Thoughts on my financial plan

[sfreeway425]

Hi! I've been lurking for a bit and am learning a lot and getting ideas... Finally mustered up the courage to post my financial situation and hopefully will get some insight on how to become financially stable. I think I'm starting to get on the right path...

I'm 29, and have a new job paying $3800 a month after taxes.

Income from job: $3800 a month after taxes and pension contribution
Rental from 2nd bedroom: $575 a month
TOTAL INCOME: $4375

Expenses:
Mortgage: $950
Cable/Utilities: $225
Car expenses: $400
Food/gym/cell phone/misc. etc: $900
TOTAL EXPENSES: $2475

Credit Card debt: $8k
Student Loans: $10k
Car Loan: $12k at 4%
Mortgage: $90k at 4%

Checking Account: $1,000
Emergency savings: $0
401(k): $13k (From my old job..I do not contribute anymore, however at my current job I contribute towards a pension that is supposed to provide 60% of salary when I retire)

So theoretically, I could be saving $1900 a month. I've been putting everything left over into my debt, (and leaving me feeling broke every month!). But I figure if I stick this out, I could be credit card debt free by the end of the year and feel more financially secure next year.

My idea is to pay off the credit cards asap, then slowly create an emergency savings (6 months worth?), and also start extra retirement savings along with funds for a future wedding and hopefully vacations.

What do you think? If you were in my shoes, what would you do?

Sorry for the long and rambling post, just wanted to provide big picture of everything!

[Fishindude77]

Generally a pretty solid plan, but I would suggest you set aside and build at least $5-10K in emergency fund rather quickly, alongside paying things down. Never know when the car might break down or the furnace might quit. Wouldn't want to go further in the hole for that, if you didn't have to.

[bjl584]

I'd save up some emergency fund money first. Then start tackling the debt.

[Jluke]

You are in a good position to eliminate the debt.

What is the rate on the Credit Card(s)? Any opportunity/need to transfer/consolidate to a lower interest credit card offer?

You didn't list the monthly payments for the loans so of the 1900, not sure how much is left.

EF: consider adding either $250/month or $500/month to the EF; use the rest for the credit card until they are paid off.

Continue to live "poorly", even after the debt is paid off.

Research ROTH IRA for retirement savings.

Create a loan amortization schedule for the mortgage and for the car - available in excel. Track your payments and eventually play around to see the impact of adding extra to the mortgage.

[kork13]

Mostly agreed with the others... I would recommend holding at least $2500 as a basic emergency fund (1 month's expenses), then continue to hammer your credit cards. Once they're knocked out, split your available income between building up your EF & paying off your car loan.

However, at the same time that you're doing all of that (as in, start doing it right now), if your work provides any sort of matching contributions to your 401k plan, start taking advantage of that immediately, contributing enough to get the full match from your job. That will give you a better return on your money even than paying off your credit cards.

[autoxer]

So theoretically, I could be saving $1900 a month. I've been putting everything left over into my debt, (and leaving me feeling broke every month!). But I figure if I stick this out, I could be credit card debt free by the end of the year and feel more financially secure next year.

Keep doing what you are doing! If you reframe how you are thinking about it, then you won't feel broke. You are putting a lot of money towards improving your net worth every month. That should make you feel good. Hang a big chart on the wall, so you can visualize your debt reduction journey. Freeing yourself of the debt will make you feel much better than whatever stuff you might buy with the money.

[snafu]

Welcome to SA. Is your new job secure or are you still on probation? In the hope of being helpful, I suggest 1st adding to your $ 1K 'float' to at least $2,500. as an EF. If eligible, immediately join retirement plan to at least capture entire employer's contribution. That's free money you don't want to leave on the table. Please pay attention to your choices for retirement investment and their fees/costs. If you give us details we'll explain pros and cons.

What interest rates are you paying on Student Loans and credit cards? Have you sought any 0% CC options? These require attention to detail if you transfer current CC debt to a 0% card, you must be prepared to divide your current $ 8.K balance by the 12 - 18 months term [$ 665. each and every month for example] or the interest rate jumps alarmingly to 24% or more!

I've no idea what the $ 8 K credit card balance represents but suggest you walk through your home and identify the items you no longer use, no longer serves you, no longer need or enjoy and make a plan to sell on CraigsList, FB sale page or free selling sites in your community. Take a photo, writing a brief description following similar ads. Price according to other ads or half off original price or what you'd be willing to pay for the used item in current condition.

Items you don't use and don't need are classified as clutter, best gone, freeing up space. The point is to have it gone and recovering even a sliver of sum already sunk goes directly to CC balance.

[BudgetPronto]

I think that your plan looks fairly solid like another use said. Make your emergency fund your priority. You'll be thanking yourself later if you do.

[sfreeway425]

Thank you for all the support and advice! Just what I needed to hear right now. I was considering putting $500-$700 a month to CC debt and putting the rest aside for savings because I hate feeling poor and living paycheck to paycheck. But after reading the advice, I think it should be the other way around and it will all be worth it in the end.

I am half way through my 6 month probation at work and so far they like me... I signed up for their pension so after 30 years, I will (hopefully should) be getting 60% of the average of my top 5 years of income. Right now they deduct 6% of my income for that. I know I should still set up a separate IRA. Or continue funding my old 401k from my old job. My current job is with government and they don't offer matching 401K.

Credit card breakdowns:
Chase $1450 @ 23%
Best Buy $1300 @ 0% till 9/2016
Discover $5400 @ 0% till 9/2015, then 23% (this bal transfer had consolidated 10 credit cards, which I no longer use.. and I tried but failed at paying it off before the 18 month 0% rate ended)

Student Loans:
Loan 1: $700 @ 2.6%. Monthly pymt of $57
Loan 2: $10,500 @ 6%. Monthly pymt of $114

Car Loan:
$13k @ 3.99%. Monthly pymt of $275 with 52 more months..

I'm not too worried about the Student and Car Loans. But I cannot Wait until the day all of my credit cards are paid off!!

[riverwed070707]

Out of curiosity, what was the original balance on your mortgage? Are your property taxes high? I feel like your payment is really high for the balance of your loan. Are you in a position to refinance and lower your payment to free up more money to put towards your debt? A refi isn't free but with rates down to 3% it could be worth it.

[snafu]

I wonder if your credit score is high enough to re-fi to another 0% card with a really low transfer fee rate. Another alternative might be a Line of Credit if you can negotiate a very low interest rate.