thebeat

I really need some serious help when it comes down to my personal financial situation. I'm going to provide alot of financial information about myself, consider you dont have my name, location..etc..Not that I really care...

I'm having some serious issues saving/planning for my immediate and future financial wellbeing.

I'm 21, engaged and I make around 26k before taxes (I work in Radio) . I have several loans including a car loan in which I have $14,000 at (7.25%) borrowed with 4.75 years left to pay on...roughly $4,000 in low intrest rate student loans, and close to $1,800 in credit card debt (6.75% APR). I make enough to pay off my bills during the month but with very little (less than $100) left at the end of the month.

Obviously investing is out of the quesiton because i do not have enough money to get started, just putting the less than $100 a month in a savings account won't get me anywhere in the short term or even long term for that matter...

Does anyone have any ideas what I can do to begin saving for me future or investing somewhere so I can generate some kind of short term return in order to save for long term? (if that makes sense) Any insight would be much appreicative.

wonderwench

My first comment is: saving even $100 (or less) a month is a good thing. Interest compounds over time: developing a regular habit of saving will benefit you.

My next comment involves your car. How much equity do you have in it? ie, if you sell it, will you clear enough to buy a cheap used car outright so that you can get rid of the car payments. As much as possible, I have tried to avoid car payments by buying used vehicles and then driving them for years. (I am on my third vehicle I have ever owned). Attaching your ego to a car is expensive; I think you'd be better off saving the money instead of consuming it.

thebeat

It's a used car, 2001 Jeep Grand Cherokee...and being in this industry, I got a great deal on it because the radio station does alot of business with the dealership...I got it financed and everything for 15k might be able to get 17k out of it if I sold it, which has been on my mind...

I agree with you on the comment " I think you'd be better off saving the money instead of consuming it." I think I would be better off without a $300 payment...I'll have to weigh my options...but that is certainly something to consider.

Thanks

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random

NoSoup

Starting with $0 and depositing $100 monthly over 10 years (at a rate of return 12%, compounded monthly and taxed at your marginal rate of 28%), you will save $18,616.
Initial balance: $0
Total deposits: $12,000
Total interest earned: $9,189
Total taxes paid: $2,573
Total Saved: $18,616

_____________________________________


Starting with $0 and depositing $100 monthly over 30 years (at a rate of return 12%, compounded monthly and taxed at your marginal rate of 28%), you will save $158,908.
Initial balance: $0
Total deposits: $36,000
Total interest earned: $170,706
Total taxes paid: $47,798
Total Saved: $158,908


+Total saved: $158,908


Starting with $0 and depositing $100 monthly over 30 years (at a rate of return 12%, compounded monthly and taxed at your marginal rate of 28%), you will save $158,908.
Initial balance: $0
Total deposits: $36,000
Total interest earned: $170,706
Total taxes paid: $47,798
Total Saved: $158,908

___________________________________

12% is the average return of the stock market over the last 40 years or so. I figure I'd just through that out there, to show that a hundred bucks a month does add up.

I would agree with wonderwench, if you can get away without a three hundred a month car payment, I would do so.

Just to show you what $400 a month can do for you...

Total saved: $635,632


Starting with $0 and depositing $400 monthly over 30 years (at a rate of return 12%, compounded monthly and taxed at your marginal rate of 28%), you will save $635,632.
Initial balance: $0
Total deposits: $144,000
Total interest earned: $682,822
Total taxes paid: $191,190
Total Saved: $635,632


Just something to keep in mind

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I have an aura of reliability and good judgement.

Just in case you were wondering...

Rodney

Lose the car; aside from putting more money away, with a pad of just $100 a month over expenses, you don't have the resources to survive any serious bumps in the road, like prolonged unemployment or a salary cut, in which case you might have to give up the car anyway (and there's always the risk that your financing will be under water at that point and you might have to _pay_ to get out of the loan.)

I'd also try to pay down the credit card debt, although your rate is unbelievably good. Is that a permanent rate, or a trial rate that expires?

Some people are big on debt and leverage and cash flow, but personally I think the best thing is to be _out of debt,_ except for things like house payments, which frankly are necessary and can be seen as long-term investments in the right market (not sure this market is the right one).

Merlocke

You're not that far in - and you've still got a ways to go as far as life and jobs and what not. I agree with the majority though - lose the car payments and go for something more affordable - so that if an emergency does occur - you've got some leeway.

Take a look at the book "the wealth barber" when you get a chance. It's got some great insight to saving money and preparing for the future.

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-=[ Merlocke ]=-

Warf Rat

First, I must pay homage to NoSoup, he is right on all points. Now I will join the rest of the crowd. The car, according to you might fetch $2000.00, that should be enough to buy something that should last 3 years. Things may be much better for you then, but I know it's not an easy decision.
Does your employer have a 401K opion??????????????
That's very important to this conversation. NoSoup, used numers that included taxes paid. If you put the money away pre-tax the added savingsa is yours. Most employer sponsored retirement plans permit loans, as long as they are paid in-full when you leave. This addresses the point Rodney brought up about bumps in the road. However, you will probably find some other way to solve your problems than taking that loan, that's usually the case.
So, look at the returns that NoSoup listed, and think for a moment.

Old car, money set aside, rate of return that will make you happy after the first 10 years. It sounds good to me.

If you don't have a retirement plan at work then forget everything I just said and use the numbers after tax that No Soup gave you.
No matter what, find a way to start now. I is the best thing for you and your future family.

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A day late, and a dollar short.

ccvirginia

get rid of the jeep. buy an older reliable car (honda, suburau, etc.)

Bamrak

Get about $1,000 or so in a savings account before you pay anything else off. This will provide you with an rainy day fund so that if the brakes or your washer goes out, you won't have to go back to a credit card which would just start the cycle all over again. If you sell the car, start working on the credit card, but don't use it while trying to pay it off.

Is a second job feasable? You can clear about 800 a month doing a crappy $7 an hour job for 30 hours a week. That would have your credit card paid off in 9 weeks, and your student loan paid off in 5 months. In 7 months and 1 week, you can either quit the second job because you're debt free ( you DID sell that crappy car and stopped using the credit card during this time, right?). Your other option is to work the second job for a while to pile up cash.

With the suplus of no loan or car payments, and the second job funds, you could start saving for a newer car, or even a house instead of trying to scramble to put back $100 a month.

Hope that helps!

rubicon

Most financial advisors (and book authors) tell you to pay off your credit card first - before you try saving or investing.

The first step is cut up your cards or put them in a ziplock bag of water and into the freezer. Create a budget and be honest with yourself on where you can cut back. Eating out, clothes, movies, and CDs are always things we can do without in the short term. Pay off your highest balance card, then knock out the others.

I don't have any advice about your vehicle, but if it's beyond your means pehaps you should consider something used and less expensive, assuming you're not "upside down" on your outstanding loan balance.

Then, take the money you were paying for the credit cards and put that away. Start with an ING Savings Account which yields around 2%. When you're comfortable and your financial outlook changes, start looking at other investments.

Oh, when you've cut up your credit cards just pay cash or use a check.

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How you do anything is how you do everything.

cmc

There are 10 Principles of Financial Freedom.
The 1st two are as follows:
Law 1: Tithe 10% of your income to the spiritual source that renews you ( your church, if you don't have a church, try some out and select one !)
Law 2: Save 10% of your income.
The APPLICATION of the first two laws Opens up your consciouness to wealth, prosperity, opportunities & financial freedom.

If you don't know from personal experience about tithing, then you can start with 5%.
The active faith of tithing opens Your Mind to the Source of all wealth, which is God.

To live the life you want, the life you deserve, the life waiting for you, you need additional income, more opportunities, better ways to enjoy serving your family and community and the mindful and emotional freedom to Not worry about money, rather to happily utilize your mind to create value & service for others, and to build wealth and to Enjoy prosperity.

When / if you read this, and want Laws 3 - 10, write your response & I'll share the other 7 secrets with you. ( on one condition though - you don't tell anyone else)

Merlocke

Why not share the rest of them?

I like the 2 laws of investing.
1) Don't lose your capital
2) Don't forget rule #1

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-=[ Merlocke ]=-