Author Topic: Case Study: Low income noob needs direction  (Read 17120 times)

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Case Study: Low income noob needs direction
« on: March 29, 2015, 11:56:12 AM »
Hello world.

I'm a single college grad, age 26, looking to get my finances in order. I found this site and started reading, quickly realizing that there's plenty room for improvement. My main concern is my low income, but I'll let the numbers speak for themselves. I work at a state liquor store in Alabama. The job provides health and dental insurance, retirement, and a meager salary. I live with 2 others, so some expenses are split 3 ways. Basically I'm wondering how these mustachian principles work at the lower end of the salary scale.

Income

Salary   $1,952

Pre-tax deductions
Insurance    $18
Retirement   $118

Taxes
Federal        $105
State           $70
Soc. Sec.    $120
Medicare      $28

AGI = $1,493

Expenses

Rent                    $391
Car                      $100
Credit card interest fees   $120
Eating out           $230
Electricity            $70
Entertainment     $83
Gas                     $90
Groceries            $140
Internet              $20
Medicine             $10
Phone                 $100
Water/Sewer       $26
Beer/Alcohol       $70
Misc                    $6

Total = $1,456

Assets

I don't think I have any...

Liabilities

Credit cards
Card 1 Balance: $2,298 APR: 15.24%
Card 2 Balance: $888 APR: 11.99%
Card 3 Balance: $4,269 APR: 22.9%

Student loans

Loan 1: Subsidized  $1,478 APR: 6%
Loan 2: Subsidized  $412    APR: 4.5%
Loan 3: Subsidized  $5,508 APR: 3.4%
Loan 4: Subsidized  $2,800 APR: 3.4%
Loan 5: Unsubsidized  $22,237 APR: 6.8%

Currently I'm in deferment due to income, so I'm not paying anything.

Total = $39,882.46

I know some of these spending numbers look off, so I'm prepared for all the face punches. I know I'm in debt emergency phase, and I plan on putting more money towards the credit cards next month. Specifically, the one with the lowest balance to get a debt snowball going. The spending on restaurants is high, and I plan on reducing that. The $100 car spending is basically what I give my mom towards the lease. She takes care of the payments and insurance.

Early retirement isn't specifically my goal, but I could definitely use some financial independence. I'm not enamored with my current job, but not exactly sure what I'd rather do. Craft beer is a passion of mine, and I've thought about opening a brewery, but that takes an insane amount of capital. I studied music in college, but finally realized I didn't have the discipline or desire to do what's necessary to be a successful full time jazz musician. I'm decent with computers, built my last 3 for gaming. My hours at work don't leave me much time for a part time job. I'm definitely feeling a quarter life crisis, lol.

Any and all input is appreciated.
« Last Edit: March 29, 2015, 01:44:29 PM by Tenormadness »

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4658
  • Age: 11
  • Location: USA
Re: Case Study: Low income noob needs direction
« Reply #1 on: March 29, 2015, 12:13:50 PM »
Things that need to change:

- $80 worth of water? Your household of 3 uses $240 worth of water a month? This should be $50 for all of you combined. The electric is a little high too but not as outrageous.
- $100 for a phone is ridiculous. Go check out the communications superguide in the "share your badassity" subforum. You can't afford to spend more than $10-$20 a month.
- with $90 of gas, you're most likely spending too much time in your car. Move closer to your job or stop driving a tank.
- You're doing great on groceries, but spend too much eating out and boozing.

Explain what's included in your retirement deduction. Consider contributing to a traditional IRA to wipe out your tax liability after you get the card situation under control.

You should be able to easily trim a $200/month to apply to your credit cards. Worry about the student loans later.

caliq

  • Pencil Stache
  • ****
  • Posts: 675
Re: Case Study: Low income noob needs direction
« Reply #2 on: March 29, 2015, 12:19:03 PM »
Ahhh, $383 on going out (Eating out + alcohol + entertainment)?!  I get that you're young -- I'm 23.  But you need to stop.  Going out for some non-memorable nights when your monthly expenses exceed your monthly income is a terrible idea.

If you divert that entire budget to paying off the credit cards, you'll get to your goals a lot faster.  Your credit card interest rates are horribly high; do you have a good enough score to transfer those balances to a 0% intro APR card?  $120 + $383 = $503/month onto the card balance.

Also, you need to find out your student loan interest rates.  There's a federal website that has all the data on federal loans.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1413
Re: Case Study: Low income noob needs direction
« Reply #3 on: March 29, 2015, 12:23:03 PM »
Drastically reduce/eliminate the eating out, entertainment, & phone, & throw the savings at your credit cards. Do not charge anything more unless you can put it on a fully paid off card AND you can pay it off in full every month. When does the car lease end?

You need a higher paying job, period. You are losing time & money the longer you stay chained to an entry level job that has no growth potential. What would it take for you to teach music? Private lessons in TX are typically $50/hour. Can you code or test computer games? If you think you want to run a brewery, you should be interviewing for a variety of jobs in that line of work to see what is required & to get needed experience.

Genevieve

  • Bristles
  • ***
  • Posts: 320
Re: Case Study: Low income noob needs direction
« Reply #4 on: March 29, 2015, 12:28:05 PM »
How much is in your checking account? If you have more than $1,000 you can direct that towards the credit cards.

I agree, you need to make more. If you don't know what you want to do with your life, you can at least try to make more while you figure it out. Post some more thoughts about what you want as a career and perhaps the MMM forum can give you ideas.

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #5 on: March 29, 2015, 12:31:57 PM »
Things that need to change:

- $80 worth of water? Your household of 3 uses $240 worth of water a month? This should be $50 for all of you combined. The electric is a little high too but not as outrageous.
- $100 for a phone is ridiculous. Go check out the communications superguide in the "share your badassity" subforum. You can't afford to spend more than $10-$20 a month.
- with $90 of gas, you're most likely spending too much time in your car. Move closer to your job or stop driving a tank.
- You're doing great on groceries, but spend too much eating out and boozing.

Explain what's included in your retirement deduction. Consider contributing to a traditional IRA to wipe out your tax liability after you get the card situation under control.

You should be able to easily trim a $200/month to apply to your credit cards. Worry about the student loans later.

- The water number is off, I'm adjusting it.
- I can't cancel my current phone plan, I'm still paying for the phone.
- The car is a 06 Scion xB. I do drive 24 miles to work both ways though.

The $118 for retirement is just taken from my check each month. Well $59 per check. I'm pretty sure it's a 401a. I'm not sure if the state offers a IRA.

Ahhh, $383 on going out (Eating out + alcohol + entertainment)?!  I get that you're young -- I'm 23.  But you need to stop.  Going out for some non-memorable nights when your monthly expenses exceed your monthly income is a terrible idea.

If you divert that entire budget to paying off the credit cards, you'll get to your goals a lot faster.  Your credit card interest rates are horribly high; do you have a good enough score to transfer those balances to a 0% intro APR card?  $120 + $383 = $503/month onto the card balance.

Also, you need to find out your student loan interest rates.  There's a federal website that has all the data on federal loans.


I know I'm going out too much. Last month got out of hand (I started dating someone). I honestly don't know if my score is good enough to do that.

I use Navient for my student loans, and it just lists 11 or so different loans with different rates. What's the federal site?

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #6 on: March 29, 2015, 12:39:07 PM »
Drastically reduce/eliminate the eating out, entertainment, & phone, & throw the savings at your credit cards. Do not charge anything more unless you can put it on a fully paid off card AND you can pay it off in full every month. When does the car lease end?

You need a higher paying job, period. You are losing time & money the longer you stay chained to an entry level job that has no growth potential. What would it take for you to teach music? Private lessons in TX are typically $50/hour. Can you code or test computer games? If you think you want to run a brewery, you should be interviewing for a variety of jobs in that line of work to see what is required & to get needed experience.

I've never taught lessons before, so I don't really know where to begin. Plus my schedule would prevent me from giving lessons on the same days each week.

I took a programming class back in college, but remember very little of it. No idea bout the game testing thing.

The brewery scene here in AL is just getting started. There's a ton of room for growth, but most of the breweries are still small. So they're not really hiring a ton of people. To get in the industry I'd either need to volunteer or take a part time job at the bar making less money than I do now.

caliq

  • Pencil Stache
  • ****
  • Posts: 675

MDM

  • Walrus Stache
  • *******
  • Posts: 9713
Re: Case Study: Low income noob needs direction
« Reply #8 on: March 29, 2015, 12:42:27 PM »
The $118 for retirement is just taken from my check each month. Well $59 per check. I'm pretty sure it's a 401a. I'm not sure if the state offers a IRA.
Where does it go?  How will you benefit "in retirement"?

Just checking: the $120 for credit card fees - is that the total of your monthly payments?  I hope you're not paying for the use of the card itself...?

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #9 on: March 29, 2015, 12:51:50 PM »
How much is in your checking account? If you have more than $1,000 you can direct that towards the credit cards.

I agree, you need to make more. If you don't know what you want to do with your life, you can at least try to make more while you figure it out. Post some more thoughts about what you want as a career and perhaps the MMM forum can give you ideas.

I've got about $20 in checking, $80 in savings.

For a career I want something that interests me, or at least challenges me. If not a brewery then maybe a bar or bottleshop. I've given some thought to becoming an electrician, but I don't know if I would enjoy it. Plus it takes a lengthy internship period. Honestly something not public facing would be better. I can't stand working a register for hours on end. I wish I'd studied engineering in college. That would've solved all these issues. As a child, my family thought I'd be an architect because I played with legos endlessly. Ultimately I didn't pursue it.

The $118 for retirement is just taken from my check each month. Well $59 per check. I'm pretty sure it's a 401a. I'm not sure if the state offers a IRA.
Where does it go?  How will you benefit "in retirement"?

Just checking: the $120 for credit card fees - is that the total of your monthly payments?  I hope you're not paying for the use of the card itself...?

I honestly don't know all the details. I have to work for 10 years to be vested, then I can withdraw the money plus interest. That's my understanding.

That $120 is interest fees, not monthly payments.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1413
Re: Case Study: Low income noob needs direction
« Reply #10 on: March 29, 2015, 01:03:37 PM »
Can you stop those retirement payments? Surely you don't intend to be at that job for 10 years & the money needs to be going towards your debt.

rpr

  • Guest
Re: Case Study: Low income noob needs direction
« Reply #11 on: March 29, 2015, 01:04:53 PM »
I think that these retirement payments are probably mandatory esp. if he works for the state.


Sent from my iPad using Tapatalk

nereo

  • Senior Mustachian
  • ********
  • Posts: 11081
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Case Study: Low income noob needs direction
« Reply #12 on: March 29, 2015, 01:05:44 PM »
Hello Tenormadness, and welcome

You said you wanted some opinions from people at the lower-end of the earning spectrum, and, well here I am :-)  Your income isn't much different than mine was 8 years ago when I was your age, and for a variety of reasons (including going back to school) it isn't much higher now

As you and others have already pointed out, you have what we call a "hair-on-fire" debt emergency here, and you need to address it, pronto!  Baring a windfall or benefactor that means buckling down your expenses and throwing everything you possibly can at your debt, starting with those credit cards.  YOu have almost $8k in credit card debt, of which half is on a card with a 22.9% interest rate.  This is a five-alarm fire, particularly when it is three times your monthly AGI.  That fire needs to be extinguished.  Start by putting throwing any available cash at your total balance.  If you get a tax-refund, that goes directly to pay off the fund.  Make the spending cuts others ahve mentioned (for example, don't even THINK about going out to eat or spending money in bars right now) until those balances are paid in full.
Given that you are paying $120 in "credit card fees" per month I'm fairly certain these balances are growing right now, not shrinking!

Next, you absolutely need to know what the interest rates are on your student loans.  Given your age and the chances to SL policies over hte past 8 years, I would wager a guess that they are all of the 6.5% to 6.8% variety.  Given your low income, Income-Based Repayment may be your best option here, but you first find out your rates, research your options and then come back with questions.

Finally, some words of encouragement:  you absolutely can become debt free and live a kick-ass life, even with your current salary.  Your current debt-load gives you quite a headwind, but it is surmountable, and you do have some great things going for you right now (like rent+utilities <$450/month).

G'luck, I know it's possible. 

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #13 on: March 29, 2015, 01:13:09 PM »
Can you stop those retirement payments? Surely you don't intend to be at that job for 10 years & the money needs to be going towards your debt.

I think that these retirement payments are probably mandatory esp. if he works for the state.


rpr is correct, the retirement payments are mandatory. One of the "benefits" of state employment.

MDM

  • Walrus Stache
  • *******
  • Posts: 9713
Re: Case Study: Low income noob needs direction
« Reply #14 on: March 29, 2015, 01:43:32 PM »
Appears (based on http://www.rsa-al.gov/index.php/members/ers/) you can get some money back, even with fewer than 10 years.  Probably worth some time exploring there so you understand your options well.

You might also go to http://www.vertex42.com/Calculators/debt-reduction-calculator.html and download the debt payoff calculator.  That should make it clear how much you could save by paying the highest interest debt first.

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #15 on: March 29, 2015, 01:50:47 PM »
Student loan info updated with APR. Currently I'm paying nothing due to income, but I'm unsure when that will be recalculated. I probably make enough now to have to begin paying.

Appears (based on http://www.rsa-al.gov/index.php/members/ers/) you can get some money back, even with fewer than 10 years.  Probably worth some time exploring there so you understand your options well.

You might also go to http://www.vertex42.com/Calculators/debt-reduction-calculator.html and download the debt payoff calculator.  That should make it clear how much you could save by paying the highest interest debt first.

Thanks for the information!

I've read about different debt payment approaches. My plan was to pay the lowest balance first to create a "debt snowball". Am I understanding that correctly? And you're saying it would be wiser to attack the highest interest rate first?

swick

  • Magnum Stache
  • ******
  • Posts: 2884
Re: Case Study: Low income noob needs direction
« Reply #16 on: March 29, 2015, 01:52:42 PM »
Hi Tenormadness,

Glad you posted a case study. I think it would be very valuable to listen to the radical personal finance podcast on Opportunity Cost here:http://radicalpersonalfinance.com/169-if-you-understand-and-apply-opportunity-cost-to-every-decision-youll-coach-yourself-to-your-ideal-life/

The site is down for weekend maintenance, but you should check it out first thing Monday morning. It might give you some new perspective and things to chew on. If you get into the habit of looking at everything in regards to it's opportunity costs, it could literally change your life.

 It is definitely worth your time to figure out what you want to do now. is it possible to go to a career councilor or check out some online tests, do you know what your myers-briggs results are.

Teaching is a great option, but it is not for everyone. Not everyone who can do, can teach successfully. If you aren't 100% living breathing music, and have the time to learn the teaching aspect I personally wouldn't go that route. It does take a bit of time to get off the group and you would be responsible for all your own taxes and insurance etc. Might be a good idea for a bit of pocket money if you put it out to your friends and social network that you could give them a good rate if they are flexible on the times.

RE DEBT SNOWBALL: You have to do what is best for you, if it will give you a psychological push to get going then go that route but it is ALWAYS better mathematically to pay your highest interest debt first.


Suit

  • Bristles
  • ***
  • Posts: 274
Re: Case Study: Low income noob needs direction
« Reply #17 on: March 29, 2015, 01:55:03 PM »
In your post you mention starting off paying down the lowest dollar amount debts first. I would recommend you pay down the highest APR first and then pay off the next highest APR, then so on until you're paying off your lowest APR. Also, if I were you, I would be applying to every other job that I might be remotely qualified for in an attempt to get a better salary or at least better hours that would allow for a side-hustle.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1413
Re: Case Study: Low income noob needs direction
« Reply #18 on: March 29, 2015, 01:57:48 PM »
If I were you, I would be applying to every other job that I might be remotely qualified for in an attempt to get a better salary or at least better hours that would allow for a side-hustle.

Plus a shorter commute & no mandatory retirement withholding.

fields

  • 5 O'Clock Shadow
  • *
  • Posts: 83
Re: Case Study: Low income noob needs direction
« Reply #19 on: March 29, 2015, 02:08:21 PM »
Following

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #20 on: March 29, 2015, 02:41:10 PM »
Thanks for all the feedback. This is alot to take in. Myers-briggs type is INTP. I'll start refining my budget and searching for other job opportunities.

Figuring out what I want has long been an issue for me. I've got some serious thinking to do.

Sibley

  • Magnum Stache
  • ******
  • Posts: 3742
  • Location: Chicago, IL
Re: Case Study: Low income noob needs direction
« Reply #21 on: March 29, 2015, 02:59:34 PM »
Not sure if this applies, but from your description of "credit card fees" - don't neglect the easiest and most difficult thing to do. PAY ON TIME. It's one of the easiest things you can do to improve your credit score and overall situation. It's also one of the hardest things for some people to do. If this is a problem, put some sort of system in place to get it under control.

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #22 on: March 29, 2015, 03:02:33 PM »
Not sure if this applies, but from your description of "credit card fees" - don't neglect the easiest and most difficult thing to do. PAY ON TIME. It's one of the easiest things you can do to improve your credit score and overall situation. It's also one of the hardest things for some people to do. If this is a problem, put some sort of system in place to get it under control.

Maybe I don't have this listed correctly. The credit card fees are interest fees. They get added to my balance after I pay. Not technically charged to my account. Should I remove them from the expenses above?

I've only had one late payment, on the capital one card. Thus the 22% interest rate. Only made that mistake once lol.

caliq

  • Pencil Stache
  • ****
  • Posts: 675
Re: Case Study: Low income noob needs direction
« Reply #23 on: March 29, 2015, 03:09:18 PM »
What are you actually paying every month on your credit cards?  And what's the minimum payment?

Sibley

  • Magnum Stache
  • ******
  • Posts: 3742
  • Location: Chicago, IL
Re: Case Study: Low income noob needs direction
« Reply #24 on: March 29, 2015, 03:16:38 PM »
Not sure if this applies, but from your description of "credit card fees" - don't neglect the easiest and most difficult thing to do. PAY ON TIME. It's one of the easiest things you can do to improve your credit score and overall situation. It's also one of the hardest things for some people to do. If this is a problem, put some sort of system in place to get it under control.

Maybe I don't have this listed correctly. The credit card fees are interest fees. They get added to my balance after I pay. Not technically charged to my account. Should I remove them from the expenses above?

I've only had one late payment, on the capital one card. Thus the 22% interest rate. Only made that mistake once lol.

Nope, you're good with as written. I was just thrown a little by the wording you used. Good on paying on time!

SarahMD428

  • 5 O'Clock Shadow
  • *
  • Posts: 32
  • Age: 39
  • Location: Warwick, RI
Re: Case Study: Low income noob needs direction
« Reply #25 on: March 29, 2015, 03:19:29 PM »
Good for you to realize your hair is on fire, and at such a young age!

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1413
Re: Case Study: Low income noob needs direction
« Reply #26 on: March 29, 2015, 03:22:00 PM »
You are paying interest on the interest. Keep it as an expense.

If you are using a calendar of any kind, and you should be, mark the due date of every payment you have to make on it, & at least a day ahead of when it's really due. A calendar app makes this really easy because you can set up the reminder to repeat every month automatically. When you make the payment, preferably online from your checking account, just delete or erase that month's reminder. It's very risky to mail payments because the USPS has recently increased its time to deliver all mail -- we've recently had mail take 9 days.

You could set up automatic payments but that's too risky unless you are keeping a cushion of cash in your checking account; you don't want to bounce checks on top of your interest fees.

rmendpara

  • Pencil Stache
  • ****
  • Posts: 602
Re: Case Study: Low income noob needs direction
« Reply #27 on: March 29, 2015, 03:33:12 PM »
The short term answer is to stop spending on so many wants.

The long term answer is to get into a real career, otherwise you'll be forced to do things you don't like for a very long time just to get by and pay your bills.

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #28 on: March 29, 2015, 03:34:43 PM »
What are you actually paying every month on your credit cards?  And what's the minimum payment?

Minimum payments are $50, $25, and $118 each, for a total of $193. I've tried a few different ideas for repaying them. Adding $25 per bill, paying the minimum plus the interest fee, etc. But I've got a new method now.

You are paying interest on the interest. Keep it as an expense.

If you are using a calendar of any kind, and you should be, mark the due date of every payment you have to make on it, & at least a day ahead of when it's really due. A calendar app makes this really easy because you can set up the reminder to repeat every month automatically. When you make the payment, preferably online from your checking account, just delete or erase that month's reminder. It's very risky to mail payments because the USPS has recently increased its time to deliver all mail -- we've recently had mail take 9 days.

You could set up automatic payments but that's too risky unless you are keeping a cushion of cash in your checking account; you don't want to bounce checks on top of your interest fees.

I pay all of my bills online. I've got email reminders set up for all of them. Definitely don't have a cash cushion yet, so auto pay isn't an option.

Runningtuff

  • 5 O'Clock Shadow
  • *
  • Posts: 43
Re: Case Study: Low income noob needs direction
« Reply #29 on: March 30, 2015, 02:13:46 AM »
Some good tips there.
Definitely cut eating out and alcohol and apply to the highest credit card. Are you full time at work? A side hustle could help a lot - maybe browse that thread for ideas or do whatever you can find. How much would it cost to get out of the phone contract, or when do you pay it off?



gecko10x

  • Bristles
  • ***
  • Posts: 420
    • SawyerPF
Re: Case Study: Low income noob needs direction
« Reply #30 on: March 30, 2015, 05:38:10 AM »
How are you leasing a 9 year old car??

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Case Study: Low income noob needs direction
« Reply #31 on: March 30, 2015, 06:22:07 AM »
Are you living in a small town? You might consider making a very good resume - spend all weekend on it - and sending it to a job agency in the nearest substantial city. Doesn't need to be Houston or Atlanta, just something with buildings over 10 stories. You will temporarily increase your gas spending going to interviews, but if you get a job that isn't dead-end - even if it's office drudgery at a big faceless corporation - you are going to be in a lot better shape if you're concurrently working on the self-discipline to live below your means. Our generation was sold a pile of crap about always having a job that challenges you and keeps you interested. Sometimes you just have to grind.

Imustacheyouaquestion

  • Bristles
  • ***
  • Posts: 261
Re: Case Study: Low income noob needs direction
« Reply #32 on: March 30, 2015, 07:07:04 AM »
How many months left on the lease term for this car? Once this is up, since your mom is willing to help you out with a car, would she be willing to buy you a $5k used car and you could pay her back in monthly installments over time?

Until your credit card debt is at 0, you have a hair on fire emergency, which hopefully you realize already. Eating out should be 0 - don't pay other people to prepare your food until you're not paying interest on money you've already spent.
     
What goes into entertainment? In my opinion, until you're debt-free, you should cut this down to ONE of the following: Netflix/Spotify/Hulu/ or less than $10/month in Steam games. Anything else (books, DVDs, whatever) you should check out from the free public library. If you really have so little free time that you can't pick up another job, then you shouldn't have enough time to be spending lots of money on entertainment.

How much do you drive outside of your commute for work? Do you bike to the grocery or anywhere else?

How much would it cost to pay the phone off entirely? You might be better off buying out the phone, then switching to a low-cost carrier (lots of info on the forum about this).

Beer/Alcohol - this one's gonna hurt but you need to rein this in, majorly. A Kirkland-brand bottle of vodka costs less than $20 and has 40 shots of liquor in it. Since you work at a liquor store, there are plenty of similar cheap options at your hand. You shouldn't be buying more than that per month. If you want to taste fancy liquor, do it at an event where a distributor is paying for you to taste.

If you are serious about the craft brewing thing, start hanging out at a brewery and offer to volunteer. Sooner or later, they'll need an extra hand for a packaging day and you can pick up random shifts that way. This is also a good way to get free beer on occasion (you can't afford it otherwise).

Since you have built a few computers, maybe put up an ad on craigslist to build custom computers for people? You need to get creative about additional income streams.

Apples

  • Pencil Stache
  • ****
  • Posts: 933
Re: Case Study: Low income noob needs direction
« Reply #33 on: March 30, 2015, 08:25:15 AM »
My husband just got a job at a brewery as pub manager/assistant brewer in January.  He brings home $1540 or so a month, depending on tips.  But he has ZERO benefits.  Fortunately, I have a retirement plan and health benefits that are enough for both of us.  But what is your schedule?  You keep citing it as a reason to not have a second job.  Are you free in the mornings?  Evenings?  Some mornings and some evenings?  Could you work as a server/bartender somewhere on Fridays and Saturdays when they're busy, with the idea of building to more hours long-term?  Or offer to be in for suuuuper early mornings to help brew?  Brewing can be a 12 hour process some places, so you could be the 6 am - 12 noon helper guy.  For a concrete example, my DH got in (as employee #4 after boss, brewer, and part-time guy) helping to serve beer Thurs-Sat nights, and at first was some volunteer labor while brewing.  He's now getting paid to brew!  And started managing the pub-keeping track of how much food they  have, and what they need to brew soon, which led to a $1/hr raise.  Which in 2 months was super fast, but I could see happening over a year other places.

You have good benefits at your current job, and no dependents.  This is the time in life to work your a** off.  You have to be able to work sometime outside of your current position.

SilveradoBojangles

  • Bristles
  • ***
  • Posts: 318
Re: Case Study: Low income noob needs direction
« Reply #34 on: March 30, 2015, 03:00:33 PM »
I'm chiming in with a perspective from the lower income mustachians. I spent the last ~5 years as a PhD student, and had an income similar to yours. I also lived in a much higher cost of living area. I paid off about 5K in student loans, and $4K on a car payment during that time.

You absolutely can buy yourself some freedom, but you will need to get serious about implementing some of the suggestions in this post. Learn to cook, give yourself a strict food and entertainment budget, lower your phone bill as soon as you can, drive less, etc. Also, you may consider using YNAB or another budgeting app. As soon as the debt is gone, focus on building yourself an emergency fund, so you don't have to rely on credit the next time unexpected expenses come up.

You can definitely do it! And believe me, the freedom you will feel in being debt free is so worth it. Whatever happens career wise, the last thing you want is to be 30 and realizing that you've spent the last 4 years paying 120$ a month (that's almost $6K!) and your CC debt is the same or higher. 

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #35 on: March 30, 2015, 10:41:25 PM »
Thanks for all the responses folks! I have much more info to work with now. Honestly this is all a bit overwhelming. This is really gonna throw me out of my comfort zone, but I need that.

Some things I've noticed popping up often and would like to clarify.

The car. It's not leased, my mom purchased it and financed it. $2467 remaining with the last payment in October.

My job. The work schedule is like this. I either open or close the store. Shifts are 9-6 or 12-9, with 7-4 on Wednesdays when we get our delivery. My concern is about being able to get a second job and consistently work the same times. The only guaranteed day off I get is Sunday. With the above example of bartending thurs-sat night, I often close on any or all of those days in a given week. But yes, I have all day Sunday, mornings when I close, and evenings when I open available.

Entertainment. Mostly that's the odd redbox rental or steam sale, or hearing a band at a bar. My roommate has netflix, so that's covered.

Driving. My current commute is a bit much, yes. I work in one city and live in another. My roommates and I want to move downtown, which could put me further from work, but closer to the breweries (a potential source of income). I don't own a bike, so I drive pretty much everywhere. Alabama isn't exactly bike friendly. Few bike lanes, little awareness etc. I feel like this would be better downtown as well.

I'm putting together my budget for April, so these ideas will turn to actions soon enough!

Imustacheyouaquestion

  • Bristles
  • ***
  • Posts: 261
Re: Case Study: Low income noob needs direction
« Reply #36 on: March 31, 2015, 07:18:08 AM »
Re: work schedule. In the service industry, it's common for people to work multiple jobs. Your second job wouldn't necessarily expect you to be available for the same hours each week, and you could say upfront that you do shift work at a liquor store so your availability will vary. Some bars would still be willing to let you to pick up shifts as a bartender.

If you do the music lessons route, that also does not have to be the same hours every week. For example, once you know your liquor store schedule (I assume you get this once every two weeks?), you text little Johnny's parents and set up a time for his weekly piano lesson. I think you need to be looking for extra income streams any way possible.

Re: entertainment. $83/month is too high for someone with your kind of debt. You can cut the RedBox rentals entirely if your roommate has Netflix. You have to sacrifice some things if you want to make real headway on your debt! Can you post exactly what you bought for this last month? Redbox rentals are like $2, Steam games on sale are usually under $15, and bands at bars shouldn't be more than a $20 cover.

libertarian4321

  • Handlebar Stache
  • *****
  • Posts: 1372
Re: Case Study: Low income noob needs direction
« Reply #37 on: March 31, 2015, 07:43:36 AM »
I would cancel the retirement funding until debts are paid off.

Cut your eating out/alcohol/entertainment budget by $200.

Take the $318/month extra and get rid of the credit card debt.

Get out of that phone (I assume it's a cell phone, not a land line) contract ASAP, get a $120 per YEAR Tracfone (or similar) "pay as you go."  Use the extra $90 a month to retire the debt quicker.

Once the credit card debt is gone, take these monies, plus the money saved on "interest payments" and knock out the student debt. 

For entertainment, hang out on these boards, go to the library and hang out in the "personal finance/money" section, "rent" free DVDs from the library.

PhotoBrandon

  • 5 O'Clock Shadow
  • *
  • Posts: 15
  • Age: 35
  • Location: Seattle, WA
Re: Case Study: Low income noob needs direction
« Reply #38 on: April 01, 2015, 04:22:38 AM »
Another person here with low income and high debt, and wanted to say that it is definitely possible to make some headwind in your situation.  Going to try not to repeat too much what has already been said, just wanted to add a few things.

You have a college degree, I would try to find a better job.  There are a lot of administrative positions out there that you qualify for that would be a more stable schedule (usually monday - friday 9-5), better money and possibly have potential to lead to something else.  Most just require a college degree of any kind.

I would definitely look into booking some music lessons.  For now you have all day on Sunday, it shouldn't be too hard to schedule 4 hour long lessons for $40 each and still have most of the day free for your own devices.  Networking with the parents can be a good opportunity as well.

Do you have anything laying around that you don't need that you can sell?  If you have $200 worth of old games or clothes that you don't wear anymore or etc, now is the time to sell it and throw it at your credit cards.  Do you have any experience fixing up instruments?  If so you could probably find some at garage sales or craigslist that just need some valves replaced or new tuners or whatnot and turn a profit with minimal investment/time committed.  Or potentially even rent these out to students.

I would make it my goal if I were you to try to come up with at least your credit card interest ($120) in side hustles for April, and then see about increasing that for May.  If worst comes to worst you could easily manage that much by donating plasma once or twice a week, although you seem to have options with better ROI for the time involved at your disposal.


Full Beard

  • Stubble
  • **
  • Posts: 132
  • Age: 36
  • Location: Northern Virginia
Re: Case Study: Low income noob needs direction
« Reply #39 on: April 01, 2015, 09:01:29 AM »
Is UBER around in your area?  That may be a good way to get some extra money coming in as long as your vehicle qualifies.  With Uber you can work when and however long you want.

Are you in decent shape? Have you ever thought about joining the military?  Having a degree is good, but it could be even better if you could combine that with a certain skill that you learn in the military.  You don't have to go full time active duty, there is also the guard and reserve where you work one weekend a month and usually 2 weeks out of the year.  Sometimes the military will offer bonuses for certain career fields.  It's definitely worth talking to a recruiter and exploring those options. 

Good luck to you.

Skipper

  • 5 O'Clock Shadow
  • *
  • Posts: 25
  • Age: 31
Re: Case Study: Low income noob needs direction
« Reply #40 on: April 01, 2015, 09:46:23 AM »
Don't assume just because you are still paying off your phone that changing your service is off the table. I got a brand-new Verizon phone in April 2014, and learned about Republic shortly thereafter. In September I bought out the contract and switched to Republic. It cost me about $300 up front, but the long-term math told me to go ahead. Using the number of months left in the contract (about 18) I figured I'd still be paying less between Sept '14 and April '16 even with the chunk required to buy the Vzw phone. Best part? You can then sell the contract phone on eBay and get a chunk of it back.

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #41 on: April 03, 2015, 09:19:09 PM »
Thanks for all the feedback. I'm gonna try to find some gigs and start teaching lessons. I did some math, and even with $300 to pay off the phone I'd still save money in the long run by switching to Ting or something. Plus I could use the same phone.

For April I've made a budget that let's me save at least $200 to go towards my debt, but it's already off to a rocky start. Already overspent in the beer category. I'm not quite used to YNAB. In Mint I make a budget based on my total income for the month. YNAB wants me to make one based on the money I actually have. That makes it harder for me to see the big picture. But I'm working on it.

Is YNAB worth the $60?

caliq

  • Pencil Stache
  • ****
  • Posts: 675
Re: Case Study: Low income noob needs direction
« Reply #42 on: April 04, 2015, 08:27:34 AM »
Wait, you went over your budget for beer 4 days into the month?  I know you work in a liquor store, but....come on man.  Budgets don't mean shit if you don't actually follow them.  And it's one thing to go over on like, the 31st by $10 vs. going over 4 days in -- that means you shouldn't be spending another penny on alcohol all month.  Can you stick to that?  If not, you need to either reassess your budget (did you make it unrealistically low?) or reassess your relationship with alcohol.

I use Mint, but I've never tried YNAB (started with Mint and liked it so figured, why spend the money?). 

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #43 on: April 04, 2015, 09:54:39 AM »
Wait, you went over your budget for beer 4 days into the month?  I know you work in a liquor store, but....come on man.  Budgets don't mean shit if you don't actually follow them.  And it's one thing to go over on like, the 31st by $10 vs. going over 4 days in -- that means you shouldn't be spending another penny on alcohol all month.  Can you stick to that?  If not, you need to either reassess your budget (did you make it unrealistically low?) or reassess your relationship with alcohol.

I use Mint, but I've never tried YNAB (started with Mint and liked it so figured, why spend the money?).

I know it sounds terrible. Basically it was a limited release that only comes out once a year. I had to get some (Founder's KBS). I suppose some of these budgets are unrealistic when compared to my previous spending. Is it better to make a drastic change or a more gradual one I can actually stick to?

Here's what I'm trying.

gas              90.00
groceries           150.00
entertainment   15.00
eating out           30.00
beer              20.00
misc              15.00

FIRE me

  • Handlebar Stache
  • *****
  • Posts: 1099
  • Location: Louisville, KY
  • So much technology, so little talent.
Re: Case Study: Low income noob needs direction
« Reply #44 on: April 04, 2015, 09:56:02 AM »
Even if it is, you can't afford it.

Use what you already have. Use pen and paper or Notepad in Windows (assuming you run a Microsoft OS).

FIRE me

  • Handlebar Stache
  • *****
  • Posts: 1099
  • Location: Louisville, KY
  • So much technology, so little talent.
Re: Case Study: Low income noob needs direction
« Reply #45 on: April 04, 2015, 10:00:48 AM »
eating out           30.00
beer              20.00

Stop. Eating. Out. Eat cheap at home. Do not buy junk food. For work, brown bag peanut butter and jelly. Drink tap water.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4658
  • Age: 11
  • Location: USA
Re: Case Study: Low income noob needs direction
« Reply #46 on: April 04, 2015, 10:35:51 AM »
Story time! There was a brief period in my professional life where I was living on next to nothing. My rent + utilities was $600/month, I was taking home $860, and not eligible for any assistance whatsoever. Food was about $80/month, and consisted almost exclusively of less than 10 ingredients. I woke up at 630 to take the bus and be at work by 9. My room consisted of a mattress on the floor and a desk that was graciously gifted by a friend.

It's not fun, but you would never have guessed from looking at me that I was living significantly under the poverty line. I came up with creative activities that cost nothing and still managed to play golf once a month, go out to drink, etc. The real trick was to have a set blow money budget that I could use to maintain a semblance of normal lifestyle. $80/month and it rolled over. Everything that wasn't spent directly on feeding, housing, or transporting me to and from work had to come out of those $80. It's okay to live a little.

nereo

  • Senior Mustachian
  • ********
  • Posts: 11081
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Case Study: Low income noob needs direction
« Reply #47 on: April 04, 2015, 11:30:59 AM »
I know it sounds terrible. Basically it was a limited release that only comes out once a year. I had to get some (Founder's KBS). I suppose some of these budgets are unrealistic when compared to my previous spending. Is it better to make a drastic change or a more gradual one I can actually stick to?

You need to find a budget that you can actually stick to, AND that allows you to rapidly attack the principle on your loans.

The suggestions for cutting expenses in this thread are all goods ones, and I'd recommend following as many as you can.  But let's not mince words here - you have a hair-on-fire debt emergency going on.  You are paying almost $200/month on credit card interest alone, some of it at over 20%.  That's more than you are budgeting right now for groceries + beer.  Refinance to a low/0% interest card if you can, then throw every single thing you can at this debt - sell stuff on ebay if you can, pick up a side-job if you can.    It will be a painful 6-12 months (perhaps even 18 months), but if you buckle down now you can get out of this debt trap and start actually improving your financial life.
Good Luck!

Tenormadness

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Birmingham, AL
Re: Case Study: Low income noob needs direction
« Reply #48 on: April 04, 2015, 05:25:50 PM »
Story time! There was a brief period in my professional life where I was living on next to nothing. My rent + utilities was $600/month, I was taking home $860, and not eligible for any assistance whatsoever. Food was about $80/month, and consisted almost exclusively of less than 10 ingredients. I woke up at 630 to take the bus and be at work by 9. My room consisted of a mattress on the floor and a desk that was graciously gifted by a friend.

It's not fun, but you would never have guessed from looking at me that I was living significantly under the poverty line. I came up with creative activities that cost nothing and still managed to play golf once a month, go out to drink, etc. The real trick was to have a set blow money budget that I could use to maintain a semblance of normal lifestyle. $80/month and it rolled over. Everything that wasn't spent directly on feeding, housing, or transporting me to and from work had to come out of those $80. It's okay to live a little.

Thanks for your story. That lets me know this is possible. I think I'm making budgeting more complicated than it needs to be. Something more simple and flexible might work better.

You need to find a budget that you can actually stick to, AND that allows you to rapidly attack the principle on your loans.

The suggestions for cutting expenses in this thread are all goods ones, and I'd recommend following as many as you can.  But let's not mince words here - you have a hair-on-fire debt emergency going on.  You are paying almost $200/month on credit card interest alone, some of it at over 20%.  That's more than you are budgeting right now for groceries + beer.  Refinance to a low/0% interest card if you can, then throw every single thing you can at this debt - sell stuff on ebay if you can, pick up a side-job if you can.    It will be a painful 6-12 months (perhaps even 18 months), but if you buckle down now you can get out of this debt trap and start actually improving your financial life.
Good Luck!

That's a good way of thinking about it. I've been paying credit card bills for so long they just became normal. But from a different perspective that's $200 a month I could be saving or investing. I'm definitely making an effort to get my act together.

nereo

  • Senior Mustachian
  • ********
  • Posts: 11081
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Case Study: Low income noob needs direction
« Reply #49 on: April 04, 2015, 05:45:55 PM »
You need to find a budget that you can actually stick to, AND that allows you to rapidly attack the principle on your loans.

The suggestions for cutting expenses in this thread are all goods ones, and I'd recommend following as many as you can.  But let's not mince words here - you have a hair-on-fire debt emergency going on.  You are paying almost $200/month on credit card interest alone, some of it at over 20%.  That's more than you are budgeting right now for groceries + beer.  Refinance to a low/0% interest card if you can, then throw every single thing you can at this debt - sell stuff on ebay if you can, pick up a side-job if you can.    It will be a painful 6-12 months (perhaps even 18 months), but if you buckle down now you can get out of this debt trap and start actually improving your financial life.
Good Luck!

That's a good way of thinking about it. I've been paying credit card bills for so long they just became normal. But from a different perspective that's $200 a month I could be saving or investing. I'm definitely making an effort to get my act together.
Good for you.  I don't want to come off as being judgemenal or a hard-ass, especially since it's so easy to fall into these debt-traps.  Being on this forum I've been witness to quite a few low-income/high-debt individuals who have clawed their way out and towards some degree of Financial Independence over the course of a few years. I think you can do this too and I'm pulling for you, but it all starts with the realization that you have to make immediate and large changes.  Getting so used to paying monthly credit-card interest is just one example of how a debt-emergency can feel normal.

One other suggestion that I think you should look into - apply to put your academic loans into deferment because of "economic hardship".  Most of the time you can do this very easily for 6-12 months.  While you will still accrue interest (at ~6%), you can divert all of that money you normally pay to student loans toward your credit card debt.  It will allow you to get out from under that 22.5% debt.  Once that debt is gone you can continue paying your student loans, but you'll be able to throw a lot more money at the principle each month.


EDIT:  re-read OP; loans are already in deferment.  My mistake.
« Last Edit: April 04, 2015, 08:43:47 PM by nereo »