| New: a few questions about CC debt and savings |
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lmbebo
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| New: a few questions about CC debt and savings |
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Hi
A little background. So I'm engaged to be married and we are interested in starting a family next year. I will be moving jobs twice in the next 3 years, hopefully/expecting to make a more significant salary with the 2nd move.
So I have been aggressively saving and working extra shifts as we have to pay for a honeymoon, move to a new city and purchase a car (at least 1). And hopefully a little cushion if we are able to start a family.
The other day I learned that my fiance has some credit card debt, waiting for her next bill cycle to see what she owes, at what interest rate and to whom. I can't see it being more than a few thousand (I hope).
Since I've never been in CC debt, not sure if there is a good way to pay it off? I always see offers for transferring debt to a credit card with 0% apr for 12-19 months. Would it be worth while to do that, assuming we paid it off that quickly?
I guess my 2nd question is.
Long story short, have some money in a brokeage account that was basically earning nothing in a sweep account? I've decided to reinvest that money. With all that is going on above (aside from the CC debt), I was wondering where I should put. I'd like for it be liquid in case I find myself needing some extra money.
I was thinking of moving the bulk of the money to Ally bank and setting up multiple 5 year CDs with a smaller amount in a no penalty CD. I was wondering if this is a good suggestion or someone would have better alternatives?
Thanks
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Thu Jun 09, 2011 2:21 pm |
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littleroc02us
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It's good that your learning her debts before you get married. If it were me I'd want to see where she stands with finances as far as getting this debt paid off. Find out how much and devise a plan to eliminate it asap. As for the brokerage account why not use it as an EF fund and put it in a Money market account that isn't to be touch except in the case of emergencies. Once the debt is gone and you have an EF fund, let the saving and investing begin. My advice to all you get married is to start off debt free and not to borrow money for anything except your mortgage, it just lowers the stress level.
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 Jun 09, 2011 2:54 pm |
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GotCommonCents
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I would not pay her CC debt until after you are married. Keep your finances separate until then, but definitely talk in depth about finances and your views on how money should be handled. Ask each other whether debt should be viewed as something to be avoided or something that you are open to using. Hopefully you will both view it as something to be avoided.
For more advice about how to handle your personal finances and manage your life in a way that will be prosperous, check out my blog:
www.GotCommonCents.com
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Tue Jun 28, 2011 12:29 am |
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lmbebo
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Hi
Well, we spoke about her cc debt. It was more than I thought, but mangeable. She's been trying to pay it off herself and was stressing about it.
I've gotten her to auto pay a certain amount every time she gets paid to a single cc. Once its paid off, she'll start on the other.
Her credit score has dipped some according to the graph, but is still in at an ok score. We are on the same page about not overspending the credit card now. She hopes paying it off will teach her a lesson. I doubt it will... but she's trying. At the rate she can pay things off, and without additional charges, I think she can pay it off in about 18-24 months. I'm not sure how much I can help right anyways. Not until I get out of residency and fellowship.
For myself, going to continue to save for our honeymoon, moving expenses and at least a new car  Looking at leasing a car if I can get one without a cap cost reduction. It'll be my first time negotiating for a car....
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Tue Jun 28, 2011 12:46 am |
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littleroc02us
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quote:
Originally posted by lmbebo
Hi
Well, we spoke about her cc debt. It was more than I thought, but mangeable. She's been trying to pay it off herself and was stressing about it.
I've gotten her to auto pay a certain amount every time she gets paid to a single cc. Once its paid off, she'll start on the other.
Her credit score has dipped some according to the graph, but is still in at an ok score. We are on the same page about not overspending the credit card now. She hopes paying it off will teach her a lesson. I doubt it will... but she's trying. At the rate she can pay things off, and without additional charges, I think she can pay it off in about 18-24 months. I'm not sure how much I can help right anyways. Not until I get out of residency and fellowship.
For myself, going to continue to save for our honeymoon, moving expenses and at least a new car Looking at leasing a car if I can get one without a cap cost reduction. It'll be my first time negotiating for a car....
It would be interesting to see how she would react if you mentioned not using the credit card right now, because of the importance of paying of the cc debt.
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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Tue Jun 28, 2011 3:16 pm |
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oldguy
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quote:
at least a new car Looking at leasing a car if I can get one without a cap cost reduction. It'll be my first time negotiating for a car....
I see this as one of the bigger problems you face (you and half of the US population, LOL). It is not unusual for US families to buy 2 new cars. The car payments are often $12,000/yr. Gas is about $6000/yr - plus insurance, tags, and so on. So - a total if about $20,000/yr net - that represents about $25,000/yr of their gross income. Yet most buyers look at a car as a $600/mon cost that they can 'afford', they acyually have no concept of the $25,000/yr. Just something to be aware of as you get started.
As you look around, note that millionaires often drive older cars - there is a reason for that. (I have a 2001 Dodge truck).
BTW, leasing costs somewhat more than 'purchasing', you pay about $3000/yr to borrow someone's car for 3 yrs - and then you pay some fees to return it.
As for the money in the brokerage - I would move it (both the stocks & the sweep funds) to a no-load company such as Vanguard or Fidelity, and invest it in an SP500 Index Fund. It grows tax deferred, averages about 11%/yr longterm (altho it was over 20% last yr). And the cash is available in about 2 days if you need some.
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Tue Jun 28, 2011 4:15 pm |
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lmbebo
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Thanks for the advice.
What do you mean by 25000/yr? I've never run across that concept before.
I'm hoping to get 1 car if we can swing it. Looking into an apartment near the hospital I'll be working at and using the car the 1 day a week I need to commute to a different hospital. The rest of the time will be left to her if she needs to use it.
I figure about $1200-1600/yr in insurance costs for the both of us. Although I think 1000/yr is more appropriate. Neither of us have any issues with our licenses and have lived in NYC for the last few years. I still maintain insurance, albeit through my parents, for there cars for when I visit.
Gas costs is the big question. I figure about $250/month at most.
Maintenance, if its new, shouldn't be much over the course of the first year. If I'm looking at buying a car, then it'll be used. But wear and tear costs should be higher as tires, wipers, etc may need addressing sooner.
Thanks for the help. Really appreciate it.
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Tue Jun 28, 2011 8:49 pm |
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oldguy
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quote:
Gas costs is the big question. I figure about $250/month at most.
Maintenance, if its new, shouldn't be much over the course of the first year. If I'm looking at buying a car, then it'll be used. But wear and tear costs should be higher as tires, wipers, etc may need addressing sooner.
Yes, gas is probably about $3000/yr. Ins = $1200. The wear items cost about the same whether it is a new car or an older car - ie, tires, brakes, battery - all are required about every 3 yrs. As for repairs - modern cars provide about 200,000 miles of troublefree service, you seldom have failures, just regular maintenance - oil changes, washes, wipers, filters, tire rotations, etc.
A big factor is "cost of ownership', ie, depreciation. If you buy a new car and trade it for a new car at 5 yrs, the depreciation cost will be $5000/yr. If you keep it 10 years the depreciation will be about $2500/yr. If you buy a 5 yr-old car and keep it 5 yrs, the depreciation will be about $1000/yr.
So, if you trade every 5 yrs, it is $3000 + $1200 + $5000 = $9000/yr out of pocket. That represents about $12,000/yr of your 'before taxes' salary. And if you are a two-car family, that is where the $25,000/yr comes from.
As you can see - two cars is expensive. And continually renewing late-model cars is expensive. And that's why millionaires drive older cars. 
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Wed Jun 29, 2011 3:14 am |
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soybean
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| Re: New: a few questions about CC debt and savings |
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quote:
Originally posted by lmbebo
Since I've never been in CC debt, not sure if there is a good way to pay it off? I always see offers for transferring debt to a credit card with 0% apr for 12-19 months. Would it be worth while to do that, assuming we paid it off that quickly?
Short answer - yes. But, let's discuss a few details you need to be aware of when making this decision. What percentage of the transfered balance will be charged as a "balance transfer fee"? And, how long does the low temporary rate actually last? An offer that runs for 12-19 months is a good length of time. Balance transfer fees typically run from 3% to 5%. The other factor to consider is the regular rate on the new account compared to the old account since this comes into play if you still have a substantial balance on the new account after the introductory rate has expired.
So, when you compare the balance transfer fee and a 0% interest rate for 12 months or longer to what the amount of interest you'd probably pay if continuing with the old account, balance transfers can definitely save on interest expense, assuming you don't just make minimum payments during the temporary rate period and then possibly end up with substantial balance on an account with a higher interest rate than the old account.
In conclusion, these balance transfer offers can often save money. Paying attention to the details I've mentioned will help in comparing balance transfer offers and deciding which one is best.
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Wed Jun 29, 2011 4:47 pm |
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littleroc02us
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| Re: New: a few questions about CC debt and savings |
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[quote="soybean"] quote:
Originally posted by lmbebo
So, when you compare the balance transfer fee and a 0% interest rate for 12 months or longer to what the amount of interest you'd probably pay if continuing with the old account, balance transfers can definitely save on interest expense, assuming you don't just make minimum payments during the temporary rate period and then possibly end up with substantial balance on an account with a higher interest rate than the old account.
In conclusion, these balance transfer offers can often save money. Paying attention to the details I've mentioned will help in comparing balance transfer offers and deciding which one is best.
What really saves money is not using credit cards at all and paying off debts. My wife and I are debt free except the house and we only use cc's for gas, so we don't have these problems that your facing. If in the short term you plan on transferring the money to another card, you must if your to make any ground in life is promise to rid of the debt forever or I guess you'll enjoy going around and around the merry go round debt wheel. It's so nice not have to play the game anymore.
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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Wed Jun 29, 2011 7:29 pm |
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lmbebo
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We are both on the same page about paying off the credit card debt. How quickly is just a matter of economics. She'd like to do it herself. I expect it will take her 2-3 years. I'll be happy if she can pay off one of the credit cards by this summer.
And hopefully pay off the other in the year or two after that.
I don't believe in over spending. I don't like borrowing. Only spend what i can pay off.
Only payments I have are educational loans. No way to avoid those.
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Sat Jul 02, 2011 1:21 pm |
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