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There is no middle ground. I feel like I’m not saving enough for retirement, not paying enough on my crushing student loans, and letting those 2 things prevent me from living life. Here's my current budget: Monthly Income Gross income: $5400 401k: $324 (6% of gross pay) HSA: $83.34 Net income after tax and deductions: $3600 Girlfriend’s contribution: $550 Total net deposits per month: $4150 Monthly Expenses Rent: $1100 Utilities: $200 Groceries and Hygiene (Walmart): $450 Cell Phone: $100 Car insurance: $75 Internet: $35 DirecTV: $75 Gym: $25 Discover Student Loan (14000, 3.25%): $50 Citibank Student Loan (4030, 3.5%): $20 ACS Student Loan (2450, 5.0%): $50 Wells Fargo Sudent Loan (4000, 2.5%): $75 Federal Student Loans (68600, 5.4%-6.8%): $250 Parent Student Loan (12600, 0%): $200 Additional toward Student Loan Principal: $250 Emergency Savings ($8000 saved so far): $500 Engagement Ring Savings: $250 Miscellaneous: $400 Total: $4105 Assets Emergency Savings Account: $8000 Engagement Ring Savings: $1500 T. Rowe Price 401k (invested in the T. Rowe Price 2055 Target Retirement Fund): $1150 (don't judge me, I just started my career) Vehicle: 2001 Honda Accord, which is getting to be a real junker, but I own it completely Student Loans In total, its about $105,000. They are all currently in deferment, due to the fact that I am working on my Master’s. Fret not, my employer is reimbursing me for tuition. I've made it a point to at least pay more than the interest that is accruing, plus the $250 a month currently. They should be paid off by the time I retire.... I racked up around $20,000 during my first whirl at college. I went back to school in August of 2009 and graduated in December of 2013 with a BS in Electrical Engineering. I now work as an IC Design Engineer (I'm 29). The good news is that I have no debt besides the student loans. Every day, I change my mind on what I should be tackling. One day, I want to shift everything toward paying off the student loans. The next, I want to max out my 401k contributions and open a Roth IRA. The next, I want to focus on saving for an engagement ring, followed by the wedding (no help from parents here), followed by a house. What is the smartest play for me? I live in Colorado Springs, which is certainly no Silicon Valley, but I'm at least employed using my degree at a good entry level salary. I'm always hearing about layoffs in my industry though, and my company isn't in the best financial situation (i.e. we can only really see 6 months into the future, and if we don't pick up more work between now and then, we stop getting paid), so I really want to build up my emergency savings to ~20k. My finances are just stressing the crap out of me and I'm hoping opening a dialogue and hearing what my fellow goons think will help me develop a more solid plan. alwayslost fucked around with this message at 19:31 on Apr 25, 2014 |
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Apr 25, 2014 19:28
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Ditch DirectTV and get netflix if you have to. Buy a <$1000 engagement ring, you can still get a real dead african child rock if you're in love with that idea. Create a budget for your wedding, invite a reasonable amount of people. Get a keg or two and hire someone to dispense for a couple hours instead of doing an open bar, etc...
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Apr 25, 2014 19:45
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Have you looked into consolidating your loans? (I'm not sure if this is possible while deferred) Is the interest subsidized on the federal ones currently? If so, you could possibly divert some of that money elsewhere. The girlfriend looks to be paying half of rent, maybe you could ask for her to split groceries/utilities/DirecTV too? What are you spending $100+ a week at Walmart on? I'm not really qualified to say if you should be going all-out on either the 401k or loans, and can't really advise you what to do there, but I think the last few years of my 401k has earned double digit interest so you probably want to keep a healthy contribution there. Especially with the late start on opening one.
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Apr 25, 2014 20:27
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Knightmare posted:What are you spending $100+ a week at Walmart on? That looks like food and toiletries.
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Apr 25, 2014 20:32
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You are taking 20 percent of your net and putting it into savings. Not that its a bad thing, but its going to be tight if you continue doing it like this. I don't see where the extra cash you are talking about is coming from.
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Apr 25, 2014 20:42
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Stop saving for a ring - the $1500 you have is all the ring you can afford, or possibly already more than you can afford. Between the ring money and the extra principal to loans, you have $500/mo free. Decide which is more important to you, emergency fund or loans, and send that $500 there. Right now I think it's the emergency fund based on what you're saying. You can let interest accumulate on the loans which would give you another $450/month. Again, it sounds like emergency savings might be more important than the interest accumulation right now. I'm not quite sure how to make that decision, I think it's a combo of the interest costs and your estimation of your job stability. Also, if you can reduce your 401k or HSA contributions without losing a match or messing up your health care budget, do that too. Just suggestions  Oh, and cancel DirecTV and get on a cheaper cell plan. That'll save you $100+, of which you can use, oh, $50 to improve whatever "living life" means to you. slap me silly fucked around with this message at 20:57 on Apr 25, 2014 |
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Apr 25, 2014 20:55
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With an HSA you can contribute directly via transfer from an existing checking or savings account with the same net effect on your tax burden. I move money ad-hoc through my HSA rather than set a fixed monthly deposit to give me more flexibility with that money and I love it. You can always max it out in the first quarter of next year if you want to use it as an investment vehicle. Also your girlfriend's contribution is extremely low. What's her deal?
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Apr 25, 2014 22:49
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SloMo, you do not need more flexibility with your money. I agree girlfriend should be paying half of utilities and groceries, assuming not too much disparity in salary, but maybe she is already.
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Apr 25, 2014 23:26
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$105k in student loans  Yeah, cut the Direct TV and get Netflix and a Antenna if you have to watch live sports. Besides that just be frugal (see if an Aldi is in your area for groceries) and pay down the debt. I know the Federal Student loan has the highest interest rate but my guess is it's better to focus on the smaller ones.
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Apr 26, 2014 00:42
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Why are you spending so much on rent and why don't you have roommates instead?
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Apr 26, 2014 02:58
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On the ring front, stay away from local jewelers. I bought my wife one for ~1700 total a few years ago. Found a .8 ct diamond on pricescope.com and shipped it off to this guy to set it in a cool as hell titanium tension setting for around $500. https://www.boonerings.com The tension set rings make the diamond look huge. She still gets compliments on it to this day for whatever that's worth. Do your research on the diamond if she insists on having one. The SI (small inclusion) categories are the sweet spot because they still look fine but come with a pretty big price break. Diamonds are dumb as hell but my wife still loves hers so I figure it was worth the relatively small investment.
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Apr 26, 2014 16:37
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As far as your budget is concerned, are they going to raise your pay when you graduate? 65k seems a bit on the low side for anything other than entry level engineering work. If you can get into that 80-90k range that would be a way bigger deal than fixing your budget. Its not like you have an egregious number of expenses you can easily cut Edit: just saw you graduated last year so the salary makes sense. Keep focused on your career and keep up with the student payments. Add any new pay raises to that debt and you should be in good shape in a couple of years. oxsnard fucked around with this message at 16:43 on Apr 26, 2014 |
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Apr 26, 2014 16:40
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alwayslost posted:Monthly Expenses I would suggest stopping the engagement ring savings for now, drastically reducing the amount you put into emergency savings and working on that debt. Is there any reason you can't immediately pay off that ACS student loan? I get that you're intending that money to be used for emergencies, but paying it off means you'll ultimately be paying less in interest. froglet fucked around with this message at 16:46 on Apr 26, 2014 |
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Apr 26, 2014 16:44
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Knightmare posted:Have you looked into consolidating your loans? (I'm not sure if this is possible while deferred) From what I understand, I can't combine private and federal student loans into one. I could get a private student loan consolidation for the smaller ones, but I believe I'll lose my in-school deferment. Knightmare posted:Is the interest subsidized on the federal ones currently? If so, you could possibly divert some of that money elsewhere. Some of them, yes. The amount I am paying on all of the loans is the interest on the unsubsidized loans, with a little extra cushion (5-10 bucks on each loan). Knightmare posted:The girlfriend looks to be paying half of rent, maybe you could ask for her to split groceries/utilities/DirecTV too? She's working on her Master's of Social Work, and only works part-time in addition to her unpaid internship. We agreed to live together knowing it helps us both in the long run (her apartment before was 675, and now we split groceries, and I get half my rent paid). Knightmare posted:What are you spending $100+ a week at Walmart on? Groceries, toiletries, and that's also the gas category (~$40 per week).
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Apr 26, 2014 17:12
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mkay0 posted:You are taking 20 percent of your net and putting it into savings. Not that its a bad thing, but its going to be tight if you continue doing it like this. I don't see where the extra cash you are talking about is coming from. Its not really extra cash, I'm looking at the $500 for emergency savings, $250 extra on student loans, $250 for the engagement ring, and potentially ~$200 in spending cash per month, for a total of about $1200 that can be moved around.
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Apr 26, 2014 17:14
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If you're splitting groceries with the girlfriend and your portion is $450, you need to seriously cut that back. How much $$ do you think you'll spend on the ring, and when? 6 months, 12 months, 18 months?
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Apr 26, 2014 17:18
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slap me silly posted:Stop saving for a ring - the $1500 you have is all the ring you can afford, or possibly already more than you can afford. Between the ring money and the extra principal to loans, you have $500/mo free. Decide which is more important to you, emergency fund or loans, and send that $500 there. Right now I think it's the emergency fund based on what you're saying. So is the whole "3 months salary" guideline bullshit? My girlfriend wants a diamond, and unfortunately she is convinced I'm buying her a 5k ring (with little consideration of my opinion, lol). I know its not the smartest financial decision, and I think diamonds are loving retarded, but I want her to be happy, too. slap me silly posted:You can let interest accumulate on the loans which would give you another $450/month. Again, it sounds like emergency savings might be more important than the interest accumulation right now. I'm not quite sure how to make that decision, I think it's a combo of the interest costs and your estimation of your job stability. I really don't want to see my total student loan debt grow. I can see moving the $250 from extra principal, but I'd rather not stop paying at least the interest. slap me silly posted:Also, if you can reduce your 401k or HSA contributions without losing a match or messing up your health care budget, do that too. I'm in a 2 year contract with DirecTV. The cell phone bill is high because I'm financing the phone through T-Mobile.
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Apr 26, 2014 17:29
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alwayslost posted:So is the whole "3 months salary" guideline bullshit?
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Apr 26, 2014 17:33
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antiga posted:If you're splitting groceries with the girlfriend and your portion is $450, you need to seriously cut that back. As I said, that includes gas and toiletries. Gas itself is like $180 a month. I will admit, my cushion for extra spending (the Misc. category) is probably way too big.
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Apr 26, 2014 17:34
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EB Nulshit posted:Why are you spending so much on rent and why don't you have roommates instead? I spend 550 on rent. The 550 from my girlfriend is for rent. Yes, she should be contributing at least another 100 for the utilities, but I'm a nice guy, and she only makes 800 a month working part-time trying to finish school.
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Apr 26, 2014 17:39
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Start talking to your girlfriend about your finances before you propose, because having the person you are marrying on board with how and when to spend money is much more important and has a lot more impact on your bottom line than a mere $105k in student loans. In addition, no matter how much you love her right now she's not a cosigner on those loans and will never be responsible for them in a divorce, so if she doesn't buy into the idea of a budget it's your head on the line for the rest of the marriage. Related to this, what to put money into first depends on two things: -the interest rate on the loans (for example, I took out $100K a decade ago and locked it in at 3.5%, so I'll be paying the minimum forever) -those loans are yours while any assets after your marriage will be held in common; again, no matter how much you love her, this stuff matters - which goes triple if she's asking for a $5K ring
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Apr 26, 2014 17:43
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alwayslost posted:I'm in a 2 year contract with DirecTV. The cell phone bill is high because I'm financing the phone through T-Mobile. The ring thing - yes, it's entirely a marketing ploy and you two are falling for it Along with most of the rest of the country so yeah. Her love for pretty rings is totally legit but you two should have a real conversation about the benefit of a pretty ring vs the benefit of having thousands of dollars less debt hanging over your life together.Other than that, my main suggestion is to make the decision now, emergency savings or loans? And then stick to it until there's a change in your circumstances: you reach the emergency savings goal, you finish the degree, you get married, you get fired, you get a raise, whatever.
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Apr 26, 2014 17:52
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alwayslost posted:So is the whole "3 months salary" guideline bullshit? My girlfriend wants a diamond, and unfortunately she is convinced I'm buying her a 5k ring (with little consideration of my opinion, lol). I know its not the smartest financial decision, and I think diamonds are loving retarded, but I want her to be happy, too. Ask her mom if there are any heirloom diamonds in the family you could get reset. My ring cost less than $200 because I just got my grandmother's necklace reset as a ring, and drat, it looks amazing and is way more sentimental for me than anything else I could have gotten for thousands and thousands of dollars. The part that worries me most is this: "with little consideration of my opinion, lol" because if you can't talk about something like this together, you should not be getting married. In my experience, my girlfriends who have insisted on X amount of spending on an engagement ring are also usually the crazy entitled ones. I love them as friends, but I pity the man who has to pay for their upkeep.
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Apr 26, 2014 18:03
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Move into a cheaper apartment - do you live in New York or something?
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Apr 26, 2014 23:54
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I would shift your emergency fund allocation into the loans unless your career is just unbelievably unstable. $400 a month allocated to miscellaneous is silly as well.
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Apr 27, 2014 00:42
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People are missing the obvious, marry a richer woman or one with more earning potential. You marry into money, you don't earn it.
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Apr 27, 2014 00:49
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This might be an obvious question, but are you making sure that your student loan payments are going towards principle? There might be rules that govern how you are allowed to repay (ie, you might have to pay interest first each month, or something like that) but paying down principle is way better, if you can do it.
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Apr 27, 2014 01:55
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Not sure why everyone is fixated on rent. $1100 isn't that much for any decent sized city. Where do you live OP?
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Apr 27, 2014 03:00
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moana posted:It's total 100% bullshit made up by an industry that would have said a year's salary if they thought they could get away with it.
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Apr 27, 2014 03:08
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alwayslost posted:So is the whole "3 months salary" guideline bullshit? My girlfriend wants a diamond, and unfortunately she is convinced I'm buying her a 5k ring (with little consideration of my opinion, lol). I know its not the smartest financial decision, and I think diamonds are loving retarded, but I want her to be happy, too. It's bullshit, but it's so widespread that a lot of girls feel that way, not just the money grubbing ones. You can afford what you can afford. If she wants more, she either has to pitch in or wait until later in life for an upgrade.
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Apr 27, 2014 03:36
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oxsnard posted:Not sure why everyone is fixated on rent. $1100 isn't that much for any decent sized city. Where do you live OP? I believe he said Colorado springs. Not sure the rent situation there but in Denver 1100 for two people anywhere near downtown would be middle of the road at best. I don't think his rent is the issue. Personally he needs to make more money. It is going to be the only way to really put a dent in loans odd that size.
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Apr 27, 2014 03:40
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OP all your federal student loans should qualify for Pay As You Earn where the monthly payments are capped at 10% of your discretionary income, and after 20 years of payments the debt is forgiven: http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn If the loans are older there's a similar program called IBR where the monthly payments are capped at 15% of your discretionary income, and after 25 years of payments the debt is forgiven: http://studentaid.ed.gov/repay-loans/understand/plans/income-based
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Apr 27, 2014 06:43
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spwrozek posted:I believe he said Colorado springs. Not sure the rent situation there but in Denver 1100 for two people anywhere near downtown would be middle of the road at best. I don't think his rent is the issue. I dont know anything about colorado springs areas, but looking at craigslist it is a cheap place to live. Lots of 1bedrooms from $400-$600. http://cosprings.craigslist.org/apa/
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Apr 28, 2014 03:16
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jeffsleepy posted:It's bullshit, but it's so widespread that a lot of girls feel that way, not just the money grubbing ones. This is unfortunately true. I spent way too much on may fiance's engagement ring but I did it for three reasons: 1) I wanted to. 2) I could afford it. 3) She deserves it, didn't expect a ring half the size, and she'll wear it for the rest of her life. I married up--her family has money and mine are a bunch of plebs--so I saw it as my "buy-in" letting people know I was serious and that I could provide, even though no one cares (but me) and it's not like that at all. But I'll tell you what, every time I see that ring on her finger I feel so loving proud that I put it there. That being said, I didn't have $100k+ in student loans so you have to weigh your priorities there.
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Apr 28, 2014 03:46
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alwayslost posted:Monthly Income You are living an exceedingly lavish lifestyle for somebody who is buried under permanent and unsecured debt. The good news is that you can quickly dispatch with this debt and get on with your life, but doing so will require sacrifices on your part. You have a very solid income and you should be able to knock these out in four years, max.
Total Savings of unnecessary items: $970 Potential Savings from "Misc": $200 HSA Excess savings: $40 That's $1210 MORE per month that you can be putting towards your debts. With your existing $895/mo, you'll can apply $2105 or $25,260 per YEAR towards those debts. Knocking them out in right about four years. HOLY poo poo, YOU COULD BE DEBT FREE IN ONLY FOUR YEARS! Once you're debt free, you can start focusing on saving for retirement. You'll be so flush with excess income by then that you'll have an easy time building up an extremely solid nest egg. Assuming you can stick to this plan, and you don't get any raises (unlikely), in 10 years, you'll be debt free with almost $200k banked towards retirement; 23 years with a 7% annual return puts you over the million dollar mark. I was in your same situation. I graduated at 28 with an engineering degree and a good amount of debt. But I made all of the cuts mentioned in this post and it really did improve my life dramatically. Edit: These numbers assume no contributions from your girlfriend or future wife. Mainly because you need to get on the same page financially before you two should consider getting married. oRenj9 fucked around with this message at 04:33 on Apr 28, 2014 |
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Apr 28, 2014 04:26
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Buy a used engagement ring. I paid a buddy of mine about 60% of the retail value on a ring from his failed engagement. It was just taking up space in his sock drawer. My wife knows the history, and doesn't care one bit. She has a beautiful ring, I paid a reasonable amount for it, and my friend was able to pay off the remaining loan on his failed engagement. He recently married a wonderful girl who makes serious bank. Everyone wins!
Nocheez fucked around with this message at 14:18 on Apr 28, 2014 |
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Apr 28, 2014 14:16
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To be debt free in 4 years he would need to pay $2395/mo (assuming average interest rate of 4.5%). Which gives him $1200/mo to live on currently. He would need drastic lifestyle changes to make that happen.
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Apr 28, 2014 14:38
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oRenj9 posted:
Can you explain this part out? Isn't it safe to assume at least 7% on returns at a young age in regards to an aggressive 401k plan?
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Apr 28, 2014 16:27
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You also have to consider the large difference in risk. Eliminating debt is guaranteed, getting 7% returns on your 401k is not.
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Apr 28, 2014 16:42
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slap me silly posted:You also have to consider the large difference in risk. Eliminating debt is guaranteed, getting 7% returns on your 401k is not. Got it. So what is the recommended APR on a student loan where you start prioritizing funding your retirement accounts over paying off the debt on a loan? Is there a reasonable number or does it come down to comfort levels at a certain point? I can understand trying to pay off the fed loans immediately, but does he slow down retirement for the 5% APR loan too?
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Apr 28, 2014 17:37
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