Paying off Debt & Managing Money

[Special_K]

Okay, so recently I've been wanting to put a plan in place on paying off my debt and I'm looking for some advice. I graduated college a few years ago and recently started a new job. I'm in sales and get a small base salary right now while I'm in training. Eventually, I'll be on all commission and will make more than I do now (if I do a good job and sell!) but my monthly income will vary so I'll need to learn to budget it every month.

Below is a list of my income, monthly expenses, and amount of debt I have.

Monthly income (after taxes & 401K taken out): $1,690

Monthly expenses:
Car Loan $262
Gym: $42
Gas: $137
Credit Card: $25 (if I just pay minimum)
Last month I spent approx $100 on food but that can vary. I don't pay rent right now as I'm living with my parents until I can make more money. I do have student loan debt but currently in forbearance until October.

Total Amount of Debt:
Credit Card: $1,025
Car Loan: $7676
Student Loan (Federal): $14,555

Savings Account: $3730

My question is how much should I be saving a month vs putting towards debt? I'm hoping with hard work I can earn more each month to put more either in savings or towards debt but I'm trying to decide what would be more of a benefit to me in the long run. Thanks for any advice, I appreciate it!

[LivingAlmostLarge]

Debt for car and CC. Then savings then back to student loan.

[snafu]

What interest rates are you paying on debt - SL, Auto, CC? What rate is savings earning? When do you anticipate completing training and moving into sales?

[Special_K]

What interest rates are you paying on debt - SL, Auto, CC?
Student Loan Interest is 6.8%
Car Loan is 6.275%
I have two CC that I added together but one is 21% APR and other is 15% APR

What rate is savings earning?
.01% I think I earned a couple cents on what I put into my savings.

When do you anticipate completing training and moving into sales?
Should be within the next couple months.

[Special_K]

By my calculations, you have about $1,174 left each month after you monthly expenses.

Here is the plan I would follow.

Take $1,025 out of the savings account and pay off the credit card.

Throw $1,100 and any other money you can get a hold of and pay off the car loan.

Throw $1,400 ($1,100 + $262 car loan) plus any other money you can get at the student loan.

$7,700 divided by $1,100 equals 7 months. $14,555 divided by $1,400 equals 10+ months. You should be completely debt free in less than 18 months. You can then start building an EF. Once that is in place, you can either save for a house or condo or move into an apartment. Personally, I think I would look at a condo.

You should be able to accomplish all of this in about 2 years.

Thanks for the advice. I didn't realize I could get rid of all that debt that quickly and can put even more towards it once my income increases

While I don't have to pay rent I didn't know if it was smarter to build a savings for when I move out to put towards a condo/house or just get rid of the debt first.

[Bob B.]

Monthly income (after taxes & 401K taken out): $1,690

Monthly expenses:
Car Loan $262
Gym: $42
Gas: $137
Credit Card: $25 (if I just pay minimum)
Last month I spent approx $100 on food but that can vary. I don't pay rent right now as I'm living with my parents until I can make more money. I do have student loan debt but currently in forbearance until October.

Total Amount of Debt:
Credit Card: $1,025
Car Loan: $7676
Student Loan (Federal): $14,555

Savings Account: $3730

Student Loan Interest is 6.8%
Car Loan is 6.275%
I have two CC that I added together but one is 21% APR and other is 15% APR

I guess I would eliminate all CC debt right now. Throw $1,700 toward your car debt. Hold $1,000 in savings as an emergency fund. Pay your parents SOMETHING for rent and chip in on the food, electricity, internet if you use it, etc.

Save up to move out - of course will get easier as you make more in sales. Set a goal date for a move-out date - September or October or somewhere around there, and stick to it.

[TheKayla]

I'd get your CC paid off right away, even with your savings, and then bring your savings back up to a few months security range, tackle your car loan asap immediately after. The CC and car loan are you're two worst debts, and luckily you can sacrifice a bit of your emergency fund since you're living with your parents right now. Just be sure to raise it to a more secure amount before moving out, and then build savings/tackle your student loan debt quickly after. When you get to your student loan, pay far more than the minimum, but keep a balanced budget while you ride it out.

[snafu]

K, interest rates of 21% and 15% on CC is extremely high in the current economy. Is there something negative in your credit report or missed payments that needs to be fixed? You are entitled to a free, no cost credit report each year. I too suggest you pay CC off immediately. Look at the statements carefully, it will reveal both the Billing/Statement date and the Due date. At those rates don't use CC unless you can absolutely pay the bill in full two business days before the Due date. If you have a credit score over 700, you should be able to get a different CC at a much lower interest rate. Pay attention to details and avoid paying a fee on any CC at this point.

When you've cleared the debts [CC, Car, SL] and start savings for a condo or house, understand that you need a 20% downpayment. The sales people and adverts suggest you can buy with low DP but they are doing you a great disservice. The lower the DP the high the cost of Mortgage Insurance, a cost will be tied to you until the entire mortgage is paid off. You may have wa-ay more than 20% equity in the future but you'll still be paying expensive Mortgage Insurance and there is no benefit of any type to you.

[workinabroad]

I know I'm late, but I'm in favor of you just keeping your savings. Your job will be commission and you don't want any hiccups. If you made less that expected it could be a number of factors. Not to mention when you're trying to get out of debt it seems like crap keeps coming up.

Your CC APRs are so high that it'd be best to pay those off first. Then only use them for their rewards at an amount that you can pay off in full monthly. After that I'd shoot cash at the car until the student loan starts knocking on the door.

[llckll]

Have a $1,000 emergency fund and and attach those credit cards. Rates are extremely high. Then use the debt snowball method.

Charlie

[dczech09]

The big thing is to get rid of your debt as quickly as possible. Do what everyone else has said. The consensus is to attack credit card, then car loan, then student loans while keep about $1,000 in savings for emergencies. It should only take you about 18 months to pay it all off.

When do you switch over the commission? I have worked on commission before and budgeting can be a little more tricky when you income fluctuates. So it is important to get a handle of how you will budget when you are no longer on salary.

In order to run a budget on commission, you need to understand your minimum. What is the smallest amount that you will receive in your paycheck? *Rhetorical question* Run a budget based on that. Then identify what you would do with every extra dollar above and beyond your minimum.

If you have $500 extra, what are going to do with that? Savings? Investing? Spending?

You need to understand how to budget on a variable income. That way, once you get this debt paid off, you can stay out of debt.

[btctony]

K, interest rates of 21% and 15% on CC is extremely high in the current economy. Is there something negative in your credit report or missed payments that needs to be fixed? You are entitled to a free, no cost credit report each year. I too suggest you pay CC off immediately. Look at the statements carefully, it will reveal both the Billing/Statement date and the Due date. At those rates don't use CC unless you can absolutely pay the bill in full two business days before the Due date. If you have a credit score over 700, you should be able to get a different CC at a much lower interest rate. Pay attention to details and avoid paying a fee on any CC at this point.

Personally I wouldn't even bother getting different credit cards with lower interest rates. I agree that they need to be paid ASAP and the OP should never again carry a balance. At that point, interest rates don't matter, because you're not paying interest. But do check the cards for annual fees. If you have any cards with annual fees, you can call the CC company and have them do a product change. They can switch you to another card of theirs that does not have an annual fee.

[btctony]

What rate is savings earning?
.01% I think I earned a couple cents on what I put into my savings.

After you've paid the credit card debt and paid on other debt, move the remainder of your savings into an online savings account. You'll get a better rate. I'm getting 0.75% from Capital One 360. I see GE Capital is offering 0.90% with a min balance of $50. You can check the current rates at Bank Rate.

I opted for the Capital One 360 account at 0.75% temporarily, because I got a $75 bonus, just for opening the account and depositing $500 into it. I also have a $125 bonus coming from them later this month for opening a checking account. When that arrives, I'll move my savings to a different online bank with a better rate.

I too was only getting 0.01% when I kept my savings with Chase. The brick and mortar banks are all that way.