Author Topic: Single dude feeling poor. Edited.  (Read 2920 times)

Sand Dreamer

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Single dude feeling poor. Edited.
« on: July 06, 2017, 07:07:53 PM »
Hello all,

I am coming to you with something I believe I know the answer to, however I would really like some alternating opinions and ideas.  My situation is this I have been at my current job almost 5 years, at that time I will become vested in a pension.  I just took on a new role and received a 9% raise, over the next 2 years my salary will increase no less than a total of 30%. If the salary amount is important at the end of the 2 years my salary will be 50k and possibly a little more. I also receive a bonus yearly it isnít substantial, but all money is good.  This year the bonus will be 500.00 and it increase 100.00 each year I am employed.   I am 32 years old and have made some crap decisions with money in the past and am working to clear all of that up.  I took on a part time job on weekends a few months ago and that generates a bring home amount around 700.00 a month.  So I currently bring home about 3100.00 a month after taxes.  To comment on some of the stupid I have done when I left my last job I cashed out my 401k which was around 10k and used it for some home repairs, I regret that daily.   My question is what should I attack?  I donít necessarily have a goal of super early retirement, of course if I can get there that would be great, but my goal has always been age 55 at the latest ( I would receive my full pension at this time).  Knowing that I have these raises coming to me over the next 2 years should I fully focus all the extra funds to paying off debt, saving, or a mixture of both.  My debts are as follows and I have rounded these numbers.
Mortgage 56,000---Home is worth 120,000  Interest rate 4%  Payment 373.00 per month
HELOC 9500.00-Intrest rate 6%-85.00 per month
Personal loan 9300.00-10%-320.00 per month
Student loans 25k total-3 loans (payments  of 100-50-95) average interest rate 3%
Credit card 6000.00-12%-250.00 per month
I have no car loans, and I never have, never plan to.
As far as my savings I have not done the best in that arena as I briefly touched on above.  My 401k is around 4k the company only matches 50.00 a month and personal savings is around 2k. 

I know some answers may be to sell the home which would clear all of my debt, but the house is on a family farm and I have no intention of selling it, nor is it an option for me.  I am open to any suggestions other than that.  I know after reading many of the case studies that my salary(FT job) seems very low, however for the region of the country I live in it is higher than the average household income without considering my second job.
I have no wife and no kids and have no problem busting my ass to earn extra income which is why I have taken on a second job already.  As far as my spending habits food likely tops the budget here as I am mostly on the go.  I have experimented with food prep on the weekend for the upcoming week and found that it saves me around 50.00 a week and will be implementing that again this week.  I just feel as though even with the extra income from job 2 I am not making progress as quickly as I would like.  The upcoming raise will help speed things up, but I want to make sure I am allocating things in the best way possible.   Thanks for any insight.




« Last Edit: July 06, 2017, 07:31:29 PM by Sand Dreamer »

Guide2003

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Re: Single dude feeling poor. Edited.
« Reply #1 on: July 06, 2017, 07:57:20 PM »
Hey Sand Dreamer, welcome to the forum and you're not in that bad of a situation compared to others we've seen! Maybe think about posting a full "case study" with your expenses. From my first look it seems like your low mortgage payment (does that include T&I?!), lack of a car payment, and no dependents indicates that there's some substantial room for optimizing and throwing money at the credit card, personal loan, and then HELOC. Aside from maybe getting the 401K match I wouldn't be doing any investing with some of those higher interest rate loans to pay off.

I know nothing about HELOCs, but would it be possible to increase that to pay off the personal loan and credit card and consolidate the payment? If not, I think your best bet is to live as frugally as possible for 6 months or so, making the minimum payments on everything and throwing everything else you can scrape together at the credit card. In the free time you have at night while not paying for entertainment, run your taxes for next year and see if you can decrease your withholding to get more cash in your pocket now that can be thrown at the loans. Once that's paid off continue in "debt avalanche" style from highest interest rate to lowest. Once you are down to just the student loans and the mortgage I'd stop throwing extra at the loans and turn to investing in your 401k and Roth.

le-weekend

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Re: Single dude feeling poor. Edited.
« Reply #2 on: July 06, 2017, 08:47:12 PM »
I cannot write a detailed reply just now, but I took a quick glance and compared your numbers to my own debt history and I just want to say, you can do it! I paid off every penny of debt (except mortgage) by buckling down, getting used to cooking, carefully spending within tight guidelines etc. I thought the day would never come but it did and it's great. Prob most important factor is "pay yourself first" meaning, put a bit in savings with every paycheck so you don't have to use a credit card when unexpected expenses come along!

Sent from my SM-G930T using Tapatalk


Kyle Schuant

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Re: Single dude feeling poor. Edited.
« Reply #3 on: July 06, 2017, 10:59:04 PM »
You don't mention your spending, that will be key. First you look at spending, second you look at income.

Earnings $3,100 - spending $4,000 tells us something. You need to fix spending NOW.
Earnings $3,100 - spending $3,100 tells us something else, your spending is too high but at least you're not sinking.
Earnings $3,100 - spending $1,200 tells us something, your spending is low so the only way up is more income.

If you don't know, then spend a month writing down EVERYTHING you spend money on. Within a week you'll see patterns and start instinctively dropping your spending.

Once you track your spending, you will think of 10 things to reduce it, and others can suggest more things.

Pay your debts off from smallest to largest. This is the advice of people who deal with people in debt stress. Logically you pay off the one that leads to the largest interest payments, but psychologically it's better to from smallest to largest, so you can wipe a debt out and never have to think about it again. This reduces stress, and when you're less stressed it's easier to deal with things, think of new solutions to spending and earning problems, and so on.


PapaBear

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Re: Single dude feeling poor. Edited.
« Reply #4 on: July 07, 2017, 06:18:35 AM »
Pay your debts off from smallest to largest. This is the advice of people who deal with people in debt stress. Logically you pay off the one that leads to the largest interest payments, but psychologically it's better to from smallest to largest, so you can wipe a debt out and never have to think about it again. This reduces stress, and when you're less stressed it's easier to deal with things, think of new solutions to spending and earning problems, and so on.

Good that it doesn't matter in this case, since the Credit card debt is both the smallest debt and has the highest interest :)
Just to be very diligent: What are the individual interest rates of your student loans? If there are outliers here, that might change the payoff order a bit.

+1 on the spending breakdown or detailed case study. The people here at the forum will help you to uncover every kind of savings potential and unnecessary spending and then some.

I like the calculators at https://unbury.me/ and http://undebt.it/debt-snowball-calculator.php
With the calculators, you can calculate how long it will take you to pay back all your debt with your current payments and what kind of difference another xxx USD per month on top makes in terms of years and total interest paid. I think this can be quite motivating, especially if you think about reducing your expenses (e.g.,  "No eating out budget means I get debt free xx months earlier" and so on) or adding more hours to your side gig. They also have a comparison of the snowball (pay smallest debt first) and the avalanche method (highest interest first).

slappy

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Re: Single dude feeling poor. Edited.
« Reply #5 on: July 07, 2017, 06:22:31 AM »
Can you get a roommate and throw that money at the debt?

Laura33

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Re: Single dude feeling poor. Edited.
« Reply #6 on: July 07, 2017, 07:57:26 AM »
Well, I am guessing that you feel tight and like you're not making progress because about 45% of the net income from your primary job goes to debt -- and that's with only a relatively tiny mortgage!

I think this is the time for patience.  Most people get themselves into this situation through impatience, i.e., "needing" to have something before they have earned the money to pay for it.  So naturally, when the light bulb goes on and they realize they have dug themselves a hole, that same impatience wants to fix the problem, right now, and they get very impatient and discouraged thinking about years of cutting back to pay off the debts.  But if they did get a windfall that provided a miracle fix, they'd just go back to their old ways, because they never fixed the impatience/need for immediate gratification that caused the problem in the first place.  The only real "fix" is actually being forced to slog through it a month at a time, so you get to feel the full impact of past choices on your future options -- that way, the next time you want something NOW, you at least have personal experience reminding you where that leads.

For you, first, track your expenses closely.  Do a full case study if you can, folks here have many suggestions for cutting, and without car loans or kids or anything, there are probably areas you can cut. 

Second, throw all available cash at the credit cards until you clear those out.  Then take all of the cash that frees up and throw it at your personal loan.  That alone will free up $670/mo. and make you feel like you have more breathing room.  [Note: if you have cut your budget to the bone and then some to clear this debt, this is a reasonable place to allow yourself a small treat as a reward, so you have something to look forward to.  But only if you have really cut back and sacrificed to get here; otherwise, it's just an excuse to go back to living up to your income.]

At that point, I think you can look at your savings.  Does your 401(k) have a match?  If so, invest at least what you need to get the full amount of the match.  And then figure out what you need for your emergency fund, and devote $50-100/mo. to increasing that $2K you have.

But with the $670 you freed up (plus whatever you have from cutting your costs), you should still have some free cash left.  So I would throw all of that at the HELOC -- even though the monthly payment is not very high, the 6% is a fairly high interest rate, and if it is like most HELOCs, (i) the interest rate is floating and therefore will rise if interest rates go up, and (ii) the payoff term is 10 years, but the minimum payment is amortized over 30, which means that $85/mo. you are paying is artificially low and will leave you a balloon payment at the end of the 10 years. 

Once you get the HELOC clear, you will be in great shape.  At that point, I think you can focus on maxing out your 401(k) and/or starting an IRA (depending on how good/bad the options are in your 401(k) and how much the fees are).  But that's down the road, so post again when you get there.  :-)

loyalreader

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Re: Single dude feeling poor. Edited.
« Reply #7 on: July 07, 2017, 08:32:49 AM »
I'd be tempted to roll the credit card, personal loan and HELOC debt into a new mortgage. You are paying an incredibly low monthly payment currently and all of that debt represents less than 80% of the worth of the house, if you have that correct. You should still be able to find rates around 4%, especially if you take a loan for less time (20 or 15) which would 'force' you to 'save' more at a faster rate.

This only works if you understand what you are spending and won't get into debt again. That's a big 'if' and it can all go wrong if you aren't being honest with yourself.

Rosy

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Re: Single dude feeling poor. Edited.
« Reply #8 on: July 07, 2017, 05:16:25 PM »
Well, I am guessing that you feel tight and like you're not making progress because about 45% of the net income from your primary job goes to debt -- and that's with only a relatively tiny mortgage!

I think this is the time for patience.  Most people get themselves into this situation through impatience, i.e., "needing" to have something before they have earned the money to pay for it.  So naturally, when the light bulb goes on and they realize they have dug themselves a hole, that same impatience wants to fix the problem, right now, and they get very impatient and discouraged thinking about years of cutting back to pay off the debts.  But if they did get a windfall that provided a miracle fix, they'd just go back to their old ways, because they never fixed the impatience/need for immediate gratification that caused the problem in the first place.  The only real "fix" is actually being forced to slog through it a month at a time, so you get to feel the full impact of past choices on your future options -- that way, the next time you want something NOW, you at least have personal experience reminding you where that leads.

For you, first, track your expenses closely.  Do a full case study if you can, folks here have many suggestions for cutting, and without car loans or kids or anything, there are probably areas you can cut. 

Second, throw all available cash at the credit cards until you clear those out.  Then take all of the cash that frees up and throw it at your personal loan.  That alone will free up $670/mo. and make you feel like you have more breathing room.  [Note: if you have cut your budget to the bone and then some to clear this debt, this is a reasonable place to allow yourself a small treat as a reward, so you have something to look forward to.  But only if you have really cut back and sacrificed to get here; otherwise, it's just an excuse to go back to living up to your income.]

At that point, I think you can look at your savings.  Does your 401(k) have a match?  If so, invest at least what you need to get the full amount of the match.  And then figure out what you need for your emergency fund, and devote $50-100/mo. to increasing that $2K you have.

But with the $670 you freed up (plus whatever you have from cutting your costs), you should still have some free cash left.  So I would throw all of that at the HELOC -- even though the monthly payment is not very high, the 6% is a fairly high interest rate, and if it is like most HELOCs, (i) the interest rate is floating and therefore will rise if interest rates go up, and (ii) the payoff term is 10 years, but the minimum payment is amortized over 30, which means that $85/mo. you are paying is artificially low and will leave you a balloon payment at the end of the 10 years. 

Once you get the HELOC clear, you will be in great shape.  At that point, I think you can focus on maxing out your 401(k) and/or starting an IRA (depending on how good/bad the options are in your 401(k) and how much the fees are).  But that's down the road, so post again when you get there.  :-)

+ 100:)

We know all about impatience - do tell us about your spending in a case study, if you want to take it to the next level. You never know what good tips you might get. Beyond that - I totally agree with Laura's approach.

I see the appeal of loyalreaders approach with a HELOC, but you know, when your home is this important to you, I don't think this is a good idea. I think you'll be just fine tackling one debt at a time. You can do it!

tawyer

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Re: Single dude feeling poor. Edited.
« Reply #9 on: July 07, 2017, 10:39:20 PM »
Your hair is on fire. Thankfully, you appear to have a fire hydrant nearby. Your ratio of post-tax income to mortgage is really good, which indicates to me that considering your cost of housing, you are fairly well paid. I also think it's great that you are willing to take on a second job and make your own food to increase income and decrease expenses, indicating that perhaps the spending habits that have gotten you all these debts are in the past.

I'm going to make a few assumptions and suggest some goals:
0. Keep paying the monthly minimum on all your lines of credit
1. Pay off the credit card completely by end of December 2017
2. Pay off the personal loan completely by end of June 2018
To succeed you will have to know where all of your money is going, as others have indicated. Track everything for a month and share the results here. I think that these are the first major things that need to happen and that everything else is details.

See you in one month with your expense sheet for July. :)