Salary: $39,000 before taxes (net between $1,159 and $1,165 per biweekly pay period)
- Health insurance/eye is deducted at about $12 per pay period
- Starting in August, my mandatory retirement payments kick in at 8.5% (I think, will get back to you when that happens.) As bummed as I am to see more of my money go away, I know I’ll be grateful in 40 years.
Savings: $30 ($25 of which is mandatory to open an account) Yeah, this needs work.
Car loan: I finally took over my car from my parents this past April. My dad sold it to me for $7,000 (KBB value is around 12, so good deal). The remaining balance is $6,549.64, interest rate is 4.5%. $102 per pay period is deducted automatically from my account. It’s a three-year plan. I really want to pay it off much sooner than that.
Chase credit card: $2,703.43 (13.24% purchase APR, it’s killing me), minimum payment around $56 a month, but I pay much more than that – fat lot of good that does, as we’ve learned.
Sallie Mae student loan: Outstanding balance is $11,884.87. I pay $170.33 per month.
Federal student loan: Outstanding balance is $3,395.76. I pay $50 a month.
Victoria’s Secret credit card: $0 as of 7/8/11. Should I get rid of this? Isn’t it more detrimental to cancel a credit card than to just cut it up? I want to get rid of it because they recently threw on a $25 fee when my payment for a $20 shirt didn’t go through on time.
Total debt: $24,533.70
- Rent: $820
- Car/renters insurance: $79
- Internet/Cable/DVR: $76.75
- Gym membership: $37
- Energy: Between $30 and $140 depending on the season.
- Groceries: $150 or so – I try to eat pretty healthily so I’m constantly buying new produce. At the same time, I’m one person so it doesn’t get TOO exorbitant.
- Gas: Around $60
Other: Off the top of my head I’d say I pay for food drinks once/twice a week, never totaling more than $30 (Panera, drinks with coworkers, Starbucks). The shopping thing varies as well…sometimes I will charge a flight to visit friends because I’m so lonely out here, other months Anthropologie will have a sale and I’ll drop $80 on a dress. I probably waste $50-$150 a month this way. Have somewhat curbed it recently though, but it’s a constant battle.
My parents pay my phone bill still, but when my contract expires in January, I will be taking it over. I also use their Netflix login (shh, don’t tell on me) for streaming instantly, so that’s another non-expense.
Rent where I live is 700-800 a month, no matter where. I pay $820 for a completely redone apartment, no roommate, free water, brand new washer and dryer, walk-in closet, etc. So reducing my rent/housing costs is not an option. I barely run the A/C, use fluorescent lights, etc.
I have two friends here, but don’t mind my alone time. My alone time is largely occupied by TV/Internet/DVR ($76). Another nonnegotiable.
Gym membership — $37 is an investment in myself that I feel great about.
I would like to save, save, save. I am uncomfortable with the fact that I cannot put money toward a new apartment should I move, or pay for emergencies.
I want to increase my car payments per month, if possible. Three years seems like forever for a 2004 vehicle. I don’t really care about the student loans, I’ve kind of accepted that I’ll pay the payments as they increase, and pay them forever. They’re the good debt…right?
Obviously, I want to obliterate my credit card balance. I am not comfortable enough to tear it up/burn it/etc. because if something sudden happens (medical, car work) I don’t have the money at the moment to cover it. I can promise you guys though, that I am making an honest effort to not use it. No charging gas or groceries on the fly. Done-zo.
I’m going to try to sell some of my hardly worn dresses on eBay, hoping to net a few hundred dollars for my immediate savings that way. I just totaled up the total debt, including student loans, and the $24,000 almost gave me a heart attack. I want to get on top of my life and this is one of the ways I need the most.
I can’t promise that won’t waste money again, because that’s too much to ask. I need help deciding where the money should go, and how much of it.
Dorothy asked if she should cancel her Victoria’s Secret credit card. I say yes. Cancel. Your credit score only matters if you are trying to refinance something in the near future or take out a loan. Because getting a mortgage or an additional loan doesn’t sound like something in your short-term plans, I say cancel it. Your other debts will keep your credit score high and you won’t have to worry about those sneaky fees.
I suggested that D read The Total Money Makeover by Dave Ramsey for some perspective of paying off debt and how to do it. His debt snowball works!
Because she wants to be able to pick up and move back to Chicago if she finds a job, I think it’s important to build up savings beyond that $30 as quickly as possible. Sell those dresses on eBay. Cut some expenses for a time. Save $1-2k that it will cost to get home and to put a deposit on your next apartment. This is your freedom fund. Get it filled!
Once your starter savings is in place, tackle that credit card. You’re right, 13+% APR really is brutal. Kick that thing outta here while paying the minimums on all other debts.
Next, I think you can make a choice here. You can keep on with your debt snowball and hit the federal student loan or your car OR you can sock away a bit more into your emergency savings until you have 3 months’ worth of expenses should you need it. That’s somewhere between $5-6k depending on how you look at it.
The car loan seems to be more of an emotional debt than paying off the student loan with the smaller balance. I’m not sure what the interest rates are for either student loan (Dorothy can you help me out with that?). Paying off the car first can be a good idea — it IS an asset that can be sold later if she decides she doesn’t need a car in Chicago. Can’t exactly sell off her student loan.
I think as long as she’s targeting some debt, that’s a positive thing. And I DO think it’s worthwhile to pay off all debts, student loans included, as quickly as possible. The money is eating up monthly cash flow in a big way and once it’s finally gone, there’s a LOT more breathing room in the budget.
The way I see her numbers, she could be completely debt-free in about two years if she hits it hard. Student loans and all. It’s going to depend on how hard she does want to pursue this.
But believe me when I say, it is MUCH easier to stretch your income when you have no debt payments to make. On down the road if some romantic interest turns into marriage, and then if children follow that, just think of how much easier it will be on everyone if this is taken care of now.
Dorothy, you’re paying $480 per month in debt minimums. That’s $5,760 per year you have to earn after taxes just to make those minimum payments. That’s roughly 5 out of your 26 paychecks every year just paying debt minimums. Ten solid weeks of work just for debt minimums. 400 hours. You get my point.
Now throw on all the extra money you’re putting toward debt to accelerate, and just think of how much extra money you’ll have each paycheck once your debts are gone. It’ll be a lot!
You’ll be able to put more toward retirement, but also you’ll be able to pay yourself each check to put toward savings. Saving for another car some day, travel, new clothes, going out…whatever you want. Without stress or guilt.
You know the areas where you can cut back the most. Since you are alone out there basically, I don’t think it’s a good idea to reduce your cable to nothing or cut your gym membership, but do identify areas where you can cut back. Maybe you can just view Netflix for awhile instead of relying on DVR. You can decide what works — just do something.
But yeah, to sum up: Build up your savings asap so you can get to Chicago on a moment’s notice if a job comes along. And then obliterate your credit card. After that, keep plugging away on your savings and debts. You can do this. It is worth doing.