Where to start?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
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Topic Author
Tempest
Posts: 2
Joined: Fri Sep 12, 2014 8:30 am

Where to start?

Post by Tempest »

I contemplated posting this in the Personal Investments forum, but I feel this post is more of a question as to whether or not I should venture into more investing or paying off my current debt. I apologize if I'm posting this in the wrong place.

I am 21, just started working professionally a couple months ago, and am in the 15% tax bracket (married and wife is not able to work). I contribute about 7.7% of monthly income to a 457(b) plan, which my employer matches 100% and vests 25% for each year I work. I opt to pay about $10 a month out of my paycheck for the investment company to manage it. I can provide a breakdown of what investments I have so far if that's relevant. My employer provides the option to enter into a post-tax 401(a) plan on top of my current plan.

Here is a breakdown of my monthly expenses vs what I get every month:

Rent 30%
Utilities 6% - Cell phone, internet, electricity, water
Debt 24% - About 9% of this is CC debt from 2 cards that I pay the minimum monthly payment on. 37% is between my private and federal student loans (currently in grace period) and 54% is auto loan, which I am in the process of refinancing to get me down about $20 a month.
Essential 14% - This is gas, groceries, and parking.
Insurance 13% - This is auto insurance and health, dental, vision, and life that I get through my employer.

This leaves a small percentage of excess income after expenses. I don't have an emergency fund right now.

I am having the urge to pay off my debt as quickly as I can, but I also understand the importance of starting to invest early. I come from a family of financial irresponsibility, so I am very naive when it comes to personal finance. I really appreciate any help or advice that you guys can provide.
lucky3
Posts: 205
Joined: Thu Apr 12, 2012 9:21 am

Re: Where to start?

Post by lucky3 »

Tempest:

Hi and welcome....

...credit card debt is expensive to have, try to make an effort to pay more then the minimum if you can. Then start an emergency fund. At 21 it would be nice to start investing in index funds but first things first. At 21 you have plenty of time to invest...get your financial priorities in line first.

Lucky3
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FelixTheCat
Posts: 2035
Joined: Sat Sep 24, 2011 12:39 am

Re: Where to start?

Post by FelixTheCat »

lucky3 wrote:Tempest:

Hi and welcome....

...credit card debt is expensive to have, try to make an effort to pay more then the minimum if you can. Then start an emergency fund. At 21 it would be nice to start investing in index funds but first things first. At 21 you have plenty of time to invest...get your financial priorities in line first.

Lucky3
I agree.

Get rid of the CC debt. Then get into the habit of paying off the CCs each month or go cash only.

Start your emergency fund. 6 months of your monthly expenses.
Felix is a wonderful, wonderful cat.
deikel
Posts: 1616
Joined: Sat Jan 25, 2014 6:13 pm

Re: Where to start?

Post by deikel »

401k match first
CC debt second
any other debt based on its APR - everything above 4 % is worthwhile taking off IMO
emergency fund
IRA next (TIRA or Roth, whatever you lean towards)
maximizing 401k space

That would be my rough guide order
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basspond
Posts: 1500
Joined: Wed Nov 27, 2013 3:01 am

Re: Where to start?

Post by basspond »

First build up an emergency fund of at least 3 months of expenses (main reason you do not want to incur more debt if something unforeseen happens)

Second payoff your credit cards and then keep paying them off monthly

Third pay off the car as quick as you can unless interest is under 2%

Fourth, at this stage throw half what's leftover into paying off your student loans the other to increase your 457 and possibly increase your emergency fund to 6 months.

Fifth after student loans are paid off, increase your contribution to retirement savings to 15-20% if you are not there (if you can start contributing to a Roth) and begin saving for larger purchase (house, etc). Good luck!
Calm Man
Posts: 2917
Joined: Wed Sep 19, 2012 9:35 am

Re: Where to start?

Post by Calm Man »

OP, are you telling us that you are married at age 21 and have a wife who never will be able to work? If you are full-time employed at age 21, I assume you do not have an advanced degree. You are younger than my children but I am worried.
denovo
Posts: 4808
Joined: Sun Oct 13, 2013 1:04 pm

Re: Where to start?

Post by denovo »

Best thing to do is get a 0 apr credit card, like chase slate, that doesn't charge for transfers, and then stop overspending on credit cards, by not using them more than infrequently.
"Don't trust everything you read on the Internet"- Abraham Lincoln
Topic Author
Tempest
Posts: 2
Joined: Fri Sep 12, 2014 8:30 am

Re: Where to start?

Post by Tempest »

First of all, thank you all so much for replying. I've already gained a ton of advice. :)
deikel wrote: IRA next (TIRA or Roth, whatever you lean towards)
maximizing 401k space
Do you mean I should increase my contribution to my 457(b) plan at that point? I can also opt for a pre-tax or post-tax 401(a) plan on top of the plan that I already have. Do you think either one of those would be worth getting over an IRA?
Calm Man wrote:OP, are you telling us that you are married at age 21 and have a wife who never will be able to work? If you are full-time employed at age 21, I assume you do not have an advanced degree. You are younger than my children but I am worried.
It's not that she won't ever be able to work, but legally, she can't work in the States yet. No, I do not have a postgraduate degree, but I work in a field where only a bachelor's degree is needed if you pursue additional certification.
denovo wrote:Best thing to do is get a 0 apr credit card, like chase slate, that doesn't charge for transfers, and then stop overspending on credit cards, by not using them more than infrequently.
So I should transfer the balance on my two cards to this 0 apr card? I know it's bad to overuse credit cards, but these were all one time expenses related to my wedding. I've been using just cash ever since.

Thanks again guys!
denovo
Posts: 4808
Joined: Sun Oct 13, 2013 1:04 pm

Re: Where to start?

Post by denovo »

Yes, you can transfer the balances, the 0 apr only lasts for a fixed amount of time so you should pay it off during that time , and use the card for nothing else less you be tempted by saying I can charge whatever and worry about it later when the interest rate goes up.

If you need the link, here it is.

https://creditcards.chase.com/credit-ca ... P4R=Y71UH0
Save on interest when you transfer higher-rate balances to Slate. For this introductory offer, pay no balance transfer fee within the first 60 days from account opening. Plus, you'll keep saving with a 0% introductory APR on balance transfers and purchases for 15 months.†
"Don't trust everything you read on the Internet"- Abraham Lincoln
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