Budget, Debt

When Big News Means Big [financial] Changes

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There are some BIG changes happening over here at Bluegrass Bones, y’all.

Our household is expanding slightly (and by “slightly”, I mean like whoa), and in five months, there will be a third human occupying space in our life! It’s pretty crazy to think about, and in addition to all the planning that goes into preparing for a child, there will also be a LOT more financial consideration.

Full disclosure–we’ve been pretty lax lately about aggressively paying off our remaining debt. When we paid off our credit cards, we were on fire. Every expense was planned and every dollar was allocated to something specific. Because of that, we were able to pay off $10K of credit card debt in six months! Since then, we were able to save up for a down payment and purchase a home. However, since then, we’ve TOTALLY pressed pause on our aggressive debt pay-off plan, which is TOTALLY unacceptable.

But let me tell you, nothing shoves you back into financial reality better than finding out a baby is on the way! Today, I’m going to let you in on a few life updates as well as what we’re doing to get back with the program and pay off as much debt as possible before daycare takes a massive chunk out of our extra income each month.

Btw, can we talk about daycare costs?? It’s out of control, but since both of us plan to continue working, it’s a major priority. The bright side is that daycare is a finite expense that will only last until our child is old enough to attend public school. It’s funny, though–realizing how much daycare costs, you also realize that if you can afford that, you could also afford to fund your child’s (in-state) college education in the future… But, nah, we’re already looking into a 529 college savings plan. More on that later.

When Big News Means Big Changes

Travel Plans and Debt Pay-Off

People talk about Babymoons, and I never really knew what one was until recently. Apparently, a Babymoon is a vacation soon-to-be parents take before the baby is born to spend quality time together and savor their last moments as “free” people.

But isn’t your whole life a Babymoon up until you give birth?

This is where the “we’ve been lax with our debt pay-off” comes in. In the past 12 months, we’ve taken a couple of trips (e.g., Glacier National Park and, most recently, Washington D.C.) that have slowed the cash flow into our savings and debt pay-off. Definitely don’t regret it, but we do have to make up that time now, which pushes back our projected pay-off dates.

I guess you could say we inadvertently planned a Babymoon out of convenience. Before finding out I was pregnant, my parents invited us to spend a couple of nights at the AirBnB they’re staying at in Tucson on their southwest vacation. Basically, our only cost will be the airfare, which we paid off months ago (again–fly Southwest, and find some amazing promo codes here). So, I guess you could say that counts as a Babymoon.

After that, it could be a LONG time before we travel anywhere that doesn’t involve a car ride packed with the two of us, a baby, and a Great Dane. Furthermore, any trip will also involve staying with friends or family rather than in a hotel (the Great Dane probably disqualifies us from that option, anyway). Travel will involve much more consideration, and that includes the added expense of kenneling the dog. We love the kennel we use, but it does cost money, and if we’re hardcore about debt pay-off, kennel stays can eat into that real quick!

The Annual Student Loan Recertification Freak-Out

October and December are supposed to be super fun party times that include Halloween and Christmas. They still are, but for us, the months of October and December are also frightening for one reason and one reason only…

ANNUAL STUDENT LOAN RECERTIFICATION!!!!

Each year, we submit our updated income information to FedLoan so that they can recalculate our Income-Driven Repayment plans. This probably won’t be as stressful in the future, but it’s stressful right now because each year has been different. We’ve increased our incomes, we’ve gotten married, we’ve filed taxes together, and all of these things affect how much we each have to pay on our student loans each month.

I’ve already had a massive freak-out about this a couple of weeks ago because I initially filed my recertification application improperly. Since I’m married and we filed our taxes jointly, FedLoan will take into account not only my spouse’s income, but also whether my spouse has student loans of his own (this part is REALLY important). Basically, the FedLoan application questions are clear as mud, and I linked our tax information to the application, but failed to complete the part where my spouse “co-signs” to allow access to his personal information from our tax return. Therefore, my payment was recalculated as if we have two incomes, but only need to repay MY loans. No bueno when you’re actually paying on two people’s loans!

I called FedLoan freaking out because my new payment was going to be SIX TIMES as much as my payment was this past year. My income has increased, but not THAT much. I spoke to a very helpful representative who pulled up my application, discovered my mistake, and instructed me to fill out a new application and, because I submitted mine early enough, I should receive an updated payment amount before the new bill comes due.

I will definitely go into this process more in a future post because I think understanding loan repayment through FedLoan is SUPER IMPORTANT, especially for anyone enrolled in the Public Service Loan Forgiveness program. When I was dealing with my own recertification freak-out, the representative said, and I quote, “I would’ve had a heart attack if I woke up and saw what you did.”

Yeah, pretty much.

Getting Aggressive with Debt Again

With a baby on the way and maneuvering the student loan recertification process, it is safe to say that we are back to beans and rice!

OK, not really. But we’re getting close, people!

No more frivolous spending and nickle-and-diming ourselves. This is super easy to do when you’re tired and you don’t feel like cooking, you want something that isn’t “expensive”. However, these things become expensive once you do that too often. I feel even more guilty that we lost so much time on this because we actually have the ability to make some major headway.

But here we are, so we need a plan! First, we listed our financial priorities and how they fit into the next twelve months of our life…

Our Debt Priorities

There are three things that are currently our top debt pay-off priorities:

  1. Private student loan #1 with highest interest rate
  2. Private student loan #2 with the second-highest interest rate
  3. Car payment we owe the most on

In addition to those priorities, we want to make sure we have a solid emergency fund in place. This is especially important since there is a baby on the way and we will be dealing with the expense of a labor and delivery at the hospital (even with insurance).

But how can we aggressively pay off our debt AND build up our emergency fund?

I have to give credit to Dave Ramsey for the answer to this question. I was listening to the Dave Ramsey Show on YouTube and someone called in with this EXACT question. So, here’s what we’re going to do…

Instead of throwing all of our extra money directly into the three debts listed above, we are going to throw all of our extra money into savings. However, it’s not going to stay there. After the delivery and we are all back home and healthy, we are going to take everything, minus $5,000 (which will stay in savings), and make a huge payment on those debts. This way, if an emergency strikes we have the resources to deal with it, and if not we haven’t lost any ground with our debt pay-off except for a little bit of interest. However, that interest isn’t going to be enough to make a difference financially AND it will be worth the peace of mind to have that sizable emergency fund.

So, there it is! This is what’s happening in our life and the financial steps we are taking to be proactive and get back on track.

I’m nosy…

What’s happening with you right now? Is there anything that is positively or negatively affecting your debt pay-off or savings plan? How do you deal with changes in your life that affect your finances?

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