Hi Money Minder,
Hey there! I’m a single mom of 2 kiddos with shared custody, and I’m bringing in some decent cash living in the midwest. Luckily, I can pay all my bills, enjoy some fun stuff, and stash away at least $500 every month in savings.
Here’s where I stand:
- $8,500 saved up
- About to receive $65,000 in settlement money
My debt situation is as follows:
- $14,000 from a loan from my parents
- $14,000 in credit card debt (from lawyer fees and a loan to my business)
- $30,000 for a car loan at 3.9% interest, with 48 months left and a $575 monthly payment
- $25,000 in federal student loans with interest ranging from 3% to 7%, a $350 monthly payment, and 72 months left if paid at the current rate
My goals:
- Reach $21,000 in savings (equivalent to 3 months of my net income)
- Wipe out all my debt
My game plan:
- With $65,000 from the settlement and $8,500 in savings, I have $73,500 to work with
Calculating the debt reduction:
- I’ll subtract $14,000 for the loan from my parents
- Minus $14,000 for the credit card debt (the business will repay me eventually, but I don’t want to carry the balance)
- Minus $30,000 for the car loan
This leaves me with $15,500 in savings.
Once I’ve cleared the car loan, I’ll focus on knocking out the student loan debt by paying $1,000 each month, getting rid of it in 25 months. Meanwhile, I’ll continue saving $500 monthly until I hit $21,000 in a year, making me 100% debt-free!
Once the student loans are history, I’ll use that $1,000 to invest, probably in annuities.
On top of all this, I have a kid heading to college in 2025. No clue about the costs yet, but we anticipate some hefty scholarships. Our 529 plan is looking sad with only $1,500 in it for college time.
What do you think?
Farewell,
Your Name
Response from THE MONEY MINDER:
Hello There,
Congratulations on making good money and being able to save significantly despite being a single mom of two. It’s clear that you have a well-thought-out plan to tackle your debt and achieve your financial goals. It’s commendable that you are determined to erase all of your debt and build up your savings.
Considering your current situation and goals, it seems like you have a solid plan in place. By using your settlement funds to pay off your debt strategically and continuing to save, you are on the right track to becoming debt-free and reaching your savings target. Your plan to allocate the money previously used for debt payments towards investments and your child’s college fund shows foresight and responsible financial planning.
When it comes to your child’s college expenses, it’s great that you have a 529 plan in place, even if it has limited funds currently. As you mentioned, scholarships can be a valuable source of financial aid, and starting early to explore options for your child’s education funding is a wise decision.
Overall, it’s essential to stay disciplined and committed to your financial plan. Your dedication to paying off debt, saving, and investing will set you up for a more secure financial future. Keep tracking your progress, adjusting as needed, and staying focused on your goals.
Best of luck on your journey towards financial freedom and achieving your aspirations. Keep up the excellent work!
Farewell from THE MONEY MINDER.
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