Been here a while but never introduced myself...

[MiikeB]

I was just thinking I have not properly introduced myself even though I have been posting for awhile.

Obv my name is Mike and I am 20 years old and a full time college student.

I came to this board after trying to form a budget (typed in budget forums in google). I can't seem to get enough of these boards.

Since joining a few months ago I have been paying a lot closer attention to my budget.

Since this is a finance forum I guess I should just spit out of my financial standing:

My bills are:

Mortgage payment - $1120 (30 years at 6.125%)
Car Loan - $380 ($19.5k financed over 5 years at 6% I was young, dumb and could afford so I bought it, I wish I had just bought a $6k used car now)
Significant other Car - $210 ($11k financed for 6.5yrs at 9%, he has no credit and I didnt have enough to cosign, his mom told him this was a good deal)
3 Credit Cards, each $50 a month, all 0% for life of balance as long as I pay $50 a month (kinda want to pay these off even though its not the wisest move just for peach of mind) Balance total is ~$2k
Electricity - $110
Water + Sewage = $75
Internet + TV = $140
2 Cell Phones = $125
Student Loan = $400 to parents, 0% loan
Food = $280
Car Insurance = $175
Total = ~$3200 in bills
My income was up until last month 2200 + 1800 from SO + 800 in rental income (tenants in my house). All after tax

After reading this board I adjusted my withholdings so I won't get a tax return + got a 10% raise, so forward my income should be 2800 a month bringing total monthy income to 5400. Me and SO both get 500 a month blow money to pay for gas and everything not on budget. That leaves us about 1200 a month extra income.

I was contributed 3% to my 401k but my employer only matched a quarter of that, which is horrible. So I stopped that contributing and plan to start a ROTH once I get a EF up to a comfortable level (tax free money out > tax free in at my age).

Currently my savings is at 1k buffer in checking, 2k in ING as EF and 1k if 401k. We have recently had a lot of stuff come up so the EF kinda has hovered at 2k for awhile. My goal is have it at 5k by the end of the summer in EF then start aggresivley working on SO car loan, then starting on Roths and some mutual fund money. I feel like 5k is enough in my EF for now because I have good job security, and my income is very deversified.

I kinda feel like I have too much commitment for a person my age. I feel stuck, and even though I think I am making sound decisions sometimes I just feel like I am not doing enough.

I would appreciate any thoughts on ways I could save more (except cut cable bill as I agreed to provide that service to tenants) and also how I should go about planning for long term.

Also, even though I feel like I save a lot, I still feel guilty when we spend our savings money on something else that month like concert tickets or recently a dog (not all of it, but some of it). Should I? My SO tells me to handle all the finances as he doesn't like messing with it much. I keep him informed, but he doesn't think its a big deal to miss half a month. While I know its not a big deal in the long run, it makes me feel horrible.

[disneysteve]

Welcome, Mike. Kudos to you for being so far along in the financial planning department at your age. Most 20 year olds are still in college and don't have a clue about money management. You may not have done everything right, but what really matters is that you are paying attention and seeking guidance to improve things even more going forward.

Some thoughts, in no particular order:

Money you get back from overwithholding of taxes is called a TAX REFUND, not a tax return. The information you file is the tax return. That's just a pet peeve of mine.

As you now realize, the car purchase wasn't the best move. How much do you still owe and what is the car worth if you sold it tomorrow? If those numbers are close to each other, consider ditching the car and buying something more affordable.

I think each of you getting $500 "blow money" is crazy. How much of that goes for gas and how much is truly "blow"? I'd want to see you cut back in that department. Having nearly $1,000/month for entertainment or whatever is a heck of a lot.

What was so horrible about your employer giving you an instant 25% return on your 401k contributions? What could you possibly invest your Roth money in that would come anywhere close to that? And that's not even counting the value of not paying taxes on the contributions. I would get back into the 401k contributing enough to get whatever the full company match is. Then use a Roth for investing above and beyond that.

I'll stop there for the moment and see what others have to say.

[MiikeB]

Welcome, Mike. Kudos to you for being so far along in the financial planning department at your age. Most 20 year olds are still in college and don't have a clue about money management. You may not have done everything right, but what really matters is that you are paying attention and seeking guidance to improve things even more going forward.

Some thoughts, in no particular order:

Money you get back from overwithholding of taxes is called a TAX REFUND, not a tax return. The information you file is the tax return. That's just a pet peeve of mine.

As you now realize, the car purchase wasn't the best move. How much do you still owe and what is the car worth if you sold it tomorrow? If those numbers are close to each other, consider ditching the car and buying something more affordable.

I think each of you getting $500 "blow money" is crazy. How much of that goes for gas and how much is truly "blow"? I'd want to see you cut back in that department. Having nearly $1,000/month for entertainment or whatever is a heck of a lot.

What was so horrible about your employer giving you an instant 25% return on your 401k contributions? What could you possibly invest your Roth money in that would come anywhere close to that? And that's not even counting the value of not paying taxes on the contributions. I would get back into the 401k contributing enough to get whatever the full company match is. Then use a Roth for investing above and beyond that.

I'll stop there for the moment and see what others have to say.

Noted on return versus Refund.

I currently owe about 16.5k on the car and I think its worth about 14k. I am currently looking into selling it for something cheaper. My dad is going to away for a year soon so I may see if I can just use his car while he is gone.

I agree 1k in blow money seems like a lot. I want to cut it down. I spend about $50 a week on gas so thats $200 a month. My SO is now working an opposite schedule than me so hopefully this will curb our spending since we cannot go out together as much. I usually end up with $100 leftover every month from mine, SO usually has none. I just put mine towards savings, but I am trying to get him to cut back. He comes from a family that has always lived paycheck to paycheck, and thinks his mom is good with money because she always has it even though she has 25k in CC debt.

And actually I think you may be right about my 401k vs Roth. My dad had told me it was smarter to go Roth, but after just running the numbers assuming 40 years at 8% annual I would come out slightly ahead with a 401k.

I guess I will start that back up again. Thanks!

[disneysteve]

My dad had told me it was smarter to go Roth, but after just running the numbers assuming 40 years at 8% annual I would come out slightly ahead with a 401k.

Assuming both the 401k and the Roth earn 8%/year, the 401k has to win. You are funding it pre-tax meaning more money is going in AND your employer is giving you a 25% match.

The only unknown is your tax rate in retirement but there is no way to know that.

[MiikeB]

Assuming both the 401k and the Roth earn 8%/year, the 401k has to win. You are funding it pre-tax meaning more money is going in AND your employer is giving you a 25% match.

The only unknown is your tax rate in retirement but there is no way to know that.

Well I believe his logic had to do with having to pay interest on the earnings in the 401k , as opposed to tax free interest in the roth. I now see that unless I was in some enormous tax bracket this is not true.

[maat55]

I would like for you to consider that personal finance is a lifestyle based on behavoir and little on knowledge. Establishing a financial plan at your age will be the most important thing you can do.

Good fundamentals are:

Only borrow money for appreciating assets such as your home.
Pay cash for all consumer products such as Cars, tv's etc.
Invest 10% of your income.
Have an EF of 3 to 6 months expenses.
House payment of no more than 25% of your take home pay.(20 year or less preferable)
Total value of auto's no more than 40% of your yearly income.

If I were in your position I would set up a tight budget.
Sell the 16,500k car
Focus intensly on getting out of debt.
List your debts smallest to largest, pay the minimums and apply all extra money toward the lowest debt till payed off and then move to the next.

Once out of debt, invest 10 to 15% of your income first to match of 401k, then go to roths.
Establish a car fund. Here's some books you can read that will help you establish a plan:

The Total Money Makeover by Dave Ramsey
Master your Money by Ron Blue.
The Millionaire Next Door by Stanley/Danko

The key is not to over consume and keep your debtload small while investing at all times. Good luck.

[mom2manyboyz]

Congrats on wanting to learn about money management at such a young age. I'm new to the forums too, but haven't formally introduced myself.