Budget Assesment/Help with Future Goals

[LegHead1]

Hello Savers!

Its been a while since my last post, but would greatly appreciate your advice once again!

I need help with debt, budget, and future goals!

Goal 1: Be debt free minus student loans by December 2012.

Goal 2: Have a 6 month emergency savings account.

Goal 3: Start saving for a down payment on a house.

Goal 4: Amp up retirement savings.

I turn 29 this month and am freaking out about being "behind" in my savings/financial status. I have had a few jobs and moved a few times over the past 3 years, so there have been substantial hiccups.

Here is my current income/budget. I live in San Francisco, fyi.

Take home pay (net): $4200. This JUST went up from 3200.
EF Savings: $4000
Checking: $1500
Retirement: $20,000

Contribute 12% each month to company 401k.

Debt:

CC: $3500 @ 0%. This stemmed from auto repairs only! I have since sold the car and found a new job in the city where I now take public transportation, which is covered by my work.

SL: $17,000 @3.5% i PAY $260/month.

I owe my GF $1800 for the security deposit, we just moved in together.

Expenses:

Rent: $1200 (each!)
Utilities: $90
Groceries: $200
Dry Cleaning: $30
SL: $260
Gym: $45
Clothes: $100
Shampoo,razors, etc: $50
CC: $270 (I pay 3x minimum due)

Total: $2245

What is the best method to pay off the debt? How behind am I?

[bjl584]

I notice that you posted a similar thread back in March laying out basically the same goals and containing basically the same numbers. It looks like your rent went up. And it looks like your income went up. But, before we start, how much progress have you made since you last posted on March 22nd?

[LegHead1]

Reply

Hi Brian -

Yes I did, good looking out!

I got a promotion/raise.

Moved in with the gf, but sold the car. This helped eliminate a car payment of $260/month, garage of $150/month, gas, and $80 in insurance. Yes, the rent with up, but this freed up some money.

[bjl584]

I think thatI would save up more of an EF before paying off SL's or saving for a house. Pay the CC off before the 0% interest ends, but other than that, I would just make the payment on the loans and put extra cash into your EF.

[scubatim84]

I used to live in Santa Clara. I don't know what your intentions are on buying a house, but if you plan to stay in San Francisco, I would just forget about that...housing is so incredibly expensive in the bay. Maybe if you can get a house in a smaller suburb, and commute, that's an option but SF itself is murderous.

As far as the credit card goes, if the 0% APR isn't going away anytime soon, I wouldn't be in a big hurry to pay it off. Likewise with the student loan...3.5% is a great interest rate! The thing is, once you get a 6-month emergency fund built up, I would decide from there what your house options are. If a house is feasible without having the house payment from hell, I would then save up for a downpayment. Otherwise, I would put the additional savings into investments. You'll get 8% return on average every year from investments and paying off your loan early is only saving you 3.5%. Ergo, you can get an additional 4.5% a year in interest by investing...win win.

[LegHead1]

Excellent advice! Thank you!

No I do not plan to buy in SF, perhaps Petaluma or Santa Rosa.

[bluedovefinancial]

I think you definitely do not need to freak out about your financial situation. It seems like you are definitely on the right path. I would say your six month savings account is the most important because in this economy you could lose your job any day. Your loans are not really costing you that much in interest so I would take the extra money you are paying towards your 0% loan and put that into your six month emergency savings fund. Maybe only pay $50 dollars more than the minimum payment on that loan. However, if the 0% is for a promotional period and will end soon, I would try to pay that debt off ASAP. Especially if at the end of the promotional period you will be paying a high variable rate. Your student loan has a very low interest rate as well. So I would take some of the extra funds you are using to pay that debt off, and put that into your emergency fund as well. Your budget seems pretty solid, so I wouldn't recommend any monetary cuts other than using the extra funds you are paying on your loans to put into your emergency fund. Now, once you have your 6 month emergency savings fund built up, I would go full force on paying those debts off. Then you will have your emergency fund for a rainy day and you can pay your debts off with the comfort of knowing if you lost your job you have a back up savings account. Hope this helps and for the record, you are on a good path. Be proud about how you look at your finances, most people do not have the kind of discipline and vision that you have. Good luck!

[LegHead1]

Awesome! Great response! Thank you so much!