Author Topic: Advice  (Read 5566 times)

TrainingWheels

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Advice
« on: August 30, 2016, 03:13:19 PM »
Hello everyone! Just wanted to say hi to the community. So being new to the community and to the site in general I just need a lot of advice. So a little about me, I am in my mid twenties as well as my wife and we are actually making decent money for where we live and our ages. We make about $80k a year gross. Unfortunately me and my wife were not raised in a frugal or money saving homes. My family always lived pay check to paycheck. I feel like we are drowning and never making progress and I want a better life for my family. So where are we financially?

Student loans - Between the two of us we have about $80k loans at about 3.5% interest
Cars - we both have car loans $11k for my wife (2.7% interest), $14k for me (9% interest) was 18% but refinanced recently
Housing - we currently rent and spend about $1000 a month (we are talking about getting a home that way we are at least putting money towards something tangible rather than throwing our money in the air)
Car Insurance - $170 through Geico
Debt - $5000 in credit cards
Cell phones - $220 Verizon
Saddest part (retirement 403b) $700.

I realize I have so much to learn and I am about to probably get a huge reality check and quite frankly I need it. I honestly have no idea how we have managed to get in the situation we are in but it is our fault and I want to do better. Probably our biggest problem is that we eat out, ALOT. Some months we spend over $500 in fast food/restaraunts. It's rediculous I know. Please, I am open to any and every advice. Thanks for your time and for allowing me to be a part of an awesome community.

redbird

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Re: Advice
« Reply #1 on: August 30, 2016, 03:28:13 PM »
What you posted is a good start of one, but I would suggest writing up a whole case study post. Then you can get more suggestions of how to improve your financial situation.

Here is the link to how to do a case study.

Bracken_Joy

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Re: Advice
« Reply #2 on: August 30, 2016, 03:38:16 PM »
As mentioned by the previous poster, a full Case Study will help get you specific feedback. A couple things stand out to me:

1. You are drowning in those cars. Sell, buy used and cheaper, eat any loss you take- it's the sunk cost fallacy to hold onto the car just because you'll "take the loss" if you sell now. You've taken that either way, it's just a question if you throw more good money after the bad.
2. Likely related: your auto insurance seems high to me, if that is a monthly cost. Shop around!
3. What interest rate is your CC debt at?
4. Track your expenses! Use Mint, or Personal Capital, or You Need a Budget (YNAB), or the Google Sheets monthly budget template. Whatever you do, TRACK IT. This is the single most powerful thing you can do.
5. Rent isn't throwing money away, and owning homes builds equity VERY SLOWLY. Most of your money on housing, whether rented OR owned, is "thrown away". That's just how it is. Read a couple posts to clarify this misconception. You can still go ahead with a goal of home ownership (we did), but do it with your eyes wide open. It is not a financial panacea.
http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/
http://affordanything.com/2015/11/24/is-renting-better-than-buying-should-i-rent-or-buy/
http://www.forbes.com/sites/rogerma/2016/07/12/are-you-really-just-throwing-your-money-away-when-you-rent/#53c096121014
http://www.gocurrycracker.com/renters-for-life/

And to answer the question "which is better financially", use this calculator: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

6. For a nice intro to investing, read the "Stock Series" by J L Collins: http://jlcollinsnh.com/stock-series/

Hotstreak

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Re: Advice
« Reply #3 on: August 30, 2016, 04:38:37 PM »
Welcome!  And Yikes!  You are in a "hair on fire" debt emergency.  The good news is that you have a decent salary & can get this fixed within a few months.  Sell your cars and buy one cheap used one to share, stop eating out & spending money on any non-essentials, pay off your credit card, start investing at least a minimal amount in your retirement accounts.  Once your debt is paid off you can invest more.  Your rent looks fine, but if you can rent a cheaper place closer to work then go ahead and do that.

While you are making those changes you need to start tracking your spending.  I like YNAB for ease of use (though it is $55/year).  Mint.com is okay too, or go old-fashioned and use excel or a piece of paper.  Everything needs to be tracked, including what you buy with cash.  After 2-3 months you will have a good idea how much you are spending, how much you've been able to put towards debt payoff, etc.  This is your monthly budget, which you can use in your Case Study if you decide to post one.  In the mean time, go ahead and read the MMM articles and the forums, you will find that most questions have been discussed already.

LeRainDrop

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Re: Advice
« Reply #4 on: August 30, 2016, 05:20:28 PM »
Adding on to Bracken_Joy's list:

7.  Is that $220 for cell phones the monthly cost for both you and your wife?  If so, are you absolutely locked into that plan?  It is incredibly expensive!  I'm not frugal on my cell phone either -- totally unlimited plan for an iPhone with AT&T -- yet still my bill is $80 per month (for one person).  There are MUCH cheaper options available.

marty998

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Re: Advice
« Reply #5 on: August 30, 2016, 05:24:52 PM »
Mmm....those credit cards cannot be a good thing. Stop adding to them! Hide them somewhere really inconvenient if you have to. Pay it down to zero, then think about whether you really need the items you purchase on there.

Then start throwing $500 a month at the very least to you car loan, in addition to the monthly payment.

Embed good habits, then tackle the major issues, like the choice to buy a house or pay off student loans or both

EnjoyIt

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Re: Advice
« Reply #6 on: August 30, 2016, 07:49:56 PM »
Welcome aboard.  The best thing you could have ever done is realize you have a problem and looking to find solutions.  As hotstreak posted above, you are in a debt emergency.  The best proof that you are in a debt emergency is that in a world of low interest rates where car loans go for 2.9% or less you have a car loan at 9%.  Even worse, it started off at 18%.  Holly shit!  To put it bluntly you are broke.  You are 1 bad event from going bankrupt.  Your debt is at this point an emergency.   Luckily your rent is not that high and you have a solid income to dig yourself out relatively quickly.  All you need to do is realize that you are in an emergency situation and do everything possible to make it stop.

Step 1:  You need to create a budget so that you can see exactly where your money is going and then work on trimming the fat.
Step 2:  Write up a case study for yourself.  Believe it or not doing these two steps is mostly for you to realize where your money is going and how to allocate it most optimally.
Step 3: Something needs to be done about the $14k car loan.  Either sell it outright and share a car or buy something much much cheaper, or find a way to pay it off ASAP.
Step 4:  Same goes for credit card debt.  I would bet the rate on that credit card is well over 10% and needs to go ASAP

Things you can do right now to save money:
1) Stop eating out so much
2) Consider walking or riding a bike to work to save on gas, Consider public transit
3) Cut cell phone bill
4) Go through your home and sell some of your useless clutter
5) Shop around for insurance

Just think about it, cut out all fast food and cut your phone bill in half will give you $600 a month to pay off your credit card in just 8.3 months.

Cwadda

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Re: Advice
« Reply #7 on: August 30, 2016, 09:24:25 PM »
Quote
Student loans - Between the two of us we have about $80k loans at about 3.5% interest
Not bad!

Quote
Cars - we both have car loans $11k for my wife (2.7% interest), $14k for me (9% interest) was 18% but refinanced recently
How much do you owe on the cars vs. what are they worth? Get rid of them and buy older, used ones.

Quote
Housing - we currently rent and spend about $1000 a month (we are talking about getting a home that way we are at least putting money towards something tangible rather than throwing our money in the air)
Not bad!

Quote
Car Insurance - $170 through Geico
Okay.

Quote
Debt - $5000 in credit cards
Pay these off ASAP.

Quote
Cell phones - $220 Verizon
Are you locked in a contract? I recently switched from AT&T to Airvoice and cut my phone bill from $65 to $30/month.

Quote
Saddest part (retirement 403b) $700
Once you start reducing your expenses and paying off debt, you'll have this up. In a year you could have $20k saved or more.


Your hair is on fire and you need to pay off that heavy debt (9%+ interest rates) ASAP. So stop eating out, learn to cook (and have fun while doing it), and gear up for a challenge that you will find wonderful.

TrainingWheels

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Re: Advice
« Reply #8 on: September 03, 2016, 03:30:32 PM »
Thank you all for your input. I have set down and made a montly budget and to be completely honest I was horrified at looking where my money has been going. I will definitely shop around for cheaper auto insurance and phone plans. As for the debt we will definitely be attacking it vigorously to get it gone.

former player

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Re: Advice
« Reply #9 on: September 03, 2016, 04:19:00 PM »
You are both young, both working, both earning respectable wages.  You've recognised the problem and are determined to do something about it.  You will be fine: it'll just take some work to get where you want to be.

Make enquiries about what tax-free savings for pensions are available to you and your wife.  You may not want to jump into putting money away on a pension until you have worked up your plan for dealing with your debts (particularly the high interest ones), but knowing what you options are (do either of you get matching money from your employer?) will help your financial planning.

The other thing I would suggest is: learn to cook, either one or other of you but preferably the two of you together.  There are plenty of threads here with advice on shopping and cooking, and links to sites such as Budget Bytes.  You should be able to save money, eat much more healthily, develop your kitchen skills and turn cooking into an activity that you and your wife enjoy together.  You don't need to start out complicated, and you can build up to a weekly or fortnightly rota of home-cooked food which suits you and your lifestyle and is much more fun to prepare and eat than going to fast food restaurants.

Rosy

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Re: Advice
« Reply #10 on: September 04, 2016, 07:36:08 PM »
Quote
You are both young, both working, both earning respectable wages.  You've recognised the problem and are determined to do something about it.  You will be fine: it'll just take some work to get where you want to be.

I totally second that!:)

Cell phones is an easy quick fix - we have T-Mobile unlimited plan - 2 phones - plus I pay an extra $15 for unlimited calls to Germany - total $134 mo.
So unless like me, you need to call overseas you can drop your cell phone payments down to $119 a month and have an unlimited plan with no contract.

Car Insurance - get a few quotes on the phone and then get price confirmation by e-mail. Done!
Geico for instance gives you a 10% credit if you take a safe driving test on line - worth it!

401K - if you are eligible, find out if there is an employer match - that is free money - do not throw that away!
Make sure you contribute the 3% or 6% monthly that is matched by your employer.
Then every time you get a raise up your contribution by half of what your raise was - painless retirement savings!

Welcome to the forum! Don't forget to check out the other section, like the challenge threads, it will be fun!

Oh and yes, do something about that utterly atrocious 9% car loan and devise a plan on how to pay off that 5K debt ASAP - you can do it!:) We have all been where you are now:)


« Last Edit: September 04, 2016, 07:40:45 PM by Rosy »

markstache

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Re: Advice
« Reply #11 on: September 04, 2016, 08:46:59 PM »
Nothing new to add, but wanted to encourage you to keep it up.

One thing not mentioned so far: have you talked with your partner about this? My wife is naturally frugal, but early conversations about priorities and spending were hard for both us. It gets better with practice. I think a good way to get the ball rolling is with a frugal date, like a picnic or trip to the library.

You have a 403b. Are you working edu?

TrainingWheels

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Re: Advice
« Reply #12 on: September 05, 2016, 10:21:58 AM »
Nothing new to add, but wanted to encourage you to keep it up.

One thing not mentioned so far: have you talked with your partner about this? My wife is naturally frugal, but early conversations about priorities and spending were hard for both us. It gets better with practice. I think a good way to get the ball rolling is with a frugal date, like a picnic or trip to the library.

You have a 403b. Are you working edu?

Me and my wife have both discussed this and have come to reality with what we need to be doing. Not education, I am actually a Registered Nurse

TrainingWheels

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Re: Advice
« Reply #13 on: September 12, 2016, 03:41:32 PM »
Quick question. I have a shopped a little around for cheaper auto insurance and unfortunately all of the ones I have checked out are much more expensive. Any advice?

former player

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Re: Advice
« Reply #14 on: September 13, 2016, 01:37:11 AM »
Quick question. I have a shopped a little around for cheaper auto insurance and unfortunately all of the ones I have checked out are much more expensive. Any advice?
Are the quotes based on accurate information about you and your wife?  Is there is any old or inaccurate information which shouldn't be taken into account?

Does it make a difference if you insure the cars separately or as a household?

What coverage are you asking for?  Can you go for a higher deductible (do you have an emergency fund to cover a higher deductible)?  Can you limit cover to named driver only?  Given your debts and no savings you do need cover for damage to your own cars and adequate liability limits.  But ask what other limitations are available to bring down quotes.

Is there any driver training that you can take to lower your premiums?  You must avoid getting any tickets for bad driving/speeding - you can't afford them.  If there are any tickets or accidents on your record, try again after they are old enough to drop out of the calculations.

Livingthedream55

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Re: Advice
« Reply #15 on: November 25, 2016, 09:07:20 AM »
How's it going, Training Wheels?