Making a new start

**disneysteve** · 03-16-2009, 06:44 PM

Welcome.

Post your income and expenses as well as the specifics of the debt with balance and interest rates. Are you single or married? Any kids? Own or rent your home? Let's see the numbers and we can give some advice.

**maat55** · 03-16-2009, 07:25 PM

I highly recommend that you read a few personal finance books, these are my favorites:

The Total Money Makeover by Dave Ramsey
The Automatic Millionaire by David Bach.

You are on the right track. Good luck.

**mohawkstrip** · 03-16-2009, 08:29 PM

Single, renting apartment, been working full time out of college for 3 years.

Monthly Budget

Rent
Apartment $600.00

Phone $65.00
Internet $35.00
Car Ins. $130.00
Subtotal $830.00

Debt Service
Student Loan $250.00 (21k) 7%
Car $350.00 (11k) 9.2%
Subtotal $600.00

Living
Food $500.00
Entertainment/clothes $150.00
Misc. $50.00
Subtotal $700.00

Total Exp. $2,130.00

Income $2,600.00

Monthly Surplus $470.00

**adam_c** · 03-16-2009, 08:45 PM

Originally posted by mohawkstrip View Post

Single, renting apartment, been working full time out of college for 3 years.

Monthly Budget

Rent
Apartment $600.00

Phone $65.00
Internet $35.00
Car Ins. $130.00
Subtotal $830.00

Debt Service
Student Loan $250.00 (21k) 7%
Car $350.00 (11k) 9.2%
Subtotal $600.00

Living
Food $500.00
Entertainment/clothes $150.00
Misc. $50.00
Subtotal $700.00

Total Exp. $2,130.00

Income $2,600.00

Monthly Surplus $470.00

Hello Mohawkstrip. First, let me say congratulations on making the choice to take control of your finances. It takes work, but you'll be glad you did.

The first thing I notice in your budget is your gross is approximately $50k, but you're bring home is only $31,200 (2,600 x12). Where is the other $18k? That is over $1,500/month coming out of your check. Is that accurate? What deductions do you have coming out to bring it that low?

**loanmodifications4you** · 03-16-2009, 08:56 PM

Originally posted by mohawkstrip View Post

Single, renting apartment, been working full time out of college for 3 years.

Monthly Budget

Rent
Apartment $600.00

Phone $65.00
Internet $35.00
Car Ins. $130.00
Subtotal $830.00

Debt Service
Student Loan $250.00 (21k) 7%
Car $350.00 (11k) 9.2%
Subtotal $600.00

Living
Food $500.00
Entertainment/clothes $150.00
Misc. $50.00
Subtotal $700.00

Total Exp. $2,130.00

Income $2,600.00

Monthly Surplus $470.00

I know it's probably impossible, but are there 2 bedroom apartments with similar rent prices where you could take a couple hundred dollars off of your monthly expenses? Also, perhaps you can subtract a few dollars in entertainment by watching movies through your computer free of charge? Just a thought

**blankcheck** · 03-17-2009, 07:43 AM

Some possible goals to start out:

-An EF of 3 months expenses, so 2130*3 = 6390

-paying down the highest interest debt first, so that's the car loan (9.2%)

-saving 10% (minimum) towards retirement. If you don't have the option of an employer's plan, open an IRA. You can learn more about investing over time, but to get started, you can always look into a targe date fund (there are plenty of prior topics explaining this stuff).

-paying down student loan debt. It's not as expensive as it seems since the interest helps lower your tax burden. But if a a house/spouse/kids aren't on the horizon, it's a worthy goal.

So right now, you have 470 "surplus" each month, to apply how you choose. Everyone has their own ideas as to here you should put it, but mine would be

EF funded to 3 months (or 6 if you have job concerns, etc) ,then car loan ,
then retirement funds (get it up to 15% of gross if you can), then student loans.
The best part about accomplishing the EF and major loans is that you get a snowballeffect; use the old payment amounts towards those goals and put it towards your next goal!

**swaymonae** · 03-17-2009, 08:02 AM

So where has the $470 been going so far?

I agree with blankcheck.. put it in the bank!

**tripods68** · 03-17-2009, 08:30 AM

You are paying high interest rate in both of your loans. So here's my suggestion. Use the
"snowball" affect:

1. ) Reduced Food/Entertainment ($650) by $150 per a month. Use that savings and add toward car payment ($150 + 350 = $500). You'll pay off this car in less 2 years year. (There is no reason why you should be spending $500 on food by yourself. Start bring lunch to work or buying food in bulk).

2.) Take money from $470 surplus ($200 + $250 = $450) towards student loan.

3.) Once the car is paid off (2 years), take that $500 add to existing student loan $450 payment, making $950 total montly payment.

There is no reason why you couldn't pay all your debt in less 4 years.

**wincrasher** · 03-17-2009, 11:02 AM

You could consolidate your student loan and save some interest.

You won't save a great deal paying off your car early since you've already paid the bulk of the interest.

I'd build your emergency fund as others have suggested. You really need 6 months minimum in this environment today.

**penny-pinchers-usa** · 03-17-2009, 11:41 AM

I have read the Dave Ramsey book. Very good and highly recommended.

Have you considered selling the car? Is it worth more than you owe? If you have negative equity, there is not point, but if you can get into a lower priced vehicle, do it! Or perhaps trade it in for a lesser priced car. Dealerships are just itching to make deals right now.

**EEinNJ** · 03-17-2009, 01:26 PM

Looks like you're doing pretty good as far as knowing how much and where you spend it. I think you might be forgetting expenses that come up only once or a few times a year- gifts, vacation, car maintenance, subscriptions, etc. Don't forget to factor those in. Also, if you want to stay out of debt, now is the time to start saving for your next car. You could probably save 200/mo for that, 100 for EF, and if you have no retirement plan, start a Roth IRA for 100/month.

**arthurb999** · 03-17-2009, 01:59 PM

Get out of debt before retirement savings... the food bill is too high.
Can you sell the car and buy a lower costing car for cash?

**cschin4** · 03-17-2009, 02:06 PM

Do NOT make any changes with the car. Keep it and get it paid off. Then drive it for as long as you possibly can, getting it fixed when needed. Don't listen to the baloney about "costing more to fix versus buying new" when you get the new car bug. If you try to sell your car, you will just lose money, and then you will lose even more money buying another car. That isn't going to get you anywhere. You have a newer car and you know it has been cared for, what kinds of problems it may have, etc.
As for the rest of your budget, just start reading some books on personal finance by and that will help you change your mindset and the way you view your money.

**mohawkstrip** · 03-17-2009, 08:33 PM

Thanks for the responses. A few things:

- I'm already living with a roomate, and this is a high rent city, so $600 is relatively dirt cheap.

- The car I got was a Prius - I could probably get more than I owe on it, but would just wind up spending another $5000 on a less reliable, less efficient car. Will pay car off and never finance another.

- Will get food costs and entertainment down. I eat out way too much.

- Will focus efforts in short term to paying off car, increasing EF, and starting IRA. Not so worried about student loans as I recoup most of my interest.

Thanks for all of your suggestions. You make the situation seem less hopeless than I had originally thought.

Making a new start