How to Use Xmas bonus? young professional need advice

[lootpacman]

Hi Everyone,

New to this forum. Read reviews and the forum was recommended for financial advice.

Here's the situation, right now I have about:

-$2100 in Credit Card Debt, $1400 (high apr) and $700(low apr)
-$3000 in Savings
-$400 monthly car payment
-$200 car insurance
-$900 in rent
-$350 in student loan (already paid December though)

I am receiving a Xmas bonus for a $1000 (on top of my bi-weekly check, but need to pay rent).

Should I use all of my bonus to pay off the $1400 debt? or save some of it?

At the end of the month I will have to pay car, car insurance and rent.

[Petunia 100]

Hi Everyone,

New to this forum. Read reviews and the forum was recommended for financial advice.

Here's the situation, right now I have about:

-$2100 in Credit Card Debt, $1400 (high apr) and $700(low apr)
-$3000 in Savings
-$400 monthly car payment
-$200 car insurance
-$900 in rent
-$350 in student loan (already paid December though)

I am receiving a Xmas bonus for a $1000 (on top of my bi-weekly check, but need to pay rent).

Should I use all of my bonus to pay off the $1400 debt? or save some of it?

At the end of the month I will have to pay car, car insurance and rent.

I would absolutely use the bonus towards the high rate debt. You have enough in savings for now; get out from under that credit card debt.

Do you have a realistic working budget? Are you contributing to a retirement plan?

[lootpacman]

I would absolutely use the bonus towards the high rate debt. You have enough in savings for now; get out from under that credit card debt.

Do you have a realistic working budget? Are you contributing to a retirement plan?

@Petunia,

Contributing $200+ per paycheck to 401K (of 2K+, haven't been working long)
-student loans are $30K
-car loan is $24K (not in my name)

after all bills have been paid, I have about $112/week to spend on whatever.

[Kundan Lal Rana]

I would suggest you to pay your $2100 in Credit Card Debt, $1400 (high apr) and $700(low apr) very first.

[snafu]

lpm, welcome to SA. I wonder if you would be willing to add up how much of your money goes towards interest for CC1, CC2, car payment and SL in December. You could multiply by the number of months you've been paying for a guesstimate of what you're losing. It's a good idea to check your credit score. It's free from one of the four agencies once a year. I hope you know it's very important to make each and every payment on time, at least two business days before the due date on the bill. Even one day late or a missed payment cause fees and jacks up interest rates.

What interest rate are you paying on your car loan in someone else's name? That is a puzzling choice since those payments do not help your credit score. Wonderful that you've signed on to your employer's retirement and I hope you are contributing the sum needed to capture any free money offered by the employer. Do you know what that is invested in and how much they charge in fees? Just ask HR for details.

Sorry for so many questions but to be financially successful you need to know where your money goes. Give yourself a dollar sum for entertainment and fun each pay, when that sum is gone so is spending in that category. You list car payments and insurance but you need a sum for operations like gas, oil change/tune-up, registration/tags for example. Do you have other irregular costs that need funding throughout the year?

[lootpacman]

lpm, welcome to SA. I wonder if you would be willing to add up how much of your money goes towards interest for CC1, CC2, car payment and SL in December. You could multiply by the number of months you've been paying for a guesstimate of what you're losing. It's a good idea to check your credit score. It's free from one of the four agencies once a year. I hope you know it's very important to make each and every payment on time, at least two business days before the due date on the bill. Even one day late or a missed payment cause fees and jacks up interest rates.

What interest rate are you paying on your car loan in someone else's name? That is a puzzling choice since those payments do not help your credit score. Wonderful that you've signed on to your employer's retirement and I hope you are contributing the sum needed to capture any free money offered by the employer. Do you know what that is invested in and how much they charge in fees? Just ask HR for details.

Sorry for so many questions but to be financially successful you need to know where your money goes. Give yourself a dollar sum for entertainment and fun each pay, when that sum is gone so is spending in that category. You list car payments and insurance but you need a sum for operations like gas, oil change/tune-up, registration/tags for example. Do you have other irregular costs that need funding throughout the year?

@snafu

I'll have to go back and do some more calculations. But off the top of my head:
-$40 per month for gas
-I'll do an oil change in January (fairly new car, not my choice, parents sprung it on me)
-car loan I believe is between 5% - 7% (either or)
-401K match should be 3%, right now I'm contributing 10%, intend to go 15% once CC debt is clear

[TBH]

wait wait wait.

You said the car loan is not in your name. You said the car is fairly new and not your choice, and that your parents sprung it on you.

Your parents got you into debt without asking you?

Give the car back to them, tell them to sell it, and buy something more affordable instead. If they want to help you out with a car, get them to help you out with a car more in line with your budget.

(My father also pushed me to buy a "decent" car when I was young, which meant a much more expensive car than I could afford. He was willing to help me with the down payment, but then I would be stuck paying off, maintaining and insuring a more expensive car. I refused, bought a beater by myself, and was much happier.)

[disneysteve]

wait wait wait.

You said the car loan is not in your name. You said the car is fairly new and not your choice, and that your parents sprung it on you.

Your parents got you into debt without asking you?

Give the car back to them, tell them to sell it, and buy something more affordable instead.

I second this. Why would you make huge payments on a very expensive car to pay off somebody else's loan? That's nuts.

How much do you earn? Rule of thumb is for your car payment to not exceed 10% of your monthly income for no more than 36 months. I suspect the current arrangement does not fit in those guidelines since $400/month for 36 months is only $14,400 and you said the loan was for $24,000. That means it's a 5 or 6 year loan. BAD NEWS!

[lootpacman]

I second this. Why would you make huge payments on a very expensive car to pay off somebody else's loan? That's nuts.

I agree with you guys...family pressure (and surprising me with it).

How much do you earn? Rule of thumb is for your car payment to not exceed 10% of your monthly income for no more than 36 months. I suspect the current arrangement does not fit in those guidelines since $400/month for 36 months is only $14,400 and you said the loan was for $24,000. That means it's a 5 or 6 year loan. BAD NEWS!

@TBH & disneysteve,

Had the car for about 3 months now, has 1000+ miles on it (I'm new to buying cars and insurance). Go for a trade in of less expensive car? Paying $600/month with insurance added on.

Would trading it in set me back much for a more affordable car?

[snafu]

I'm sure your parents meant well but you need to discuss this situation with them. Financially speaking, you need a car that meets the parameters outlined by Dr. Steve. They need to sell the current car. It takes time and effort but in most instances you do better selling privately. What is the KBB {Kelly Black Book] value for your particular make, model, mileage, features and options. The dealers commissions are often high but you need to know what they will give on trade.

BTW, never, ever make purchases without fully understanding the interest rate. What is your criteria for a vehicle that will meet your needs? Do you need front wheel drive [snow zone], truck [haul stuff around], high box [primarily hwy miles], fuel efficient [commute/sit in traffic] etc. you'll be buying, selling and trading a lot of vehicles over the next 40 years.

[disneysteve]

Go for a trade in of less expensive car?

Would trading it in set me back much for a more affordable car?

I'm sure your parents meant well but you need to discuss this situation with them.

snafu is absolutely right. You need to speak to your parents. You don't own the car - they do. They need to decide what to do with it, not you. You need to tell them that you can't afford the payments on such an expensive car so you're giving it back to them. Then go buy yourself something you can afford, using the 10% of monthly income for 36 months as the maximum you spend.

[lootpacman]

snafu is absolutely right. You need to speak to your parents. You don't own the car - they do. They need to decide what to do with it, not you. You need to tell them that you can't afford the payments on such an expensive car so you're giving it back to them. Then go buy yourself something you can afford, using the 10% of monthly income for 36 months as the maximum you spend.

I have decided to return the car to my parents. Not sure what they intend to do with it. Doesn't seem like they intend on returning (or selling it).

A car is not a major need for me at the moment (had a hand-me down that was paid off before this car). Just the basics such as laundry and grocery shopping.

If my parents do return the car and want to spring for another then I will use disneysteve's advice.

[bjl584]

I vote credit cards.

[disneysteve]

I have decided to return the car to my parents. Not sure what they intend to do with it. Doesn't seem like they intend on returning (or selling it).

Very curious to hear your parents' reaction to you giving the car back.

[Green43]

Just using your high interest debt, take what your interest percentage is (APR) divided by 12= your monthly interest (ie 16% apr = 1.3% monthly) now look on your cards statement for calculated minimum payment (usually between 1-2%/MO).. See where they get ya? Do your self a favor and kill the high interest card then snowball it into your low interest card. Your budget will thank you in 6 months. JM $.02