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    Small debt advice

    Hello SA!

    I think I already know what you guys will say, but I would like to ask anyway.

    I recently moved to a new job from college. During that move I incurred a fair amount of CC debt trying to get my apartment set up.

    I have just over 1 month of experience living on my own, so I don't have a good rhythm set yet.

    Here is where I am at:
    95k Income
    10% 401k matched 125% up to 6%

    My take home should be about 2,300 per pay so about 4,600 a month
    After 401k stuff though it is actually more like 4,200 though.
    Rent: 1,690
    Motorcycle: 110 @ 7.9% - $2,900 remaining
    Laptop: 55 - 1,100 remaining
    Food: 600, I am trying to take that down to 300 - 400, but I haven't been successful yet
    Car insurance: 195 (970 * 2 for the car per year + 380 for the motorcycle per year)/12
    Car payment: ~450 not sure yet, Just got the car (I know I shouldn't have, but the risk on an everyday commute on the motorcycle was getting too high. I bought a little too much car, also, but it is going to last a long time and should have a good 150-250k miles left on its' life.)
    Commute: ~180 a month (this is gas, but it is less on the bike and even less if I ride my bicycle, which I do sometimes)
    Internet: 85
    Health Insurance/ vision /dental: 52
    Electricity: ~150 This one I think will be lower
    Not sure what a water bill will be yet, but I budgeted $40, which I think might be low.
    Renters Insurance: $24

    All of the insurance has been paid in full to take advantage of paid in full savings.

    All of this adds up to 3,633 which we'll call 3,700 just for fun.

    4,200 - 3,700 = $500

    I also have RSUs coming my way, which the intial value should be about 6k minus uncles sam's part. Well call those 3k
    My safety net is about $450 right now because I am trying to pay down this next part:

    I owe (in order from lowest to highest interest rate):
    Student Loans which I start paying in about 8 months: $40,000 or about $350 a month
    American express: $6,600
    Discover: $300
    Chase: $3,150


    This excludes tax returns and bonuses obviously, but I think that is important to note. A yearly bonus should be about $10-11k and the TurboTax estimator says my tax return could be 5k or more. (This is mostly important to me because I want to take a chunk out of the car loan and the student loans with these.)

    So of CC debt I have about 10,000 (I am usually quite good with these, but moving across the country and filling a house for the first time with furniture that will last is not a cheap endeavor, but hopefully it won't happen again anytime soon.)

    I don't think I should reduce my 401k contribution to 6%, It seems like I should leave it at 10% if I can still make it that way.

    I was trying to decide if I should use the RSUs to conquer the CC debt or to keep them as a bit of an emergency fund. I know how important an emergency fund is, but it seems like I should eliminate the 15 - 18% interest debt first. Also my discover card offers a 0% for 16 month balance transfer rate at a 3% initial fee.

    Like I said I just started my new job, so I haven't really gotten great at tracking my budgets just yet. I am currently making a web app that is basically a virtual envelope system. (I use myFitnessPal to track my calorie intake this way with pretty good success, so I think this will work well for me.)

    What advice could you offer me on the order of operations here? Transferring the Chase debt to the Discover card seems like a good idea. It is also worth noting that I have been making a ton of over time so my take home is actually usually more like 2,800 - 2,600 per pay. I have just been paying my bills then putting everything that was left into paying off the CC debt. I hope I have given all the info you need, but if not please feel free to ask.
    Last edited by zemon1; 07-15-2015, 01:44 PM.

    #2
    I wouldn't start transferring balances around - that costs money. You have a good income and you can pay these off quickly if you prioritize and make some sacrifices. I think your rent payment is crazy high, even for your income. Can you get a roommate while you're paying down debt? Beyond that, look for every opportunity to cut expenses. I'm guessing you have more than what's listed here. Also think about ways to boost income - can you freelance? Mow lawns? Pick up a bartending gig? You really let your expenses leap to meet your new income and now you need to find balance.

    Without interest rates its hard to make a recommendation on what order to pay things off, but I wouldn't just be focusing on loans and those 2 cards - your laptop, bike and car should be included in the repayment plan as well.

    ... Is it too late to return the car? I think for someone who both has a motorcycle and lives close enough to bicycle to work, you should really reconsider your new shiny car. Pay off your cards with that payment ($600+/mo between car payment, insurance and gas!) and then get yourself a car.

    Comment


      #3
      Really the big focus here is should I keep the RSUs as an emergency fund, or put it into the CC debt. And should I transfer the Chase debt to the Discover.

      I am not returning the car. In the end that will prove to be a good purchase, either financially down the road since it should last a while, or in the short term having me not murdered by the dozens of people who pay no attention while they drive.

      I do live in a high rent area, but turning my 15 minute commute into a 45 minute commute would still only save me about $300, and it would take me away from all of the people my age, and all of the interesting things. Getting a roommate at some point might be good, but I like living alone.

      I think the best place for improvement is the one I spend on food. Reducing that would be good.

      I have gotten some new hobbies that have somewhat high costs of entry, but after that low cost (Cycling). So entertainment is covered for the most part.

      It is also worth noting that I don't /really/ live close enough to cycle to work every day. It is a very challenging ride to work and back haha
      Last edited by zemon1; 07-15-2015, 02:41 PM.

      Comment


        #4
        What is an RSU?

        You have $500 per month "left over", before CC minimum payments. How much are those? Student loans with minimum payments of $350 will begin coming due soon.

        How much do you plan to spend for car maintenance, motorcycle maintenance, medical co-pays, clothing, entertainment, hobbies, gifts, travel? You have not included any of these in your budget.

        You can't afford ALL of the choices you are making, you will have to decide which to change.

        The car is important to you. OK, so what are you willing to part with? The motorcycle? The apartment (and find something closer to work)? Living alone? Your free time (by taking a second job)?

        There is no right or wrong, it is all personal priorities.

        I wouldn't worry about paying down either the car loan or the student loans until credit card debts are paid in full. And you have a bit more cushion on hand.

        Congrats on the new job.

        Comment


          #5
          Originally posted by Petunia 100 View Post
          What is an RSU?

          You have $500 per month "left over", before CC minimum payments. How much are those? Student loans with minimum payments of $350 will begin coming due soon.

          How much do you plan to spend for car maintenance, motorcycle maintenance, medical co-pays, clothing, entertainment, hobbies, gifts, travel? You have not included any of these in your budget.

          You can't afford ALL of the choices you are making, you will have to decide which to change.

          The car is important to you. OK, so what are you willing to part with? The motorcycle? The apartment (and find something closer to work)? Living alone? Your free time (by taking a second job)?

          There is no right or wrong, it is all personal priorities.

          I wouldn't worry about paying down either the car loan or the student loans until credit card debts are paid in full. And you have a bit more cushion on hand.

          Congrats on the new job.

          An RSU is a restricted stock unit. In my case I 18k vested over 3 years, so 6k a year. It is basically a slowly disbursed signing bonus, in the form of stock.

          I have no idea what the minimum payments are, I always pay more than them, and in advance, so I can't actually look that up either, because my current amount due on all 3 cards is $0

          Car maintenance will be very low, oil changes, tires, and brakes
          Motorcycle maintenance will also be very low, in 3 years of owning the bike I have paid a total of $900. So, $10 a month?

          I think my co-pay is like $10 or $100, but I haven't been to a doctor in probably 6 years, so don't think more than 2 or 3 times my co pay is really necessary.

          My entertainment is, for the most part grouped with my hobbies, which is cycling. I don't know how much that should be, now that I have bought the necessities there isn't a whole lot more I need.

          Gifts and Travel, I missed those, but I also have no idea what to put there.

          All of this said, Thank you both for your insight thus far.

          I think I am just going to cash the first round of RSUs out and kill the CC debt. After that, I'll take out the laptop, then then Motorcycle. If I also put my tax return into all of that I should only have my car and my student loans after that. I'll pay down that car, then the student debt.

          How does that plan sound? And if I can reduce my food to 400, that will also give me some more wiggle room.

          I don't need a second job for a few reasons, but the biggest of which being if I just work more at my current job I will get paid more. Certainly more than I would get at any second job.

          Thanks!

          Comment


            #6
            Agree with Petunia you need to decide what your priorities are. While you might be skating by OK now, when those student loans come due, you aren't going to have any breathing room and there isn't a lot in your budget that can be cut and one big medical bill or car issue or whatever else and you're going to be relying on credit to cover it. I'd work really hard to reduce spending and pay off those cards before you have to start paying on them.

            Good idea to throw your tax return at it, but 1) since this is your first year with this new income, you can't count on it and 2) if you feel really confident your return will be that large, i'd suggest adjusting your withholdings so you have more in your monthly budget instead of having the government hold on to it for you.

            Comment


              #7
              Debt relief advice - including 9 ways to stay debt free!

              I appreciate your details, making it easy for me to understand your entire situation.

              Let's start with your student loan debt. How many family members live in your household? There are income based hardship programs that are based on income and family size. The more family members you have living with you, the lower your payment will be on this plan. I have seen students consolidate their student loans and their payment was reduced from $500 per month, down to zero dollars per month, and then after 300 payments at zero dollars per month the rest of their balance would be forgiven. So how much did that person end up paying towards their student loans? Yes, zero dollars on $40,000 of student loan debt. You probably will not qualify for a zero dollar payment due to your income sounding relatively high, but find out your options it's free.

              Consolidation is actually good for your credit, unlike debt settlement, since all of your current loans will be paid off in full. If you don't qualify for the income based plan, there are 5 other potential options that may benefit you. You can consolidate all your student loans in minutes at (studentloans dot gov. It's simple to do!

              Regarding the credit cards, you can always take out a new loan, if and only if on the new loan the interest rate is lower than the average interest rate on all your credit cards, if not then doing this would not make sense. Debt settlement will lower your credit score, but you can always repair your credit after debt settlement.

              The benefit with debt settlement is that your debt balances could be cut in half.

              And of course you can also do consumer credit counseling for your credit card debt, where you would get set up with one easy monthly payment, and your payment and interest would be reduced from what you're paying on your own. With this type of plan you can be debt free in 4-5 years.


              Thank you,
              Paul Paquin
              Last edited by jeffrey; 07-16-2015, 08:12 AM. Reason: forum rules

              Comment


                #8
                I think you should cut up all of the credit cards, or at least freeze them in a block of ice, so that you have to wait and think before swiping the card. I think you have blurred the line between needs and wants.

                Car payment: ~450 not sure yet, Just got the car
                What does this mean? You don't know how much the car payment is yet? Did you sign any paperwork? I know you need safe transportation, but you don't need to spend $450/month for the next 5 years to acquire a safe vehicle.

                I owe (in order from lowest to highest interest rate):
                Student Loans which I start paying in about 8 months: $40,000 or about $350 a month
                American express: $6,600
                Discover: $300
                Chase: $3,150
                Why don't you include the motorcycle, laptop or car loan in your list of debts?

                How far is your commute that you can ride a bike, but need to spend $180/month in gas? For $180, I could drive 1500 miles.

                If you have a good credit rating, then you might be able to refinance the student loans with a company like SoFi.

                Comment


                  #9
                  Originally posted by autoxer View Post
                  I think you should cut up all of the credit cards, or at least freeze them in a block of ice, so that you have to wait and think before swiping the card. I think you have blurred the line between needs and wants.


                  What does this mean? You don't know how much the car payment is yet? Did you sign any paperwork? I know you need safe transportation, but you don't need to spend $450/month for the next 5 years to acquire a safe vehicle.

                  Why don't you include the motorcycle, laptop or car loan in your list of debts?

                  How far is your commute that you can ride a bike, but need to spend $180/month in gas? For $180, I could drive 1500 miles.

                  If you have a good credit rating, then you might be able to refinance the student loans with a company like SoFi.
                  I was pre-approved for a loan for $6,000 more than I used. That is why I don't know the exact amount. I bought a safe car, that I also liked. The focus of the question was not the car.

                  I didn't include the Motorcycle, car and laptop because, once again, that was not the area I was looking for help in. I was not asking for help making my budget, though I am glad I did, because I have gotten some good advice. I was asking how whether or not I should Use my RSUs as an emergency fund or to pay down the CC debt.

                  The gas line is about $100 more than I actually should need. My commute is 16 miles each way with about 2,000+ ft of elevation change. It is not a fun bike ride. I do it occasionally.

                  As I have stated, I am really looking for guidance in one particular area. I am glad to hear some of the ideas in other areas, but to be frank, I don't really care if you agree with some of my purchasing decisions. I have been in charge of my own credit for 5 or 6 years now, and I have been doing great (Thanks in part to Saving advice and a couple other similar web sites). I am not worried If I will be able to pay my bills, I was asking about the order I should pay off the debts. The rest of the info was so that you could tell my situation.

                  I really don't want to come off as hostile or anything, I do appreciate some of the advice that I am being given. Thank you for taking the time out of your day's to help me.

                  Comment


                    #10
                    Originally posted by zemon1 View Post
                    I was asking how whether or not I should Use my RSUs as an emergency fund or to pay down the CC debt.
                    If the RSU's are easy to liquidate and the CC's have a high interest rate, then you might as well use the money to pay down the credit cards. If you do have a true emergency, then you can just charge the cards back up.

                    It's tough not to comment on other things, when we see red flags. I understand that you are comfortable with your debts, but after racking up my own debts and paying them off, I don't like seeing the banks take advantage of people. I would rather earn interest than pay interest.

                    Comment


                      #11
                      With so much debt, FOCUS on paying off as much DEBT as possible. You don't deserve a Motorcycle right now....that's a luxury you cannot afford (which will help reduce car insurance and upkeep cost by the way).

                      Have a MONTHLY BUDGET. This will help plan your monthly expenses, debt, and income.

                      1. ) Sell Motorcycle to pay off your Laptop computer.
                      2. ) Stop making Temporarily retirement contributions.
                      3. ) Peanut butter n Jelly for a year. No more eating out, unless you work in a restaurant
                      4. ) Start paying off from the LOWEST CC balance to the highest balance (Debt Snowball).
                      5. ) Get a 2nd JOB to pay off all your debt. Yearly bonuses apply to all debt.
                      6. ) RSU, keep about 1000 the rest should be use to payoff your DEBT.

                      Once you have all debt paid off you can restart contributing to Employer 401(k) at 15% and save 3-6 months of EF.

                      I'm not sure if you are single or married but if you are single, you should be working 24 hours a day to make EXTRA $$ to get out of DEBT. No life for a year or two! Peanut butter and Jelly only. My advice is very extreme and for mature audience and NOT for the average citizen. With you DEBT load you need to make some tough choices: be slaved to debt for life, or live the "life" debt FREE!

                      Good Luck!
                      Last edited by tripods68; 07-16-2015, 07:56 PM.
                      Got debt?
                      www.mo-moneyman.com

                      Comment


                        #12
                        Please read this thread:

                        http://www.savingadvice.com/forums/d...car-loans.html

                        It may seem irrelevant, but it is absolutely relevant to your situation. I asked a simple question and just wanted SA to answer the friggin' question. But the boobs on here insisted on asking completely irrelevant questions about my overall financial situation. I clearly had no interest in hearing any of it. Just wanted to know whether to pay off my car loans. Why are they digging into my budget, asking why I needed 4 cars, etc... Very annoying, really.

                        After fighting with everyone on SA and just wishing they would answer my simple question, I finally figured out I had a much bigger issue and needed a much bigger answer. When I finally started listening, and implementing the suggestions the folks on here made, it has completely changed my life. Completely. My real issue was I spent more than I made. I had a warped sense of "wealth" in that I thought it meant spending lots of money and "owning" lots of things. After a thorough grilling on SA and reading the book "The Millionaire Next Door" (you should read it), I managed to change my view and now I feel a lot wealthier even though I spend a LOT less money and own a lot fewer things.

                        I am very thankful that they stuck with me even after I was acting like a total arse. I hope you will stick with this thread and keep an open mind. They may just end up changing your life as well.

                        Tom
                        Last edited by corn18; 07-17-2015, 01:03 AM.

                        Comment


                          #13
                          Originally posted by tomhole View Post
                          Please read this thread:

                          http://www.savingadvice.com/forums/d...car-loans.html

                          It may seem irrelevant, but it is absolutely relevant to your situation. I asked a simple question and just wanted SA to answer the friggin' question. But the boobs on here insisted on asking completely irrelevant questions about my overall financial situation. I clearly had no interest in hearing any of it. Just wanted to know whether to pay off my car loans. Why are they digging into my budget, asking why I needed 4 cars, etc... Very annoying, really.

                          After fighting with everyone on SA and just wishing they would answer my simple question, I finally figured out I had a much bigger issue and needed a much bigger answer. When I finally started listening, and implementing the suggestions the folks on here made, it has completely changed my life. Completely. My real issue was I spent more than I made. I had a warped sense of "wealth" in that I thought it meant spending lots of money and "owning" lots of things. After a thorough grilling on SA and reading the book "The Millionaire Next Door" (you should read it), I managed to change my view and now I feel a lot wealthier even though I spend a LOT less money and own a lot fewer things.

                          I am very thankful that they stuck with me even after I was acting like a total arse. I hope you will stick with this thread and keep an open mind. They may just end up changing your life as well.

                          Tom
                          Great success story example Tom. I remember that thread when it was new and I just sat and reread all 5 pages It really is an amazing community we have here.

                          Your post made me go back and look at some of my old threads. Was a nice reminder for where I started when I came here with a take home of $3,100/mo and saving $500/mo to where we are now with a take home of almost $9k and saving $2,100/mo while managing 6 rental units... My 26 year old self would have thought that was impossible to achieve.

                          Comment


                            #14
                            Tom, thank you for that link, that was a really good read. Also thank you for the book, I am reading through that now.

                            I found a cool app called Level Money that can help me keep my day to day spending on track. I am setting my goal at $400 a month on food. Hoping to actually move that down to $300 after I see how I well I can make 400 happen. I liked the correlation between weight and spending. I have recently dropped 45lbs, hoping to also drop a couple hundred in spending. Turns out the original question in this thread doesn't actually matter because my RSUs don't vest until July 2016 anyway.

                            Comment


                              #15
                              FWIW, I think cutting down on food is a good move; with four of us, I never spent anywhere near $400 on food, and now that there are three, it's obviously less. We cook a lot, make extras and freeze, pack ALL our lunches and use a crockpot. I also bake bread and all our baked stuff and make our own yogurt, but that's just 'cause I like to do that stuff ... do the other stuff - cooking at home and packing your lunches - at least SOME of the time (I have a 25-y.o- son, and I know how important it is to go out for lunch sometimes w/work friends) - and you'll be surprised how much you can save. Plus, you'll be healthier, and knowing how to cook makes you a much more attractive dating prospect. Take it from a woman who's been married for nearly 27 years to a guy who cooks NOTHING. Once you start saving some money on one area, you'll want to do a little more and a little more, and pretty soon, you'll be in a great place financially. Just try not to get spoiled by your high salary. And like the other poster said, congrats on your job!!!

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