What can I do to better my situation?

[uRabbit]

I am a 22 year old male. My bills are almost $1200/mo and my income is $1500/mo net. It used to be more but I moved in with my parentsthis month.

Here is a screenshot of my monthly budget spreadsheet: http://s151.photobucket.com/albums/s...er_media_share

My irresponsible decisions started a year ago when I got rid of my dream car, my 2003 MINI Cooper S that my parents paid off, and got a truck. Six months later I got a different vehicle; my current one. Ugh! Now I'm upside down in this car, paying off remaining balance on it and the truck I traded in on one loan, and the MINI to my parents.

Loans:
Car loan / $13,500 / 6.5% / 60 mo / $280 per mo / local credit union
MINI / $15,500 / - / - / $200 per mo / parents
Student loan / $3,500 / 5.5% / 10 yrs / $50 per mo/ Sallie Mae
MasterCard / $850 (limit=$950) / 13.9% / - / $50 per mo / HSBC
BestBuy MasterCard / $650 (limit=$700) / 12.9% / - / $15 per mo / HSBC

That should be it. The credit cards; I'm paying off the higher interest card first. I am also thinking about asking HSBC to raise the limit on that card so as to make it look better on my history and to provide an emergency card. I may need help determinf what an emergency is tho.

According to my budget, I will have about $250 available to put into savings. I am thinking about opening a savings account with higher APY (is that right?). I currently have free checking and savings with US Bank.

For penny pinching, I have an iPhone app that acts like a checkbook reister on steroids. Whenever I make a purchase, I round to the nearest higher dollar. That way, at the end of the month, I can add the dividend into my savings.

What else can I do? Should I pay off the cards then start saving? Then cancel the Best Buy card and then do what with the other?

I am going to enter college again this year. By the end of my college career, I will have about $50,000 in studen loans (if I get no grants/scholarships and if they loan it all to me). I cannot afford to pay for school while I attend, obviously.

Anything I can do better?

[FinanciallySMART]

Prioritized the debt you are in. Can you do without the credit card if the answer is yes then closed them out. Emergency to me is a sudden sickness or loss of a job. So it is good to have an Emergency savings.

[Silver purse gal]

Hmm, I can tell you're feeling a little strapped by the 5 debt payments. As you seem to have figured out, it's good to pay down the highest interest loans from credit cards first, so pick one of those cards and do your best to pay it off in the next 4 months.

Then tackle the other card. (You might be able to pay them both off before returning to college if you're going in Sept.) But meanwhile, try not to use those cards at all, so the debt doesn't keep heading north on you.

It's best not to cancel your credit cards, as that may lower your credit score by reducing your available credit. You need to reduce CC debt and keep paying on the other loans so you'll look like a good candidate when you apply for more student loans. Just stick the CC somewhere safe at home and make them inactive now for purchases.

After you've paid off at least one of your credit cards, start putting a little money aside each month for an emergency fund if you don't have one already. That way you won't get caught unprepared if something comes up that needs extra funds--car repairs, moving-to-college costs, etc. Speaking of college, have you considered the possiblity of doing without a car for a couple of years while in school? Cars are expensive to maintain, and you might be able to save a bundle if you can rely on public transportation/bike while in school. Not sure if that's feasible, but it's worth exploring.

[uRabbit]

Thank you!

I was thinking... What if I buy a cheaper used car with cash and sell my current car to get rid of the $280/mo payment? I'm wondering if this would be a better idea, then pay the cards off after that. I've had one card since I was 18 and the other for over a year and haven't used either since they neared their limit. Which was over a year.

Also, my car is worth about what I owe. I owe $13.5k and could probably get around $12k. That leaves me with a little bit to pay off.

[Socal104]

uRabbit, a little kudos to you for understanding you have a problem and seeking help. Now here's something you might not want to hear: If you have this much of a problem at 22 and don't fix things, your going to be in awful shape by 32.

First things, first: stop the car buying mania. Buying and selling cars rapidly is the fastest way to blow through your money. If you look at your budget, the vast majority of all your expenses are tied to autos. Your car insurance is outrageously expensive a function I am sure of your age, gender, vehicle choice, and possibly driving record.

Second, you already have an emergency fund, it's called your parents and you are already tapping that to get unrealistic $50 rent. But since they are so kind to you, here's what you really need to do: tell them you have screwed up, but you are going to get it fixed. Tell them that if they will not charge you anything and you can mooch off their food for six months, you'll eliminate all of your debt. Get rid of the mini since they paid it off for you. Seriously, how could you possibly ask your parents to pay off your dream car and then buy a truck and put yourself in debt again?

Income: $1,500 a month for which you are paying $850 a month just for transportation? I'm guessing that you are clearing about $22K a year gross which is not that much but a reasonable amount for 22. If you want to get rid of your debt, time to get a second job or get a raise at your current job. Not easy in this economy, but if you can't you need to cut your expenses that much more. Nobody likes to talk about income on these boards, but if you want to live your lifestyle, you need to figure out how to make more money: and don't assume it's just going to happen because you head to school (next).

School: Don't do it until you get your debt under control. Hate to say it, but being that you are 22 and you have got $50K of debt in front of you to finish, I am guessing that you aren't that serious about school. Don't waste your money until you are. The last thing you need is another $50K of debt and then find out that you have no better job prospects than you did before you went to school. And that's if you graduate. The notion that you can't afford to pay for school but you are going to do it anyway begs the question: So when are you magically going to afford it. Take a look at last years graduating class from college. Something like 17% of them got jobs.

So, the basic plan would be to pare down your car expenses. Get rid of at least one of those car payments and if you can, cut your insurance costs. Ideally, get rid of all your car expenses and bum a ride, take the bus, or get a cheap beater car.

You'll pay off your debt at an amazing pace. Think of paying your debt down at $1,000 a month or more

[uRabbit]

Well the MINI is gone but I am still paying them for it. I traded it in to apply it to the truck's loan. Awesome, huh?

By purchasing a car with cash, I would be eliminating that debt I have in my current newer car, provided that it sells. If I decide to use the money I have now (almost $1400 after tax returns), I could get a cheapo car. But then I may be getting myself into new debt. If I save for a year, I may get into a more reliable car that won't suck my money, for $3000 or so.

I'm not sure I can hold out on going to school much longer. I have been at my job for three years and they refuse to give anyone a raise. It's horrible! Just thinking about doing it for another four years to get my Bachelors is bad enough to think about! And with education costs going up drastically...

As for mooching off my parents... I feel bad enough as it is. My brother, his wif and two kids have been living there for eleven months, without paying rent or utilities. All they do is buy food, and my mother has to get the kids from school, make them dinner sometimes, etc. They SAY they're moving out after they get tax returns. If they do, I'm sure my parents will have no problem not charging me rent. But still, $50/mo doesn't cover much.

I say this more than once every day; "Shoulda kept my MINI!"

[Ryan6]

Personally I would try to negotiate extended loan instalments with your creditors. They should take a listen so long as you let them know the position that you are in today.

[uRabbit]

Originally Posted by Ryan6

Personally I would try to negotiate extended loan instalments with your creditors. They should take a listen so long as you let them know the position that you are in today.

Do you mean lowering interest rate on my auto loan and the like?

[Silver purse gal]

uRabbit, we can see you're trying to find some way forward. You get credit for that! I think Socal104 has some good points about making debt reduction a priority. The "tough love" approach may be hard, but it looks like you're about $34,000 in debt and that's scary for someone your age with limited income. You're headed down a dangerous path. You may have much company on that path, but you've got the sense to see the dark forest ahead and it isn't comforting.

I would still say, pay off those credit cards first! Getting extended debt arrangements is just a way to reshuffle and pay more interest in the long run. You're at a crossroads. You can continue to have a life where debts nag you and wear you down, or you can take control, douse the debts and use your money to invest in things like IRAs to build some real wealth. There are no easy solutions. To get out from under a burden of debt, one just has to buckle down and pay up. Most of us have been there at some point, so you're not alone in that experience. You can do it.

It may be wise to really examine whether you're ready and motivated to go back to school before you take on lots more debt. Do you have clear goals? Will your degree be likely to propel your career/job forward? Have you done any career or guidance counseling at the school? I'm a big believer in education, but be clear about where you're going with it.

Socal has a good point about buying and selling cars being a losing game. I was suggesting trying to do without a car while at school in order to pay down your various debts faster. It's something to think about since you've put all your cards on the table in order to look at ways to improve your situation. It might also work to trade down to a cheaper but reliable car if you just can't get by without one.

This is a long post, but one last word: if you're getting sizable tax refunds, that means you're withholding too much money. Change your withholding at work so you get more take home pay--then put that to work paying down debt faster.

[uRabbit]

My return will be only about $850. I have $150 in savings right now and just received a settlement check for $350 that is going into savings as well.

I really wish I could go without a car! I would love to ride my bicycle to school and work! However... My job requires me to have a car that safely seats four people. And still no raise. Yay! I work in mental healthcare. I have been looking for similar jobs that do not require a vehicle, but all of them pay less. So much less that in order to be able to take the job I would have to sell my car at the same exact time, since working for two different companies is against the work contract.

I am very vigilantly looking at purchasing a car for a grand or more and selling
my current car. I am researching reliability ratings on cars, in order that I don't find myself in a bad situation. Then I can do away with those credit card balances in a matter of months!

I am very motivated in the career goal I've set for myself. I plan to go to school for Social Work for a Bachelors. After I get enough experience I will be able to enter the Masters program. I've spoken with the regional National Association of Social Workers branch and the director there said that she doesn't know of ANY Bachelor-level Social Workers making less than I have set as a goal for my first year earnings of $30,000. She did go on to say that there is also not much work for Master-level Social Workers.

Boise State University will be my college of choice. Currently it is $2800/semester. Providing I don't get any grants, and they actually loan me that much, and taking into account the 10% annual raise in tuition, my four-year student loans should be about $32,000.

I have thought long and hard about this. This career is what I want to do.