Paradox Wealth Family Financial Snapshot, April 2018

One of the missions of Paradox Wealth is to improve our own financial health through increased financial fluency and hopefully a little bit of income from this blog. Remember the safety briefings at the beginning of your flight tells you to first put on your own oxygen mask before helping others? We’re in this to help you, but first we have to help ourselves and make sure our own house in in order.

Soon after starting this blog, we agreed to formalize our monthly family financial meetings and we spent a full day together figuring out how to rearrange our finances in order to better prioritize our debt payoff (the snowball is picking up momentum!). This post is essentially our first big family financial meeting made public.

As we continue to improve our financial health, it will hopefully be fulfilling to look back at how far we’ve come. We’ll plan on sharing our financial review after every April, because it’s the anniversary of Paradox Wealth, not to mention tax month.

Some notes on our finances in 2018

Mr. PW leased an electric car a few years ago (the lease is cheap, but we know, leasing is a terrible financial deal) and will have to find another car next year once the current lease is up. Mrs. PW’s used car is fortunately bought and paid for, and we now have the financial knowledge and motivation to avoid car payments in the future. Otherwise, we have no major planned purchases on the horizon.

We have an emergency fund of $35,911.04, which is enough for almost a year’s worth of expenses. We’ve both agreed that while an emergency fund is crucial early on, this is probably a little excessive for us and that uninvested case is essentially losing ground to inflation (even in a high-interest online savings account), so Mr. PW’s new (used) car next year will have to come out of that. He’s become really passionate about electric cars, so it’s a good thing that a decent used electric car can be had for half that amount.

We both have significant medical school loans. Mr. PW additionally has a few straggling undergraduate and graduate school loans. We are renting so we have no mortgage. Combined, we work 1.6 FTE (Mr. PW is full-time and Mrs. PW is part-time). Both of our children are in childcare full-time. Despite trying, we haven’t had any supplemental income in the last year, though Mr. PW will be doing a little moonlighting at a community hospital.

Changes made to cash flow since April 2017

  • We decreased retirement contributions to the minimum amount required to get our company’s full match.
  • Stopped monthly contributions to 529. There is no tax benefit in our state for 529 contributions.
  • We used the money that was going towards retirement and 529 and put it towards paying off loans thus increasing loan payments by over 10% every month. We know this will be a little controversial because there’s huge benefit to maxing out tax-deferred space for people in our income bracket, but to us the “guaranteed return” of paying off more loans at 4.5% interest and the psychological aspect of attacking our loans hard was worth it.
  • Changed monthly loan payments to every 2 weeks.
  • Put 60% of our annual bonus towards paying off student loans, 30% into savings, and 10% straight into our checking account.
  • With our bonus we paid off 3 of the 7 remaining undergrad and graduate school loans in March 2018! These are smaller and Mr. PW has been paying on them for years, but it does free up extra money, “snowball” style, for paying into the mega huge medical school loans.

 

Here’s a snapshot of our financial health at the birth of Paradox Wealth on April 19. 2018.

  • Debt: $534,066.95 (no mortgage, no credit card debt)
    • Of that debt, most is Medical school loans: $490,296.55 (4.53% variable and 4.28% variable interest). Remainder are scattered loans left over from undergrad and grad school (thanks to Mr. PW)
    • Monthly % towards interest May 2017: 24.7%
    • Monthly % towards interest April 2016: 32.8%
  • Net worth: -$300,418.78
  • Projected date of Zero Party: December 2020
  • Projected path to pay off debt at current rate: April 19, 2025 (that’s when Mrs. PW’s loans will be polished off at the current rate – Mr. PW’s loans will be dead by February 2, 2024). If we were only paying minimum payments, loans would be paid off in May 2027. It sure seems like we should be finishing faster than just 2 years early given all the effort we feel like we’re putting into these loans.

By the way, the Investment Policy Statement (IPS) Mr. PW created in 2015 naïvely stated that all loans will be paid off by 2021. Maybe with a little more belt-tightening and a little more moonlighting, that date won’t be so naïve? We’ll be excited to share our progress with you.

 

Do you and your family take a look at your finances on a regular basis? What insights can you share from your own review? Share your stories in the comments.

 

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