Author Topic: Back to it! I need advice now that my income is back up  (Read 5545 times)

SpendyMcSpend

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Back to it! I need advice now that my income is back up
« on: January 05, 2015, 02:17:16 PM »
I make about 85,000 a year now.  After health insurance, pre-tax transportation, and a 3% 401k contribution, my take-home pay is about $4400 a month.  I'm trying to figure out the best way to pay off loans and save money.

My current stats:
Age 31, single, major metro area (expensive)
401k:  $105,000
Student loan 1:  $22,000 3.3% interest rate (variable) - private
Student loan 2:  $13,000 2.75% interest rate (fixed) - federal
Student loan 3:  $13,000 6.7% interest rate (fixed) - federal

Now should I be directing my money to a Roth IRA or paying off my loans?

Rough budget:
Rent:  $850
Internet/Electric:  $75
SL 1 minimum:  $230
SL 2 minimum:  $83
SL 3 minimum:  $167  (Total all 3 loans $480)
Gas: $35
Food/Entertainment/Going out/Cabs:  $500
Personal care (pedicures, haircuts, makeup, razors, i'm a single girl):  $100
Clothes (work etc.):  $50
Gym: $50 (have to!)
Phone:  $120 (in contract, high data use, prob should fix this)
Miscellaneous:  $100

Total spending:  $2360
401k savings per year:  $2550
Leftover AFTER TAX:  $4400-2360 = $2550

I could also save pre-tax and those numbers will be a bit different with the tax benefits and what my take-home would be. So for example, I could save 20% pre-tax instead and that would bring my take home to around 1800-1900 per paycheck ($3800 a month) and only about $1340 per month take home to save/pay down debt with.

Thoughts?  I like mental tricks and I often have trouble saving if it's available in my bank account.




« Last Edit: January 05, 2015, 02:19:29 PM by Meadow »

ShoulderThingThatGoesUp

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Re: Back to it! I need advice now that my income is back up
« Reply #1 on: January 05, 2015, 02:21:34 PM »
Seems you have plenty of room to max out your 401k - why don't you?

SpendyMcSpend

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Re: Back to it! I need advice now that my income is back up
« Reply #2 on: January 05, 2015, 02:24:16 PM »
Should I do that before paying my loans off?

seattlecyclone

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Re: Back to it! I need advice now that my income is back up
« Reply #3 on: January 05, 2015, 02:24:51 PM »
6.7% is too high of an interest rate. Put every spare cent toward Student Loan 3 until it is dead. With your income it should be done by Independence Day. After that, increase your 401(k) contributions to the point where you're on pace to max it out ($18k) by the end of the year. If you still have extra money after doing that, it's kind of a toss up between accelerating loan payments or doing additional investing. 2.75-3.3% is a very manageable interest rate and you'll probably do better by investing, but there's a psychological component to having the loans gone that you may value more.

ShoulderThingThatGoesUp

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Re: Back to it! I need advice now that my income is back up
« Reply #4 on: January 05, 2015, 02:32:53 PM »
Should I do that before paying my loans off?

You didn't list any assets - do you by any chance have a checking account with a big pile of money in it earning 0.02% interest?

SpendyMcSpend

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Re: Back to it! I need advice now that my income is back up
« Reply #5 on: January 05, 2015, 02:46:13 PM »
I just have my 401k which I listed, nothing in cash savings.  I use whatever cash comes in to pay off debt usually.

Future Lazy

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Re: Back to it! I need advice now that my income is back up
« Reply #6 on: January 05, 2015, 03:18:37 PM »
Food/Entertainment/Going out/Cabs:  $500

Keep this up for 10 years, until you're 41, and you'll have spent $60,000 you didn't need to.
Invested, this is...
$94,288 after 10 years.
$371,777 after 25 years.
http://www.bankrate.com/calculators/retirement/roi-calculator.aspx

In other words, you could keep going out, or you could pay off your student loans instead. 

To play a different game, let's assume you spend 25% of this on beers in bars/mo.
That's $125/mo in beer. At $5 per beer, that's 25 beers in bars.
If there's 154 calories in a beer, and you're drinking 25 beers a month, that's 3850 calories consumed in beer.
That's slightly more than 1lb of body fat a month, in beer alone.
13.2 lbs of body fat per year.

No wonder you "have to!" gym membership. :0 Not only are you paying grotesque amounts of money for the calories in (food), you're paying for calories out (gym).

Of course, my example makes assumptions, but you can just replace the variables with your own factual experiences.

Personal care (pedicures, haircuts, makeup, razors, i'm a single girl):  $100
Clothes (work etc.):  $50

I'm a little confused what being a single girl has to do with this. Are you saying that if you weren't a single girl, this expense would disappear because... Dating/married women don't keep up with 'pretty' expenses? Hmm...

Why aren't you able to:
Do you own pedicures?
Cut your own hair?

Do you continue to buy makeup, even though you have plenty of makeup? If so, why?

Not gonna touch razors, women shaving is too deeply ingrained in American culture. :)

Will you clothes spending go down after ~1yr at your job, or is $50/mo in clothes just your normal budget?

Once again: $1800 per year, $18,000 over ten years.
Invested:
$28,287 after 10 years.
$111,533 after 25 years.
http://www.bankrate.com/calculators/retirement/roi-calculator.aspx

You didn't list any goals in your post. Seems like you're making a fair amount of money with no direction for it, so it finds it's own direction pretty conveniently. What are your financial goals?

Challenge: Leave all of your plastic magic money cards at home for one week; freeze them in a block of ice to keep them out of your hands. Take with you, in cash, only exactly what you need to get to and from work for the day. Plan all your purchases. Take with you, in cash, only what you intend to spend while out.
« Last Edit: January 05, 2015, 03:22:04 PM by KaylaEM »

SpendyMcSpend

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Re: Back to it! I need advice now that my income is back up
« Reply #7 on: January 05, 2015, 03:31:49 PM »
Are you saying I shouldn't eat?  lol

Future Lazy

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Re: Back to it! I need advice now that my income is back up
« Reply #8 on: January 05, 2015, 03:37:28 PM »
Maybe more accurately that you shouldn't lump "Food" with "Going Out/Entertainment" with "Cabs", unless you want everyone to think you only eat at restaurants, and only take cabs to get there. :0 Fancy.

GreenPen

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Re: Back to it! I need advice now that my income is back up
« Reply #9 on: January 05, 2015, 04:07:25 PM »
How much did you make in 2014? Since it sounds like your income was down last year, your top priority might be to max out your 2014 Roth IRA.

SpendyMcSpend

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Re: Back to it! I need advice now that my income is back up
« Reply #10 on: January 05, 2015, 04:15:58 PM »
about 59,000

mm1970

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Re: Back to it! I need advice now that my income is back up
« Reply #11 on: January 05, 2015, 04:17:49 PM »
Are you saying I shouldn't eat?  lol
Ha! No.  But that's high.  (I mean, I was a single girl, and I easily spent that back then, and that was 2 decades ago in an expensive city.  I get it.  But I've reformed.  And I reformed at about the age you are now.)

So, food-wise, figure out if you can cut that by a third.  That can be eating out 1/3 less, not taking cabs anymore if that's 1/3, eating food when you go out that is 1/3 cheaper, skipping the beer, whatever.

And then - on girly stuff (I admit, not so girly) - $100 a month?

So, how often do you really have to replace your makeup?  Minimize makeup use.
Haircuts - go for something simple.  My haircut is basic, and it's 2x a year, at $30 a pop.  I'm not suggesting  you go that far, but...trim it, so to speak.
Pedicures - I'm freaking 44 years old and I've never had a pedicure.

Gym - not going to bust you on that, I'm a gym rat, I belong to 2 gyms.

I would hit the 6.7% hard and then up the 401k to max out the $18k

GreenPen

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Re: Back to it! I need advice now that my income is back up
« Reply #12 on: January 05, 2015, 04:50:20 PM »
about 59,000

Hum... well I would still consider maxing out a 2014 Roth IRA before paying off loans. This could also serve temporarily as your emergency fund, since it looks like you do not have one. Then you can attack the heck out of that 6.7% loan.

justajane

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Re: Back to it! I need advice now that my income is back up
« Reply #13 on: January 11, 2015, 01:53:45 PM »
I agree with others that you need to kill student loan #3. With your income and being single and no dependents, this is the time to get rid of all that student loan debt. It's not going to get any easier as you get older.

Try raising your monthly payment to $200 instead of the minimum. Then watch how much more every month starts going towards principle. This might galvanize you to raise it even more. That's what I did with my loans, and I managed to get rid of them fairly quickly.

EconDiva

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Re: Back to it! I need advice now that my income is back up
« Reply #14 on: January 11, 2015, 01:59:03 PM »
Very off topic...do you mind explaining how you got such a significant increase in pay in one year?  What industry are you in?

SpendyMcSpend

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Re: Back to it! I need advice now that my income is back up
« Reply #15 on: August 26, 2017, 12:01:40 PM »
Very off topic...do you mind explaining how you got such a significant increase in pay in one year?  What industry are you in?

I'm a good negotiator.  In Fall of 2015, I switched jobs again to 105,000 and then got a raise to 108,500.  After staying there for a year and a half I was offered 125,000 to work somewhere else.  When I went from 59,000 to 85,000, I declined an offer for 75,000.  I also negotiated up to 85,000 from the initial 80,000 I was offered.  I then told the recruiter who contacted me that I wouldn't leave for less than 110,000 and ended up settling on 105,000.  For this job I just started this week, they initially offered me 120,000 but I pointed out it  wouldn't make sense for me to leave for less than a 15% increase.  Now I make 125,000 with a 10-30% year end bonus and a better 401k match.  So from 2014 to now I increased my salary by $66,000 and my bonus will be between $12,500 and $37,500 (pro-rated 1/3 of the year this year). 

Which brings me to why I'm here.

Now I am making 125,000.  I currently have 30,000 left in debt and $168,000 in my 401k in mutual funds (very low expense ratios).  I plan on knocking out the rest of my debt by the end of the year. 

I get paid 26 times a year biweekly.  So this turns out to be $4807 per pay period.  Knock out 35% for NY State and Federal taxes = $3124.  Knock out ~$164 a month for the high -deductible health insurance plan plus ~$50 give or take for dental, STD etc.  = after tax $150 off.  so about $2950 left in the paycheck.

Most of the time I get two paychecks a month so that is $5900 a month before I consider 401k.  I need to catch up this year since i only contributed $4200 so far.  So I need to put in about $2000 per pay period for the rest of the year.   They didn't say when the bonus is paid or what I will be getting yet exactly.  So if I do that then $4807-2000 = $2807.  $2807-$200 = $2607.  Then take out 30% in taxes = $1800 a paycheck.

$3600 a month.  I have a renter for my 2nd bedroom so my expenses are thus:

Rent:  $1000
Cell: $55
Gas/Electric: $75
Cable/Internet:  $110
Gym: $20
Various subscriptions: $20
Car Insurance (twice a year $425)
Total fixed expenses: $1380

Debt payments:
Credit card 1 (0% interest): $100 a month
Credit card 2: $75 a month
Credit card 3: $25 a month
Credit card 4:  $75 a month
Student Loan: $100 a month
Total debt payments minimum: $375

Total expenses:  $1755
Remaining for food/fun/debt payoff/savings:  $1845

Now here is where my main issue lies.  I have really bad spending control.  Even when I think I haven't bought anything, Mint says my shopping is $400 for the month of August.  My food/Seamless/restaurant/bars habit costs me $800-900 a month.  Most of my social activities are going out eating.  I hate cooking but I like delicious food.  One night I have Indian and one night sushi.  I also take cabs frequently at $10 a pop.  Amazon.com gets another $100 a month of who knows what.  So I end up using up all my extra (which admittedly just started to be a lot this week).

I want to make sure that I am using all this extra money the right way but I need a TaskRabbit to follow me around and slap me if I spend too much on food.  I can't realistically not order delivery so has anyone successfully just limited the price on what I can order, for example limit my delivery to $12 each time.  HELP!  It's like I just blindly act and don't realize how much it's hitting my pocketbook. I also get bored and food makes me happy!   I'm thin believe it or not I just love delicious food made for me.