Opinions please

[dczech09]

Hey all, I've been on the forum for a little while now but have not really asked for advice on my own personal finances. Here is the breakdown:

I'm 23 years old, college graduate with a job as an auditor.
Net Income: $3,000 per month (give or take)
EF savings: $1,000 in liquid savings separated from normal accounts
Brokerage: $1,500 in stocks- mix of small cap stocks and midcaps
Roth IRA: $1,400 contributed so far for 2010. Started in February 2010

Credit card: $500 from business expenses (being paid off)
Car Loan: $8,500 (7.25%)
Student Loans: $30,000 (6.0%)

Rent: $545
Electric: $55
Cell Phone: $70
Cable/Intenet: $110
Gym Membership: $35
Auto Insurance: $100
Car loan: $225 minimum, paying $450 or more (debt snowball starter)
Student Loans: $350 minimum, paying $425
Groceries: $200
Car Maintenance: $100
Miscellaneous: $310 (entertainment, gas, etc)
Roth IRA: $200
TOTAL: $2,600

Now to give you a little background: my income is variable (production based) and I just started this pay class recently. I budget for $2,600 per month when running my books as this is about the lowest I will make, however I am realizing that $3,000 per month is actually very realistic and can be obtained consistently without much struggle.

I have started my debt snowball with my car loan and hope to be on my way to be being debt free within 3 years. I have set myself three criteria before I will even consider moving into homebuying: debt free, at least $10,000 for EF savings, and at least a 20% down payment for my home.

I would like your opinion as to how I am doing thus far and if there is any improvements that you would recommend. Are my homebuying goals reasonable or am I setting my sights too high?

I plan on contributing $200 per month for the rest of the year, plus an additional $200 at year end to make it an even $3,000 contribution for the year. Would you recommend cutting my retirement savings and shoot that money towards debt payoffs, or should I stay the course?

I am also thinking about liquidating my $1,500 in brokerage assets to pay off debts. I feel that once I am debt free, savings will accumulate quickly and I will not have too much trouble getting back to square one. Would this be a good idea? Keep in mind that I do have $1,000 in EF savings set aside.

Ultimately, this is my roadmap to building towards financial independence and my total money makeover. Let me know. Thanks!

[jpg7n16]

Not bad. I think you're doing fine.

But your debt snowball is a bit weird. Cause you're not really snowballing it, you're dividing it out into the student loans too.

The only real change I see that's needed: stop paying extra on the student loans - pay the min and put that extra $75 towards the cc/car instead

Pay off credit card first every month, and only pay extra on the car, until it's gone. Only after the car is paid off, apply extra to the student loans.

[swanson719]

If I woke up today and found myself in your shoes, would liquidate the brokerage account and throw it at your car note. I would figure out where the entertainment $310 is going, and cut that down. Not that $310 is excessive, but I personally don't like the concept of spending more on entertainment than investing.

Why not put all extra funds towards the car note as opposed to splitting between the car and student loan? If you are making $3,000 a month and have $400 left over, you could be paying $925 a month on the car and have it paid off as a Christmas present to yourself. Switch that $925 plus the $350 on student loans, you have $1275 going towards student loans, paying them off right around next Thanksgiving 2013. I would take every nickel you have in pay raises and put it towards the Roth.

You're not being overly aggressive in your home buying goals. What your spending now on rent is about what you'd be spending on mortgage interest. You could keep doing what you are and be just fine, but this assessment is what I would do. I'm the same age as you, married, no kids, no debt, $10,000 in separate savings, but we bought our house 0% down and are paying about $1,000 a month. We max out the Roths. I don't know if having a big mortgage downpayment is better than a big mortgage and investing what would have been the down payment. I like to think it is.

[disneysteve]

I think the 7.25% rate on the car loan is high enough that it is worth attacking that before funding the Roth. You might do better in your investments, but you might not.

I would look to slash your cable/internet bill. You should be able to cut that in half quite easily.

You need to break down that "misc" category and figure out where that $310 is really going. I suspect a lot of that is fluff that you can cut out temporarily until the debts are repaid.

Stop paying extra on the student loan. Put all the extra cash toward the car first since that has the higher rate. Once that is gone you can attack the student loan.

I don't think I'd bother cashing out the brokerage account. It isn't that large an amount and after commissions and taxes, it would be even less. You have plenty of free cash flow to get things taken care of in a reasonable period of time without touching that money.