It is fairly obvious that we are hyper focused on paying down my girlfriend’s student loans. I have been writing a lot about it recently with posts like Debt Pay Off Updated – January 2013 and How We Set Up Girlfriend’s Budget.
It is awesome that we’re working to pay her debt off by the end of 2013 but being hyper focused on her debt caused a problem with our finances.
We Lost Sight of the Big Picture
Joe at the Free Financial Advisor said it well when he wrote that Getting Out of Debt Isn’t a Goal. He says
When you reach the summit and actually get out of debt, you shouldn’t be surprised when you bellow out a gigantic “WHAT NOW?” You have more money, more freedom and more flexibility. What do you do with it all these new resources?
We have been so focused on paying off my girlfriend’s debt that we didn’t have any solid financial goals. What do we want to accomplish with our money once the nasty debt monster is finally slayed? We have some general ideas but we don’t have a solid game plan yet.
Our number one priority post student loans is to set ourselves up for a secure retirement. Currently my girlfriend is only contributing 3% into her 401(k) at work. This is enough to receive the full match from her employer, which is the main reason why she is contributing to her retirement at all.
The interest rates on her student loans are high enough that we felt comfortable not putting more toward retirement while we attacked her student loan debt. However, 3% is nowhere near enough after the student loans are paid off.
We’re both still young so we don’t have a ton of catching up to do to get where we should be in terms of retirement savings. We will be kicking up her retirement contribution percentage to between 15% and 20%. This should be easy because she’s not used to spending the money she pays toward her loans so she won’t miss it.
I will be using my car replacement fund to help my girlfriend pay off her student loans so my car replacement fund will be at $0. She doesn’t have any savings specified for a car replacement either so we will be rather behind in this category.
Luckily we both have reliable cars that should last us many more years. Her car should last at least 3 to 5 more years (if not more) before giving us any major problems that would require us to get a new car. I’m hoping my car will last us 7+ more years!
Even though our car replacements are many years away it makes sense to start saving for replacement as soon as possible. We’ll aim to have a few thousand dollars in savings within a year of the student loans being paid off so if something bad happens we can either fix our cars or buy a cheaper used car to replace our failing car.
Our Next House
Our last goal for our money after my girlfriend’s student loans are paid off is saving for a down payment on our next house. We bought this townhouse because it fit our needs for the immediate future (3-7 years) and we knew that should we decide we wanted to move it’d be a great first rental property.
We have a couple ideas of where we’d like to live down the road. We could either buy a larger house in town or we could buy a condo on the beach. We’re not sure which way we’re going to go yet but we’re leaning toward the condo route. Either way, we’ll need a down payment because we don’t want to sell the townhouse.
We’ll start shoveling all of our left over/extra money into this account so that we can move when we’re ready. Then, once we move into the new place we’ll tidy up the townhouse we currently live in and rent it out! Then, if we ever want to downsize or have a yard again all we have to do is rent out our new place and move back to the townhouse!
Big Picture Back in Focus
We’re glad that we took some time to figure out what we want to do after my girlfriend’s student loans are paid off. If we hadn’t come up with a game plan we’d either have a growing bank account with no purpose or we would find other frivolous ways to spend our money.
Do you have a goal for your money once your debt is paid off? What type of debt are you working to pay off right now? If you don’t have any debt, what is your number one money goal?