Getting Control of My Finances - Seeking Advice

**bjl584** · 03-22-2012, 10:16 AM

I think that you are doing fine. You aren't talking a huge amount of cc debt, and as you said, it will be gone after one bonus check.

I suggest that you look into a Roth Ira. Maybe back off on the mutual fund contribution and instead start a Roth and/or bump up your 401K contribution (if it has a match.)

There is always room for improvement in a budget (cut expenses, boost income, etc.) but a quick glance, and I think you spend too much on clothes.

You definitely want to get the car paid off too. I'd focus on that debt as soon as the cc are paid off.

I'd probably do it like this:

1) pay off credit cards
2) start paying extra on car AND save more aggressively into an EF
3) boost up 401K and/or start Roth
4) save up for house
5) pay off student loans.

**LegHead1** · 03-22-2012, 10:48 AM

Thanks Brian -

Do you suggest I reduce the 401k (Match is up to 6%) to 6%, and take the 5% I have been contributing into a Roth?

Or keep contributing 11% to the 401k and additional start a roth?

**Petunia 100** · 03-22-2012, 10:59 AM

You're paying $750 for rent in SF? How are you doing that? Are you living on someone's couch?

**bjl584** · 03-22-2012, 11:02 AM

Originally posted by LegHead1 View Post

Thanks Brian -

Do you suggest I reduce the 401k (Match is up to 6%) to 6%, and take the 5% I have been contributing into a Roth?

Or keep contributing 11% to the 401k and additional start a roth?

That depends on how much disposable income you have and how fast you want to accomplish your goals.

I'd be inclined to pay off the debts as quickly as possible (the CC's and the car anyway.) So, I may drop the 401K to 6% (the match) then either shift all the extra money to debt or shift part of it to debt and part of it to a Roth. It just depends on your mindset about debt and how long you are willing to wait to pay it off.

Personally, I max a Roth, have a 401K at 10%, and pay extra on my student loans. I am saving a considerable amount and paying off my debts early. It's a formula that works for me.

**BudgetSurgeon** · 03-23-2012, 09:18 AM

Originally posted by LegHead1 View Post

Hello -

Posted here a few years ago, but back again for more valuable advice!

I am getting back on track after a layoff.

Goals:

1. Pay off revolving debt.
2. Save 6 months of emergency fund.
3. Save for house down payment.

Assets:

401k - $22,000
Mutual Fund - $2200 (Contribute $250/month)
Emergency Savings - $3000

Income - $45,000/year plus 5k qtrly bonus ($65k/annual)gross.

Net - $3,300/month

Expenses -

Rent - $750/month
Garage - $150/month
Utilities - $71/month
Car Insurance - $84
Student loan - $250/month - 17k @ 3% remaining
Auto Loan - $260/month - 8K @ 8% remaining
Gym - $100/month
Gas - $60/month
Food - $250/month
Household Items - $60/month
Phone - work pays
Clothes - $100/month

Outgoing - $2,135
Remaining - $1,065

CC Debt - $3200 - Car repair during first few weeks of employment. Alll car repairs, I don't use cc's unless emergencies!

I live in SF, so rent is expensive. I pay the garage to protect my car. I just started a new job that I can bus too, so I am debating to sell the car or just keep it garaged for when travel is needed. Thoughts on this?

My plan is to pay off a huge chunk of the cc debt when I receive my bonus (incoporated into monthly budgets)

Once that is paid off, I want to build the emergency savings to 7 or 8k.

From there, I want to build a new savings for a down payment on a house.

How am I doing? I feel I am behind for someone at 28years old, with too much debt and not enough savings. I contribute 11% to my 401k, but feel its not enough and I will never retire.

Any suggestions/advice/criticism would help.

Thanks!

Hi,

I think you have the right mentality, and the fact that you know what your expenses are is a real good sign, since many don't even bother to figure this out.

Here are some suggestions for you, from a weathered pro:

1) Pay off that Credit Card Debt, and NEVER EVER incur credit card charges again in your
life. Use your CC's as only a short-term 30-day cash vehicle, and make sure you pay off
any accrued charges IN FULL, each an every month. If this is not possible, then you must
reduce your spending. Credit Cards are poison, and they need to be controlled;

2) I have a family of 5 in NY, and we average $800 per month in food expense. This amount
that you are paying ($ 250) is way too much for a single dude. Eat out minimally, cook
for yourself, bring lunch to work, eat breakfast at home, and stop paying $ 5 for those
lattes. Get this amount down to at least $200/month, but aim for $175. You can do it.
Food costs add up quickly, and take a big chunk out of your budget. Knocking $75/month
of this, will save you $900 per year;

3) Being healthy is good, but paying $100 per month is off the chart, as far as I am concerned.
We have gym deals by us for $10 per month. If you cannot procure this kind of deal, I
would suggest some alternative options: buying gym equipment for your apartment, walking/
running in your neighborhood (free). You should be able to knock off $90 per month here
(possibly after an initial gym equipment fixed-cost expense). That is $1,080 per year;

4) I'm not a big proponent for new cars and taking out loans for them. An automobile is a
depreciating asset, and loans should be avoided at all costs. Buy a 2nd-hand car from a
dealer next time (they usually inspect them very well), and pay cash for your next car.
No loans. You don't have to impress your friends and girls with what you drive.

These are some small starter points. Get these 4 items under control, and then you can work
on other parts of your budget. Always start with small, bite-size deliverables.

You can do it!

Best of Luck,

The BudgetSurgeon

**BudgetSurgeon** · 03-23-2012, 09:30 AM

Originally posted by LegHead1 View Post

Thanks Brian -

Do you suggest I reduce the 401k (Match is up to 6%) to 6%, and take the 5% I have been contributing into a Roth?

Or keep contributing 11% to the 401k and additional start a roth?

Here is my 2 cents on this:

1) ALWAYS take advantage of the FULL matching offer that your employer offers you with
a 401K (this is Free money). Additionally, contrary to many, I still favor 401K over
Roth. 401K contributions provide you with a tax-break, whereas Roth contributions
do not (they are after-tax contributions). There are many "experts" that are clamoring
for Roth, Roth, Roth, with the doom & gloom scenario of higher tax rates coming in the
future. I am of the elk, that you will be withdrawing your 401K after you reach the
age of 59 1/2, AND when you withdraw during retirement, you will presumably be in a
much lower tax bracket, and not incurring high tax rates (of course, this will depend
on what, if any, other income sources you will have during retirement). 401K's offer
you instant tax-deduction, employer matches, and the tax deduction money saved can be
invested along the way, as you march towards retirement. I still think it's the better
idea, and unless you are betting on super-high tax rates for all down the road, I would
take 401K over Roth any day of the week.

2) Before plowing additional money into a Roth (and you can do this too), get rid of all of
your debt first (CC debt, Student loans, car payments). Once you are debt free, then
we can talk about opening up an addition Roth.

Again, my 2 cents.

BudgetSurgeon

Getting Control of My Finances - Seeking Advice