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Small finacial question, BIG step for me

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Hindsight2020
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Location: Illinois
Small finacial question, BIG step for me  Reply with quote  

23 years old, and I am currently a sponge for money talk. I have steadily grown into the understanding of what long term means and I am ready to begin my journey of building wealth. I am in some debt, it isn't much but every penny counts right?

$3586 to a debt collector. So this is the sticky situation. I was going to a community college and enrolled into a program hosted by a state university. In my ignorance i ignored the mail coming from this university and found out what collections is the hard way. I could give you many reasons as to why i made this mistske but lets leave it to me being 20 and dumb. Even 3 years ago , feels like a decade of maturity. I'm currently paying collections a flat $200 per month with no real basis on a minimum payment. I was laid off in January and contacted them to lower the payment. They lowered it to $50/mo with little hesitation for 6 months.

$3500 vehicle loan at 6%. $228 per month. Pretty basic. My first loan and I've been chipping away at it.

I owe FedLoans some money. Another dumb 20 year old take. I needed a reliable vehicle back in those days and took more than I needed.
$1600 unsub 6.55%
$2400 sub 3.15%
The minimum payment is around $70 for both. I am paying $100 for month. But after reading this forum I have come to the conclusion that that probably isn't the best thing i could be doing.

I make around $4400 per month. I'm not the greatest at budgeting. It's always in the back of my mind when I purchase a frivolous thing but alas.

What direction should I take to pay this all off and begin seriously investing?

With the collection on my credit what is the best course of action to fix my credit (600)?

It may seem like pocket change to some. I am looking for effieciency and guidance. I want to learn how to build wealth. Thank you for your time.
Post Mon Nov 06, 2017 9:13 pm
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oldguy
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Joined: 21 May 2006
Location: arizona
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If I followed correctly, you are about $11,000 in debt, have one asset (the car), and you earn $53,000 per year.

Do you have anything that could be sold - motorcycles, snow mobile, ATV, second car?

I would quit prepaying on the loans, instead, pay the minimums except for the collections. (The reason that they were happy to lower your payment temporarily is that the interest rate is high - and it's their job to lend you as much as possible to suck you in.). So make the collections the first priority - sell things, work OT, whatever it takes.

After paying off the collections keep your other loans full term (including the 6.55% loan). And invest about $400/month into an SP500 Index Fund (You can keep the SP500 money in a 401k, an IRA, a brokerage account - whatever it available to you. The longterm average of the SP500 is 11%/year, your $400/month should grow to about $183,000 in 15 years, $1,060,000 in 30 years (age 53).

That's what 'longterm" and "wealth-building" means. You have to make the $400/m your priority, never miss, never skip a month. Pay the investment first, then live on what is left - most people do the opposite, they pay the bills first and then invest what is left - that's why there are so few millionaires! Very Happy
Post Mon Nov 06, 2017 10:12 pm
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marketsignals
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How much i will earned? A Big question for investor.  Reply with quote  

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Post Tue Nov 07, 2017 9:47 am
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