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Financial Advice needed!

Old 02-09-2015, 08:27 AM
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Default Financial Advice needed!

Hey Guys,
I wanted to reach out to board today and get everyone's advice and comments on a financial impacts of my situation.

Long story short, I have some big student loans and I hate them haha!
As of right now I owe about $60K @ 4.75% (no other debt at all). I am very debt adverse and this debt has really been weighting on me for years now and I believe is heavily affecting my work and personal life.

I'm 27, out the door making around $80K (bottom of my the pay scale in my industry with no where to go put up, putting away my max company max of 7.5% (100% matched), they typically throw an additional 3.5% a year on top of that to make it a total of 18.5% annually.

Right now I'm paying $1100 a month towards the loan and have been putting my total bonus and tax return towards the principal each year.

Currently my father has 633 shares (as of today about $58K) of Exxon Mobile set aside for part of my inheritance ( he inherited them about 10-15 years ago).

My thinking is (and this is where I need advice from you guys) that I have him sell, gift, transfer the shares or sell them and pay off the loan or after taxes make a big dent.

Once my loans are gone I would be taking that loan payment/ return/ bonus and buying back into the market but a lot more diversified. I'm thinking in the long term I would come out a head and be a lot less stressed out in my day to day life with having that loan constantly on my mind.

What are your guys comments, suggestions or thoughts? Would I take too big of a tax hit now if I did this?

Thank you everyone for all of your help!

Last edited by scubayachts13; 02-09-2015 at 08:37 AM.
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Old 02-09-2015, 08:31 AM
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No financial expert here but through my own experience I would say hold the shares. Selling will be a mistake. Bite the bullet and pay off your loan in due course. It will provide you with valuable experience later in life when you go to purchase a big ticket item. Just my $0.02 Good luck with your career sounds like you have a good future ahead of you.
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Old 02-09-2015, 08:41 AM
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Originally Posted by Squidd Vicious View Post
No financial expert here but through my own experience I would say hold the shares. Selling will be a mistake. Bite the bullet and pay off your loan in due course. It will provide you with valuable experience later in life when you go to purchase a big ticket item. Just my $0.02 Good luck with your career sounds like you have a good future ahead of you.
What is your reasoning behind this? You mention your "own experience" but can you shed some additional light on this?
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Old 02-09-2015, 08:42 AM
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I agree with Squidd. Pay down the loans asap with your free cash but keep the shares for the future.
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Old 02-09-2015, 08:44 AM
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You're too young to sell Exxon Mobil stock.
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Old 02-09-2015, 08:48 AM
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Look at what the stock is earning you vs. the oevrall interest you are paying on your loans. I would guess you are earning more (over time) than you are paying on your loans. Sell you rstock and payoff the loans and no more interest being paid but, also no more LONG TERM stock dividends.

Disclaimer: I am no financial guru, just my .02.
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Old 02-09-2015, 08:52 AM
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Conventional wisdom would say to not worry so much about a loan at 4.75%, just make minimal payments and invest your money elsewhere at a higher rate of return.

However, you indicated a couple of times how this is weighing on you and stressing you out, of which you really can't put a price tag on. You seem to be on track, paying $1100 a month toward the loan + other money, so it looks like Sally Mae will be moving out of your house in 4 years or less. You appear to be doing a good job at the moment, perhaps you just need some encouragement to lessen your stress and anxiety. Are you receiving peer pressure, or some other pressure from a spouse, girlfriend, etc., that is weighing you down?
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Old 02-09-2015, 08:53 AM
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Would you borrow $60K at 4.75% to buy Exon stock? If the answer is no then sell the stock assuming it is not at a huge loss and pay the student loans off. The mental well being of being debt free is worth a lot. You have to have discipline after the fact and continue to reinvest strongly.
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Old 02-09-2015, 08:56 AM
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Originally Posted by DFreedom View Post
Look at what the stock is earning you vs. the oevrall interest you are paying on your loans. I would guess you are earning more (over time) than you are paying on your loans. Sell you rstock and payoff the loans and no more interest being paid but, also no more LONG TERM stock dividends.

Disclaimer: I am no financial guru, just my .02.
Agreed.

Plus the Middle East is unsettled. Oil will go up again.

XOM dividend is 3%. So your loan interest is actually 1.75% is it not?
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Old 02-09-2015, 09:03 AM
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Will a stock sale subject the seller to capital gains?
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Old 02-09-2015, 09:04 AM
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I appreciate all the responses. No, at the current price now, I would not borrow $60K at 4.75% to buy XOM.

I think this really comes down to my mental well being. Instead of working right now, I'm on a forum trying to figure out my debt problem. It hangs over my head big time.

Let's look at this a different way, lets assume in 15-20 years I still own the stock and through price increases and dividend reinvesting its worth $120K instead of the current $60K value. I'm thinking that $1100 a month + my future tax returns and bonus will add up to significantly more than $120K in 15-20 yrs all without having the debt stress over my head for the foreseeable future.

I don't know, really conflicted on this one.
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Old 02-09-2015, 09:05 AM
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Originally Posted by Schmaltz~Herring View Post
Will a stock sale subject the seller to capital gains?
I believe it will. My father inherited the stock 15 or so years ago.
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Old 02-09-2015, 09:06 AM
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My advice is personal advice, not financial advice:

Act like you don't have an "inheritance" to sell. Those share are not yours. They are someone else's shares and that someone may need them sometime. When they become yours, then you can have a say in their value.

Accelerate paying off your debts by adjusting your lifestyle according. You took on the debt. Be responsible for it.

While you might think your debt is "weighing heavily on your work and personal life...??" that is just too bad. Wait until you get a 30 year mortgage, or child, or some other long term "inconvenience."
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Old 02-09-2015, 09:08 AM
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It's been 15 years since I had a student loan but I'm assuming the 60k isn't one large loan but a few smaller loans unless you did a consolidation. If there are a few loans I would start by applying any overpayment to the smallest one first and just the minimum on the larger ones. Knocking off individual loans is the fastest way to reduce your minimum monthly nut.

4.75% isn't the end if the world. Make sure you start saving some money for emergencies
Having no debt is good, but being debt free and broke isn't great either.

Keep the Exxon, biggest mistake would be selling it.
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Old 02-09-2015, 09:12 AM
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Ok you've got a chunk a debt. But it's locked in at 4.75... Not a bad rate at all. You seem to have a good start in a career and earn decent money. Unless their is something I am not seeing in your financial situation I wouldn't worry about the loan. I understand it stresses you but if I were in your shoes, with your income, and that interest rate, I wouldn't be worried about it.

Hold on to the Exxon Shares. It sounds like with your current payment scheme, if you continue over paying at 1000 a month you'll be rid of the debt in 3-4 years. I'm not a financial guru, this is just my opinion, even If I had 60,000 in cash I'm not sure I would pay off my debt at 4.75 vs invest the money in something else.
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Old 02-09-2015, 09:13 AM
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If you inherit the stock, your cost basis will be the value at time of transfer. I'm not sure what the basis would be if it's gifted to you, but I believe there is a 10k limit on gifts before you run into tax issues? Do you want your father to have tax burden dye to him selling it and giving you the cash?
Pay off the loan with your own money.
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Old 02-09-2015, 09:14 AM
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It's basically your call but here are a few things to consider :You are currently paying interest at 4.75%....you are earning 3.80% in XOM divvy's. Being the loan is close to the price of the stock its pretty much a wash at this point. The concern that I would have is what percent of your inheritance does that XOM stock represent. If not a substantial part , thats fine, but if its a significant part ,then you have a concentrated equity position and that has risks. The risk is that when you need the money, the stock could be in the crapper when you need to sell it. Remember the exxon valdez? More recently the BP oil spill? GM bankruptcy? There are many examples of these type of problems over the years, in even the bluest of blue chips. that depressed the prices for a decent amount of time. Not a big deal if its a small part of your inheritance. Not a big deal if the timing is right. If it is a big part of your inheritance, I would be more comfortable asking dad to diversify your share a bit, or as you mentioned gift them to you and you diversify them. (yes there will be a tax hit). Not my area but maybe there could be some trust solution as a better alternative. Good luck in whatever you do.
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Old 02-09-2015, 09:15 AM
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Originally Posted by dssmith View Post
My advice is personal advice, not financial advice:

Act like you don't have an "inheritance" to sell. Those share are not yours. They are some else's shares and that someone may need them sometime. When they become yours, then you can have a say in their value.

Accelerate paying off your debts by adjusting your lifestyle according. You took on the debt. Be responsible for it.

While you might think your debt is "weighing heavily on your work and personal life...??" that is just too bad. Wait until you get a 30 year mortgage, or child, or some other long term "inconvenience."

I am taking into consideration that this stock could be used as a back up for my parents in case a need arises, thank you for your concern. They wouldn't be offering this as an option if they didn't have all their bases covered.

I fully understand I took the debt. Your comment for be responsible for it has no barring here. I'm paying close to $20K a year, all while putting money away, so I certainly think that's being responsible. Again, thanks for your comment but this one was un-needed.

On your last subject, my plan to be debt free (by 30) is all so I don't have to have a 30 year mortgage, use credit cards or sacrifice saving so I can pay for my kids and their activities. Unless something catastrophic happens, long term financial inconveniences shouldn't be an issue. Thanks again.
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Old 02-09-2015, 09:18 AM
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IM not an expert, but I had student loans. Remember as annoying as they are you get all that interest back at the end of the year on your taxes. They are basically a interest free loan. Dont sell that stock. Move back home, get a roomate, and pay down those loans. Trust me
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Old 02-09-2015, 09:27 AM
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Talk to a CPA if this is really something you are considering and I bet once the real world impacts are explained, you will quickly remove the thought. Gift tax impact, cap gains, etc. and you wont realize much money at all out of it. Just suck up and pay the loans off - you'll feel allot better about yourself and those loans if you have to make some sacrifices and work hard to get them out of your life. JMO - Had allot of SL debt and worked my ass off and did NOT buy the boat and newer truck for several years, minimal vacations, dinners out, etc. just to get those out of my life.
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