Who wants to help me build a plan for my finances?

[brizzad]

Okay guys, Here's the deal, I'm 21, and over $20,000 in debt. I've been reading a lot and you guys are simply experts at managing money.

Annual income:
$35,000-$45,000 (it varies, commission based)

My mandatory monthly expenses (NOT INCLUDING THE DEBT):
-$320 daycare and child support
-$22.50 web hosting
-$250 food
-$100 gas
-$60 weed
-$180 car insurance
-$55 cell phone

A breakdown of my debt:
$6,000+ in student loans ($74/mo)
$14,000+ car note ($259/mo)
$1500 from a small personal loan ($160/mo)
$750 credit card debt ($15/mo min.)

What I'd like to accomplish:
Have all debt paid off within 18-24 months.
Make regular deposits to my savings account.

I'm completely clueless and unorganized about how to handle my finances. Like I said above, I'm only 21, and I'm new to the 'real world' Would anyone be willing to help me come with a plan for how much to pay on each bill a month, how much I should drop into savings, etc..

Thanks in advance!

[sweeps]

Originally Posted by brizzad

-$250 food
-$60 weed
-$55 cell phone

If you cut out the weed, that will save you $60. Plus since that would cut down on the munchies, your food bill will go down. Also you'll be able to get a cheaper cell phone plan because you won't have to call your dealer as much.

Ok, being serious -- what are the interest rates on the loans?

[brizzad]

Originally Posted by Sweepsplayer

If you cut out the weed, that will save you $60. Plus since that would cut down on the munchies, your food bill will go down. Also you'll be able to get a cheaper cell phone plan because you won't have to call your dealer as much.

Ok, being serious -- what are the interest rates on the loans?

True, but with the weed, I'm actually saving money.. I could take my high maintenance girlfriend on $30-$100 dates every weekend, but, if I get her high, she acts goofy and falls asleep, thus saving me a great deal of cash!

Student loans = I've got no clue about the interest
Car note = 11.54%
Personal Loan = 17%
Credit Card = 9.9% until sept - 19% after that

[PRICEPLUS]

$60 dollars on weed. Oh please tell me that is an acronym for something else!

I leave this in your capable hands Sweepsplayer!

[Haku]

Don't worry if you feel overwhelmed. Just take it one step at a time.

Childcare:
Do you live close to a family member that can help out?

Web hosting:
Are you sure that's something you need? $22.50/month is steep, unless you have a viable online business. I'd get rid of it, or at least move it to a cheaper host.

Food:
That seems a bit high. Is it because you have children? If so, how many? If you're eating out often, I would recommend to cut that back.

Gas:
That actually sounds normal. Sadly. However, if you're going out just to goof off, I would recommend not to do so. Besides spending more on gas, you'll also be tempted to spend more on things you don't need. I recommend finding cheap activities that you'd be interested in at home so you can stay home more.

Weed:
Um, you can cut that out, right? RIGHT?

Car insurance:
Depending on the vehicle, this can be trimmed down. However, without knowing any details, I'm tempted to say just leave it alone. It's steep, but then, you ARE 21....

Cell phone:
Cut it back to basic service or perhaps a pre-pay if you can. Talk to your service provider about the latest discounts and deals. Even better if you can remove this expense entirely.

Student loan:
I'd probably leave this alone until the other debts are paid off, especially if you have a lower interest rate than the other debts (and you probably do).

Car note:
Um, can you go without the car? If so, can you sell it? May or may not make back much doing that, but hey, you'll also save on gas and insurance.

Personal loan:
What is this loan for? Seriously, what is it?

Credit card:
I recommend paying this off first. Once paid off, it can help you build credit and can also function as an emergency fund. That is, assume you can be financial disciplined. If not, I recommend cutting it up and not use it again.

Conclusion:
It seems like you have a good grasp of your personal finances. That's good. After this is to set up and stick to a budget, and I'd recommend putting all available funds towards paying off your credit card. From then, I'd probably snowball into the personal loan next, even though I don't know what that is. Probably student loan after that, but the car is fine too. It's your choice. Besides snowballing your debt, I would look very hard at each expenses that you have and figure out why they cost as much as they do and see if they can't be trimmed down or eliminated altogether.

I hope this helps. My compliments for wanting to take control of your finances while still at an early age.

[brizzad]

Wow, thanks for the detailed suggestions, Haku! One question though, what's snowballing? Here's some input on your suggestions.

Web Hosting: the $22.50 is very cheap considering it's my own server, and ?I usually generate $100-$500 extra each month from websites, so it pays for itself.

Childcare: It was court ordered that I pay for whatever daycare her mother chooses. (waaaaay beyond my control unfortunately)

The personal loan was for my first car back when I was 18.

Food: This is so high because I spend at least $5/day on fast food because there's just nothing else around.. I guess I could start bringing leftovers from the night before for lunch.

[brizzad]

Originally Posted by PRICEPLUS

$60 dollars on weed. Oh please tell me that is an acronym for something else!

At least I'm being honest about where my money goes

[brizzad]

Oh, I forgot to mention my savings gets 3.8%-4% regardless of the balance, and I'd like to get as much of my money in there as possible. Also, any suggestions for no-risk investments, like CDs, would be greatly appreciated.

[sweeps]

Based on my very rough estimate, you should have about $1250/month after your expenses and minimum payments. (I assume you're living at home, hence no rent?) If this is the case, you should be able to pay off the personal loan and the credit card in about 3 or 4 months, while putting some money in your savings. Then start paying down the car loan.

GMAC (gmacbank.com) is paying 4.75% on its money market right now. HSBC (hsbcdirect.com) is currently 4.8% and should be announcing its new rate in the next few days. Could go up, could go down.

Haku has very good suggestions on saving some money.

You should also be looking at retirement plans. Since you're first starting out and presumably your income will go up in the future, a Roth IRA would be ideal.

[PRICEPLUS]

brizzad,

I am sure you are a very honest person. It just struck me as funny and still does. Nothing personal, I just can't stop laughing when I read the post.

[brizzad]

Originally Posted by Sweepsplayer

Based on my very rough estimate, you should have about $1250/month after your expenses and minimum payments. (I assume you're living at home, hence no rent?)

I'm actually staying with my girlfriend whose parents pay her rent, so I'm trying to take advantage of this free ride to get straight with my debt before it's time to grow up and buy a house.


PRICEPLUS, nothing personal taken at all, glad we could keep some humor in this thread. What was it exactly that made you laugh?

[PRICEPLUS]

I have never seen a budget that budgets for recreational drugs. I am sorry but 60 dollars for weed in the middle of your budget was and still is humorous.

[sweeps]

Yeah, normally it's billed as "Entertainment & Misc", but might as well call it what it is.

[CJsoccerchic]

Honesty is the bets policy and way to go with being honest. heee heee

[boefixepa]

Oh my!! I can't stop laughing about the weed AND the girlfriend!!!

On a side note-- Make sure this girl friend doesn't add another court ordered child support payment to list since she doesn't seem to be a long term asset.....LOL --- These kind are fun, but not the type you marry or take home to mom and dad...right?

First, the interest rates you have on the loans seem REALLY high, but that is probably because you are so young.

What I would do.....

Okay - assuming a Minimum take home pay of $2,500.00 - Everything over that goes toward saving until you reach $10K (Emergency Fund) then into long term savings/investment.

With the Budget you gave us that leaves 1K to put toward Debt. I'd do the personal loan first - paid off in two months

Then the CC paid off in one month (Pay the 160 you were paying on the loan too)- total 3

Then the car - paid off in a year (with the help of the 160 + 15 from the other two --this rollover or snowballing)

Then the student loan (Again add the car payment in so you are paying like 1500 a month on this loan) - four months.

So in less than two years you will be debt free and have a nice nest egg for a good down payment on that house. Once everything is paid off you can add that $1.5K to the nest egg fund and really watch it grow.

That's my two cents

[brizzad]

Thanks a lot boefixepa! The thought of taking the monthly payments from a newly paid off loan and applying them, in addition to my regular payments, to pay off another loan never crossed my mind. Is that what snowballing is?

[boefixepa]

YEP and it works!!

[Ima saver]

Boe, told you right, that is snowballing. You have quite a bit of extra income, you should get most of your debts paid off quickly. My husband takes his lunch to work every day. His workers go out and spend $5-10 for lunch every day. (Plus lose an hours pay)
Then you want to save as much as possible for an emergency fund, 10K is a good amount to shoot for. Plus could you take that extra money you make each month and earmark it for savings only? You need to open a Roth Ira with that money!

[lrjohnson]

I was much more shocked by the $250 a month on food, $5 for lunches, than the honest mention of weed.

Entertainment is in my budget, but, I get Netflix and internet cable because I cut spending on household and electricity and food and other things. I think you should be able to cut food by at least $60. I'd like to see you eventually aim for $140.

[PrincessPerky]

Dude! pack a lunch!

and if you can't quit the weed you are addicted, get help for it. (if you simply don't want too...well I don't want to drop my hot showers either, but be honest you don't NEED it.)

If your gal is that expensive she had better be worth it, you don't need another court ordered child care bill to tack on to your list....