| How Would You Budget This? |
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phattonez
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| How Would You Budget This? |
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Hey everyone,
I'm currently working as an educator part time and making about $1500 a month after taxes. I have about $3500 in stocks and ETF's, $1200 in a retirement account invested in mutual funds, and basically $100 in my checking account. In addition, I have currently around $3000 in credit card debt. Yes, I'm looking to pay down the debt (I've been paying for school, applications, Christmas, so it was an expensive past 2 months), but I'm kind of wondering how I should budget it. I have to pay around $650 per month on rent, and my only other expense really is just food and gas. Should I use all extra money on the credit cards, or mostly pay the credit cards and save some for my checking? I'm leaning toward the former so I can get rid of those interest payments. What do you think?
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Tue Jan 24, 2012 5:37 am |
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coaster
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Making a budget is an essential part of making the most effective use of your income; however most people make the mistake of drafting a nice-looking-on-paper budget without having a firm idea of where their money is actually going. Such a budget has a high likelihood of failing. So, before you do that budget, my suggestion is to track your spending for a period of at least three months. When I say track, I mean every penny. Make up whatever broad categories suit you, but every cent gets recorded in one or another of those categories. At the end of that time you'll have a very good idea of where your money is actually going. THEN you can intelligently make up a realistic budget; realistic in the sense that it's a budget you can actually follow.
~Tim~
Eye Candy : Why Whimsy
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Fri Jan 27, 2012 6:47 pm |
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eastmn
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I'd work on the salary. Create a vacuum.
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Fri Jan 27, 2012 7:49 pm |
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riffdex
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The big question is what kind of interest rate are you paying on your credit card debt? If you are, for example, paying anything near or above 12%+, I would say you need to pay it off ASAP! What you should do is pay EVERY CENT you can afford to pay toward the CC every month. Let's say that you figure out you can afford to pay $500/mo on the CC debt. You would have the debt gone in about 6 months. Even if you can only afford $300/month, you would be paid in less than a year. Even if you can only afford $100/month, it is worth it! You should get it paid off ASAP. It all depends on your interest rate but you must take into account how much you will save in the long-run by not having to pay high interest rates. I, for example, have a 17% interest rate on my CC. This is because I am only 20 and have only had credit for less than a year. My dad has a credit score of around 9% bc he has always paid his bills when due and he has been building his credit history for many years. My point is, unless you have an exceptionally good credit score (and thus low interest rate), you should focus on paying that CC debt off right away. But think about what will happen as soon as you pay off your CC.
You will (assuming you were paying $500 per month) suddenly have $500 extra dollars coming in per month, that you didn't have before bc you were paying off debt with that every month. You were doing just fine without it for that period of time, so you could probably survive without it still. I would suggest adding to savings and investments with at least part of that money, starting the day you pay off your CC debt. Last but not least, do not build up a large amount of CC debt again. It is so easy to build up a large debt and get in a hole that you cannot get out of. Right now you are in a good (for lack of a better word) situation, where you have a good amount more coming in every month than your monthly expenses. However, in the future, you may not be in the same situation. Next time you get into debt, you may have other expenses or lower income (from losing job or having to take a worse job). My point is take advantage of the situation and take care of it when it is still in your control. My advice is to pay off the CC and from then on, only use it for gas/groceries (ie necessities you need to buy anyways) and pay it off in FULL every month. Don't use it on anything else, use cash for everything else. This will be good for your credit score. This is what I do. I don't spend any amount on credit that I do not have in the bank right then. (Btw I used to buy everything w/ my credit card but I noticed it caused me to spend more than I normally did. thats why I decided to use cash for all non-essential purchases). If you can't trust yourself to only spend on essentials, then you might just want to cut it up to not be tempted. It all depends on your willpower (=
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Sat Jan 28, 2012 3:12 am |
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johna
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Budgeting is a great idea. You may be surprised to see where your money is really going. Check out my website. I have a free downloadable budget workbook that will help! Good luck
For a free budget spreadsheet, great articles on saving money, earning money and investing for the future, visit http://www.livingonabeerbudget.com
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Tue Jan 31, 2012 4:32 pm |
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littleroc02us
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Do you have an emergency fund set aside of around 1k? You should before you pay down the cc's because if something should happen like your car has issues, you have a backup plan. Then I would go after the cc debt like it's a mosquito buzzing in your ear.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Feb 02, 2012 2:31 pm |
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fast
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| Re: How Would You Budget This? |
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quote:
Originally posted by phattonez
Hey everyone,
I'm currently working as an educator part time and making about $1500 a month after taxes. I have about $3500 in stocks and ETF's, $1200 in a retirement account invested in mutual funds, and basically $100 in my checking account. In addition, I have currently around $3000 in credit card debt. Yes, I'm looking to pay down the debt (I've been paying for school, applications, Christmas, so it was an expensive past 2 months), but I'm kind of wondering how I should budget it. I have to pay around $650 per month on rent, and my only other expense really is just food and gas. Should I use all extra money on the credit cards, or mostly pay the credit cards and save some for my checking? I'm leaning toward the former so I can get rid of those interest payments. What do you think?
I'd go with the latter. I’d want a little more cushion.
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Thu Feb 02, 2012 3:26 pm |
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2StepsFwd1StepBack
Full Member
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Joined: 31 Jan 2012
Location: Michigan
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quote:
Originally posted by coaster
Making a budget is an essential part of making the most effective use of your income; however most people make the mistake of drafting a nice-looking-on-paper budget without having a firm idea of where their money is actually going. Such a budget has a high likelihood of failing. So, before you do that budget, my suggestion is to track your spending for a period of at least three months. When I say track, I mean every penny. Make up whatever broad categories suit you, but every cent gets recorded in one or another of those categories. At the end of that time you'll have a very good idea of where your money is actually going. THEN you can intelligently make up a realistic budget; realistic in the sense that it's a budget you can actually follow.
Absolutely agree. I created my own budget using Excel years ago and quickly realized how unrealistic it was until I had a year's worth of actuals tracked. Then, I was able to stick to it. One thing that the budget/spreadsheet also helped me do was to glance weeks/months into the future and adjust accordingly if I was overspending in one category or had unexpected expenses. So, I added a Forecast column to my original Budget and Actual columns.
- Aurelio
Educate. Participate. Donate. www.ndsccenter.org
Why Waldorf Works: www.whywaldorfworks.org/02_W_Education/faq_about.asp
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Thu Feb 02, 2012 4:40 pm |
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2StepsFwd1StepBack
Full Member
Cash: $ 13.25
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Joined: 31 Jan 2012
Location: Michigan
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| Re: How Would You Budget This? |
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quote:
Originally posted by phattonez
Hey everyone,
I'm currently working as an educator part time and making about $1500 a month after taxes. I have about $3500 in stocks and ETF's, $1200 in a retirement account invested in mutual funds, and basically $100 in my checking account. In addition, I have currently around $3000 in credit card debt. Yes, I'm looking to pay down the debt (I've been paying for school, applications, Christmas, so it was an expensive past 2 months), but I'm kind of wondering how I should budget it. I have to pay around $650 per month on rent, and my only other expense really is just food and gas. Should I use all extra money on the credit cards, or mostly pay the credit cards and save some for my checking? I'm leaning toward the former so I can get rid of those interest payments. What do you think?
I am by no means a financial expert, but I do listen and try to learn. There is an approach that I learned about years ago...think it's called "snowballing", IIRC. Basically, you list all of your debts from the costliest (e.g., highest int rate) to lowest cost. You then start with something like 10% of your disposable income and add that amount to the minimium payment of the debt at the top of the list. The extra money will speed up payment of it. Once it's paid off, you take the minimum payment plus 10% you were sending that debt and add it to the mimum pmt of the next one on the list until that one is paid off, and so on and so forth. The idea is that other than the 10%, nothing really changes in your budget because you were already sending that money to those debtors. The trick is having the will power not to use the new money elsewhere or frivolously.
When I had significant disposable income, I did this and it worked. Unfortunately, I am not in that position at the moment so need to make harder choices.
Good luck!
- Aurelio
Educate. Participate. Donate. www.ndsccenter.org
Why Waldorf Works: www.whywaldorfworks.org/02_W_Education/faq_about.asp
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Thu Feb 02, 2012 4:49 pm |
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