This one is gonna make the Dave Ramsey
purists’ collective heads explode. Yeah but you read that right. We are stopping
the debt snowball. Yep yes we know you Yup. Yes we are. No. You cannot talk us out of it! This is
honestly what’s best for us and our financial future. And I know some of you
are just going to inhale deeply and go “did she just say stopping the debt
snowball is best for her financial future?” Why yes yes I did. So today we are going over our debt payoff plan in detail you can see why we’re making the choice that
we’re making and how it’s actually beneficial to us. Hey Guys! I am Wendy Valencia. My husband
Mauricio, my seven year old Melina and I have been paying off debt for three
years and in that time we paid off over $200,000 and we’re
stopping. Sort of. So today’s video is going to be math heavy so, Mauricio since I
know the last time I talked about this with you I saw your eyes rolling back in
the back of your head you need to pay attention this is gonna have graphics
and it’s gonna make it a lot easier for you to understand so as you all know we
are going to be buying my parents house we don’t have a date we don’t really
know when we know it’ll be sometime in the next few years but we need to plan
for it and our mortgage payment is going to be less than 30% of our take-home pay
so that is a huge incentive so why would we consider buying any house let alone
buying this particular house when we’re in the middle of paying off debt and
killing it really so there are a few factors factoring into this why we would
do this now and one it’s helpful for my parents too it keeps us in the same
school district because this school district is extremely expensive and the
houses in this neighborhood are actually like the poor section of town so you
know million-dollar homes yeah so this is really pretty much the only
neighborhood and at the very immediate surrounding neighborhoods that we could
actually afford if we want to stay in this school district 3e we know the
history of the house back in the past we had a huge problem with our house and we
put a hundred and thirty thousand dollars into it and lost it and it we
didn’t lose the house we lost one hundred and thirty thousand dollars just
trying to repair things that they had hidden from us when we purchased the
house so there was a lot of fraud involved there was ultimately a law
see that we won and it was a whole big long debacle and it’s made Mauricio and
I a little gun-shy about purchasing in another house and we know my parents and
we know the history of this house and we trust them so this house is actually
going to be sold to us way under market value so we will go in immediately
having significant equity in the house we’ve already got a positive net worth
so this will just make it that much more positive and yeah it’s a money-making
thing for us so for all intents and purposes we have three debts left we’re
not going to factor in the personal loan that we have which is around $20,000
because that’s actually a loan from my parents and when we purchase the house
we’re gonna go ahead and just roll that into the amount of money that we’re
giving them for the house so whatever price they quote us we’re gonna attack
on the twenty thousand on top of that so that will be technically paid off and
it’ll still be in the house but we’ll still have a significant amount of
equity in the house and we’re also not factoring in those two school loans that
we co-signed on that we may or may not have to pay we’re not gonna find out
about those right now we’re not even dealing with those right now so for all
intents and purposes we have three debts left we have the car loan we have the
USAA loan and we have mauricio school alone the car loan is due to be paid off
in June of 2019 and the USA a loan is due to be paid off in December of 2019
and that puts maurizio school alone to be paid off in September of 2020 that
means if we continue on at the rate we’re going we will be debt-free by
September of 2020 which is a huge incentive but this house thing is likely
going to happen before then or right immediately after then we expect it will
happen in the next two years so we need to make plans for that so let’s go ahead
and compare that September 2022 what would happen if we lowered our payment
down to our self-imposed minimums which if you don’t understand what I say
self-imposed minimums we make significantly more than the actual
minimum payment except on mauricio school alone we
actually just make the minimum payment on that but those are the minimums that
we agreed that we would never go below and I you know all honest you know I
think maybe a couple of times we have that we’re all impacted by the
government shutdown but for the most part we’ve made kept to these minimum
payments the entire time so if we were to continue on our self-imposed minimum
payments of eighteen fifty a month we would be debt-free in August 2024
yeah that’s four years more but that’s doable because we’ve committed to never
taking out debt again so this this number doesn’t actually really factor in
any like job changes for me or the fact that Mauricio is probably gonna quit his
job in a few years and go to school full-time so where is that 1850 well
that’s 465 on our car loan 1200 on our USA a loan and 185 on our school loan
which in that time period would actually go up and we have agreed that 1850 would
be the absolute lowest we would go if we can avoid having to get lower I mean if
we’re struggling to pay our bills obviously we’ll drop it down to the very
bare minimums but we will keep that 1850 as long as physically possible so in
order to purchase this house we need to have a down payment 5% of the purchase
price we don’t have to pay PMI because we’re getting our loan through Navy
federal and Navy Federal does not require PMI we are looking around but
honestly the last time we had a mortgage it was through somebody else and it
didn’t end well for us because they kept switching it around and it became a big
giant headache so we kind of like the idea of doing it through Navy federal
because they know us we trust them they’re not gonna mess with us and I
like the idea of not paying PMI so we have to save 5% and closing costs and 5%
y 5% because the 5% is the minimum amount that we can put down and get the
best loan rate and we want that loan rate because
essentially it saves us like seven hundred and fifty dollars a month in
interest payments so yeah we want to be there so we need to have that that 5% at
least to pay back and then obviously we got to pay closing costs so we’re
estimating around sixty thousand dollars ish for us to have saved by the time
it’s time to purchase the house and then we also would like to have another
twenty thousand dollars on top of that set aside for house emergencies because
this is an older house and it’s gonna have problems and we’ll need to be able
to have the money ready to go as soon as the roof gets a giant hole in it because
of a hailstorm or because the kitchen floods and you know so whatever happens
we need to have that pile of money set aside for that and we’re gonna prepare
for that because the house isn’t an investment and I’d like to protect my
investments so we are starting to save this month and let’s say we save $4,000
a month that’ll give us thirty two thousand
dollars by December but if we say five thousand dollars a month I don’t give us
forty thousand dollars by December and six thousand dollars a month we give us
forty eight thousand dollars by December but a lot of it is going to depend on
our other bills and how much we have to pay now here are some other numbers you
need to look at and I want you to really understand these before we go into the
next portion of our discussion our self-imposed minimum car payment is 465
a month times eight months gives us three thousand seven hundred and twenty
dollars now as you saw before we owe about eleven thousand seven
hundred dollars on our car which would leave us with a balance of about eight
thousand dollars and the USA alone which has a balance of forty thousand eight
hundred dollars ish we would have paid at twelve hundred dollars a month for
the next eight months we would have paid nine thousand six hundred dollars off
leaving us with approximately 31 thousand dollars in balance so keep in
mind we’ll have saved in cash somewhere
between thirty two thousand and forty eight thousand dollars by December and
we’ve told my parents that it’s financially best for us if they go ahead
and wait until we’re debt-free and have set aside enough cash to do all of this
but there are some medical issues and waiting may not be an option and that’s
okay because their medical health is far more important to me than our desire to
be debt-free while our desire is really high I am more concerned about their
health and safety than anything and at this point we know they’re probably not
gonna leave before December too many things have to happen for them to be
able to leave and then they have to get on a waitlist and the waitlist could be
six months or a year long we don’t know it depends on which place they pick to
get on the waitlist so what we’re gonna do is in December we’re gonna sit down
maurizio my parents and I and we are gonna figure out when they think they’re
gonna leave if it’s gonna be another year then we’re gonna go ahead and take
that big old pile of money that we saved up and we’re gonna drop it on the car
and drop it on the USA a loan and hopefully it’ll cover both of them but
if they’re leaving or we already know they’re gonna be leaving and we’re gonna
go ahead and keep sitting on it but you also have to keep in mind that probably
in two years Mauricio is going to quit his job and be going to graduate school
full time because right now he’s working full time and he’s taking classes at
Nova but that’s not an option for graduate school for architecture it is a
full-time job and it is expected that you will attend full-time and every
architect that you ever talked to will tell you very no way you can work your
way through architecture school there’s just too much involved in it and
something major for us is that we don’t want to take on any more debt if we can
avoid it I am not adverse to taking on school loan debt I actually think it’s
not a horrible thing if it promises you a much better future if you’re doing it
out of obligation than no but you know I’m not adverse to taking on school loan
debt because schooling is what gets you a good job that allows you to
have a better income and in mauricio situation this would be definitely true
and while he’s in graduate school he’s gonna have no income well except for
that part-time job of the loans and grants that he’s going to be finding so
if you want to know why exactly we are living with my parents when we make this
much money I’m gonna point you to a video right over here and I’ll see you
in the next one see ya we’re out