Can I afford it?

[docstudent]

Hey People,

I recently purchased a trip to visit Rome and Milan for Christmas break and I am thinking about opting out of it. I paid $1255 for a six day, five night excursion, (airfare/hotel included). Typically, I travel to the Midwest to visit family, and it totals near the same price as Italy: (airfare, rental car, food, and entertainment). If I opt out, I will have to pay a small fee of $55, if I do so by Friday. My other option is to remain in California for the holiday, and save the money and not celebrate the holiday season.


I bring home about $3555 to $3700, a month (I contribute $500 a month before taxes to my 403b account)

Current bills:
Car: $459
Rent: $1350
Insurance: $139
Phone: $140
Cable/ Internet: $98
Student loan: $640
Credit card payment: $500
Gas/ Food: $200

Savings: $6,033
403b acccount #1: $15,550
403b account #2: $3,500
Retirement account #1: $25,000
Retirement accoint #2: $13,000


Credit card debt/loan:
Credit card #1: $3000, limit $17,300
Credit card #2, $0, limit $9,000
Credit card #3, $0, limit $8,000
Credit card, #4, $0, limit $7,500
Credit card, #5, $0, limit $7,000
Student loan: $137,000, payment $640 a month


I charged my trip and I plan on paying off the credit card debt by February, and I pledge not to charge more than I can pay off in a month. I have budgeted about $300 for food and entertainment.

[maat55]

The fact that you have auto debt, CC debt and SL debt, gets you a no from me.

I also thing you are investing too much while carrying debt. I would invest in your 403b to the match only, then payoff debt with everything you can find.

If you are content with being in debt for a very long time, keep doing what you are doing. If you want to get out of debt, change your mentallity and spending habits and focus on the debt.

[disneysteve]

Originally Posted by docstudent

Credit card #1: $3000

I charged my trip and I plan on paying off the credit card debt by February

If you can't afford to pay the full bill when it comes, you can't afford the purchase.

[segmond]

lol, many people will tell you that you can't afford it. life is too short, sometimes, you gotta treat yourself too even if you are still in debt. i find that sometimes, getting out like that motivates me to want to make more money so i can travel some more. i do say, if you met your financial goals for 08, treat yourself, if not, don't. set a goal that you do like to meet in 09, if you meet it by nov, treat yourself. life is too short.

[fruitbowlk]

I agree with Matt.

[maat55]

Originally Posted by segmond

lol, many people will tell you that you can't afford it. life is too short, sometimes, you gotta treat yourself too even if you are still in debt. i find that sometimes, getting out like that motivates me to want to make more money so i can travel some more. i do say, if you met your financial goals for 08, treat yourself, if not, don't. set a goal that you do like to meet in 09, if you meet it by nov, treat yourself. life is too short.

I can't help myself, when I read your post, I keep seeing this little debt-devil with horns snickering.

[disneysteve]

Another thing to consider is that you listed monthly expenses of $3,526, and I'm sure there are things you didn't include like clothing, auto maintenance, entertainment, etc., which means your actual spending is virtually 100% of your take-home pay.

Your current savings is over $1,000 short of being even a 2-month emergency fund and the general recommendation is to have 3-6 months of expenses in reserve.

Not only can't you afford this trip, but you can't afford the lifestyle you are living. My cable/internet bill is just 40% of yours. And what the heck are you getting for that $140/month phone bill? That's crazy. You could get a land line and cell phone for much less than that. Your rent is 36-38% of your income. Have you considered getting a roommate or moving to a cheaper place? The car payment isn't helping matters either.

Rome and Milan will still be there next year and the year after that. Dedicate yourself to getting on the right track financially and dangle that Italy trip as your carrot to serve as your motivaiton to form better habits. Once you are in a better place, take that trip with cash and you'll enjoy it far more.

[boosami]

Do you have any money in accessible savings? If not, you need to rethink your financial strategy and save some money so you aren't forced to rely on credit in a crunch.

[Ima saver]

I would have to vote no on the trip also. You owe a lot in student loans. That would worry me to death. What do you do for a living?

[Tree0164]

No get your credit card debt paid off and then save for the trip in cash. You are denied as Suze Orman would say

[disneysteve]

Originally Posted by Ima saver

You owe a lot in student loans. That would worry me to death.

Actually, the student loans bother me the least in this scenario. Having paid off over $100,000 in student loans myself, I know all about that situation. During the 12 years that I was repaying mine, we still funded retirement accounts and an emergency fund and bought a house and had a child and took vacations and did everything else normal people do with their money. The difference, though, was that we were living well BELOW our means which allowed us to do all of those things while still making substantial extra payments on the student loans, paying them off 13 years early. We also paid off a couple of cars along the way and never, ever had credit card debt.

As I see it with the info presented, OP is living at, or maybe even a little beyond, his means and that's what concerns me.

[docstudent]

Thanks for the input--

Age: 31, single, and I live in Los Angeles, CA.

At the moment, I am living below my means, I think. I recently completed my doctorate degree and I did not get an opportunity to celebrate. I passed on a trip in the summer with my classmates due to my financial situation. Should I stop contributing to my 403b account, that would increase my take home from $3700 to $4100 a month? I could use the extra money to pay on my credit card debt or contribute to my savings. As posted earlier, I had to downgrade my position at work due to the closing of the department that I worked in. My salary went from about 89G to 70G, and I had already moved into a new place and my rent went up by $200, and my car payment increased by $59. I needed more space, and I did try the roommate situation and it was a complete nightmare, so I will not be living with anyone until I get MARRIED, lol!!

I eliminated several items from my budget per my other posts:
Eliminated the cleaner ..saved $100 a month
Barber, every other week..saved $60
I use coupons.....saving about $40 a month

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I loaned $1300 to a friend she is going to pay me back at the beginning of January, and I can make an additional payment to my credit card debt.

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I am most worried- because I am not from a well-off family, and I do not have anyone to help me when I fall of hard times. I have a huge loan, because my father could not contribute a single dime for my college education. As a result- I had to take out loans for my BA, MA, MS, and Doctorate degree. I do not regret my decision to continue my education, but it is causing a bit of strain on my finances at the moment. I am optimistic that my salary will increase by 35G in a year or so. Should I just sit at home for the holiday season, because if I go home, it is going to cost about the same?

[maat55]

Invest in your 403b only to the match and apply all extra funds to debt reduction. When you get a raise, do not increase your lifestyle until all debts are paid, have built an 3 to 6 month EF and you have a financial plan.

Spend some time reading personal finance books. Learning how to manage money is just as important as leaning how to earn it.

[disneysteve]

Originally Posted by docstudent

At the moment, I am living below my means, I think.

As I pointed out above, I have to disagree. You listed expenses that are within a few dollars of your take-home pay, and I'm sure there are costs not on your list. I think you need to keep a written spending log of absolutely every cent you spend for the next month and review it item by item after the month. If you'd like, post it here so we can help point out possible problem areas.

Should I stop contributing to my 403b account

Is there a match? If so, I agree with maat55 that you should contribute enough to get the full match. If there is no match, it might be better to fund a Roth.

I eliminated several items from my budget per my other posts:
Eliminated the cleaner ..saved $100 a month
Barber, every other week..saved $60
I use coupons.....saving about $40 a month

This is a great start. I remember those posts now.
Be careful with coupons, though. Very often, it is still cheaper to buy the store brands than to buy the more costly national brands, even when using coupons.

I loaned $1300 to a friend

While this may have seemed like a very nice gesture, you certainly couldn't afford it.
Besides, what will you do if she doesn't pay you back? How do you think that will affect the friendship. In the future, don't ever lend money to friends and family. There have been a few threads here on that topic.

I am optimistic that my salary will increase by 35G in a year or so.

Obviously, this could help your situation tremendously, as long as you don't allow your lifestyle and spending to grow to consume the higher income. If your salary goes up and you start going back to the barber, rehire the cleaning person and stop clipping coupons, you may find yourself right back where you are now.

[Joan.of.the.Arch]

Yes, you should stay home for the holiday if it is going to cost as much as the Rome trip. In these days, I think your family will easily understand.