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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: JMB16 on July 27, 2016, 06:53:55 AM

Title: Typical College Kid
Post by: JMB16 on July 27, 2016, 06:53:55 AM
Hi All,

I'm new to the forum here, but have been poking round MMM for about 6 months now. I'm looking for assistance on how I can turn my financial life around, and directly turn my overall life around.

I've made quite a few large scale financial mistakes, and I'm only 24 years old. The most ironic aspect being my career is in accounting. I was hoping others here with much greater experience could review my current situation and help assist me in getting out of this financial mess.

Currently I have $170K of student loans (including capitalization of interest, as I'm 6 credits away from having my masters) with $90K of it being through a private lender, 37K through a parent plus loan and the remaining all from financial aid (loan in my name). Shockingly, my previous company paid for the majority of my masters, so most of this is from my undergraduate degree. I've  paid down about $5K in total over the past year and half. The parent plus loan is the only one that has enetered repayment, as the others will start up in June 2017. I'm looking at a monthly bill of about $1571 in total for my loans.

My other debts are :
1) 2013 Subaru impresa (bought new)   $10,289 left at 8.9%    (315.00 a month for another 36)
2) Motorcycle (2nd mistake)                  $11,231 left at 8.9%    (238 a month until loan is paid)

I currently have about $3K in a IRA ( rollover from 401k at previous job) and about $1K in a roth I started a while back. I have $1500 cash in my savings account as well. I'm currently making $50K a year, or about 33k net of taxes(2600 a month). I'm renting with friends ($450 a month) to help cut costs. My co-signer on my car loan, went through bankruptcy, so the car loan got called in, and I could potentially give it up.

In total my monthly expenses are about $1400 for my bare essential. I have been using all spare cash to pay for my remaining courses, which is why I have stopped putting away in my retirement accounts or savings. 

I was hoping the MMM community would be able to assist me in the best course of action, I'm really dedicated to doing anything it takes to fix the mess I have put myself in. I'm deeply worried about not just paying all this off, but being able to make the monthly payments.

Thank you,

Title: Re: Typical College Kid
Post by: Fishindude on July 27, 2016, 07:04:46 AM
An easy one is sell and get rid of the motorcycle debt and payment, and use that monthly money towards other debt.
My rule as always been we don't borrow money for toys.   The only thing we borrow for are appreciating assets such as real estate, or income producing opportunities such as your education or a business venture.

At your age a car loan is understandable, but work towards paying cash for your cars as soon as possible in life and you will be ahead of your peers.

Focus on putting your education to work as soon as you can, getting as much income out of it as possible, so you can get free and clear of debt and start accumulating $$.
Title: Re: Typical College Kid
Post by: plog on July 27, 2016, 07:08:03 AM
My co-signer on my car loan, went through bankruptcy, so the car loan got called in, and I could potentially give it up.

I'm showing my age, but I use to approve credit in the 90's.  Maybe its changed in the 2 decades since, but in the 90's if that car went back via bankruptcy it would show as such on your credit report and be counted hard against you. You wouldn't get the big mark of death bankruptcy notice at the top of your report, but you would get a line item on that car that said 'included in bankruptcy'.   

Title: Re: Typical College Kid
Post by: mozar on July 27, 2016, 08:03:47 AM
When I was 25 I was 135k in student loan debt. I got my masters in accounting as well and my first job out of grad school making 54k. I kept my rent to around 500 a month for the next 5 years and paid off 100k of it. I'm 33 and I have 8k left. So it's doable. It will suck though. My advice is to take risks with your career. I was able to get big raises by negotiating with recruiters every couple years. I went from 54k to 60k, then 65k, then 75k, then 94k, all from learning how to negotiate.
Title: Re: Typical College Kid
Post by: Gimesalot on July 27, 2016, 09:18:12 AM
You do realize that you "bare" essentials are $1400 and your loans are $1571, so you need to earn  $2971 per month to stay afloat.  You earn significantly less than this amount.  Your hair is on fire in a bad way.

Here's my advice:

Sell the motorcycle
Sell your car

You are spending 21% of your take home on toys.  Yes your car is a toy, not a reasonable car for commuting.  Take any money you have left over and buy a reasonable, i.e. cheap but reliable car. 

Be honest about your spending.  The idea that a single 24 year old man who has room mates is spending $1400 as a "bare" minimum is difficult to believe.  There's probably a ton of fluff in your budget and given your very low salary and your very high debt, you are barely on track to retire at 70 much less any time before then. **Just as an example, my bare minimum budget with my DH included is around $1200 per month.**
Title: Re: Typical College Kid
Post by: abhe8 on July 27, 2016, 09:39:24 AM
I would also look at moving to a place within bike or walking distance of your job.
Title: Re: Typical College Kid
Post by: Sibley on July 27, 2016, 09:40:04 AM
OP, you need to track every penny you're spending for a while, because you've got fluff in there. Given your age and circumstances, you're probably spending a lot more on take out and alcohol than you realize (yes that's a stereotype, but things become stereotypes for a reason).

Sell the car and motorcycle, buy something cheap and reliable.
Title: Re: Typical College Kid
Post by: JMB16 on July 27, 2016, 09:52:00 AM
Thank you for all the responses.

Currently what I include in my bare essentials is:

Rent: $450
Utilities: $60
Food: $100  (more often then not this is less)
Insurance: $200 (for car and bike)
Gas: $100 (more often then not less than this)
Car Payment: $315.00

I would more likely than not be upside down on the car ( 82K miles) as for my last job I was driving 200 a day in order to keep costs down. I also would be upside down on the motorcycle as well, as it's total worth is only about 6-7K.

I do live about 10 miles from work, so biking could be an option for a few months, but living in CT, with the winter weather being completely unpredictable biking wouldn't be a year around option.

I typically only get take out 1x a month ( usually on Chipotle) and I am not a drinker (I understand the stereotype). I have been putting any extra money into paying for my final 4 classes for school (Summer 16 and Fall 16) which is roughly 14K. I made the decision to go to a upscale private school for graduate school, as my previous employer was paying for me to attend. I'm now on the hook for the final 4 classes.

Is it worth selling the car for a much cheaper car, even if I have to roll over a 1-2K? As for the motorcycle, I'm not sure how to get rid of this, other than trading in the car and the bike at the same time?



Title: Re: Typical College Kid
Post by: Sibley on July 27, 2016, 11:43:59 AM
Well, glad you're not following the stereotype :) That would be boring, and accountants have enough stereotypes (I'm a CPA, well aware of them).

You're still in grad school, so don't have much of an income, is that correct? Given that you're in accounting, you should be able to find a decently paying job once you've graduated. Income helps, and the accounting firms hire a TON of new grads, so that's a pretty good bet if you're so inclined.

What can you get doing a private sale, for both vehicles? It'll be more than trade in value. And really, even if you're upside down right now, you'd still be better off wiping the majority of the debt off your books. Can you borrow from family to make up the difference? You can also check what you'd get with a trade-in for both and roll it into a new (used) vehicle loan.

I would urge you to do plenty of research on options with your SLs once you graduate. I'm not going to say you should do any particular thing, but you should be well educated on the options so you can determine what your best choice is.
Title: Re: Typical College Kid
Post by: ariapluscat on July 27, 2016, 12:25:37 PM
Not advice, but a similar age and I wanted to congratulate you on finishing your masters so fast!
Title: Re: Typical College Kid
Post by: patchyfacialhair on July 27, 2016, 12:39:57 PM
It's simple math: Take your income, minus your expenses, and that's what you have to put toward your debt. Increase your income, and decrease your expenses. Wash, rinse, repeat.

Really hope the "upscale private school" has a career placement office or some way for you to use the school's network connections. Meet face to face with the important people in your industry, and hopefully at least one of them likes you enough to pay you more than you're making now.

Title: Re: Typical College Kid
Post by: JMB16 on July 27, 2016, 12:56:43 PM
Thanks for the help everyone.

To address the income question, I am working full-time at a small CPA firm (20 people or so) and currently making 50K as a salary, which I know is lower than I believe I desire. I have talked to my firm about a raise, but that was almost shut down until next June (review time). My goal was to finish my degree in December 2016 and start applying to other firms after next April(2017) with the hope the degree (Masters in Taxation) will be more appealing with my experience and land me a position at a higher salary.

I should have put the private school comment in quotations, as I really am paying IVY league pricing, but not going to be getting the same return, which was the largest mistake so far I have made.

From the research I've done, I'd have to roll over roughly $5-8K from the bike and car if I wanted to get a new loan on a new (used) car. I know looking at the private sale for the bike would be tricky because of how the loan is set up with company (ie it's a credit card).

Does anyone recommend trading in the bike and car in order to get a new(used) car even with the rollover? I know I don't need anything special to get back and forth to work.


Title: Re: Typical College Kid
Post by: jjcamembert on July 27, 2016, 01:00:01 PM
8.9% is a ridiculous auto loan rate today, but I don't know what your credit situation is. With good credit you can get around 2%.

Definitely sell the motorcycle.

Maybe you need the car for transportation, but I'd lean toward selling that too especially because you're worried about making payments. You don't want that kind of stress in your life. Look into public transportation and biking, and if that's absolutely not possible then look into a reliable used car under $10k.

This is just a hiccup; good job thinking about your financial future and I'm sure you'll be doing well once you get out of school and find a good job!
Title: Re: Typical College Kid
Post by: Matt (Semper Fi) on July 27, 2016, 01:16:54 PM
I agree with those who say to sell the car and bike.  You will take a hit, but look into the possibility of a short-term loan to cover the balance due.  Use the most economical vehicle for your commute until the vehicles sell.  If the weather is still agreeable at the time that they sell, pick up a cheap-ass bicycle and make the commute.  As far as when bad weather kicks in: can you temporarily borrow a car from family or friends?  Even a POS is better than the situation in which you now find yourself.  Also, what is the possibility that you can find housing closer to where you work/go to school?  Then commuting/needing a car would be a non-issue.

Congratulations on the hard work you've put in at school!  And don't get too down on yourself in regards to your current straits -- I was a fool for about 20 years of my adult life, and it has only been in the past 6 years that I have pulled my head out, hahaha!  You are light years ahead of me in some ways -- you have 20 more years than I do to grow a thick and luxurious 'stache!