First Real Job...No Idea How to Save

[Whitechapel]

I don't think this has been suggested yet but pick up a copy of Dave Ramsey's book The Total Money Makeover. If you can read that, I think it may significantly change your outlook on life and money.

The more I reread your posts, the more problems I see with how you are approaching everything. For example, you are carrying credit card debt (and maxed out on a couple of cards) but at the same time you are talking about giving your mom a $500 present next month and spending $50 or more on each of your friends' presents. You have no money! You are in debt and spending more than you earn. You've got $400 to your name. Where exactly is this money going to magically come from?

You can't spend money that you don't have. You shouldn't be spending money on wants and luxuries and "feel good" things like drugs and alcohol while carrying consumer debt. If you truly want to clean up this mess and get on solid footing going forward, you need a major attitude adjustment. It just sounds like the whole situation isn't a big deal to you. Maybe I'm wrong, but that's what I'm getting from your posts. I guess I just got used to spending how I spend, which we all know is very badly. I don't need to buy expensive gifts for my friends and family, I'd LIKE to. But I can't. And sometimes my good heart leads to bad financial decisions.

Dave Ramsey, who I don't entirely agree with by the way, teaches a system of 7 baby steps:
1. Save a $1,000 starter EF.
2. Pay off all debts except your mortgage using the snowball method.
3. Save a full EF of 3-6 months of expenses.
4. Invest 15% for retirement.
5. Invest for college.
6. Pay off your home.
7. Build wealth and give money.

Again, I am not 100% aligned with DR's teachings but I think his system works and helps many, many people clean up the messes they've gotten themselves into. Most importantly, it changes the way you think about money which I think is what you need to do. Check it out.

I'll pick up the book, I work part time at Barnes & Noble and get 30% off books. If it's hard cover I can actually "rent" it, so I can do it for free. I checked and our store does have it, so I'll go in a few minutes early today and pick up a copy. But you are right, I'm living in a way where I cannot save money. I don't disagree with you at all. And while it may not seem like a big deal to me, I was freaking out 2 months ago when I wasn't working. It really does bother me that I'm in debt this bad. And that's why I'm here to fix it. Am I going to develop great money handling practices overnight? No! But they will come in time, so I just need to begin shaping up. I agree, I'm rather delusional to just how bad the whole situation is, but again, I'm here for help.

[Whitechapel]

So let's rock talk, quickly.

The secret expense. Everyone knows it, and someone even figured it out. It's cannabis. Now, I'm not here to be judged. I'm here for help. I used to be very antidrug, then 2 years ago I smoked my first bowl and have been a regular toker since. I smoke for a multitude of reasons. I'm also bipolar...very bipolar. If things are bad I can crash hard even on my meds. Cannabis helps me to calm down and think clearly about something. Not only that but all except one person out of my friends smokes. Now I know my job isn't amazing probably pay-wise, I'm making around $40k pretax remember. But I'm single, I have no allegiance to any company, and I can go wherever I want. So I'm moving a bit more west into Michigan (where cannabis is legalized to a degree). Cannabis has been nothing but a good experience for me. When I was out of work my friend's family would invite me over to clip buds for them and theyd give me a good day's wage and let me smoke while I worked. I want to grow some day when I own my own house, and I can't do that with how I spend. But like I said, cannabis is a part of my life and it makes things great. If you disagree with it, that's your opinion. And I'm cool with that, but other than that I think my track record precedes itself somewhat. I don't let pot define who I am. I graduated college with a degree in computer engineering (decided I hated programming, so am hoping to move to IT ), got a good job after 9 months after graduation in this horrible economy. I'm doing well, making a name for myself and I've been there literally weeks. But I need to put in my time of course, I am not getting ahead of myself by any means. I just have goals I want to reach. I'm just an idiot with money. I literally do not understand it. At all. If you couldn't tell from my spending habits and all you know, hahaha. But the good news, a friend of mine tells me he'll sell me a months worth for a great deal. Like really great. So once that starts coming in I'll be spending about the same amount for double the quantity. Anyway, it should be clear that I'm not some typical pothead. I like to smoke but I have a great job that doesn't drug test and I finally have some direction in my life after a very L O N G 6 months. Things went from bad to absolute horrid for a while and I didn't know if I was going to make it out alive, but I did. That is why therapy is so important...I must be on my meds. I am a monster when off them, it's pretty bad. And I just got into some great healthcare recommended by the U of M staff. I'm looking to revamp everything and do it all right this time. Either way, they're expenses I'm eating until I meet my deductible.

Mods...I apologize if this is inappropriate, but it's what the masses wanted.

[smithzs]

Hi WhiteChapel, I know I'm a bit late and it looks like the forum has really picked up. But as I was reading through all of the posts and I noticed you made the comment of not saving into a high yield account but in the market and commodities. I have a few comments on that.

From what I can tell you are in bad shape to start investing in the stock market. You need to get the majority of your debt paid off before you can even begin to start thinking about investing in the market. If you don't like the savings account idea, you could always do a money market account or mutual funds. But for an Emergency fund, you're not looking to invest that money. That money is meant to be liquid (meaning easy access too in less than a day).

To start investing in the stock market takes time. I myself have yet to do this, mainly because I am still building up my emergency fund. But that doesn't mean I'm not doing my homework on the matter. If you really want to invest in the market someone gave me some good advice, "Take One year, read investment/strategies books, put some money way each month solely for the purpose of investing in the stock market, enroll in a virtual trade market (try out your in/out strategy), once a year has passed you're very knowledgeable on the market and what makes it fluctuate and your virtual account is in the green" only then should you consider investing.

I hope this helps!

[Whitechapel]

Hi WhiteChapel, I know I'm a bit late and it looks like the forum has really picked up. But as I was reading through all of the posts and I noticed you made the comment of not saving into a high yield account but in the market and commodities. I have a few comments on that.

From what I can tell you are in bad shape to start investing in the stock market. You need to get the majority of your debt paid off before you can even begin to start thinking about investing in the market. If you don't like the savings account idea, you could always do a money market account or mutual funds. But for an Emergency fund, you're not looking to invest that money. That money is meant to be liquid (meaning easy access too in less than a day).

To start investing in the stock market takes time. I myself have yet to do this, mainly because I am still building up my emergency fund. But that doesn't mean I'm not doing my homework on the matter. If you really want to invest in the market someone gave me some good advice, "Take One year, read investment/strategies books, put some money way each month solely for the purpose of investing in the stock market, enroll in a virtual trade market (try out your in/out strategy), once a year has passed you're very knowledgeable on the market and what makes it fluctuate and your virtual account is in the green" only then should you consider investing.

I hope this helps!

That's awesome advice, thank you! I will definitely do that!

[disneysteve]

The secret expense. Everyone knows it, and someone even figured it out. It's cannabis. Now, I'm not here to be judged. I'm here for help.

cannabis is a part of my life and it makes things great.

a friend of mine tells me he'll sell me a months worth for a great deal. Like really great. So once that starts coming in I'll be spending about the same amount for double the quantity.

I'm not some typical pothead. I like to smoke but I have a great job that doesn't drug test

(takes a deep breath before responding...)

Let me preface my post by stating that I am both a parent and a physician just to put that out there. I understand you don't want to be judged - who does? - so I'll apologize if my post comes off as overly judgemental. Just to give my stance here, I am 100%, absolutely, totally and completely against drug abuse in any form. No matter how you choose to rationalize what you are doing, it is abuse, plain and simple. I'm not familiar with Michigan drug laws but I'm guessing that what you are doing, or at least how you are doing it, is also illegal. I don't believe any state permits "friends" to sell pot to other "friends." And just because you currently happen to have a job that chooses to ignore the drug use of its employees, that may not always be the case. They may change their policy or you may change jobs and suddenly your drug use will become a much bigger problem for you. You also always risk getting arrested and even though the drug use itself may not affect your job, the felony charges certainly might. Enough said on that. Let's get back to the financial issues at hand.

You can't afford it. Let me say that again. YOU CAN'T AFFORD IT! Even if your dealer - I mean "friend" - starts supplying you at half the price, you still can't afford it. You're broke. You're spending more than you earn. You have maxed out credit cards and virtually no savings. So you'll go from spending $320 (16%) of your income to $200 (10%) of your income on drugs. Big friggin' deal. And those numbers don't include what you also blow on alcohol.

You've said several times that you are here for help. As you can see from my post count, I've been here a while. I think others will agree that I give pretty solid financial advice so here's my advice. You can't spend more than you make. I don't care if you're spending on cars, rent, utilities, food, video games, charitable gifts, travel or drugs and alcohol. The bottom line never changes. You can't spend more than you make. You can't charge purchases that you don't already have the money to pay for when the bill comes.

Come up with a REAL list of Needs and Wants. When you do that, I think you'll see that your budget actually looks just fine. You should be able to have the credit cards paid off in a relatively short period of time. Then you can fully fund your EF. Then you can start saving and investing.

elessar78 posted this estimate:

your income is $2166/month and you have out going expenses of $2463.

Let's assume that's pretty accurate. Take off $320 for drugs. That change alone balances your budget. Knock food down to $200/month. That saves another $75 or so. Once you move, you'll be saving around $200/month on gas. Suddenly, instead of being $300 over budget, you're then about $300 under budget. You owe about $2,500 on the credit cards which means you can have that gone in about 8 months, though the next 2 months I'd keep paying the minimums and put that extra $300 into your EF. Then attack the debt, so in 10 months it'll be gone and you can start saving seriously.

It's getting late so I'm going to stop there for now.

[Whitechapel]

(takes a deep breath before responding...)

Let me preface my post by stating that I am both a parent and a physician just to put that out there. I understand you don't want to be judged - who does? - so I'll apologize if my post comes off as overly judgemental. Just to give my stance here, I am 100%, absolutely, totally and completely against drug abuse in any form. No matter how you choose to rationalize what you are doing, it is abuse, plain and simple. I'm not familiar with Michigan drug laws but I'm guessing that what you are doing, or at least how you are doing it, is also illegal. I don't believe any state permits "friends" to sell pot to other "friends." And just because you currently happen to have a job that chooses to ignore the drug use of its employees, that may not always be the case. They may change their policy or you may change jobs and suddenly your drug use will become a much bigger problem for you. You also always risk getting arrested and even though the drug use itself may not affect your job, the felony charges certainly might. Enough said on that. Let's get back to the financial issues at hand.

You can't afford it. Let me say that again. YOU CAN'T AFFORD IT! Even if your dealer - I mean "friend" - starts supplying you at half the price, you still can't afford it. You're broke. You're spending more than you earn. You have maxed out credit cards and virtually no savings. So you'll go from spending $320 (16%) of your income to $200 (10%) of your income on drugs. Big friggin' deal. And those numbers don't include what you also blow on alcohol.

You've said several times that you are here for help. As you can see from my post count, I've been here a while. I think others will agree that I give pretty solid financial advice so here's my advice. You can't spend more than you make. I don't care if you're spending on cars, rent, utilities, food, video games, charitable gifts, travel or drugs and alcohol. The bottom line never changes. You can't spend more than you make. You can't charge purchases that you don't already have the money to pay for when the bill comes.

Come up with a REAL list of Needs and Wants. When you do that, I think you'll see that your budget actually looks just fine. You should be able to have the credit cards paid off in a relatively short period of time. Then you can fully fund your EF. Then you can start saving and investing.

elessar78 posted this estimate:
Let's assume that's pretty accurate. Take off $320 for drugs. That change alone balances your budget. Knock food down to $200/month. That saves another $75 or so. Once you move, you'll be saving around $200/month on gas. Suddenly, instead of being $300 over budget, you're then about $300 under budget. You owe about $2,500 on the credit cards which means you can have that gone in about 8 months, though the next 2 months I'd keep paying the minimums and put that extra $300 into your EF. Then attack the debt, so in 10 months it'll be gone and you can start saving seriously.

It's getting late so I'm going to stop there for now.

OK, so say I knock off the secret expense. Budget is balanced. Let's knock down groceries, I'm taking 30 minute lunches anyway at work so the less time I spend running to grab lunch the more time I have to work on my budget. On the 1st, two credit cards autobilled me and I'm having a tough time figuring out what is what so I can make a note of it in EasyMoney. Attack what debt? All I have is my mom every check and my credit cards? And school loans. So I'm assuming you mean the credit card debt. I didn't even figure in school loan payments either, I need to figure out how much I'm paying for it. I think my mom recommended 200-300 a month. I owe around 20k for school. I got paid today from my part time job, should I bother putting anything in my savings? I made about 60 bucks. But like I said, two credit cards authorized payments on the first so now I'm about 100 dollars smaller than I was. Which is infuriating, but whatever keeps me on track and keeps the creditors from harassing me.

[riverwed070707]

OK, so say I knock off the secret expense. Budget is balanced. Let's knock down groceries, I'm taking 30 minute lunches anyway at work so the less time I spend running to grab lunch the more time I have to work on my budget. On the 1st, two credit cards autobilled me and I'm having a tough time figuring out what is what so I can make a note of it in EasyMoney. Attack what debt? All I have is my mom every check and my credit cards? And school loans. So I'm assuming you mean the credit card debt. I didn't even figure in school loan payments either, I need to figure out how much I'm paying for it. I think my mom recommended 200-300 a month. I owe around 20k for school. I got paid today from my part time job, should I bother putting anything in my savings? I made about 60 bucks. But like I said, two credit cards authorized payments on the first so now I'm about 100 dollars smaller than I was. Which is infuriating, but whatever keeps me on track and keeps the creditors from harassing me.

Debt payments shouldn't be based on a recommendation. Stop relying on your mom to do your finances (including borrowing money). When you get your next bill, or if you have access to your accounts online, go find out what the minimum payment is for each card/debt (including student loans). List your debts in order from highest interest rate to lowest. Then you figure out how much from your budget you have to put toward debt. From there, each month when you pay bills you make the minimum payments on all of your debts and put whatever is left toward the one at the top of your list. Once that's paid off, you put the extra amount plus whatever the minimum was for the one you just paid toward the next on the list. It's called snowballing. Try plugging your numbers into What's The Cost? - Become debt free at WhatsTheCost.com. It will show you a debt payoff table and you can also play with it to see how much of an impact it makes to throw and extra $50-100 at your debt each month.

One last note -- in general, student loans regardless of interest rate are usually paid off last simply because you get a tax deduction for interest paid.

[disneysteve]

On the 1st, two credit cards autobilled me and I'm having a tough time figuring out what is what so I can make a note of it in EasyMoney. Attack what debt? All I have is my mom every check and my credit cards? And school loans. So I'm assuming you mean the credit card debt. I didn't even figure in school loan payments either, I need to figure out how much I'm paying for it. I think my mom recommended 200-300 a month. I owe around 20k for school.

I think you are on the right track and are getting good advice here.

Do what riverwed suggested. Make a list of all debts including the outstanding balance, interest rate and minimum required payment. If you're willing, post that list here so we can advise how to attack them.

[Frugal]

I was once in your situation, and the first thing I should have tried to do was pay down my student loans. I highly recommend it, but it depends upon your situation. In my instance, I did not have any credit card debt, but the interest rates on my loans were far too high (near 7%). I am still working on paying them off, years later. It takes paying down debt to build wealth.

[Whitechapel]

Debt payments shouldn't be based on a recommendation. Stop relying on your mom to do your finances (including borrowing money). When you get your next bill, or if you have access to your accounts online, go find out what the minimum payment is for each card/debt (including student loans). List your debts in order from highest interest rate to lowest. Then you figure out how much from your budget you have to put toward debt. From there, each month when you pay bills you make the minimum payments on all of your debts and put whatever is left toward the one at the top of your list. Once that's paid off, you put the extra amount plus whatever the minimum was for the one you just paid toward the next on the list. It's called snowballing. Try plugging your numbers into What's The Cost? - Become debt free at WhatsTheCost.com. It will show you a debt payoff table and you can also play with it to see how much of an impact it makes to throw and extra $50-100 at your debt each month.

One last note -- in general, student loans regardless of interest rate are usually paid off last simply because you get a tax deduction for interest paid.

Awesome, thanks for the tips.

Chase - $409.76 - 22.24% APR
HSBC - $1236.91 - 20.99% APR
Citibank - $810.46 - unknown APR (how can I find it?)

I'll look into my student loans as soon as I get home. Am I missing expense-wise that I should be including here? I'll edit this more when I get home, we've been kind of slammed all day. If it gets slow enough, I'll come back and edit as time allows.

[disneysteve]

Awesome, thanks for the tips.

Chase - $409.76 - 22.24% APR
HSBC - $1236.91 - 20.99% APR
Citibank - $810.46 - unknown APR (how can I find it?)

The APR should be clearly listed on your monthly statement, the same way you found it for the other 2 cards.

[elessar78]

holy Crap!! Whitechapel, you're getting killed on those interest rates!! I'm only saying this to give you a frame of reference, as you are new to this not to make you feel bad ...

0-3.99% awesome for credit card interest rate
4-6.99% pretty good, not ideal but you can live with it.
7+% "yikes" (find a way to get yourself out of this situation asap).

As for the drugs... our "habits" don't always have to be illicit to be detrimental to our finances. I used to be spending on $3,000/year on lunches and my daily coffee. It was enjoyable, it took the edge off. My bar tab the first few years out of college, conservatively was prob. $5,000-$7,000 a year. So, nearly half of my take home pay was going to stupid stuff. It wasn't until my mid 20s that I realized "Man, I wish I had something to show for all that money I spent."

Again, attitudes/beliefs about money . . .

BTW, Dave Ramsey also has a podcast. Not a replacement for the book, but good when you're out and about.

[crazyskunk82]

Hey Whitechapel,
I was in your shoes. Except, I had 20k in vehicle debt, and 15k in credit card debt, and 5k in student loan debt. I also made your income when I started out.

What I did was save a months worth of expenses up. I tucked it away in a savings account. Every pay, just move some over to it. After a few months, I had it.

Then I paid down my debt. I started out paying off the smallest debts first to keep motivated. But then I switched to paying down the ones I hated the most. Went from 40k to 20k in 2011 alone. It took sacrifice, maybe taking leftovers for lunch, not going to see movies as often as I'd like, etc. But within a year, 20k was gone, meaning that I now have more extra money each month. I can save it, or pay down more debt.

It's possible to reach your goal, just figure out what you need to get there. Think of it as a puzzle, get some advice from people you know who are good with money, and then work your own plan out and be patient.

Good luck!

[disneysteve]

BTW, Dave Ramsey also has a podcast. Not a replacement for the book, but good when you're out and about.

Yep. You can download the first hour of his daily show for free at iTunes. I listen to it pretty much every day.

[Whitechapel]

The APR should be clearly listed on your monthly statement, the same way you found it for the other 2 cards.

I only knew those because they were listed in my mint.com account. I looked through a statement during the whole 10 minutes of lunch I had, but I couldn't find anything. I will look again after I get home and relax.