Looking for suggestions on my situation..

**pdweaver** · 12-27-2011, 01:19 PM

My suggestion is to pay of the loans before you move out. How much do you have in savings currently? Save up at least $10k before even thinking about moving out, thats on top of 6-9 months bills which is going to be around $10k. Your bills will be around $2000 a month owning your own place so i am not so sure you would be able to afford a $130k place with your current income. You might be able to afford a condo around $60k right now, but in my opinion thats it.

Start with calling state farm and maybe some other car insurance agents to lower that payment. Unless you have accidents and tickets, there is no reason your rate should be that high

Next, apply more towards that personal loan. 10% is ridiculous. One idea everyone will hate is to use one of the convenience checks Discover no doubt send to you to pay towards your loan. Convenience checks allow you to pay off other debts. It is a balance transfer, and generally charges a fee. If Discover gives you a check for 0% for a year and no fee to use, then i would say pay maybe 1-2k towards your personal loan with that. This is a risky move because if you miss a payment then the rate will be outrageous, so its your choice.

Discover offers decent cash back rewards, but postandsavefinance.blogspot.com in the credit card section has the chase freedom which will give you $200 and offers 5% back on certain categories. I love this card and save around $240 a year with it. You can even pay some bill with it and get more money back.

Bottom line, don't move out yet. Roommates can suck, and even though living with the parents can be difficult, enjoy it for another year or two. The housing market won't be any better so you will still get a great deal. Your monthly income may be a little higher then as well allowing you to afford that $130k house you want.

**Aehs01** · 12-27-2011, 01:29 PM

Originally posted by pdweaver View Post

My suggestion is to pay of the loans before you move out. How much do you have in savings currently? Save up at least $10k before even thinking about moving out, thats on top of 6-9 months bills which is going to be around $10k. Your bills will be around $2000 a month owning your own place so i am not so sure you would be able to afford a $130k place with your current income. You might be able to afford a condo around $60k right now, but in my opinion thats it.

Start with calling state farm and maybe some other car insurance agents to lower that payment. Unless you have accidents and tickets, there is no reason your rate should be that high

Next, apply more towards that personal loan. 10% is ridiculous. One idea everyone will hate is to use one of the convenience checks Discover no doubt send to you to pay towards your loan. Convenience checks allow you to pay off other debts. It is a balance transfer, and generally charges a fee. If Discover gives you a check for 0% for a year and no fee to use, then i would say pay maybe 1-2k towards your personal loan with that. This is a risky move because if you miss a payment then the rate will be outrageous, so its your choice.

Discover offers decent cash back rewards, but postandsavefinance.blogspot.com in the credit card section has the chase freedom which will give you $200 and offers 5% back on certain categories. I love this card and save around $240 a year with it. You can even pay some bill with it and get more money back.

Bottom line, don't move out yet. Roommates can suck, and even though living with the parents can be difficult, enjoy it for another year or two. The housing market won't be any better so you will still get a great deal. Your monthly income may be a little higher then as well allowing you to afford that $130k house you want.

Thanks for the reply, I do not currently have any savings as I have been really just focused on eliminating this personal loan. I tend to notice I am using my card more and more but find I can easily pay it back quickly.

I was thinking about making some sort of small, say $100 increments from my discover using some cash advance method to get rid of the personal loan quickly then just pay back my discover card constantly. This might help me control some of my spending habits, I have noticed I tend to have an addiction to material items and 'buying things' constantly. It's a pretty easy habit to have with this sort of 'extra' income I have. I just badly want to get away from it.. I did good this month and put down $800 on the personal loan bringing it to that $6500. I will research this Discover check idea, I could probably pay that $1000 off very easily with the extra income I have and I'd be putting myself in a situation where I'd HAVE to do it otherwise I'd be caught with crazy interest fees I'd assume.

**pdweaver** · 12-27-2011, 01:39 PM

No problem. It is risky to do this and others will probably suggest against it but it will save money as long as no payments are missed. Good luck and hang in there!

**disneysteve** · 12-27-2011, 04:59 PM

Originally posted by Aehs01 View Post

My Monthly income is $2200 after taxes.

So gross is about $2,600/month or $31,000/year. Is that about right?

Personal loan $6500 with a 10% interest rate.

I do not owe a payment on this loan until March of 2013.

How do you get a bank loan that has no payment required for such a long time? Bank loans aren't typically deferable.

Monthly Bills-
-Side Business $115 a month

What does this mean? A side business should be earning you money, not costing you money.

So give or take, I've got $1400-1500 in monthly bills.

That's great, however the main reason for the $700 surplus is that you live with your parents. As you well know, you can't live in the real world for $200/month.

I am mostly independent covering all bills on my own

Except housing expenses.

My current thought was to pay off the $6500 as soon as possible then save 10-20% for a down payment on a place, most likely 100-130k range

You are off base here. You can't afford to buy a 100K home unless your income goes up. The maximum you should spend is 3 times your income, so about 90K, and ideally it shouldn't exceed 2.5 times income, so about 78K. Plus, you need a 20% down payment and need to have a 6 month emergency fund in place first.

What's wrong with renting? Most people do that for some time before buying. I rented for 8 years before buying (which was after I was married for almost 2 years).

recently approved for FHA type mortgage (3.5% down on a home basically).

Just forget that even exists. NOBODY should ever buy a house with only 3.5% down.

What would you do in my situation?

I'd move out. I'd get my own place, the cheapest place I could find that was in a decent neighborhood. If I needed a roomamte to make it work, I'd get a roommate. I'd also be busting my butt to get my income up. How many jobs are you working?

**Aehs01** · 12-28-2011, 04:37 AM

Just to clarify, I don't owe a payment on the personal loan till 2013 because I have been making a lot of extra payments. I originally owed around $12,000 on it when I it out last year.

My side business is new and I have not spent a lot of time with it yet to start breaking even and making more income.

I am just working my full time job, 40 hrs a week then my side business.

I really don't believe in renting, my full time job has not given anyone a raise in some time so more likely than not I am not seeing an increase in salary soon. My plan is to grow my side business into a full time business and surpass my full time income but this will take some time and commitment.

Everything else you wrote, clearly I understand. No need to be so critical over it all. The tip on the 3x income for purchase price was something I've heard, I'm mostly looking between 80-130k range to see what is out there.

**disneysteve** · 12-28-2011, 04:53 AM

Originally posted by Aehs01 View Post

Just to clarify, I don't owe a payment on the personal loan till 2013 because I have been making a lot of extra payments. I originally owed around $12,000 on it when I it out last year.

Gotcha. Is it possible for extra payments to go directly toward principal rather than advance payments or is that not an option?

My side business is new and I have not spent a lot of time with it yet to start breaking even and making more income.

How soon do you anticipate the business will be profitable? Some start up costs are inevitable but there needs to be a light at the end of the tunnel. Right now, you're spending just over 5% of your income on the side business. That's a good chunk of money.

I really don't believe in renting

What do you mean by that?

my full time job has not given anyone a raise in some time so more likely than not I am not seeing an increase in salary soon

.
Are you seeking other full time employment (besides the side business)? It sounds like your current job isn't going to get better anytime soon.

Everything else you wrote, clearly I understand. No need to be so critical over it all.

Sorry if I sounded critical. Had a rough day and was in a lousy mood. My apologies.

**cypher1** · 12-28-2011, 06:26 AM

I know the majority on this forum are all about moving out at 18 or so. But I will say every situation is different. I didn't move out of my parents basement till I was 28 and bought a house, but I actually got along with my parents for the most part. It all comes down to your priorities.

First, forget the house idea. With your current salary and debt, that's the last thing to think about, no matter how well interest rates are. House is a WANT, rent/roof over head is a NEED if you follow this forum. I used to think Rent was a waste of money, but now appreciate it.

As a bachelor myself, I realize others may be quick to judge you for living at home, hence a confidence issue. Who cares? You're focusing on your goals, making sacrifices to better improve yourself in the long run. When I lived at home, I was never home, unless showering/sleeping, or helping my parents with cars/housework. I worked all the time, saved a ton, and still dated the ladies. Any girl quick to judge you for living at home for your own personal reasons, isn't the right match then for dating.

And if you do decide to move out, get roommate(s), to save on rent. I've heard many horror stories via friends/family on roommates. I've been lucky to have a great renter and friend currently at my place. But it's just something to be cautious about. Otherwise get another job to increase income if you really want out of your parents place. Either way, there's always a price to pay.

I would think your priorities would be to buildup an emergency fund, get out of debt, move out, focus on your side business, BUT not always in that order.

**Like2Plan** · 12-28-2011, 06:56 AM

Aehs01,
Congrats on not having a lot of CC debt and also making a tough choice to give up some of your independence now in order to put your future self in a better situation with a firm finacial foundation.

Obviously, the 6500 at 10% interest should be retired as soon as possible. It looks like your are putting a lot of focus on this debt already. You could have it completely retired in less than 9 months if you put your monthly budget surplus of $700 towards it.

But, you should also have an emergency fund set aside. I don't even have to have much of an imagination think of some vulnerabilities you currently have. Let's start with your car--I don't see any line items in your budget to cover routine maint such as oil changes, battery, tires and so on--let alone if you need a repair. But, let's take it one step further--you financed your used car for 5 years at 120% of its value (what is the interest rate for the car?). So, you were upsidedown on the car value when you started. You financed this over 5 years, so you won't be getting caught up anytime soon. What happens if your car gets stolen or is completely totaled in a car accident? Your insurance will only pay up to the value of your car and then you would have to come up with the rest of the money for the remaining balance on the loan AND then you would somehow have to acquire another vehicle (and presumably another payment on top of that).
So, hand in hand with the emergency fund I think you need to focus on paying extra on the car payment, too. Ideally--getting that paid off ASAP.

Your personal spending. You could easily set aside some money from your budget each month and have it earmarked for the things you like to buy. It is hard to stay focused on a budget if you have nothing to look forward to for years on end. You set the limit depending on how motivated you are to move out.

One last thing-$80.00/month for your cell phone seems a bit high. Is it still under a contract?

**SeanH** · 12-28-2011, 08:34 AM

I would discourage you from any sort of complicated borrowing schemes in which you use credit card money to pay off loan money. You have a plan that uses money that is yours. Stick with it. Either acquire additional income or further decrease your spending.

Could you increase your income by working additional hours at your current job? The breakdowns of your spending are still a bit "lumped". Have you taken the time to actually itemize into true need and want categories. For example: a food budget shouldn't be groceries and eating out lumped together. Each of those is separate because one is a luxury.

Everyone who rents feels like they are throwing money away (myself included). We don't consider the flexibility, the ability to be underwater, the additional bills and PMI and the maintenance. If you found a higher paying job in another state you could be there in a month.

**disneysteve** · 12-28-2011, 08:46 AM

Originally posted by SeanH View Post

Everyone who rents feels like they are throwing money away

I never felt that way. There are times when buying makes sense and there are times when renting is by far the better option. I rented alone and later with my wife until our situation was such that buying was a reasonable decision and we were financially ready to do so.

I can never quite understand the mindset that renting is a waste.

**GREENBACK** · 12-28-2011, 10:44 AM

Originally posted by disneysteve View Post

I can never quite understand the mindset that renting is a waste.

I agree. The expenses involved in home ownership can make renting a worthwhile thing. I love owning my home but you spend lots of money on upkeep that a renter doesn't generally have to deal with.

**disneysteve** · 12-28-2011, 11:12 AM

Originally posted by GREENBACK View Post

I agree. The expenses involved in home ownership can make renting a worthwhile thing. I love owning my home but you spend lots of money on upkeep that a renter doesn't generally have to deal with.

There is also a time commitment to owning. When I was renting, I was still in school and in training. I didn't have the time to be mowing a lawn, shoveling snow, cleaning gutters, changing filters, etc. I was happy to have someone to handle all of that for me.

**papa_squat** · 12-28-2011, 12:37 PM

I would just like to add that a good friend of mine thought renting was a waste of money, too, so he bought a house his second-to-last year of college in 2005 after saving up a 20% downpayment. He graduated 2007, couldn't find a good job locally, but didn't want to move because his home value started dropping. Worked a dead-end, temporary job; started fixing up the home in case he needed to sell it. Applied for grad school hoping to get something better. Couldn't work as much to keep his income up to make his house payments, so there goes the expendable part of his income. Finished grad school in 2010; all the while his house value dropped until he was nearing upsidedown on the mortgage. Again, bad time to find a job, period. He waits it out in the crap job, making the house payments until he feels totally trapped. Finally, he applies for a great job across the country and gets it (only good news to this entire story). He was lucky that he didn't fall behind on payments and was able to sell the house because of the close proximity to the university. He did a little better than break even on the final sale of the home because he was smart enough to negotiate the offer, but he seriously considered foreclosure.

Six years after buying his house, he's renting now and back to square one, but I don't think he considers his rent a waste. The downpayment was his ultimate investment lost, but it could have been worse. The story IS much worse for people who bought a home with a 3.5% downpayment; even if only a small part of you was considering the FHA mortgage, I hope the advice you've recieved on here convinces you not to take a risk like that.

My advice is either wait it our with the folks (let's face it: it's not paradise for you or your parents, but $200 in rent is a pittance) or rent a cheap, 2-3 bedroom bachelor pad once you have a few quality roomates lined up first. Saving for a 20% downpayment on a house will go by faster than you know it (IF you keep your fun money down to $100 or so a month and keep making all your debt payments on time). The housing market will likely be low for a few years to come. Check in here regularly with any questions you have, and read a few good books on finances. Good luck and keep us posted!

**charlieh** · 12-29-2011, 04:31 PM

Please beware that when you finally go to move out and have your own place there are many costs you would have never considered that can come to haunt you.

I would first pay off all of your debt prior to moving out. Try to stick it out. Once you do have your own place to live you want to know that you have a large cushion in an emergency fund to take care of one off situations that will arise. Currently you are in the red - as you said your job has not given you a raise - and your side business is not yet where you want it to be.

Prior to making the leap towards having your own place you may want to have that side business more solid, and have your debt paid off, particularly assuming you intend to get a loan and take on more debt to purchase your first residence.

Looking for suggestions on my situation..