Climbing out of debt, moving out [need your opinions]

[papakron]

This is my first post, so a little background information may be helpful. I've been checking up on the boards for a month or two, and have already learned to be in much more control of my spending (props to the envelope system!). I even transfer all the money for my bills off a paycheque into a chequings account where it is automatically withdrawn on the appropriate date.

I am 21, and make about 1800-2200 a month net pay, depending on how many shifts i work and whether or not overtime is available. I've taken home as much as 1500-1700 some cheques, which is immediately deposited into my savings account. My bills are as follows-

Bank Account- $1104.88

$267.05- Car Loan (I only owe $933.15 on the loan, but want to keep that money instead for an EF)
$200.00- Orthodontics (Only owe 600, 3 payments. I decided to get braces at 19. My parents never had the financial means to provide it for me, so when I started making enough income, I made the choice)
$222.77- Car Insurance
$45- Gym Membership
$75- Cell Phone (my only means of telephone)
$200- Rent (Paying rent for my room at my parents, but am looking to move out Jan. 1st)

Gas usually runs me about 200-240 a paycheque.... my car is not quite economical.

I used the vast information on this site to pay off my credit card balance, and really focus on paying down my debts. I should be out before I'm 22, and plan to spend much time handling my money in the future! After my debts are done, I am going to start putting 100-150 a cheque in either an RRSP (Registered Retirement Savings Plan in Canada, likened to Roth IRA) or mutual funds. Any opinions are appreciated, looking to spend 500-600 a month on rent.

[scfr]

Oh how I wish I had done as much advance planning as you are doing before going out on my own at age 18 (that was many, many years ago)! If I had, I probably wouldn't have ended up eating nothing but spaghetti noodles with ketchup for 3 days straight. I can look back and chuckle about it now, but at the time it was pretty miserable!

It sounds like you have already made some good moves.

In what specific area are you looking for opinions? Setting up a post-move-out budget? Cutting expenses? Where to invest the RRSP? How to get information about investing? All of the above? Something else?

[Broken Arrow]

Welcome.

For someone so young, I think you are doing very well. Cash flow is good. Liabilities are low.

Basically, I would focus on trying to establish as much of a financial head start as possible. For example, I would try to lower my spending and try to pay off everything you can get your hands on, as well as fund a full emergency fund. I would also try to do this while negotiating a longer stay with your parents while you still can.

Just some food for thought anyway.

[lynclarke]

When you say $500-$600 for rent- does that mean everything?- rent, gas&elec, trash, water, and sewer - or did you mean just rent?
I am with Broken Arrow. If you can stay a bit longer with your parents you can get all your debts paid off, a minimum 3 months emergency fund, your security deposit on your new place, first month's rent, and at least one months rent for stuff you never knew you needed in your new place. You will be shocked about how much it costs to cover the basics- mop, broom, light bulbs, detergent, plastic bags, paper towels, PLUS all the furniture you will need. Maybe you can start looking in second hand shops and auctions for furniture while you are still home.

[papakron]

Thanks for the quick feedback. Financially, it is smarter to prolong my stay at my parents for longer, but mentally- not happening. I was out on my own before, but had to move back after some problems with my roommate to sort out my financial situation. My parents constantly fight, drag me into t he middle, and my mom does daycare...'nuff said.

I was basically looking at setting up a post-move out budget with my available income, with abit to invest (and into what). I need my own space, for sanity purposes.

Thanks all

[papakron]

And yes, the 5-600 would cover all my utilities.

[lorraine67]

I agree, I wish I had started saving and watching my bills more closely at such a young age. I think your doing great...good luck!! I would continue "making payments" to yourself after your vehicle is paid off since it sounds like you may be in the need of a newer vehicle in the near future...would help towards a down payment.

[Ima saver]

Sounds like you are off to a good start!

[Daylily]

Are you going to have a roommate or does the $500-600 for rent equate to a one bedroom apartment? When I was younger I valued my privacy and ended up paying substantially for it in order to have my own place.

Find an apartment mate if possible.

[Aleta]

I think that you are an extremely smart 21 year old. While it could be difficult to live with your parents, it would be very helpful to you now. Especially if you sat down with them and explained what it is that you're doing about getting out of debt and that you want to be able to get more savings ahead so that you don't have to move in with them again in the future. That is one thing that I think most parents would love to hear from their 21 year old. I bet they would be even more helpful to you. You're off to a great start, but I do agree with most here that the emergency savings will determine a good safety net for you, so that when a roommate isn't working out, you will have enough savings to make other choices.

[Lonewolf]

Like everyone has already posted, you are ahead of your time worrying about finances and not the new Playstation 3 on the market. I don't know if in Canada there are similar programs, but I know at 21 my car insurance was much higher, so I'd recommend taking a Defensive Driving Course. Getting a percentage savings off your insurance is worth spending a few hours in a course.

Financially, as everyone has also stated, if you could get through a few more months at home, you'll be better off, but understand you have to put a price on mental costs as well. Good luck to you.

Wolf

[kristinecfp]

Sounds like you're off to a good start.

However, I noticed two things when reading your post:

1. Your total car expenses seem really high, especially insurance and gas. Can you do anything to reduce your transportation expenses? Increase your insurance deductible for a lower premium, switch to a more gas-friendly car, is public transportation available in your area?

2. You mentioned that you will start saving when your debt is paid off. I would suggest that you start saving for your emergency fund and your RRSP now. There's no reason why you can't tackle these goals at the same time (unless your debts are at unusually high interest rates). Getting those savings habits in place now will help you tremendously down the road. Too many people wait until they are out of debt to start saving, only to find that they never start!

[scfr]

Expenses: My recommendation is to look seriously at the car expenses, since they appear quite large. If public transportation is available in your town and if the hours you work make it safe to do so, you may want to look at getting an apartment on a bus/subway line and taking transit to work. If you cut down the miles you drive, you will of course save on gas but may also be able to reduce your insurance costs. You could even consider getting a place close enough where you could walk to work, and then you might even be able to cut out the gym membership because of the extra exercise you'll be getting!

Emergency Fund: I recommend getting that emergency fund (bank savings) built up to $3-5K as soon as you can, before you start contribuiting to the RRSP. Shop around for an account with a good interest rate.

Additional "Emergency" Prep: Look in to renter's insurance. It may not be necessary if you don't have much of value, but it's at least worth looking in to.

Preparing for Life on Your Own: If you don't already know how, start learning to cook nutritious inexpensive meals for yourself. It's easy to fall in to the trap of getting takeout when you live alone, but that can be a big drain on the finances.

Enjoy your freedom. Good luck to you!

[kealina]

you've gotten some great advice here... i second learning to cook because it can save you lots of money... good luck and i'm glad you are starting so early... wish i had found this site when i was 21...

[papakron]

Thanks once again for the input. I actually meant gas runs me about 200-240 a MONTH, not a cheque... oops. Usually withdraw 120 for gas, 120 for social (drinks, movies, restaurants, etc.) for my two week pay period. Often around 5% into a 'clothes' envelope I save up so I can splurge now and then on some kicks or new clothes guilt free, knowing I've saved for it. I probably could cut down on the social spending from 120 to maybe 80 or 100, but I soemtimes find it hard to even live within 120 due to the fact that I always feel the need to be out doing something so I'm not sitting in my room on the computer or wasting my time. This is where my gym membership comes in... it's my hobby and something that's beneficial to me both physically and mentally.

I did the roommate thing a few months ago, and HATED it. Cleaning up after other people, having that akward need to conversate when all you want to do is sit on the couch and veg out... or have your girlfriend over and make as much "noise" as you want. I REALLY need my own place in the next 3-6 months.

My focus will be on getting together a respectable EF (I'd be ecstatic to have 3-5G's!) along with my RRSP off the ground. Would it be wise to invest $50 off of every paycheque towards mutual funds? I've heard these are lower risk, but also have lower return (I don't like gambling with my money!). I might have to tough it out at home for a few months like many suggested, with the big picture in mind. Thanks all... even my friends come to me for financial help after I told them all about what I've learned on this site... some even want me to get THEM started on an envelope system.