24, new to financial world, need advice

[MaverickSB]

Hello-

This is my first post on this forum. I recently graduated college with a BA, and am in my firt year of work at a software development firm. I am always stressing about money (who isn't). I would like to list my current financial situation, and see if anyone has any advice to areas I can trim, invest more, etc.

Investments:

-401K- I invest 6% of each check (max matched by emplyer)
-Roth IRA - I just opened this, $100/month auto withdrawn for now.
-Stock Purchase Plan- Given company stock at 15% strike price, I devote 5% of each check to this.

Debt:
Installment: $3,100 of student/personal loan debt.
Credit Card Debt: $200.00 (I pay all balances in full).

Savings: I have $5k in an HSBC online savings at 4.75% that I keep for an emergency fund.

Income: Pre-taxed: av. 56-60k annual. I work in sales so this varies, my base salary gross is $2,750/month. Comm. usually doubles or triples that, depending on how well I do, although I also have a month or two where I make very little.

I rent. No home ownership yet. My car is cheap, only $2,800 in value, which I will be selling. once sold, I will take out appx: 15k loan and buy a 2002-2003 car and run it into the ground. I hate debt, but I need a car and have a decent commute.

My monthy budget is this:

Rent: $850
Utilities: $100
Phone/Blackberry: $123.00
Loan: $135
Food: $360
Car Insurance: $110.00
Roth: $100.00
Netflix: $15.00
Gym: $40.00

Total: $1,833.00
If comm is Good, my post tax is 3500ish, if bad, is around 2400.

Basically, I want to know if I am off to a good start in "the real world." Should I invest more? Should I not take out an auto loan? Am I making enough money for a guy my age? Saving enough? Just looking to ease the worries.

Thanks.

Regards,

-Mike

[Broken Arrow]

Mike, first off, let me congratulate you because I think you're doing great!

I would try to budget your regular living expenses to your base take-home pay if you can. That way, you would not have to rely on commission just to get by.

I would then use your commission as your war fund to advance your finances; be it debt reduction or investing.

Also, are you renting by yourself? Any way you can either pick up a roommate or at least find somewhere with a shorter commute?

Your phone/blackberry bill seems high as well. Any way you can hack it down?

I think you're off to a good start! I wish my start was as good as yours. I wouldn't slack off, but I would certainly breathe normal and give yourself a pat on the back. You're doing just fine.

[bjl584]

You're off to a good start. Just from glancing at your situation, one thing that I would recommend is that you try to contribute more into your Roth each month. That money grows tax free. (that is a HUGE benefit) Maybe trim some expenses or stop buying the company stock. (I've never been a fan of owning my company's stock. ) Anyway, it's almost 2008 and your Roth contribution will be at $5000 for the year. That's $416 a month that you could contribute to it. That is unless you plan to catch up on it with a bonus or a tax refund later.

[project15]

Yes, you're making enough. I'm at the 50k mark in the chicago suburbs in software (testing) and I'm 23.

How are you budgeting entertainment? You may have $1800 in bills, but that means that the extra money is either being saved or spent. I give myself an allowance of $50 a week that includes entertainment and clothes. It seems to work for me. Every dollar I make goes somewhere. If I make more, it automatically goes to a house down payment fund rather than being spent.

[bjl584]

Something else I noticed is your auto insurance. When is the last time you shopped around for better rates? It's a good idea to take a look at that every couple years or so. You'd be surprised how much rates can vary between insurance providers. Another thing is your car. What kind of car do you currently have? Year, make, mileage? Is it truely on its last leg, or could you squeeze some more life out of it? If you have even a basic understanding of cars you can do your own maintenance and upkeep saving you tons of money and extending the life of your vehicle. One last thing, you have a loan of $135 a month listed in your expenses. What is that for?

[nanook124]

I think everything looks good. You are making great money for just being out of college (IMHO).
One thing I see is $600 (at the least) unaccounted for. Make sure you know where every dollar is going (for the most part). That extra money you get for commissions could be saved up to buy a good used car (because new cars are a waste of money). You'd be amazed at what you can have saved up in 6 months!
We also have an allowance- which keeps cash in our wallets and then we don't use the debit card.

Keep up the good work!

[Coleroo]

from one 24 year old to another.. ..i think you're doing great! you can probably look forward to a nice dip in car insurance rates when you hit 25 too. I would suggest increasing your roth as well. i would also suggest to buy a car strait out if you can - or at least dont go for a 15k car if all you want is a decent commute. last year my husband (who's also 24) got a new 2006 chevy aveo 4 door sedan for his 30 minute commute each day. its cute, gets about 40 mpg and our loan was only $9200 after a 2k cash downpayment. we'll have that loan paid off within the next year..hopefully sooner.. - and the car makes for an awesome sporty commute.

are you also budgeting for car taxes and gifts? whatabout entertainment? do you have a handle on where all of your spending money is going?

right now i see you only have an emergency fund and retirement accounts. you may also want to look into opening another savings account devoted to "future" wants - such as for a that new car, or a downpayment on a house..or for a honeymoon.

[Tree0164]

It looks good

I agree with Lisa try to pay cash for the car- if you can save up over the next few months for a car and do a smaller car loan.

Also since you are commission (my husband is commission and his pay can vary thousands each month-right now we are in a major dry spell) we based our budget on an average and use the extra when the dry spell is several months.

[anonymous_saver]

First, I would hold off on selling your car. And when that car is "run into the ground", then only buy a car with cash, don't buy a $15,000 car, I think you can do this without going into any more debt.

Your phone/blackbery does sound incredibly high, can you cut this down by half?

With your stock option plan, once you get the stock, are you able to exchange it for something else? I would advise against keeping so much company stock.

I agree that you are doing good, but that you should also try to calculate how much "extras" cost. By the way, $360 for food for just yourself? That sounds very high. I know I personally spend more than most onmyself, and I spend about $180-$200/month on food. What about necessities like shampoo/conditioner, pet food/bills (if applicable), entertainment money, work clothes etc. How much "extra" money does that leave you with each month?

What rate is your personal loan at? I would put all extra money towards paying this off as soon as possible, that means temporarily stop putting money into your emergency fund until you pay it off (since you do have a decent start to an emergncy fund). Then I would use the money that you used to put towards that loan and put it towards your emergncy fund savings each month (as well as any "extra" money). Once you have 3 months of expenses saved up, I would start saving for a down payment (if it is a goal of yours to own a home). You can create subaccounts at your online bank (labeling one for "Emergency Fund" and one for "Down Payment" usually makes it easier). Then once you buy a house, I would try to raise that emergency fund to the 6-8 range.

Once you pay off your personal loan, I would actually increase your Roth IRA contribution to the maximum amount allowed. You make a very decent income and yes it would probably take you longer to buy a house, but you would be doing excellent with saving for retirement.

I'll look forward to seeing what you choose to do!

Good job!

[jIM_Ohio]

Hello-

This is my first post on this forum. I recently graduated college with a BA, and am in my firt year of work at a software development firm. I am always stressing about money (who isn't). I would like to list my current financial situation, and see if anyone has any advice to areas I can trim, invest more, etc.

Welcome

Investments:

-401K- I invest 6% of each check (max matched by emplyer)
-Roth IRA - I just opened this, $100/month auto withdrawn for now.
-Stock Purchase Plan- Given company stock at 15% strike price, I devote 5% of each check to this.

The stock might be a good deal. I might consider dropping this to 1% and adding more to a Roth.

Debt:
Installment: $3,100 of student/personal loan debt.
Credit Card Debt: $200.00 (I pay all balances in full).

Note sure what loan is for, consider paying off with commissions once Roth is fully funded (4k for 2007 and 5k for 2008).

Savings: I have $5k in an HSBC online savings at 4.75% that I keep for an emergency fund.

Because your income fluctuates month to month, consider upping this to around 6 months expenses.

Income: Pre-taxed: av. 56-60k annual. I work in sales so this varies, my base salary gross is $2,750/month. Comm. usually doubles or triples that, depending on how well I do, although I also have a month or two where I make very little.

You have an "income risk" you might want to protect against. Consider holding more cash because income fluctuates.

I rent. No home ownership yet. My car is cheap, only $2,800 in value, which I will be selling. once sold, I will take out appx: 15k loan and buy a 2002-2003 car and run it into the ground. I hate debt, but I need a car and have a decent commute.

Keep out of car debt if possible. Get a second used car. Drive one car into ground and keep the second for use the day after the other one is buried. Car debt (even for a traveling salesman) should be avoided.

My monthy budget is this:

Rent: $850
Utilities: $100
Phone/Blackberry: $123.00
Loan: $135
Food: $360
Car Insurance: $110.00
Roth: $100.00
Netflix: $15.00
Gym: $40.00

Total: $1,833.00
If comm is Good, my post tax is 3500ish, if bad, is around 2400.

you have $1700 of surplus- where does this go? I would suggest $500 to a Roth any month where you can, plus keep the stock purchase to 5%, maybe increase 401k to 10% or so.

Basically, I want to know if I am off to a good start in "the real world." Should I invest more? Should I not take out an auto loan? Am I making enough money for a guy my age? Saving enough? Just looking to ease the worries.

Thanks.

Regards,

-Mike

The start is good, but keep in mind how you finish is just as important. Enjoy life now, and look to set aside around 10-20% of income for retirement or future spending.

[Scanner]

Do you have a housing goal or plan?

[Gruntina]

What about car fuel? My commute is one hour to work each way which adds up to between 400-500 dollars a month in gas. What is your commute like?

[MaverickSB]

Car fuel is expensive. This is the reason I am selling the car. Its runs me close to $60/week. It takes on 91 fuel type, and in santa barbara that runs about 3.75/gal. right now. Its a V8. Bleh.

[MaverickSB]

Mike, first off, let me congratulate you because I think you're doing great!

I would try to budget your regular living expenses to your base take-home pay if you can. That way, you would not have to rely on commission just to get by.

I would then use your commission as your war fund to advance your finances; be it debt reduction or investing.

Also, are you renting by yourself? Any way you can either pick up a roommate or at least find somewhere with a shorter commute?

Your phone/blackberry bill seems high as well. Any way you can hack it down?

I think you're off to a good start! I wish my start was as good as yours. I wouldn't slack off, but I would certainly breathe normal and give yourself a pat on the back. You're doing just fine.

Thanks. I write off the phone/blackberry in taxes, but thats about as low as I can get for the services I use on it. I share with 2 other roomates already, and they wont allow me to split the room. Other than that, most extra I make goes to saving or paying off the student loan. Thanks for the help!!!!!

[MaverickSB]

You're off to a good start. Just from glancing at your situation, one thing that I would recommend is that you try to contribute more into your Roth each month. That money grows tax free. (that is a HUGE benefit) Maybe trim some expenses or stop buying the company stock. (I've never been a fan of owning my company's stock. ) Anyway, it's almost 2008 and your Roth contribution will be at $5000 for the year. That's $416 a month that you could contribute to it. That is unless you plan to catch up on it with a bonus or a tax refund later.

Thank you! My plan is use most of my tax refund to put in the Roth/401K accounts. The stock has been doing good, and at a 15% discount, thats already a 15% buffer for profits/loss. Thanks for the advice!