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Discussion Starter · #1 · (Edited)
Hey friends,

I have a precarious situation that has a lot involved so this is a deeper decision than normal and need some advice from fellow Dave Ramsey enthusiasts!

I have $16,000 in savings. This is comprised of an $8,000 tax credit from condo I purchased last year, $4,000 sign-on bonus of my current job, and $4,000 of my own saved money.


My Income:
Net- ~2600/mo (also 26 pay periods, so 2 extra paychecks/yr = extra ~2,600/yr since I budget for 12 months, 2 paychecks per month)
After Budget: ~150/mo left-over for savings if I stick to budget

Positives:
16,000 liquid
2,500 Roth IRA
1,500 in checking

My Debts:
Student Loan: $11,300 ($150/mo payment for 8 more yrs)
Mortgage: $124,000

I have credit cards- one for 5k and one for 8k, both with 0 balances, and my car is only 3 years old and paid in full, so no actual debt except for mortgage and student loan.

My dilemma is this:

According to Dave Ramsey, I should spend $11,300 and just pay the student loan off immediately, and I would still have $1,000 baby EF remaining to then build my emergency fund back up.

The problem is this: I have been waiting for a government job to come through since 2008. I have had a tentative offer letter from the government and they are waiting on a slot to open up for me to train and then begin the job. This job will offer significantly more money than my current job (almost double once fully certified), however the problem is that for this government job, I train for 3 months, and at the end of training, if I do not pass performance evaluation (which is very hard), I am put back on the street with no job. Also this offer could come through at any moment and it could force me to move to another city.

This means that I must 1) sell my condo, and 2) pay back $8,000 to the government if I move before Feb 2013, 3) pay back $5,000 to my current job if I resign before Aug 2012. This is why I am hesitant to spend the savings money on the student loan. I really want to, but if this government job offer comes through, I will have to quit my current job (and pay back signon bonus), go to another city and train for 3 months where I may potentially not pass performance evaluation, and/or if I do pass and move to another city, I will have to pay back the $8,000.

So theoretically if I paid off the student loan, I would be left with ~$5,000 in savings. Which means if I get laid off from my current job, my mortgage is $1000/mo, I would only have enough money to survive for a month or two. I can't NOT pay the mortgage or short sale because not only do I not want to take the hit on my credit, but a family member cosigned for the mortgage for me and I refuse to hurt their credit (my previous job before my current job didn't have high enough salary to qualify on my own - mistake I know, lesson learned).

So if you were in my shoes, would you hold onto the $16,000 until after Feb 2013 and then pay off the student loan once the funds have "matured" and won't have to be potentially paid back, or would you pay it off immediately, hope that the government job doesn't come through until after Feb 2013 and hope that you don't loose your current job while you slowly try to rebuild your big emergency fund? $5,000 emergency fund would only last me a few months if I get laid off (which is possible because I work in the retail industry).

There is also a potential chance I may have to bring money to the table to sell the condo if I sell it within the next 5 yrs due to the bad market.

Thoughts/opinions? Thanks for reading & helping!
 

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Me, I have a family to worry about. So I'd keep that in savings, honestly. With that much up in the air, that would just kill me to not know if I'd have money to survive with. But then, I'm not good under pressure like that. If you don't have a family, and you are OK with risk, pay it off, and you'd have that much more to save up quickly in case something does happen.
 

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This is a difficult situation. May I ask why you bought a condo instead of renting if you knew this government job might come through? (Or did you buy the condo before all of that came into play?)

I am personally building up a 3 month ER fund before I start paying down my student loans (my only debt). I am on a yearly contract at my job and that could be history after July. The staff where I work have not had a raise in 3 years and I am at the bottom of the totem pole, so to speak, if it came to job elimination.

Personally, I would make a pro/con list of taking the government job before Feb 2013. Is this a job that doesn't come open often? Could you train in the meantime for this job, so that when (if) you go to training, it will only be a refresher?

If you could manage it, you could always rent out your condo until you met the deadline for the $8,000 credit thing. It would be hard from another city but maybe not impossible.
 

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i wouldnt take the risk of paying it off early just yet. but in the end, its your decision
 

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Hold onto your $ 16,000.
The economy is still rough. Money in the bank is always a good idea. Just wait it out before you make any big decisions.

There is no way that Dave Ramsey can be a expert in everyone's personal situations. Too many variables.
 

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Discussion Starter · #6 ·
Wow thank you all for your responses! Just to reply to some of your questions-

I am single so I only have me to worry about, but I'm not a big risk taker.
I bought the condo because there was a lot of builder incentive, covered my FHA downpayment, most closing costs paid, etc and I got the tax refund from the government. I bought because the government offer letter is for the city I live in, but with the staffing situation for that job here, they may very well force ne to switch cities.
I cannot train while I wait because it requires government sponsored classes and training unfortunately. There are a few books I could read to become more familiar with things though.
And unfortunately regarding renting out my condo until the 3 years is up, not allowed - must remain my primary residence for 3 years or I have to pay the money back. IRS very strict about it lol.
 

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Hold onto your $ 16,000.
The economy is still rough. Money in the bank is always a good idea. Just wait it out before you make any big decisions.

There is no way that Dave Ramsey can be a expert in everyone's personal situations. Too many variables.

My thoughts exactly. Hold on to your savings, that will get you through hard times if for some reason things get a little tough for you. I am all for getting ahead, paying things off but this economy is too risky right now to take chances with that many variables. The plus is you don't have a family to take care of but still liquidity and money in the bank is much better then counting your chickens before they hatch in this economy. Just my two cents but as sightofoneself said in the end your decision. Blessings to you.
 

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That student loan is nothing - I have something similar and practically forget about it half the time. I consolidated my student loan debt a few years ago and have a pretty low interest rate on it. If you took those out in the last few years then I can't imagine you have a hefty interest rate on those at all.

I concur with what some of the others have said about liquidity and flexibility - those are worth more at this time than paying off a debt that isn't necessarily piling up on the interest. In a year when you are more stable and making more money anyway THAT would be the time to pay it off!
 

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If you could manage it, you could always rent out your condo until you met the deadline for the $8,000 credit thing. It would be hard from another city but maybe not impossible.
no this is NOT an option. The language of the FTHB tax credit specifically states that it must remain PRIMARY RESIDENCE and NOT be a rental unit to qualify to keep the credit.

Personally, I would look at the situation -- how happy are you in your current job? If you can accept doing that for a while, then you can avoid all the risk. Are the benefits that much better to risk so much on it?
 

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Discussion Starter · #10 ·
no this is NOT an option. The language of the FTHB tax credit specifically states that it must remain PRIMARY RESIDENCE and NOT be a rental unit to qualify to keep the credit.

Personally, I would look at the situation -- how happy are you in your current job? If you can accept doing that for a while, then you can avoid all the risk. Are the benefits that much better to risk so much on it?
I am very happy with my current job. It is with a great company with a very unconventional environment and for the most part major stress-free job. The only reason I would pursue the government job is for more "job security" and for much higher pay. But in the end, pay is not always everything, but I wonder if I'd kick myself in hindsight if I didn't take the chance on this government job.

You all are right and I am leaning toward hanging onto the money for now. I am thinking of instituting a plan to pay the loan off over 1.5-2 years. The interest rates are all 6.5% fixed except the first loan of ~3,000, which is 2% variable right now. So no outrageous interest charges. Just eager to get ahead so I can start paying the mortgage down so that when 5 years rolls around being in this condo (if I'm still here) I'd like to have it paid down to 78% LTV so PMI can be dropped off the FHA loan and save me ~55/mo.

You are right in a year I'd probably have a raise/promotion and being making a little more than now anyway.

Thanks everyone for the handy advice and taking the time to read/help me in this crucial decision.
 
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