Current Financial Situation - Rent just doubled

[juicebox3]

I will lay out my current financial position before asking for advice:

- 25 Years old
- Live in NYC
- $21,000 in cash
- $49,000 invested
- $12,000 in credit card debt (0% apr -- used a balance transfer offer to pay off a car loan that was costing 4% annually)
- Income: $100K base salary, but year end bonus is around $120K so all in cash comp of roughly $220K

I have been living with my girlfriend (now ex) and we pay $4200 a month in rent (split so $2,100 a piece). She is now leaving and I will have to pay the entire amount myself. My $100K salary gives me about $5500 a month. The fact that I now have to pay this entire rent is completely destroying my budget:

Income: $5,500/mo
Rent: -$4,200
Credit Card Debt: -$1,200
My own expenses incl. utlities etc: -$1,200
DEFICIT: -$1,200

Under my prior rent situation, I was able to save around $1,000 a month (and my entire annual bonus). Now I am running at over a $1,000 deficit, mainly due to the fact I am paying $1,200 a month to pay off my card.

I guess my question is, should I pay off the entire credit card balance in one go? I have the cash to do it, but it would leave me thin. Should I lower my credit card payment to $250/mo or something and take care of the big chunk with some of my bonus?

The idea of running such a huge deficit terrifies me (for 2 years I saved >50% of my salary)

Appreciate any thoughts. Leaving the apt is not an option, the penalty is 3 months rent. I gave the car to my younger sister so I can't sell it either to pay off the credit card (not worth it anyway, the car is only work probably $8K now)

[rennigade]

Find a room mate fast. As painful as that will be. Either that or eat the 3 months rent and move out. Was her name also on the lease? If so she cant just leave...she would still be responsible for half rent. If her name was just on the lease...consider that a lesson learned.

[TBH]

I agree. You need a roommate. If it's a 1-bedroom, maybe you can sublet it and move somewhere cheaper til you get out of the lease.

Otherwise, if it were me I would probably reduce my credit card payments for the next couple of months and then pay the card off with my year-end bonus. After the card is paid off your budget will be back in balance, but with no room to save.

The bottom line is you can't afford to live where you're living, and you need to get out ASAP. When is the lease up?

[ua_guy]

Juicebox3- Your income is stated as $5500/month which would equate to $66,000/annually. I'm assuming that's net income, after taxes and retirement contributions.

I don't think your situation is as dire as you believe. Your income this year is really $220k. I don't know what the tax rate is on your bonus, but let's assume it's 50%.

That leaves you with an extra $60,000 from your bonus after taxes.

With that money, pay off the credit card (~$12,000)

When is your lease up? With the remaining $48,000 of your bonus before even touching savings or backing off retirement contributions, you've got some time to figure this all out, whether you find a roommate, or ride out the lease until it's done. If not, it might be wise to break the lease; or; work with your landlord. They might be more lenient if you can help them line up a new tenant or someone to assume the lease.

Point is, you've got time and income on your side to get through this. But, you need to move quickly to retain as much of your extra income as you can.

[doingitallwrong]

Sorry, but is this a serious question? You have $70K in savings, $12K in credit card debt at 0% interest and an upcoming bonus that is 10x the amount of your debt. There's really no wrong answer here; you've got plenty of money to cover the monthly deficit if you keep doing things the way you're doing them, and your bonus will pay off the credit card and thus eliminate the deficit in a few months.

You can easily drop your credit card payments to the minimum, you're at 0% so it makes no difference until the payoff. That would reduce your deficit by a wide margin. Based on your payments now I'm guessing the card's 0% interest rate doesn't expire (if it expires at all) until after your bonus is paid. If that's the case, then just pay it off with your bonus. You'll eliminate the deficit and have what, $60K still left from your bonus (after taxes, 401(k), etc.)? That alone will cover a year's rent if something untoward happened. (Of course I wouldn't leave that all in savings, find your comfort level for your cash savings and put the rest in a taxable investment account that you can access if you absolutely need to.)

[cologero]

Sorry, but is this a serious question? You have $70K in savings, $12K in credit card debt at 0% interest and an upcoming bonus that is 10x the amount of your debt. There's really no wrong answer here; you've got plenty of money to cover the monthly deficit if you keep doing things the way you're doing them, and your bonus will pay off the credit card and thus eliminate the deficit in a few months.

You can easily drop your credit card payments to the minimum, you're at 0% so it makes no difference until the payoff. That would reduce your deficit by a wide margin. Based on your payments now I'm guessing the card's 0% interest rate doesn't expire (if it expires at all) until after your bonus is paid. If that's the case, then just pay it off with your bonus. You'll eliminate the deficit and have what, $60K still left from your bonus (after taxes, 401(k), etc.)? That alone will cover a year's rent if something untoward happened. (Of course I wouldn't leave that all in savings, find your comfort level for your cash savings and put the rest in a taxable investment account that you can access if you absolutely need to.)

Agreed ^

[juicebox3]

Thanks guys, I wasn't sure. I generally value liquidity so was leaning toward just running a monthly deficit rather than paying down a lump sum, but I guess I'll just take it out.

[autoxer]

Running a deficit for a few months isn't a big problem, but long term, you need to think about either getting another roommate or getting out of that apartment. When is the lease up?

[naturesenergies112]

First of all, buyers are not “throwing their money away” for the first five years of home ownership. Their monthly payments do consist of primarily interest on their mortgage, but a portion of that payment goes towards the value of the home itself, and that portion grows larger with each payment.