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Debt Repayment Strategy

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  • Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2282
    Joined: 03/01/2018

    So EMD what’s your debt repayment plan now? And where does that leave you with regards to remaining debt and remaining cash?

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #238824 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 288
    Joined: 06/10/2019

    So EMD what’s your debt repayment plan now? And where does that leave you with regards to remaining debt and remaining cash?

    Click to expand…

    No change other than the acceleration of my existing plans to prepare for the bear/next bull cycle.

    The onslaught of recent critical data points clearly accelerates the onset of the next inevitable recession given the 2/10 inversion and world economic predicament. This may be the beginning of a major recession/depression, or it may come in 2020/21 but clearly it is going to come sooner rather than later. This wasn’t rocket science, I was saying this since I showed up on CYAI due to the age of the bull, the sideways markets since 01/2018, weak inflation (pricing power), rising gold prices, etc. I mean come on, how much do people need to see reality? It can also be a market that continues without direction, but I doubt it (further data points should help assess).

    Given this is what I have been preparing for, my decisions may accelerate. The sooner we see a 50% drop or so the better, history says about Dow 14-15K. There may or may not be another 10-20 percent melt up that we often see before the big sell off. I certainly will continue deleveraging debt but if the new bull will start sooner rather than later, may slow the repayment of the commercial office building  so the dry gunpowder is ready to work in the next bull. Spectacular opportunities abound.

    What many struggled to understand is that I didn’t put funds into 3% CD’s for the return, but to house the funds for those spectacular opportunities whether it’s in a new young bull (preferred), lower borrowing rates for future real estate acquisition, or lower vendor costs for the expansion of my business – goal is to get it from 3 providers to 8-10 providers over the next decade.

    #238957 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2282
    Joined: 03/01/2018

    Is there a general rule regarding debt repayment, or is it specific to one’s own circumstances (income, NW, tax benefits of debt, etc.)?

    Commercial loan $1.4M 10 year (no balloon) 3.5% fixed, 8 years left, payment is $17K/month

    Home loan $350K 5 year arm 2.75%, resetting 11/1/2019, payment is currently $1700/month

    Car loan $65K 6 year loan 1.75%, 3 years left, payment is $1700/month

    Credit card debt $45K 0% intro term, resetting 1/2020, 4/2020 split about 50/50 on two cards, minimum payment is currently $470/month.

    CD interest income 2.65%-3% 12-18 month CD terms, savings interest 1.5%-2.3% with combined interest income about $50K/year on $2.1M cash flow reserves for annual expenditures (not expenses) about $1.9M.

    Pay off highest interest rate debts off first? Pay off smallest loans first to decrease monthly payments/improve cash flow? Pay off non tax-advantaged auto loans first? Pay off by riskiest attached asset? Pay off everything and wipe out reserves? Pay off debts as they reset from low to high interest rate (5 year ARM, credit cards) or refinance them to pay off highest debt rates first.

    Do not recommend I invest it in these markets instead, you all know how I feel about the current markets, it’s not 2009. I’m more interested in debt repayment strategies. However I proceed, I wanted all debts paid off in next 2-3 years.

    How would you tackle? Thanks in advance.

    Click to expand…

    What I meant by my question is, relative to this original post, after getting opinions from the forum, what’s your plan with regards to the debt? Are you paying any of this off imminently, or just going to keep making payments and holding lots of cash?

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #238959 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 288
    Joined: 06/10/2019

    Oh yes. I like the feedback from those that recommended paying off the smaller resetting loans first and take my time with the commercial loans. Based on those recommendations, I’m thinking home loan then car loan then credit card debt all in 2019.

    One person mentioned paying off the commercial loan in intervals over 2-3 years to still wind up with the same reserve level ultimately, perhaps $500K/year which is about how fast I accumulate reserves annually. I liked their idea.

    #238962 Reply
    Avatar Tim 
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    Status: Accountant
    Posts: 2857
    Joined: 09/18/2018

    How did your 2x tech funds do so far this week?

    DXQLX lost 6+% in one day. Sounds like your leading indicators need a tuneup. Good thing you are conservative and don’t go all in.

    “The sooner we see a 50% drop or so the better”.
    Are you waiting for 50%? What is your trigger and by when?

    #238993 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 288
    Joined: 06/10/2019

    How did your 2x tech funds do so far this week?

    DXQLX lost 6+% in one day. Sounds like your leading indicators need a tuneup. Good thing you are conservative and don’t go all in.

    “The sooner we see a 50% drop or so the better”.
    Are you waiting for 50%? What is your trigger and by when?

    Click to expand…

    Anyone in the markets had a bad week. With diversified investment vehicles, who cares? Only about 12% of NW is in the markets. So the recession happens. Just wait it out for the peak of the next bull run. More likely there may be that retail investor melt up in the months after the 2/10 inversion. Probably another opportunity for the smart institutional money to unload most funds at higher levels. If not no big deal. A big recession is a tremendous opportunity and washes out overleverage and excess. Rewards the patient. Don’t fear it, it’s a rare opportunity.

    50% a good historical number, extent of a recession/depression is monitored by data points to clue you in on good entry point, no one knows where it will land (top of last bull market (2007 in this case) often bottom). 30% will at least get my interest. Great Depression was about 90%. The bigger the drop, generally the longer the stabilization period and the longer you have to identify a bottom. 2/10 yield inversions suggests it should happen sometime within the next 2 years based on historical norms.

    #239040 Reply
    Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1753
    Joined: 01/08/2016

    “50% drop or so the better, history says about Dow 14-15K. There may or may not be another 10-20 percent melt up”

    So…what you’re saying is that equities could go up or they could go down.

    That just might be right.

    Good grief

    #239051 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2857
    Joined: 09/18/2018

    Great!
    Just waiting for the loan repayment schedule.
    Copies of complete loan documents.
    UCC statements.
    Closing documents on each loan.

    So you want to payoff debt. Each loan has a balance and terms. Simply put it on schedule and document it.
    How much and when?

    The topic is loan payments, not the market. Stay on point. It doesn’t matter about the assets liquidations or earnings or liquidations ( unless you don’t have free title).
    That’s the beauty of debt, it’s easy to define and payoff.
    Once you have the plan, all you have to do is document the payments.
    One rule, no new debt and make the payments.
    That is you goal isn’t it? Then make a plan and execute.
    By the way, you can sell any assets to get cash to pay. Don’t care. Just the schedule of debt and hit the payments. In other words, it’s not relevant and doesn’t add value to the goal.
    Good luck.

    #239071 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1666
    Joined: 02/11/2019

    Gotta love horoscope like predictions.

    “There will be a change in your future”

    “Never let your sense of morals prevent you from doing what is right.”

    #239131 Reply
    Liked by fatlittlepig

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