushed into a life they couldn't afford and realistically are going to be paying it off for the rest of their lives.

I think the waiting a few years and "oh look at this I tripped and fell and have this 529" is a good way of going about it without making it seem like it's about them. It also buys time for someone else in the family to have a kid, which would let me loop in everyone and say "for any cousin of mine who has kids, this is what I'm willing to contribute". That way there's no spotlight and it's "fair".

Thanks man. This is why I hate mixing family and money.

[MWil23]

6 minutes ago, ramssuperbowl99 said:

Yeah man, it's brutal. They rushed into a life they couldn't afford and realistically are going to be paying it off for the rest of their lives.

Another reason to add why Personal Finance should be a mandated HS course. It's mind blowing to me.

6 minutes ago, ramssuperbowl99 said:

I think the waiting a few years and "oh look at this I tripped and fell and have this 529" is a good way of going about it without making it seem like it's about them. It also buys time for someone else in the family to have a kid, which would let me loop in everyone and say "for any cousin of mine who has kids, this is what I'm willing to contribute". That way there's no spotlight and it's "fair".

100% agreed. No spotlight, it's fair, it's no pressure/the ball is in their court. PLUS, when __________ turns 18, you can extend this to all the cousins and "pool it" or distribute it however you choose. It definitely buys time and is very low key/no pressure and doesn't come across as judgmental.

6 minutes ago, ramssuperbowl99 said:

Thanks man. This is why I hate mixing family and money.

No problem, I hope it helps. Mixing family and money is really hard and really tricky. Even small things like giving gifts, how much you spend at Christmas/birthdays, who does/doesn't give them, etc. It's hard. This is coming from a 31 year old as well, so while I'm a little older than you, we're in a similar place in life.

[pwny]

Set up the 529 plan for yourself. When they turn 18 or before that if you want to tread those waters beforehand, drop a “I was saving this money in case I had a child, but now that I haven’t, I think it’s fair that we use it for little Timmy”. 

[LETSGOBROWNIES]

23 minutes ago, iPwn said:

Set up the 529 plan for yourself. When they turn 18 or before that if you want to tread those waters beforehand, drop a “I was saving this money in case I had a child, but now that I haven’t, I think it’s fair that we use it for little Timmy”. 

This is a solid approach.

Also, as someone with a kid who will have to one day pay for college, I’d in no way be insulted if someone wanted to pay for part of it. My kid’s future and well-being far outweigh my pride.

 

[ramssuperbowl99]

24 minutes ago, LETSGOBROWNIES said:

49 minutes ago, iPwn said:

Set up the 529 plan for yourself. When they turn 18 or before that if you want to tread those waters beforehand, drop a “I was saving this money in case I had a child, but now that I haven’t, I think it’s fair that we use it for little Timmy”. 

This is a solid approach.

Also, as someone with a kid who will have to one day pay for college, I’d in no way be insulted if someone wanted to pay for part of it. My kid’s future and well-being far outweigh my pride.

Yeah makes sense. Thanks guys.

[bigbadbuff23835]

4 hours ago, ramssuperbowl99 said:

They have at least $150k of student loan debt with no ability to get them forgiven and bought a $350k house on a combined salaries of maybe $100k with no significant upward potential. They also financed a huge wedding (at least $40k), have new cars, had previous debt from trips in college (though that may have been wrapped up in the student loans, but it wasn't going to Mexico for spring break, it was a 2 week European vacation).

This isn't a case where they are secretly buckling down to support their lifestyle or nailing a budget. They've openly talked about how they'll be paying down their student loans for 20 years and their house long beyond that.

This is what I'm worried about. I do care about their feelings and don't want it to look like it's me passive-aggressively disapproving of their financial life. And it would be completely unfair of me to their kid to dangle 5 figures in front of them at 18 in exchange for her parent's pride.

My major problem with this is that once I bring the subject up, I can't un-ring the bell. And I'm worried that based on how public they've been about their debts, they'll take any sign of help as pity.

Yoooo what!!!

I’m graduating school in May with a PR degree, so I’m not counting on making a crap to unless i become a director or get into sales, but if i can get 40k a year and wait tables two nights a week at the restaurant i currently work at (roughly 150 a night) I’ll be ok until i get some experience and move up in a company.

I have zero credit card debt and about 40k in student loans, and I’m still stressing lol. 

My girlfriend and i are going on 4 years this year and i plan on proposing this summer, i already know we are gonna be spending 20 grand on a wedding. Which really isn’t that bad because that’s what we both want and we will both be able to save up that money in a year or so.

In the mean time we are gonna just get a place that’s about 900$ a month and save up. I couldn’t imagine the anxiety of the scenario that you explained when i get anxious just thinking about the next couple years of my life which isn’t even going to be that bad comparatively speaking.