Where to put the money

[rvtgirl]

I read through several of the threads but didn't see anything that really helped me, sorry if this has been posted before and I missed it.

My situation is I was doing good financially, but in January my landlord sold the apt complex and rent went up, it is still cheaper than any other place in the area (rent control and previous landlord hand't raised rent in 5 years). but it did throw in wrench in the finances.

I have $4500 in credit card debt, I am paying $300 a month and it is 0% interest until September this year. With what I make most months I do not need to put anything new on my credit card debt, but when I have to it is usually around $60 and never more than $200. I put $25 into my savings and currently have about $1000 in there, I am trying to build that up and don't want to spent it. I put about $200 each month into a retirement plan (through my job), and I am working 2 jobs.

A family member is giving me $2000 as a gift and this would be a big step toward paying off debt and being able to put more into my savings, my debate is the best way to spend it. I see 3 options and would like opinions on the best one (or maybe you see more options?).

#1) Put the entire $2k on the credit card and reduce my payments by $200 a month, this should enable me to not use the credit card anymore, and some months I can contribute more to my savings but it would be slow and there is the possibility that if another emergency arises I am back to credit card debt.

#2) Put about half of the $2k on my card and reduce payments by half, it will take longer to pay off the card than #1, but I will have more in my savings and could potentially not use my credit card in the event of an emergency, there still might be some months I have to put purchases on my card though.

#3) Keep doing what I am doing and leave the entire $2k in my savings, it would give me coverage in the event of emergencies and I would use small amounts of it to not add to my credit card debt.

Also I am trying to get a budget going, but the task is a little overwhelming, if anyone has tips to get started I am all ears!

[lorraineb]

The main thing you need to concentrate on is getting rid of all the credit card debt before it starts charging interest in September. With this in mind, I would put the entire $2000 toward the credit card debt, but not stop there. I would then continue to pay $300 a month toward the credit card debt (not the new $200 payment) to tackle it even more. I also would refuse to place any more debt on the credit card. If you can't pay for something that is an emergency, that is what the emergency fund is for (and then you need to build that up again asap. Until that debt is completely gone, you are always going to be living paycheck to paycheck and adding more to it should no longer be an option.

[MoneyTips4U]

I wholeheartedly agree with lorrainb.

You should worry about paying off the credit card first. Regardless of an emergency down the road, the more left on your card in September, the more interest you will be paying.

You will save more money in the long-term if you put the $2000 on the card and continue with the $300 monthly payments. And as soon as the credit card is paid off you can start saving an extra $300/month!

[rvtgirl]

Thanks

Unfortunately I cannot avoid putting money on the credit card, if I were too use my savings for every time I was tight cash the $1000 in my saving would not out last the credit card debt. I'm not putting frivolous things on my credit card, but I have a medical condition, I can do the routine medical stuff when my pay is higher (my job hours fluctuate), but when medical issues arise, there is little I can do, I am either losing money due to not being able to work (when they happen in the busy season) or an short money already because the medical issues happen during the slower season.

If I can cut my expenses by about $150 month I think I could do it, or at least I could build up my savings to the point it could get me by until the debt is gone. I am not worried about paying off the entire debt by September, I never thought it would be gone before it started accruing interest, I just want as much as possible gone before then.

June is usually the point that business picks up and I will be making extra money through August, I usually split the extra money at the end of each pay period between more in the savings and more on the debt. Would it make sense to put all of the $2k on the card, make $200 a month in payments and put 100% of the extra income on the debt through the summer?

[snafu]

No matter the details, you're living beyond your means if you have $ 4,500. in credit card debt and must add to it. After September what interest rate going forward? Whatever the source you need to either increase your income or reduce expenses. What percent of your income is spent on rent and utilities? What percentage of your income is going to pay off debt? Is it practical to get a roommate? If not I suggest you consider moving to a house/apartment share to lower sum spent on rent. Variable income combined with pay lost to illness and expensive meds certainly throws a major, long term wrench into your situation. You are making up the difference by borrowing against money not-yet-earned and that isn't sustainable. Are there any support organizations for your particular medical problem? Can you manage a part time job to add to your income?

[scfr]

Also I am trying to get a budget going, but the task is a little overwhelming, if anyone has tips to get started I am all ears!

Start by recording every penny you spend for 2 months. Every time you pay for anything, whether it is by cash, check, credit card, or debit card write it down. Carry a little notebook & pen with you at all times to do this. At the end of 2 months, the information from your notebook plus your knowledge of "irregular" expenses that you incur (annual car registration, vet bills, etc) will be the basis for your first budget. Creating a practical working budget is going to be really important for you to get a handle on your finances and come up with a plan so that you are living within your means.

[rvtgirl]

The truth hurts but

I am living above my income, I already have a 2nd job and I live with my fiance, so a roommate is out of the question.

I guess the part I didn't want to admit is my fiance is not helping as much financially as I need him too. He was having trouble finding a job for over a year, and working part time which was eating up savings and adding to credit card debt. He just got a really good job in April, but has been focusing on paying down his debt and building his savings, but the hard truth is it really isn't helping us for him to have no debt and me to be getting deeper and deeper into debt. It looks like I have a really hard conversation in front of me.

Both of us were raised by single parents, so there was no money talks for us to learn from and neither of our mothers really talked about money, so it always feels awkward - even posting in this forum feels awkward, especially admitting my money troubles! It took me a lot of reading to gather my courage to post.

I have started carrying a notebook in my purse and writing down were my money goes, I also have been making notes of what I am spending money on that are both our expenses (food, rent, etc) so that I am prepared to have the conversation.

I will put the entire $2k on my credit card and do my best to continue making the $300 payments and not use the card, I have already removed it from my wallet and stuck it in the freezer (advice from another post ).

[scfr]

I am living above my income, I already have a 2nd job and I live with my fiance, so a roommate is out of the question.

I guess the part I didn't want to admit is my fiance is not helping as much financially as I need him too. He was having trouble finding a job for over a year, and working part time which was eating up savings and adding to credit card debt. He just got a really good job in April, but has been focusing on paying down his debt and building his savings, but the hard truth is it really isn't helping us for him to have no debt and me to be getting deeper and deeper into debt. It looks like I have a really hard conversation in front of me.

Both of us were raised by single parents, so there was no money talks for us to learn from and neither of our mothers really talked about money, so it always feels awkward - even posting in this forum feels awkward, especially admitting my money troubles! It took me a lot of reading to gather my courage to post.

I have started carrying a notebook in my purse and writing down were my money goes, I also have been making notes of what I am spending money on that are both our expenses (food, rent, etc) so that I am prepared to have the conversation.

I will put the entire $2k on my credit card and do my best to continue making the $300 payments and not use the card, I have already removed it from my wallet and stuck it in the freezer (advice from another post ).

Good for you! As the proverb says "A journey of a thousand miles begins with a single step" and you have taken some really good first steps.

[fiveace]

Unfortunately I cannot avoid putting money on the credit card

This needs to be addressed immediately. Nothing else matters at this point; not savings, retirement, an emergency fund, a vacation fund etc., until you figure out a way to budget your life so you don't have to depend on a credit card to get by. This is almost as bad as writing a check before depositing the funds into your checking account.

I notice you didn't aswer the question about the interest rate you'll be charged starting in September. This leads me to believe you don't know the rate, and if that's the case you're in for a big shock when the time comes. Credit cards that offer 0% introductory rates often hit you with big when the grace period ends to make up for the free money they were letting you borrow until now.

Now this is the part that really bothered me about your last repy:

I am living above my income, I already have a 2nd job and I live with my fiance, so a roommate is out of the question. I guess the part I didn't want to admit is my fiance is not helping as much financially as I need him too.

If you're serious about getting out of debt and on the right path the nothing is "out of the question." Why can't the two of you share a place with a roommate to save a few extra hundred bucks a month when at this point you can't get by without using your credit card?

I don't mean to sound rude, but sometimes we all need a reality check and it isn't always pretty. You're doing the right thing by wanting to focus your attention on your debt but your still too comfortable with having it. You do need to have a talk with your future husband. Does he understand that your debt will be his debt when you get married? He too should be focused on paying off the debt before contributing to savings. You say he has a good job. There's no excuse to have such a high credit card balance.

[snafu]

rvt: Good on your leaving the CC in the freezer. Delighted to learn you've chosen to track every dollar spent as suggested by scfr, to identify where every dollar goes. I'm disappointed fiance wasn't carrying his share of the financial load. I hope you have found a way to open the door to conversations about money, earn, retain, spending options and consequences. It might feel awkward at first but with you both using positive words and attitudes it gets easy peasy. Now that he has acquired a good job, I hope fiancee steps it up to reimburse you for his part of the rent and any of his expenses that you covered or were added to your CC.

Perhaps under another heading you might like to discuss options for money management and splitting expenses with your fiance.

[rvtgirl]

Update

My interest rate is going to be 9.9%, not too terrible but the less I pay in interest the better. I have made some small steps in talking to the fiance, he gets a little prickly when the money subject comes up. He has acknowledged that he needs to help more toward the household finances. We haven't worked out a joined budget yet but he has seen the need. He is proud of the fact that I am working on creating a budget - I joined Mint.com and showing him some of the pie charts really opened his eyes (and mine) to where my money goes.

We know that we need to talk more about money, but the conversations always seem to go downhill. I am hoping that with me tracking every penny I am spending for the next 2 months, especially how much I spend on us that once I have some hard numbers in front of us to discuss things will go smoother. I have some to the conclusion from trying to talk to him over the weekend that he really doesn't realize how all the small amounts can add up.

I am also going to spend tonight meal planning and grocery shop tomorrow with a list and no extras! I am starting to realize that while each individual extra doesn't cost much, it adds up fast! Looking at Mint I am seeing a few areas that I think can be reduced.

I'm stressing right now because my car started making a funny noise, with overtime I will be able to get it looked at/fixed in June. Normally I would take it in this month, even though I would have to put something on the credit card. I am driving very carefully and hoping to make it 11 more days!

[rvtgirl]

[QUOTE=Whatever the source you need to either increase your income or reduce expenses. What percent of your income is spent on rent and utilities?[/QUOTE] Rent = 45% of my income (on average) I know that sound high, but believe me when I say that it is below market rent for the area I live in, I do keep an eye on the rental market, even smaller apartments cost more. The only lower cost are not nice areas and I will not live in an area where I have to worry about being shot! My fiance has been covering utilities, we keep lights off, unplug appliances that aren't being used, etc to keep costs down.

[QUOTE=What percentage of your income is going to pay off debt?[/QUOTE] Roughly 10% on an average month.

[QUOTE=Variable income combined with pay lost to illness and expensive meds certainly throws a major, long term wrench into your situation. Are there any support organizations for your particular medical problem? Can you manage a part time job to add to your income?[/QUOTE] I was looking at help programs at first, but there is always a lot of paperwork and information that I didn't have. I just pulled up the links and printed out the paperwork, I will fill that out and send it in.

Since my income varies does it make sense to do a yearly budget? I was thinking I could take my yearly average for everything. I was then thinking that any "extra" money from the months I make more money could be used during the slower months to keep me on budget. Does that make sense, has anybody done this before? I might be getting ahead of myself since I only have a few days of tracking started, but I don't want to do 12 budgets one for every month!