I absolutely should not use the term
debt free living in this video because I actually have zero intention to pay off
our mortgage in seven years because paying off a million dollar home in seven to ten years is just a decade of a lifestyle that I never want to live. so
what do we call what we’re doing? living a mostly debt-free lifestyle? debt-free
but the home? half-assed debt freedom? but seriously, today I wanted to discuss our
weird and somewhat unconventional debt payoff plan and if you’re new to these
parts, here in the Valencia household we do not use the debt snowball to pay off
our debt and we’re actually saving to buy a home and saving for retirement all
while heading towards debt freedom. so let’s go over our totally different (and weird) debt payoff method and I want to walk you through our plan to be debt-free in
detail because that’s the way I like to do it. Hi! I’m Wendy Valencia. so how long will it take us to be debt free not
including their mortgage? if you don’t want to watch a long drawn-out video
with numbers and scenarios here’s the short version, a really really long time.
but seriously like many of you, our situation is weird and we have multiple
things going on at the same time and lots and lots and lots of goals we want
to accomplish. so how is our situation weird first of all we don’t currently
actually own a home we’re living in this house with my parents but they’re moving
into a retirement community and and we’ll need to either buy this home in
about 18 months or rent in another school district then on top of that my
husband Mauricio is in the process of changing careers he’s currently taking
architecture classes at our local community college in a feeder program
which will feed him into Virginia Tech for graduate school in architecture and
so our plan is to not take out a single cent in debt and get him all the way
through that program if we can and on top of that we’re making our minimum
matches to our 401ks for retirement so that we will be having a nice awesome
stable retirement when we decide that we’re too old to work anymore so we’re
doing all of that while we are paying off the last of our ridiculous amounts
of debt and might I dare say read on Kilis amounts of debt so how much is a
read on Kilis amount of debt you ask well the short answer a lot we’ve
actually already paid off over $200,000 but we have a significant amount to go
still it’s right around this point that people start typing down in the comments
when they hear that we paid off over $200,000 in debt Wendy how in the world
could you have so much debt well honestly that’s a question I ask myself
well I missed everything okay but seriously when I first started
this channel I did a whole video on that and it’s super cringy so don’t judge it
was like my firm video or something and it’s always linked down in the
description box under frequently asked questions so go scroll down after this
video is over and check that out if you want to know more information about that
so before I go over our plan I actually have to talk about what we have left
debt wise and this is as of when I was pulling the numbers together our first
debt is our car max car loan and as of today we onine thousand five hundred
nineteen dollars and ninety three cents and it is really really nice to finally
have that under ten thousand dollars but it’ll be a lot nicer when it’s actually
completely paid off our second debt is the USA a loan and as of this moment we
owe thirty six thousand four hundred forty two dollars and fifty nine cents
our third debt is Maurizio’s undergraduate school alone and this is
where it starts to get really painful because we still owe fifty thousand two
hundred fifty seven dollars and ninety two cents and as you can see that has
actually been put into deferment because Mauricio is taking two classes a
semester right now so technically by the school loan
program considered to be going to school sufficiently enough to automatically put
him into deferment and after that we have my brother and sister-in-laws
school loans as well and if you’re not aware of what’s going on with that The
Reader’s Digest version is that basically we sponsored them to come to
the United States to go to school in fact our largest debt of a hundred and
forty thousand dollars was to actually pay for English immersion classes for
one year for them and after that they started college and we co-signed on
their school loans and after a year and a half on a trip back to Columbia
Columbia had updated their passport so my sister-in-law had to get a new
passport and when she went to get student visa transferred from her old
Colombian passport to her new Colombian passport they actually revoked her
student visa and her tourist visa like right then and there on the spot I don’t
know we honestly have no idea why it happened we have our theories but we
really don’t know for sure so she couldn’t even come back to get her stuff
so she actually stayed down there while her husband finished out the semester
and then he moved back and since Columbian salaries are so much lower
than us salaries there’s really no way they will ever be able to pay a u.s.
school loan back so it’s ours to pay and you know that is kind of one of the
hazards of co-signing a loan you have to assume that something will happen and
you’re gonna pay for it and we we kind of knew that there was always that
possibility so it while upsetting it wasn’t at all shocking so my
brother-in-law’s school alone is twenty one thousand two hundred and fifty seven
dollars and forty six cents and my sister in law school loan is eighteen
thousand for ninety one forty eight and both of those loans will come due on
June 23rd twenty twenty two so that leaves us with a grand total of one
hundred thirty five thousand nine hundred sixty nine dollars on thirty
eight cents which I know for most of you is a redonkulous amount of debt but keep
in mind we started with so much debt that this last pile is kind of a walk in
the park so last week we finally settled on our current plan and as you all know
we have always used what we call self-imposed minimums on our debt
payments that means we set our own minimum payment and we don’t go below
that amount ever our current self-imposed minimums are four sixty
five for the car and twelve hundred for the USA a loan and 185 for mauricio
school alone which is actually the real minimum payment for mauricio school
alone and the other two student loans haven’t come due yet so I’m we haven’t
start hating on them so I’m not even sure how
much those are gonna be but we expect them to to be you know in the 200s range
but for now the total of what we’re actually paying on is one thousand eight
hundred and fifty dollars so our new plan starting in August we are going to
raise those self-imposed minimum payments to two thousand dollars why you
ask cuz you know I like to operate and hole
around numbers so the big debate is that since mauricio school loan is now in
deferment should we pay on it or not now the interesting thing about school loans
is that when they put them in deferment they pick a new duty okay which is five
years exactly from the date of deferment and they do that for each individual
loan and then they send you a letter telling you if it’s subsidized or
unsubsidized and how much it’s going to add to your loan in interest or
unsubsidized loans when they’re in deferment the US government pays the
interest and in deferment for unsubsidized loans the the interest gets
added to the total balance that you owe so we got a letter for each loan and
surprisingly we had a lot of subsidized loans and in the five years that
Mauricio could be in deferment we will basically be paying around $4,000 more
in interest which sounds like a lot until you start breaking it down by
monthly interest over time because that settles right around sixty seven dollars
and how do I arrive at sixty seven dollars because five years is a total of
sixty months and four thousand divided by sixty months is sixty seven per month
in interest you’re accumulating and if you compare that with the USA a loan and
last month my interest payment was 293 eighty eight and once you do that it
really comes a no-brainer so armed with these
numbers our current plan is to take that two thousand dollar self-imposed minimum
and focus on two debts the car loan and the USAA loan will pay twelve hundred
dollars to the USA a loan and $800 to the car loan if we do that we will have
the car paid off in July of 2020 and the USA in the September of 2021 which is
arguably a lot longer than we would have if we were focusing all our money on our
debt we would be easily done by next summer but we wouldn’t be able to buy
this house and we wouldn’t be contributing to retirement that means
with this plan that once mauricio graduates from grad school and
has a nice stable job again this time in architecture you will probably see us go
hog-wild for a few months because let’s be honest we’re gonna have a crazy tight
budget while he is in school to make this all work because he’s gonna have to
quit his job eventually and we generally freaked out after really tight budgets
for a few months we’ve always had done that and I don’t know that there’s
anything horribly wrong with loosening the belt every once in a while but then
after the debauchery is over we will start to pay off again this time we’ll
go with the two school loans mauricio school loan and my in law school and
well technically it’s three people’s school loans but I have ours and theirs
okay in my head and after we buy this house you will actually likely see us
move our in-laws loans over to some sort of HELOC HELOC being a home equity line
of credit because we’ll already have around thirty percent in equity in the
house and their loans my in-laws loans are at a significantly higher interest
rate than a HELOC and if we already owe the money it doesn’t really matter where
we have to pay it right because it’s not like we’re gonna go run out and get more
debt after that so now what are we doing about the house down payment well you
know we need to have 5% down because we’re taking it
out our mortgage with Navy federal and they offer the best rate for a jumbo
mortgage with only a minimum of 5% down and at Navy Federal you never pay PMI so
I don’t have to worry about having 20% down so that’ll be thirty seven thousand
five hundred that we will need to save up just for the down payment and then we
will also need to pay closing costs which is about another 20,000 ish so
when it’s all said and done we will need about fifty seven thousand five hundred
to get into this house so going into this month
we will have eighty nine hundred thirty three dollars and seventy two cents
eight thousand nine hundred thirty three dollars on seventy two cents
saved in our by the house fund and our plan is to save an additional two to
three thousand a month toward that aiming for three thousand but eating
okay as long as it’s two that’s so for math purposes let’s say we put three
thousand every month because some months will be well over three thousand and
some months will be under so on an average we’ll probably put three
thousand dollars so fifty seven 500 on enos eight thousand nine hundred $33 on
72 cents leaves us with forty eight thousand five hundred sixty six dollars
and twenty eight cents if we divide that total by three thousand dollars then it
means that in sixteen point two months we will have the money for the down
payment and closing costs and that’s actually right on target with our plan
so now I have discussed over and over that my parents may need to move sooner
rather than later and since my mother’s doing so incredibly well after her hip
replacement that’s looking like less and less of a necessity so we can go back to
focusing on end of the year 2020 but should
something happen in the emergency and they need to go right away we are
already one full month ahead and do have around $10,000 in sinking funds which
will just continue to increase over time so that would be an additional like
twenty to twenty four thousand that we could pull immediately if we absolutely
had to but honestly I’d avoid that at all costs if I can so we will be putting
a two thousand towards debt and three thousand towards the house down payment
which if you look at our history a payment is smack like right around what
we’ve been hitting all along we’ve had higher and lower months for sure but
overall it averages out so what will we do with any extra well that’s completely
up in the air right now personally I’m leaning towards putting it on debt and
paying off those faster than we plan so we can go ahead and get those two loans
done right about the same time that we’re actually buying the house which
honestly I think is completely doable because if you look at like June 2017
when Mauricio started the job that he has now on average from that point
forward we put at least five thousand a month towards debt every single month
except for those random weird months you know like when the government decides to
shut down or you know September September is always kind of a disaster
for us now keep in mind it’s not going to be as high as it was in these
previous months obviously because we do now have other financial commitments
we’re putting money towards retirement again every month and we have to pay for
two classes for Mauricio every semester which ends up being right around like
$1300 over three months but all of the extra aside from that can go to debt
pretty easily so I’ll see you in the next one see ya
we’re out