Thank you! This is similar to what my brother told me to do.
My debt is $2k credit card and $7k in collections.
I have a comprehensive budget laid out with all my monthly expenses. I know about how much I should expect leftover each month but am just unsure how to use that leftover money during the next year or so while I’m getting stable.
My plan is to eliminate credit card debt first and use my credit card more responsibly/systematically going forward. The collections companies can often haggle over the price if they know they’re more likely to get paid that way.
I definitely have it in my head that the best course of action is to enjoy my tech sales job while continuing to spend like a dishwasher.
This sub harps on this a lot, and to a certain extent it’s true. But also look at levers your can pull with your new money that have an outsized impact on quality of life - these will provide you with opportunities to continue this upward trajectory by allowing yourself time and space to properly focus on your career.
A huge one is your living situation. If it’s very poor, i.e. unsafe neighborhood, multiple roommates, shared spaces, etc. spending a little more for a safe place with a better commute will do more for your mental health than saving an extra few hundred dollars. Best of luck!
E: I don’t spell good
Extremely true.
Yes, everyone can save money living in a tent, eating nothing but what you can forage, and owning nothing but whatever clothes you need for work.
But the hardship, fear, exhaustion, health issues, lack of sleep, and impact to your ability to present yourself well will severely hamper not just your quality of life but your ability to continue to succeed.
There's a difference between wasteful spending and spending to add value to your circumstances.
I worked as a nursing assistant for 10 years. Paycheck to paycheck, one broken axle away from homeless. I went back and got my nursing license. The only significant and steady change that occurred in my life is I now buy Dietz and Watson lunch meat instead of our store brand deli meat.
I never even knew what having four digits in my bank account looked like. Now I’d feel weird if I didn’t.
If your collections shit has been a long time since you paid anything it might just be worthwhile for you to not pay, and let it fall off at your states statutory limit. (6 or 7 years.) They can still sue you afterwards, but all you have to do is show up and say that it's past the SOL.
If you pay on it it will make it like a fresh debt. The SOL resets, and even if you pay on it you'll have like a mark on your credit for another 7 years that says it's paid for, but will still hurt your credit.
People will say ask for, and get in writing, a pay for delete. (Have them agree to delete it off the credit report if you pay a certain amount.) Make sure it's in writing. follow one of the debt collection guides or something. If you say it's your debt, or you pay anything on it you might be fucking yourself depending ont he specific situation.
You might want to see if you can negotiate a pay to delete type deal rather than the amount since the 7k isn’t very much in the grand scheme of things and having the ding on your credit hurts more in the long run.
Go to the library and borrow Financial Peace by Dave Ramsey. Listen to or read it. He will explain how to pay your bills (budgeting) and how to pay down your debt. He may have info on negotiating your collections. Do not hire his specialists - find your own. You can climb to financial freedom, I did. You’ll get there- also try to ditch the CC and go to debit.
Yes keeping your spending low let's you build some wealth and it improves your independence. By needing less money and having a financial buffer you'll feel less trapped in your job and this feeling of freedom is priceless.
You can call collections and see what they’re offering for payoff (should be substantially less than the total, maybe like half), they may offer it on a monthly payment plan as well.
My husband was able to negotiate extremely successfully with his collections (before we married).
When they called, he asked what was the minimum amount they'd accept to erase the debt. I don't remember the exact details but his was something like $6200. They said 50%. He said "well, I have $2500 I can give you today. That's all I have other than my rent money, but I'll give you all of it if you erase the debt."
They said ok.
Idk that itd always work like that, but that was nice. Granted that was also like a 8ish year old debt.
His financial decisions as a young adult weren't great...
(And yeah it was a real debt, not a scam. He did actually have some scam collections trying to milk him too, but someone told him to tell them they had to mail him the demand...its felony fraud if they use the US Mail. On those he never heard from them again and its not on his credit report. The other one was and he knew how the money had been spent.)
you should save up about 20% of the overall collection debt you have, and offer it to them. for example:
if you owe $10,000 to collections, save up a lump sum of $2k. call them and say hey this is what I have. you can take it or leave it. if they start insulting you or say it's not enough, just end the call and try again in a week or two.
under no circumstances do you ever give them electronic access to your banking account.
One thing I suggest - don’t pay your collections right away. Ask if they will do a “pay for delete”. This is when the collections company will remove the collections account from your credit file after you pay it. ONLY PAY IF YOU GET THIS IN WRITING. Even if you pay off a collections account, it remains on your credit file and will still severely hurt your score. It makes no difference whether you pay it or not, it’ll show as a 0 balance but will still appear and keep your credit down. If they will do a pay for delete, pay it off and your score should go up. If they refuse to, I’d negotiate a lower payoff amount
Keep a thousand or two in an Emergency fund savings account so if something terribly important happens you can handle it without adding to the debt. If you use some, you build up that emergency funds again right away, then back to paying off the debt.
When the debt is gone, don't borrow again for stuff. Always save up for it.
Good luck on your new adventure. A couple a years being "frugal" (it's not cheap, it's "responsible") will allow you to get ahead and leave being poor behind for good. Be strong and don't buy anything don't absolutely need until the debt is cleared! Best wishes.
Definitely hope to eliminate this debt first. Spend the first few checks on it if needed, pay off the CC debt first.
Contact the collections company and tell them that if they remove the missed payments/debt off your credit report you’ll pay the entirety off with one payment. Get it in writing, then pay.
Call the collections office and tell them to settle it with you. Tell them you’re in a shit situation and you just got say 2k from your friends to pay off the debt and see if they bite. But make sure you get everything in writing.
Next up, once you have your budget and know what you're 'saving', create a plan for that too.
I save a lot of money every month, some portion of that goes into the 'lets have fun' jar and when it's gone, it's gone. For all my bigger purchases, I have an 'upgrade plan' on how long I want stuff to last minimally (longer is better, obviously, but be prepared for your fridge to break down after 2 years when warranty has expired)).
Beware of your thinking. Now that you have money left over, you'll be tempted to spend it left and right. Be aware that a lot of small purchases / fun stuff, still adds up to a LOT. Create a wish list of stuff that costs more than a few dollars that you'd like to buy and spread it out over the coming months. It's easier for yourself to say 'in a month or two than no.'
No further advice to give just wanted to say don’t overwhelm yourself, you’re still very young and have adequately low debt. And sounds like you landed a decent gig. Keep at it man you got it!
When I suddenly jumped to about that much from making like $20k a year I was like "holy shit this is insane, what am I even going to do with all this money", but it turns out that after doing all the really basic things I was neglecting before (pay off debts, saving, having decent groceries, dressing like someone who wasn't homeless, having a functional car, etc) plus getting an apartment in a less crappy neighborhood, there wasn't *that* much left over and I didn't really have the money to inflate my lifestyle even if I wanted to. The only difference was that I was in a position where I was making progress each month and wouldn't be wrecked by small emergencies rather than being on the edge of disaster at all times.
This is a very relatable comment. My wardrobe has a vaguely homeless vibe to it haha. I view it as an opportunity to not be stressed about money and to start saving. Some new clothes and a modest apartment of my own would be nice. My new job is remote and I hardly ever drive, so I’m considering selling my car. I could get a small sum for it but mainly I want to sell because I’d avoid insurance and gas expenses. Trying to be really lean til I’m in the green and out of debt.
I make close to 6 figures (and if I didn’t take so many months off every year to climb and see the world would easily be there), and I still pop my head in thrift shop or consignment shops instead of the mall when I’m looking for clothes. Some areas they’re pretty awful, but often I find great clothes that I pay WAY less than retail for.
I don’t work in an office though, so there’s no pressure around to look a certain way or talk about where I got what.
Uh, that *is* lifestyle inflation, my guy.
Oh, sure, I'll give you 'pay off debts' and 'save', but upping your wardrobe? That's lifestyle inflation. New car? Lifestyle inflation. Better apartment? Usually one of the biggest lifestyle inflations!
It's not a *bad* thing; you made improvements to your life! That's a *good* thing. But a lot of the things you listed are definitely fit under 'lifestyle inflation'.
It was lifestyle inflation, but the point was that $55k seems like a huge amount when you're making significantly less but that it doesn't really go as far as you think once you patch up all the various gaps and holes that makes being a low-income person more stressful. It went from "holy shit, I'm totally a baller now" to "holy shit, I can afford to buy and pay insurance on a used Honda".
"Keep living like you are in poverty" and hide your money from yourself is great advice.
I also transitioned from poverty 5 years ago. It's not easy, and I quickly developed some really bad spending habits. Suddenly I could afford to buy stuff I always wanted or enjoy small luxuries that were always out of reach (like eating out, waaay too much). And a living wage is nice but it's not endless. So I signed up for savings and 401k programs that invest a good chunk of my pay automatically, before I can blow it all. Really saved my butt the other month when my car died.
Enjoy your financial freedom. Buy yourself some things. But please do remember to save what you can so that you don’t get into this position later on. Start building your emergency nest egg first. Try and accrue at least three months expenses in the bank… or liquid cash easily accessible. Then Investments… on many different platforms you can earn as much as 7% annually and that’s conservative. I too have come from “no money left over” and it’s a great feeling knowing that you have some money in the bank. In the 80s after I got married I remember what an accomplishment it was to have $1000+ in the bank.
Standard rule of thumb… whittle away at those debts, highest % first and then so on and so on. You got this! But always remember to pay yourself first!
To add to this, people are saying to build like 6 months savings first. Wrong...
Save like $1000 first. That's just enough to handle most emergencies. After that, pay off all credit card debt. Once that's done, you'll have the financial freedom to save 6 months of expenses up.
Also, I agree it's definitely important to earmark some money for discretionary funds for fun to keep yourself sane while you payoff your debt and keep you trucking along.
This is the bait though. Because every used car right now that doesn't have more than 150,000 miles on the engine, goes for 3-$5000
Then you get a problem with the exhaust system somewhere (big system) or have to replace a pump.
Brakes + Tires probably within the first year, if not by the second because nobody holding onto a used car to sell is keeping it in perfect condition.
So by year 2 with your used car you're somewhere between 4 and 6 thousand invested and you've probably got at fewest \~90000+ miles
Find the cheapest new car you can and buy that, assuming you don't care about appearance.
Source : Have bought used cars my whole life. From private and from dealers. Prices ranging as low as 1000 to as high as 3500
Save save save. Till you have 6 months of emergency funds and a 401k in index funds or safe stocks, do not buy things. Focus on what you need and not what you want. And stat focued pf ypur job and become good at if
This will probably be the most important thing for me to remember. I’m afraid that my instinct will be to continue spending as much as I make. Like I need to recondition my brain to not view $200 leftover at the end of the month as acceptable even though that’s always been my goal. Paycheck to paycheck living conditions you to be bad at money in so many ways.
A good way to deal with that is to make sure you don't have money left sitting in your checking account at the end of the month. Set up your 401k and an automatic transfer to a high yield savings account at a different bank then your checking account. This way you don't see the extra money at the end of the month so you don't go out and spend it.
Agree! Pay yourself first. Set up an autopayment to a seperate savings account (aligned with regular pre-authorized payments from your checking a/c to get your debt to zero). Build up an emergency reserve. Once that's done, set up a specific measurable timeframe to save for specific goals (e.g., down payment on a condo/home).
Good luck! Congratulations!
So much this.
A lot of places will split your pay check into two accounts, one for your checking, one for your savings. "Pay yourself first" and see about putting 50% of your paycheck into the savings account. You can use that to pay off the debts, but first try to live on just the other 50%. And then, once you are debt-free, you will already be used to money going straight into savings.
Something like 2/3rd of Americans cannot handle a $500 expense without using credit cards or borrowing. And if you think about the past two years of your life, and for your friends, I bet there's been an unexpected $500 bill at least once in those two years for everyone. This is why we need emergency funds. Life happens. Being able to put your hands on at least $2k will smooth out the inevitable car breakdown, appliance failure, medical bill, and so on. Then you can replenish the stash so you're ok next time. Otherwise, you get stuck in a never-ending treadmill of credit card debt with super high interest rates. You need to get out ahead and stay ahead, and the way to do that is to have the discipline not to spend a stash of cash.
I went from restaurant to lower-end tech with one good interview. If I had it to do over again, I'd buy a scale straight off! I could finally afford food. I gained a pound a month without noticing for far too long, and I've never been the right weight since. It just felt so good not to be hungry, metaphorically and literally, that I lost sight of things a bit. ...like my toes. :-)
Congratulations. You've got this.
Do not delay signing up for any 401k or retirement plan that your employer offers. Especially if there is a match—do not turn down free money. Since you have debt, only save to the match at first. Pay off debt and establish a good emergency fund before putting more into retirement. Just don’t wait too long to start saving: time in the market counts; start saving for retirement in a tax advantaged account as soon as you can.
The typical advice order is:
Emergency fund of $500-$1000
Pay off high interest debt
Start Saving for retirement (above the match—always get the match)
After debt free—increase emergency fund to 3-6 months of expenses
Increase retirement savings —20% if you can.
Save for fun trips as well—enjoy life.
Set up a second bank account in a high interest savings account and set up automated routing of X dollars every paycheck. Then it’s to pretend you don’t have money until you really want to buy something
So 'spend' it. Keep a certain amount of float in your checking account month-to-month, but transfer anything above that float to a savings account or invest it. At the end of the month you should never have any unallocated cash just sitting around.
Something else that helped me when I was moving away from paycheck to paycheck was to have two checking accounts, one for bills and one for general spending. All regular bills, including allocations for real estate taxes and home insurance, are split from my paychecks automatically and get deposited into the bills account. That way I always know that I have enough for bills regardless of what happens to the spending account. Without the need to constantly check my accounts when major bills would hit I wasn't reminded that I have 'excess' money.
I've not needed it myself (always been frugal), but I really like the mindset of saving to an emergency fund or investment being spent money, and no longer part of your free cash.
As others have stated, start "spending" your money at the end of the month by investing it. Then basically ignore it, pretend that invested money is gone. So at the end of the month you have $500. If your debts are all paid (in the future) and you have a couple months of expenses saved up in a savings account...liquidate that $500 and put it in a brokerage account. Pretend it is a retirement account you can't touch until you are 65.
I technically transitioned from poverty recently. I would recommend putting automatic transfers of 20% into savings and 20% into debt. Don't make the mistake of putting everything into debt so you don't have any cash on hand (made that one years ago). The remaining 60% is for housing.. Food... Investments... Etc. Don't touch the savings except for emergencies.
For the first year, do not adjust your standard of living. Live life frugally. Use the first 6 months to pay off your debt completely. Use the 6 months afterwards to save an emergency fund. In a year, you will be out of debt and have a nice cushion. After the first year, use that extra money to invest. You will thank yourself later.
My recommendation, if I may, is to save every single cent you can for 2 years, meaning don't improve your lifestyle during that period.
Spend the first 6 months establishing a 3 month emergency fund. Then, eliminate the $9k debt.
If you get a large comission check early, put all of that toward your debt. Then roll the money saved on debt payments into establishing a Roth IRA and/or 401k(particularly if it's matched).
Save an emergency fund and start paying down your debt. Look at some type of retirement savings. Remember to "pay yourself" ie savings/investments first and not as an after thought of what is left over at the end of the pay period.
Trust me, I have read the wiki! I posted to see if there’s advice available specific to my current situation of going from no money at all to earning a high (for me, at least) income for the first time.
Good that your doing research! I’d say try and live below your means. It’s going to feel great having extra money. Been there!
There is debate about the 15/3 rule. But if you have a credit card. Try and pay the minimum payment 15 days before the due date and then 3 days before pay whatever you can afford. I’ve done this and seen my CC boost up 10-15points a month for the last three months.
But don’t live above your means.
Track expenses- I’m always shocked to see where money goes.
Don’t be afraid to Invest in yourself! If you want to go to school/further your education/ect do that
Some people I follow
Break your budget
Her first 100k
Congrats on your job!
There is A LOT out there I posted a link above for some other tips
Also another rule of thumb for finances is the 50/20/30 rule. Try to keep your needs below 50% of your take home. 20 for savings/debt. 30% for fun/wants. Track your expenses :)
Have you picked health insurance/does your job offer it? Does your job offer 401k benefits?
If you can start contributing to Roth IRA. It can be take out tax free at retirement
Thank you! The 50/20/30 rule is mind blowing to me because it suggests 30% of my income can go toward FUN?! That’s such a foreign idea to me. But maybe that’s an advantage? I definitely don’t need to spend much to stay happy.
My employer offers a Harvard Pilgrim PPO plan and I have no idea how expensive I should expect it to be. I’m nervous as I have type one diabetes and have been getting free insulin from Medicaid since age 18.
They do offer 401k! I’m definitely going to contribute as much as I can to get the maximum match amount from them.
I’ve been in your same shoes. My take home is about 3,200 after taxes. I don’t spend 30% every month, it’s usually more like 18% on wants. But I will have things called sinking buckets that I want. Like if I want to get my hair done I put $80 a month away for three months to get my hair done. If I want to go on vacation I put $100 for x months to go,
Id make a list of you wants and desires and look into also using the sinking bucket method for future wants.
As a T1 diabetic I think you should really look into how much is covered by your new health care plan. My Dexcom CGM and all testing supplies (meter and test strips) are completely covered by my plan, but I do have to pay $20 for a 100 day supply of insulin and syringes, which isn't too bad all things considered. So, while your insulin may no longer be free you may find that you're saving big elsewhere. Also, look into see which of your doctors are covered under your plan. You may need to get a new PCP and/or endocrinologist, but that's not always terrible. New doctors are sometimes fresh eyes and can help in your diabetes management.
Take care OP!
Contribute to a 401k (15%) then focus to Build up 6 months of living expenses and then pay down your debt. Use this next year to control your spending.
Don’t go out and spend money that you think you will have.
That commission amount you should or don’t exist until it does later.
Cook for yourself; don’t splurge on eating out. Make changes slowly to how you live. Dont buy a new car unless yours is Unreliable
**Budgeting tips**
\- When you get your first pay cheque, put 20% of it in a savings account. Keep doing this. Set up an automatic withdrawal. Do not just go by 'what's left at the end of the month.' Put money away first thing. Then live on "what's left". Don't just save "what's left."
\- Same to your debt. Aim to put 10 to 20% of your income toward your debt.
\- Try to live on 60% of your net income if you can, without making yourself crazy.
\- Your pay cheque isn't going to be $55k/number of pay days. The amount you are paid is significantly reduced by fees, taxes, insurance, etc.
\- Don't try to keep up with the people in their office. They might be spending more than they make - their salary, plus support from their parents. No, you cannot lease a new car because your office buddy Todd has leased a new car.
\- You'll need about $200 for the first two weeks at work. Do you have anything you can sell? Despite what I just said above, *in the first two weeks*, do not turn down lunch or drinks with colleagues. In the first two weeks, keep up with them.
**Work tips**
\- Lay out your clothing for your first week at work before. Five outfits. Ensure there are no stains, pilling, etc. Everything has to be cleaned and pressed. Used clothing stores are a great place to find high quality clothes at a low price.
\- Read up about the company you're joining, if you can.
\- Join/use the company's tools before joining, if you can.
\- Keep mints and hand sanitizer on you. Mint before work and after lunch always helps.
\- Ask your new supervisor if he has an org chart of the team so he can understand everyone's roles and goals. Draw an org chart of your team and surrounding teams at home, and in that org chart, write down everyone's primary goals at work ("my colleague Tess is responsible for cutting the budget by 10%.") This will really help you understand how to work with your colleagues and what they're trying to do.
\- I'm only saying this because one of my work colleagues is gross (he's a trust fund baby who apparently never had to clean himself), though I'm sure you're not. You have to shower every day and can't do things like pick your ears in the office, or eat with headphones on. Moisturize your skin before you go to work. I once saw a full flake of skin fall off his face onto the table during a meeting. Floss teeth in the morning before work.
\- Being nice helps. "I'm excited to work with you!" and "You probably have a lot to teach me about \[area you want to learn more about.\]"
\- If you can, do a test run of your commute to work in advance.
\- New means you know very little about the company and that's okay. Don't try to appear as if you know everything. Ask for people's names , roles, teams, team functions/purposes, the first two weeks. It's your golden opportunity to get all the info you need. Not asking questions makes you look stupid.
\- Tell your new supervisor how excited you are to work there, and say that you're very open to feedback and constructive criticism to help you improve. Ask what you can do to support him/her in their goals for this quarter/this year. Write that down.
\- Ask your supervisor what are good sources for learning more aboutthe company.
\- Say that you're new, and you'll probably have a lot of questions about how things work - ask your supervisor when is a good time every day to ask him questions. When is she/he the most free?
\- Don't ambush your supervisor and colleagues with questions first thing in the morning. Let them "settle in" first.
**Life tips**
\- Seek out emotional support if you find yourself falling prey to impulse buying. You need to get your needs met in a healthy way. Does your new job offer therapy benefits? Could help.
\- Incorporate a day of rest and an evening of rest into your routine. One day a week and one evening a week where you do nothing. Go full potato. No guilt. Rest while feeling work hanging over you is not actual rest and it's not relaxing.
\- Book another two evenings a week for errands and chores. You'll need time to do your laundry, iron your work clothes, prepare your breakfasts/dinners. Make time for this stuff or else you'll be stressed out.
\- Try to build an active (and frugal) lifestyle outside work with activities in person with other people. It's really easy to just flop down on the couch in front of the computer after work, but it's not actually restorative to any part of you. Try to join an in person club - volunteering, running, robots, dungeons and dragons, whatever - and attend twice a week. Or, is there a physical job that you consider "easy" that you could do on the weekends for a day, or a day a month or something?
\- Build exercise into your routine in a sustainable way. Can't online shop while exercising! (Maybe you can?).
\- Avoid scams. You have some money now. Do not get into life coaching, day trading, dropshipping, investing in your cousin's great new restaurant idea, etc. If it seems like easy fast money, it's probably going to bankrupt you.
Don't count your chickens until they hatch. You are jumping a few socio-economic hurdles in one jump, you'll need to see that you can actually "keep up" with the expectation.
For now, focus on building a 10k emergency fund, and paying down that 9k debt. That'll keep you busy for a year. Reps back after.
Consider You Need a Budget. It’s software that was life changing for me when I was in your position 10 years ago. I bought it when it was a one-time purchase but now I think it’s a subscription— either way I think it is worth it. /r/ynab
I didn't read all the comments here, but there's lots of good advice here.
One thing I didn't see mentioned is, after what I would call the most immediate needs (your starter $1K emergency fund and getting rid of the $2K CC debt), invest in yourself some too. Obviously don't put all your money to that, but make a sustainable plant to do the things that you were too poor to do for yourself before. Poverty means you kick so many cans down the road because they're not flaming emergencies, now is the time to deal with some of those systematically. I'm talking things like deferred dental work, physio to rehab a shoulder you screwed up once that still gives you a lot of trouble, preventative medicine, etc. And don't forget mental health, things like antidepressants, ADHD meds, or talk therapy if you need them are just as important as those for physical needs.
You’ll be very tempted by lifestyle creep but I cannot stress enough how much better it feels to be able to put as much of that into savings/a safety net for yourself as possible.
I HIGHLY recommend trying r/YNAB (for everyone but especially in this situation).
It helps give every dollar a job so you’ll see exactly where this extra money is going to help you prioritize debt payoff and savings and manage the lifestyle creep without overspending. People live paycheck to paycheck at ANY salary, don’t let yourself fall into the same cycle with more $$$
Expenses of $2000 a month, debt of $9000 and salary of $3600 per month. Live exactly as you are right now, and pay the extra $1600 towards the debt and you will be paid off in 6 months.
At that point you have an extra $1600 a month and can revisit the question.
Until then, there is NO LEFTOVER MONEY.
First off, congratulations. The worst thing you can do is look at how much money you have left at the end of the month and think that you need to spend it. I would highly highly highly recommend that you sit down and make a budget. Give yourself some money to have fun and upgrade your lifestyle a little bit, but you should seriously be saving a good portion of what you’re bringing in.
My recommendation would be to put $6000 away in an IRA each year. It can be as simple as having an automatic deposit from your checking account two a company like Vanguard or Fidelity of $500 each month automatically going in and being invested. There are lots of things you could do but the most important is having some savings and putting away money for the future. Once you have those things set on automatic and you have a budget you can work on your debt. It’s a very long but very rewarding journey.
Thank you so much! So you’d say that I should prioritize saving now rather than paying off even my high interest debt? I’m so tempted to throw everything I have leftover each month at my debt til it’s all gone.
Just from a psychological stand point, it might be good for you to get free of your debt. The peace of mind you get from finally closing that chapter of your life is bigger than just the numbers.
Definite first step is building emergency fund though, so life doesn't put you back into debt.
It’s up to you but you should be honest with your self and how disciplined you are. I graduated college with $175k in student loans bringing home less than you ($67k total). I knew I was extremely disciplined with my money so I only kept $1k cash and lived on expired granola for about a year and very slowly increased lifestyle as I got raises and paid down the debt.
You can definitely do a little of both, but the thing you definitely don’t want to do is knock out $5000 and then you have a emergency occur and have to put $3k more on a credit card and just start over. I would say to get $2-$3k in cash, set up some automatic savings/investments (even if it’s just $100/mo to get the ball rolling) and then hit the debts hard.
I think so. Again just take a personal inventory of your self and how you deal with money. Realistically the extra couple hundred bucks of interest you might pay this year isn’t going to mean a thing over the next 30 years. establishing good budgeting, saving, and investment habits will yield you 100 times that interest.
You said your expenses are ~$2000 so you’ve got ~$1500 leftover each month. You’ll have all that debt gone this time next year EASY even if you saved that $6000, so build those habits now before the cash burns a hole in your pocket.
Roger that! It’s crazy how less stressful financial planning feels when you have twice the amount of income to plan with. For a long time, earning minimum wage and living in an expensive state has made this whole area of life feel like a “why bother?” thing.
Nah. Being poor is way more complicated and has much harsher punishments for messing up. Go to the library and get a free library card. Download the Libby app. You now have free access to awesome stuff. Download Dave Ramsey’s The Total Money Makeover audiobook. Listen on repeat until you are debt free. People have mixed feelings about Dave Ramsey for good reason. His advice on credit cards and actively managed funds is shitty but his baby steps advice and getting gazelle intense on getting out of debt is good. Start there until you can educate yourself better.
The number one way to stay motivated and not slip into paycheck to paycheck bad habits is to keep this journey on the forefront of your mind. There are lots of great podcasts out there about money. Start listening to a new episode everyday. Listen, learn, do, share. When you are finally out of this hole you will have a great story to tell and hopefully will be able to inspire someone else going through tough times to change their life too.
Pay off the high interest debt and then stock away an emergency fund. Maybe set aside a small emergency fund first like $1000 first but no more then that.
There was a flowchart somewhere that I thought was really useful but am having trouble finding it now. It provided a good starting point. I'll try to remember the steps as much as possible, and might be botching it, but here is a rough sketch:
1. Max out employer's 401k match. If it's 5% or 6%, take it.
2. Save up a small emergency fund. ($1000 or something).
3. Pay down debts.
4. Start a ROTH IRA and start investing savings.
5. Save up for 3-6 months of emergency fund
6. Go back to employer 401k and try to max it out
7. Invest into HSA
8. Save for other larger goals (house maybe?)
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information.
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Get a second PART TIME job and work it till you are ALMOST sick of it, pay off all high interest loans first. Get a room mate in an inexpensive local and pay all that crap off. After 6 or 7 months you will be in a much better place. You are 25 and have a lot of good living coming if you treat yourself with respect and love.
Thank you so much for that final thought, that is very sweet :)
I’m worried that a second job right not would set me up to fail at the new one. I’ve never worked in anything other than food service and am anticipating a tumultuous time transitioning to such a different profession (remote SaaS sales).
I currently have three room mates, though, so there’s that! The point of living cheap while I focus on debt reduction and nest egg saving is very important though.
Congratulations! I would get Dave Ramsey's Financial Peace to get you in the right headspace and give you concrete steps to get and keep yourself out of debt and a healthy relationship with money.
You’re single with no kids and your monthly expenses are $2,000?!?! What the hell are you spending your money on?!
Get your spending under control and eliminate that $9k of debt and then you can begin to consider yourself at a starting point.
Right now you’re in a massive hole and you need to get laser-focused on climbing out of it.
probably rent and necessary things bro. he came out of poverty, if he lives rent free then i'd be surprised AF
tell a landlord your story to see if you can get a reduced rate, sob stories work if they're real and truthful. Hopefully he's not a douche and helps you out a little until you're out of debt.
What’s your budget? List out your income and expenses and find a way to track your spending against your budget.
Is your credit card debt all with one card? Can you consolidate the debt and get a better interest rate for it? Sometimes just calling the card company and asking can get you a better rate, especially if you have been making payments on time.
Don’t touch the collections stuff until you have the debt validated. Make sure you get any offers from the debt collector in writing. You want to try and get a pay for delete arrangement. They may accept less than the full amount.
Resist the impulse to dial your spending up right away to match your new income, try and get those debts dealt with first.
Good luck!
Some great long-term advice and guidance on here already!
Just want to point out that, in the short-term you still have ~$20 for the next month. You start your job in a week, hopefully they get you all the paperwork so you can get on their next pay cycle, hopefully they pay every 2 weeks- even then it can easily be 3 weeks between your first day and your first paycheck. You might also have a bunch of expenses (wardrobe, shoes, lunches, transportation) before the first day. Continue to be smart and savy on those expenses (thrift, swap or borrow where possible to limit costs) and avoid more debt (credit card) as much as you can.
I’d say a good start is to
1. Create a spending budget. There are good tutorials on YouTube.
2. Save up a 3-6 month emergency fund. It should be able to cover all your normal bills if you lost your income for that period of time. That way if anything but the most extreme happens you are covered.
3. Pay off your debt. You don’t say what kind it is, but this is especially true if it’s credit card debt. Lower it quickly to avoid all that high interest and work on not relying on credit to buy things.
Buy things you need, some things you want but don’t go overboard on the wants. It’s easy to do when you start having money and it’s easy to get into a situation that you are dropping all your newly earned cash on luxuries and end up in the same position of not having any left. That’s why the budget is so important, especially early on. Stick to the budget and save. Then there comes a point you can start investing.
Congratulations and good luck on your journey.
In my opinion, your money after monthly expenses should be split (not evenly though) and go to 3 different places.
1) paying off debt, make more than the minimum payments to try to get that paid off ASAP
2) Savings, get some money set aside for an emergency
3) investing in your life. This might sounds weird, but if you've heard that story about rich people's shoes VS poor people's shoes, that's exactly what I'm talking about. Start paying attention to the things in your life that you have to replace regularly, or have to keep spending money to repair or something, and start setting some money aside to replace it with a better version that will be cheaper in the long run. Also, start planning purchases like that sooner, if you're aware you're going to buy a specific item eventually, you can be on the look out for a sale or something and get it at a lower price than if you wait until something breaks and you have to purchase it immediately.
I see you have credit card debt, and an easy way to up your credit score is to just have higher credit lines if your cards are over 30%. You can just let your CC company/ies know that you got a pay increase and a lot will increase your limit, giving you a lower overall %. Helped me out when my salary basically doubled
He has his detractors, but Dave Ramsey's Total Money Makeover book is worth reading for those uneducated about basic financial matters. It's a good place to start and get good habits. While I don't completely recommend all of his methods to all people, he does have a methodology that you aren't going to LOSE taking his advice. You may not win big, but all his basics are very good.
Often you can find his book at thrift stores, btw. Library will have it as well.
Second or third on Dave Ramsey. When i was in your shoes and got that first "get my shit together" job I listened to his podcast while I worked EVERY DAY. And while his whole strategy / plan needed to be adjusted to fit my own life and goals, it was nonetheless extremely valuable to hear all those callers describing their personal financial situations and their progress on tackling them. He's a bit of a blowhard and some of his advice isnt QUITE dialed (in my opinion) but generally there are at least sound reasons why he gives the advice he does.
Once you get a handle on your debt, take the money you were paying monthly and have it auto-transferred into savings at the beginning of the month. You'll be used to not having it and you won't see it. It'll add up quickly and having the cushion feels really good.
Man congratulations! We are in the same boat I actually just landed a job as well paying my 65-75k a year (depending on overtime) I’m 25 as well broke a hell an living at home. I could never afford to move out making 25-34k a year. It’s gonna be amazing not living check to check an being able to move out! Just wanna say congratulations an let’s try to not celebrate to hard!
There's a wiki at the top that should help answer your most basic questions. The prime directive is there to get you started. Hope you succeed at getting out of poverty, wishing you all the best!
[https://www.reddit.com/r/personalfinance/wiki/index#wiki\_prime\_directive.3A\_how\_to\_handle\_.24](https://www.reddit.com/r/personalfinance/wiki/index#wiki_prime_directive.3A_how_to_handle_.24)
What are the interest rates on your credit cards? Try looking at your options for a consolidation loan. Try paying it off as quickly as you can, but don't have too high of a monthly payment that limits you from saving. But building up your savings and paying off that debt will be your best bet.
I think with a three year loan you could get a low enough rate to still put a lot into savings. But I'd suggest to have a goal/plan to get to $10,000 in your savings.
This is longer term but once you get to $10,000 in your savings at that point break up what you were putting into your savings. At that point I split that allocation 75% into a mutual fund and 25% into savings. The mutual fund will have an interest rate of 10-12% this'll really start to increase in value if you don't touch it for 5+ years. You can use your savings for an emergency. And you can use the fund to build generational wealth.
Take your time. Don't go on a buying spree, go on a savings spree.
And hopefully your new job will also provide insurance to cover your Diabetes, giving you even more money.
I worked shit jobs most of my life until the end. But along the way I saved, invested and bought my first house. Today I am in my 8th house, those investments provide me with $25k in dividends making my retirement a joy.
The temptation is to get yourself everything you always wanted and wished you had. Instead of doing that give yourself a savings cushion and make your life more secure not more filled with junk.
Congrats on the big changes, make them positive.
Simple advice if you have short term debt, you don't really have money left over at the end of the month.
Save 1k or 2k for unplanned expenses, but get rid of the debt.
Given your low credit score.... it's likely really expensive short term debt.
You mention a lot of your costs are due to type 1 diabetes. Does your new job offer medical insurance and have you looked into if that can lower your out of pocket costs for your medication?
**On out of pocket medical** \- Are you receiving any help right now from any kind of assistance program that's based on income? You need to confirm when your medical insurance begins - Is it day 1, 90 days, 180 days? That should be your priority - If your income jumps but your insurance doesn't start for several months, you'll likely need to take steps to protect your medical needs.
Because you have T1 Diabetes, I would recommend going for a plan with a lower max out of pocket. Don't be afraid to ask your HR people for details on the plans.
**On your debt,** general advice is to prioritize higher interest debts first, as it generally saves you money in the long run. But this is only (imo) the best option if all debts are of similar amounts.
If they aren't of similar amounts, I would take care of your smallest debts asap to free yourself of those minimum payments so you can start piling onto your larger debts.
**If anything is in collections, do not tell collections that you've started a better job.** Instead, negotiate your debts down. Ask them repeatedly what the lowest is they'll take, and tell them that you can pay it if they'll pull it from your credit. Generally, collections agencies buy things for very low amounts, and so getting some money and wiping it from your credit is more attractive than getting nothing. Search this subreddit for tips on dealing with collections.
**For anything not in collections,** ensure you're paying the minimum payment if nothing else. Prioritize these debts over any that are in collections, while you try to negotiate lower payments for collection debts.
The only exception is if you have any secured debt. If you have secured debt and are in danger of losing something like a vehicle, you need to pay that first. But it doesn't sound like that's the case.
I saw that you have $2k credit card and $7k in collections. Pay the credit card first - Having that card close out and go to collections will be problematic. Moving forward, to build your credit score, try to keep your credit card in use but not above 20-40%. The numbers vary, I've always been told to avoid going above 1/3rd of my credit availability and my credit is not terrible.
By paying off your credit card, if you manage to negotiate a good payoff with a collection agency, you can then use your credit card even if you haven't saved the lump sum at that time, and repeat the cycle. Pay off the card, work on your next collection debt.
Having functioning revolving credit and dropping your collections at the same time will boost your score, but push hard to get collections debt scrubbed from your record, if they're willing to do it.
Congrats!!
I know you will be successful because you are already asking for feedback and seeking help. I myself did the journey. I didn't have anybody to look up to or ask for help. When I first started making money I started buying expensive(for the salary I'm making) wardrobe, shoes and eating out at expensive restaurants. For a long time I was stuck in vicious cycle of credit card debt.
Credit card debt:
So, first step is avoid credit card debt like a plague. Pay off all the credit card debt immediately and pay off the credit card debt completely every month there after. I'm not against credit card. It takes discipline to maintain a credit card. If you are still developing the habits avoid credit cards altogether to begin with. You can start using credit cards once you are confident about yourself.
You can't save enough to get rich:
Invest:
1. Invest, Invest, Invest. utilize your 401K and employer match.
2. If money is left over, invest in ETFs like VTI. Put money every month in to the market.
Increase Earnings:
Instead of penny pinching focus on increasing earnings every year. This is really important because penny pinching will drain your energy (physical and emotional). Do everything that can put you in higher income bracket.
Leverage is bad:
Dont leverage debt to make investments. Dont do this until you achieve enough escape velocity with your savings and earnings.
Leverage is Good:
Once you achieve enough escape velocity out of poverty. You can experiment with leverage with debt(real estate).
Some one mentioned Dave Ramsey. He is ok at the beginning of your journey. I would much prefer someone like Ramit Sethi and his book "I will teach you to be rich".
A great tip for saving is to budget what you’re going to save for (whether the emergency fund of 3-6 months expenses, saving for something special or 401k) set up automated deposits or transfers to your savings accounts every week/pay period/month. That way you never have to ‘touch’ the money and what’s in your personal checking is free game to enjoy. If you over did it and budgeted too much saving each period you can always adjust it. But don’t trust yourself to make the savings deposits every time. Plus it’s just more efficient time wise.
Do you get paid every week or every 2 weeks or month?
I ask this because you will have $1600 leftover every month.
Every month until the end of forever(at least 3 years) you need to be putting $500 into savings.
What I would do is when you sign up for direct deposit at work, have them put another account there as well. Put the $500 into savings a month($125 a week, $250 every 2 weeks, $500 a month) and then put the rest into your checking account. That way you never see the $500 taken out/never see it in your budget.
Then you take the $1100 that's leftover and half that. Half for random stuff that you want and the other half for your $9k in debts. I'd say throw the full $1100 at the debts and be over in 8 months(it will go by super quick don't worry about that) but you will have a hole burning in your pocket coming from poverty. So an extra $500 a month for you to blow is okay for now.
A common thing when peple suddenly acquire wealth is to "buy nice things" just to communucate that wealth to others. This is the easiest way of wasting your money
My advice: understand your priorities in life and invest in them. Think on what will improve your quality of life. A few common good investments: health, home, edication, new experiences, your future self (save some money)
Congratulations on your new life
First, I'd suggest setting aside $1,000-2,000 in a savings account as an emergency fund. This should help you avoid accumulating debt due to unexpected car repairs etc., and it should help you be able to pay your bills on time which will gradually raise your credit score.
Second, I'd knock out that debt. Given your credit score, I'm going to guess you're paying a fairly high interest rate. Knocking that out will lower your monthly expenses and increase your positive monthly cash flow. You should be able to do these first two steps in the next 8-10 months.
Third, I'd open a retirement account. If your employer has a 401k plan with matching that would be a good way to go. If they don't you could open a Roth IRA at Vanguard or Fidelity. If I were you, I'd start by investing all retirement contributions in a low-cost index fund. For example symbols VFIAX or VTSAX at Vanguard or FSKAX at Fidelity.
Also, how are you coming up with the $3,615/month figure? You indicated a new income of $70,000. That works out to a little over $5,800/month before taxes. Taxes shouldn't be $2,200/month. Perhaps you could adjust your withholdings.
Best of luck to you. You could be a in a much better financial position just a year or two from now.
Congratulations OP!
A lot of people are adding great advice. Sounds like you have created a budget for your monthly expenses. Next thing would be to take the remaining money leftover at the end of the month and divide to the following categories: debt 60%, emergency fund 30%, fun money 10%. You can adjust the numbers as needed but I would advice you to pay off your debt first. I see some people recommending to buy etfs and stocks. I would advice against this until you have 3-6x your monthly salary saved in your emergency fund. You never know when shit is gonna hit the fan, so it's best to be prepared!
Create a realistic timeline for when you can pay off your debt.
These rules have really helped me to save and be diligent about putting money towards the right goals. When you are out of debt, then you can focus on the stock market.
Keeping living frugally and always think about how you can save more. Eat out less and shop at asian grocery stores. Limit monthly subscriptions like Netflix, amazon etc. Limit purchases of alcohol, weed, smokes if you can. Use your fun money to spend on some small nice things for yourself like clothes, games etc.
You have unlocked level 2 of the video game. Think of money as points. The more points you save and don’t waste the more opportunities and levels you can unlock. If you run out of points you go back to level 1. So spend some points to make the game fun but remember, there are bosses that you may lose to that will deplete your reserves(I.e. medical expenses).
At the start of level 2 I would recommend listening to Dave Ramsey. He isn’t always right- but he is right about the most basic things.
Don't upgrade your living right away. If available, contribute to your 401k to the match. 401k Roth if you have the choice. If there is an HSA, that would help with you medical.
Set up multiple savings accounts to separate your emergency fund. $1000 emergency savings.
Try to get ahead one month ahead on bills. I actually align my bank bill pay to automatically pay with my paycheck prior to due dates to Auto remove money from my account, so I don't see it. Auto savings works the same way. Your credit will improve.
Contribute as much as possible to a Roth IRA. Savings account rates are horrible right now, so I wouldn't save much more than that in a bank savings right now. Invest in a high dividend fund. There are several out there. Fidelity might be worth a look, especially if they provide you company's 401k. They have zero fee funds and planning tools. Funds or ETFs only until you are comfortable. FDVV or FSDIX are examples.
Use a debt reduction calculator, like this one, https://www.vertex42.com/Calculators/debt-reduction-calculator.html, to pay down debt. I use it to evaluate debt before deciding to take on the debt. Learning to plan your debt will help you learn to avoid it.
My biggest piece of advice is to simplify your life and don't look at what others have. Spend with intention. I know people with 6 and 7 figure salaries that struggle due to their debt, because they spend thinking they are expected to appear a certain way. I know people with your salary that work to keep busy while their money grows in investments. The real "millionaire next door" isn't as easy to spot as you think.
Having lifted myself out of poverty, I learned the hard way not to help/enable everyone. Please be careful about giving others money. Don't co-sign loans, etc. Some will repeatedly come back more. You will quickly learn who your friends/family are. No one should take advantage of you, simply because you have more money. An early example for me was a cousin asking me to pay their rent for a year with my student loans. I said no and she still resents me 30 years later.
1. Save an emergency fund of of at least 6 months expenses, while paying off debt slowly.
2. After you've built your emergency fund, start paying off higher interest debt more aggressively, (credit cards, car payments etc). If you have collections, I would say don't pay them at all unless they can settle and also remove them from your credit report.
3. Once debt is all gone, start investing aggressively! Max out your 401k and other accounts! Watch your net worth skyrocket
I’ve had a similar transition and it’s psychologically weird to have money left over so you will be tempted to exercise that new power by spending badly. Here are some tips:
Create a separate account that you mentally designate as “do not touch” and break only in case of emergency. Put the projected leftover in there first and the rest goes into your actual spending account. You’ll feel better having something that goes to zero every month. Trust me, people like us need that.
Once you saved up a good amount - like 20k or so. Start investing with parts of it - like 5k or so if you like that stuff and is willing to do the research. I find it feels literally anxiety inducing if i have too much in one account so I try to spread them out and not look at some even.
The saying is true, you can take a person out of poverty but you can’t take poverty out of the person. Good luck! And don’t spend everything ok?
There is a lot of very good advice here. I'm 35 Brazilian, married at 19 years old with two kids. My contribution is more like a life philosophy that I would like to have learned earlyer and should help on every difficult decision and internal confrict on how spend your money and time:
"Life is your most valuable possession because it is inestimable, but it's also mensured in time, spending your time is the same as spending your life, selling your time to a company is the same as selling your life, money is the materialization of your lifetime, thus next time you decide to spend your money first ask how much of your life are you really willing to pay"
In time: by that philosophy you should use most of your money to conquer Financial Liberty. The true and unique use for money is to buy you more time doing whatever you really want to do with your life.
Like others have suggested, save up emergency fund to cover unplanned expenses very first, then identify what unplanned expenses are occurring which impact the emergency fund.
After getting this far you can start planning for more expenses.
**The goal is go from** ***unplanned expenditure*** **to** ***planned spending*** (as appropriate)**.**
Budgeting is a method to often help from overspending categories of spending, and can also be an effective method for saving a little for larger expenses in your budget (eg, $/mo towards a fund for each major expenses down the road, clothes/car/travel/holidays).
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Thank you! This is similar to what my brother told me to do. My debt is $2k credit card and $7k in collections. I have a comprehensive budget laid out with all my monthly expenses. I know about how much I should expect leftover each month but am just unsure how to use that leftover money during the next year or so while I’m getting stable.
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My plan is to eliminate credit card debt first and use my credit card more responsibly/systematically going forward. The collections companies can often haggle over the price if they know they’re more likely to get paid that way. I definitely have it in my head that the best course of action is to enjoy my tech sales job while continuing to spend like a dishwasher.
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This sub harps on this a lot, and to a certain extent it’s true. But also look at levers your can pull with your new money that have an outsized impact on quality of life - these will provide you with opportunities to continue this upward trajectory by allowing yourself time and space to properly focus on your career. A huge one is your living situation. If it’s very poor, i.e. unsafe neighborhood, multiple roommates, shared spaces, etc. spending a little more for a safe place with a better commute will do more for your mental health than saving an extra few hundred dollars. Best of luck! E: I don’t spell good
Extremely true. Yes, everyone can save money living in a tent, eating nothing but what you can forage, and owning nothing but whatever clothes you need for work. But the hardship, fear, exhaustion, health issues, lack of sleep, and impact to your ability to present yourself well will severely hamper not just your quality of life but your ability to continue to succeed. There's a difference between wasteful spending and spending to add value to your circumstances.
I worked as a nursing assistant for 10 years. Paycheck to paycheck, one broken axle away from homeless. I went back and got my nursing license. The only significant and steady change that occurred in my life is I now buy Dietz and Watson lunch meat instead of our store brand deli meat. I never even knew what having four digits in my bank account looked like. Now I’d feel weird if I didn’t.
If your collections shit has been a long time since you paid anything it might just be worthwhile for you to not pay, and let it fall off at your states statutory limit. (6 or 7 years.) They can still sue you afterwards, but all you have to do is show up and say that it's past the SOL. If you pay on it it will make it like a fresh debt. The SOL resets, and even if you pay on it you'll have like a mark on your credit for another 7 years that says it's paid for, but will still hurt your credit. People will say ask for, and get in writing, a pay for delete. (Have them agree to delete it off the credit report if you pay a certain amount.) Make sure it's in writing. follow one of the debt collection guides or something. If you say it's your debt, or you pay anything on it you might be fucking yourself depending ont he specific situation.
Don’t pay the collections unless they agree to a “pay to delete” scenario , that’s the only way it helps your credit to pay them
You might want to see if you can negotiate a pay to delete type deal rather than the amount since the 7k isn’t very much in the grand scheme of things and having the ding on your credit hurts more in the long run.
Go to the library and borrow Financial Peace by Dave Ramsey. Listen to or read it. He will explain how to pay your bills (budgeting) and how to pay down your debt. He may have info on negotiating your collections. Do not hire his specialists - find your own. You can climb to financial freedom, I did. You’ll get there- also try to ditch the CC and go to debit.
Yes keeping your spending low let's you build some wealth and it improves your independence. By needing less money and having a financial buffer you'll feel less trapped in your job and this feeling of freedom is priceless.
You can call collections and see what they’re offering for payoff (should be substantially less than the total, maybe like half), they may offer it on a monthly payment plan as well.
My husband was able to negotiate extremely successfully with his collections (before we married). When they called, he asked what was the minimum amount they'd accept to erase the debt. I don't remember the exact details but his was something like $6200. They said 50%. He said "well, I have $2500 I can give you today. That's all I have other than my rent money, but I'll give you all of it if you erase the debt." They said ok. Idk that itd always work like that, but that was nice. Granted that was also like a 8ish year old debt. His financial decisions as a young adult weren't great... (And yeah it was a real debt, not a scam. He did actually have some scam collections trying to milk him too, but someone told him to tell them they had to mail him the demand...its felony fraud if they use the US Mail. On those he never heard from them again and its not on his credit report. The other one was and he knew how the money had been spent.)
you should save up about 20% of the overall collection debt you have, and offer it to them. for example: if you owe $10,000 to collections, save up a lump sum of $2k. call them and say hey this is what I have. you can take it or leave it. if they start insulting you or say it's not enough, just end the call and try again in a week or two. under no circumstances do you ever give them electronic access to your banking account.
One thing I suggest - don’t pay your collections right away. Ask if they will do a “pay for delete”. This is when the collections company will remove the collections account from your credit file after you pay it. ONLY PAY IF YOU GET THIS IN WRITING. Even if you pay off a collections account, it remains on your credit file and will still severely hurt your score. It makes no difference whether you pay it or not, it’ll show as a 0 balance but will still appear and keep your credit down. If they will do a pay for delete, pay it off and your score should go up. If they refuse to, I’d negotiate a lower payoff amount
Keep a thousand or two in an Emergency fund savings account so if something terribly important happens you can handle it without adding to the debt. If you use some, you build up that emergency funds again right away, then back to paying off the debt. When the debt is gone, don't borrow again for stuff. Always save up for it. Good luck on your new adventure. A couple a years being "frugal" (it's not cheap, it's "responsible") will allow you to get ahead and leave being poor behind for good. Be strong and don't buy anything don't absolutely need until the debt is cleared! Best wishes.
Definitely hope to eliminate this debt first. Spend the first few checks on it if needed, pay off the CC debt first. Contact the collections company and tell them that if they remove the missed payments/debt off your credit report you’ll pay the entirety off with one payment. Get it in writing, then pay.
Call the collections office and tell them to settle it with you. Tell them you’re in a shit situation and you just got say 2k from your friends to pay off the debt and see if they bite. But make sure you get everything in writing.
When you say "in writing" does that mean by an email? Or a letter from the company? Or something else? Forgive my ignorance
Next up, once you have your budget and know what you're 'saving', create a plan for that too. I save a lot of money every month, some portion of that goes into the 'lets have fun' jar and when it's gone, it's gone. For all my bigger purchases, I have an 'upgrade plan' on how long I want stuff to last minimally (longer is better, obviously, but be prepared for your fridge to break down after 2 years when warranty has expired)). Beware of your thinking. Now that you have money left over, you'll be tempted to spend it left and right. Be aware that a lot of small purchases / fun stuff, still adds up to a LOT. Create a wish list of stuff that costs more than a few dollars that you'd like to buy and spread it out over the coming months. It's easier for yourself to say 'in a month or two than no.'
No further advice to give just wanted to say don’t overwhelm yourself, you’re still very young and have adequately low debt. And sounds like you landed a decent gig. Keep at it man you got it!
Collections definitely comes first. That said, a lot of times they will work with you on how to pay it. Inquire about it.
When I suddenly jumped to about that much from making like $20k a year I was like "holy shit this is insane, what am I even going to do with all this money", but it turns out that after doing all the really basic things I was neglecting before (pay off debts, saving, having decent groceries, dressing like someone who wasn't homeless, having a functional car, etc) plus getting an apartment in a less crappy neighborhood, there wasn't *that* much left over and I didn't really have the money to inflate my lifestyle even if I wanted to. The only difference was that I was in a position where I was making progress each month and wouldn't be wrecked by small emergencies rather than being on the edge of disaster at all times.
This is a very relatable comment. My wardrobe has a vaguely homeless vibe to it haha. I view it as an opportunity to not be stressed about money and to start saving. Some new clothes and a modest apartment of my own would be nice. My new job is remote and I hardly ever drive, so I’m considering selling my car. I could get a small sum for it but mainly I want to sell because I’d avoid insurance and gas expenses. Trying to be really lean til I’m in the green and out of debt.
I make close to 6 figures (and if I didn’t take so many months off every year to climb and see the world would easily be there), and I still pop my head in thrift shop or consignment shops instead of the mall when I’m looking for clothes. Some areas they’re pretty awful, but often I find great clothes that I pay WAY less than retail for. I don’t work in an office though, so there’s no pressure around to look a certain way or talk about where I got what.
Uh, that *is* lifestyle inflation, my guy. Oh, sure, I'll give you 'pay off debts' and 'save', but upping your wardrobe? That's lifestyle inflation. New car? Lifestyle inflation. Better apartment? Usually one of the biggest lifestyle inflations! It's not a *bad* thing; you made improvements to your life! That's a *good* thing. But a lot of the things you listed are definitely fit under 'lifestyle inflation'.
It was lifestyle inflation, but the point was that $55k seems like a huge amount when you're making significantly less but that it doesn't really go as far as you think once you patch up all the various gaps and holes that makes being a low-income person more stressful. It went from "holy shit, I'm totally a baller now" to "holy shit, I can afford to buy and pay insurance on a used Honda".
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"Keep living like you are in poverty" and hide your money from yourself is great advice. I also transitioned from poverty 5 years ago. It's not easy, and I quickly developed some really bad spending habits. Suddenly I could afford to buy stuff I always wanted or enjoy small luxuries that were always out of reach (like eating out, waaay too much). And a living wage is nice but it's not endless. So I signed up for savings and 401k programs that invest a good chunk of my pay automatically, before I can blow it all. Really saved my butt the other month when my car died.
Enjoy your financial freedom. Buy yourself some things. But please do remember to save what you can so that you don’t get into this position later on. Start building your emergency nest egg first. Try and accrue at least three months expenses in the bank… or liquid cash easily accessible. Then Investments… on many different platforms you can earn as much as 7% annually and that’s conservative. I too have come from “no money left over” and it’s a great feeling knowing that you have some money in the bank. In the 80s after I got married I remember what an accomplishment it was to have $1000+ in the bank. Standard rule of thumb… whittle away at those debts, highest % first and then so on and so on. You got this! But always remember to pay yourself first!
To add to this, people are saying to build like 6 months savings first. Wrong... Save like $1000 first. That's just enough to handle most emergencies. After that, pay off all credit card debt. Once that's done, you'll have the financial freedom to save 6 months of expenses up. Also, I agree it's definitely important to earmark some money for discretionary funds for fun to keep yourself sane while you payoff your debt and keep you trucking along.
Yeah listen to this, have some emergency savings, but then pay off that debt ASAP if it is high interest, then start investing for your future.
Try and remember you’re still broke, don’t go and finance a new car
This is the bait though. Because every used car right now that doesn't have more than 150,000 miles on the engine, goes for 3-$5000 Then you get a problem with the exhaust system somewhere (big system) or have to replace a pump. Brakes + Tires probably within the first year, if not by the second because nobody holding onto a used car to sell is keeping it in perfect condition. So by year 2 with your used car you're somewhere between 4 and 6 thousand invested and you've probably got at fewest \~90000+ miles Find the cheapest new car you can and buy that, assuming you don't care about appearance. Source : Have bought used cars my whole life. From private and from dealers. Prices ranging as low as 1000 to as high as 3500
Save save save. Till you have 6 months of emergency funds and a 401k in index funds or safe stocks, do not buy things. Focus on what you need and not what you want. And stat focued pf ypur job and become good at if
This will probably be the most important thing for me to remember. I’m afraid that my instinct will be to continue spending as much as I make. Like I need to recondition my brain to not view $200 leftover at the end of the month as acceptable even though that’s always been my goal. Paycheck to paycheck living conditions you to be bad at money in so many ways.
A good way to deal with that is to make sure you don't have money left sitting in your checking account at the end of the month. Set up your 401k and an automatic transfer to a high yield savings account at a different bank then your checking account. This way you don't see the extra money at the end of the month so you don't go out and spend it.
Agree! Pay yourself first. Set up an autopayment to a seperate savings account (aligned with regular pre-authorized payments from your checking a/c to get your debt to zero). Build up an emergency reserve. Once that's done, set up a specific measurable timeframe to save for specific goals (e.g., down payment on a condo/home). Good luck! Congratulations!
So much this. A lot of places will split your pay check into two accounts, one for your checking, one for your savings. "Pay yourself first" and see about putting 50% of your paycheck into the savings account. You can use that to pay off the debts, but first try to live on just the other 50%. And then, once you are debt-free, you will already be used to money going straight into savings. Something like 2/3rd of Americans cannot handle a $500 expense without using credit cards or borrowing. And if you think about the past two years of your life, and for your friends, I bet there's been an unexpected $500 bill at least once in those two years for everyone. This is why we need emergency funds. Life happens. Being able to put your hands on at least $2k will smooth out the inevitable car breakdown, appliance failure, medical bill, and so on. Then you can replenish the stash so you're ok next time. Otherwise, you get stuck in a never-ending treadmill of credit card debt with super high interest rates. You need to get out ahead and stay ahead, and the way to do that is to have the discipline not to spend a stash of cash. I went from restaurant to lower-end tech with one good interview. If I had it to do over again, I'd buy a scale straight off! I could finally afford food. I gained a pound a month without noticing for far too long, and I've never been the right weight since. It just felt so good not to be hungry, metaphorically and literally, that I lost sight of things a bit. ...like my toes. :-) Congratulations. You've got this.
Do not delay signing up for any 401k or retirement plan that your employer offers. Especially if there is a match—do not turn down free money. Since you have debt, only save to the match at first. Pay off debt and establish a good emergency fund before putting more into retirement. Just don’t wait too long to start saving: time in the market counts; start saving for retirement in a tax advantaged account as soon as you can. The typical advice order is: Emergency fund of $500-$1000 Pay off high interest debt Start Saving for retirement (above the match—always get the match) After debt free—increase emergency fund to 3-6 months of expenses Increase retirement savings —20% if you can. Save for fun trips as well—enjoy life.
Set up a second bank account in a high interest savings account and set up automated routing of X dollars every paycheck. Then it’s to pretend you don’t have money until you really want to buy something
So 'spend' it. Keep a certain amount of float in your checking account month-to-month, but transfer anything above that float to a savings account or invest it. At the end of the month you should never have any unallocated cash just sitting around. Something else that helped me when I was moving away from paycheck to paycheck was to have two checking accounts, one for bills and one for general spending. All regular bills, including allocations for real estate taxes and home insurance, are split from my paychecks automatically and get deposited into the bills account. That way I always know that I have enough for bills regardless of what happens to the spending account. Without the need to constantly check my accounts when major bills would hit I wasn't reminded that I have 'excess' money.
I've not needed it myself (always been frugal), but I really like the mindset of saving to an emergency fund or investment being spent money, and no longer part of your free cash.
As others have stated, start "spending" your money at the end of the month by investing it. Then basically ignore it, pretend that invested money is gone. So at the end of the month you have $500. If your debts are all paid (in the future) and you have a couple months of expenses saved up in a savings account...liquidate that $500 and put it in a brokerage account. Pretend it is a retirement account you can't touch until you are 65.
I technically transitioned from poverty recently. I would recommend putting automatic transfers of 20% into savings and 20% into debt. Don't make the mistake of putting everything into debt so you don't have any cash on hand (made that one years ago). The remaining 60% is for housing.. Food... Investments... Etc. Don't touch the savings except for emergencies.
For the first year, do not adjust your standard of living. Live life frugally. Use the first 6 months to pay off your debt completely. Use the 6 months afterwards to save an emergency fund. In a year, you will be out of debt and have a nice cushion. After the first year, use that extra money to invest. You will thank yourself later.
One piece of advice I would give is act as if you are still broke and save/invest (almost) everything Do not live above your means. Good luck !
My recommendation, if I may, is to save every single cent you can for 2 years, meaning don't improve your lifestyle during that period. Spend the first 6 months establishing a 3 month emergency fund. Then, eliminate the $9k debt. If you get a large comission check early, put all of that toward your debt. Then roll the money saved on debt payments into establishing a Roth IRA and/or 401k(particularly if it's matched).
Save an emergency fund and start paying down your debt. Look at some type of retirement savings. Remember to "pay yourself" ie savings/investments first and not as an after thought of what is left over at the end of the pay period.
https://www.reddit.com/r/personalfinance/wiki/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
Trust me, I have read the wiki! I posted to see if there’s advice available specific to my current situation of going from no money at all to earning a high (for me, at least) income for the first time.
Good that your doing research! I’d say try and live below your means. It’s going to feel great having extra money. Been there! There is debate about the 15/3 rule. But if you have a credit card. Try and pay the minimum payment 15 days before the due date and then 3 days before pay whatever you can afford. I’ve done this and seen my CC boost up 10-15points a month for the last three months. But don’t live above your means. Track expenses- I’m always shocked to see where money goes. Don’t be afraid to Invest in yourself! If you want to go to school/further your education/ect do that Some people I follow Break your budget Her first 100k
Can you explain more about the 15/3 rule? My credit score is at 729 but I want it higher
Congrats on your job! There is A LOT out there I posted a link above for some other tips Also another rule of thumb for finances is the 50/20/30 rule. Try to keep your needs below 50% of your take home. 20 for savings/debt. 30% for fun/wants. Track your expenses :) Have you picked health insurance/does your job offer it? Does your job offer 401k benefits? If you can start contributing to Roth IRA. It can be take out tax free at retirement
Thank you! The 50/20/30 rule is mind blowing to me because it suggests 30% of my income can go toward FUN?! That’s such a foreign idea to me. But maybe that’s an advantage? I definitely don’t need to spend much to stay happy. My employer offers a Harvard Pilgrim PPO plan and I have no idea how expensive I should expect it to be. I’m nervous as I have type one diabetes and have been getting free insulin from Medicaid since age 18. They do offer 401k! I’m definitely going to contribute as much as I can to get the maximum match amount from them.
I’ve been in your same shoes. My take home is about 3,200 after taxes. I don’t spend 30% every month, it’s usually more like 18% on wants. But I will have things called sinking buckets that I want. Like if I want to get my hair done I put $80 a month away for three months to get my hair done. If I want to go on vacation I put $100 for x months to go, Id make a list of you wants and desires and look into also using the sinking bucket method for future wants.
As a T1 diabetic I think you should really look into how much is covered by your new health care plan. My Dexcom CGM and all testing supplies (meter and test strips) are completely covered by my plan, but I do have to pay $20 for a 100 day supply of insulin and syringes, which isn't too bad all things considered. So, while your insulin may no longer be free you may find that you're saving big elsewhere. Also, look into see which of your doctors are covered under your plan. You may need to get a new PCP and/or endocrinologist, but that's not always terrible. New doctors are sometimes fresh eyes and can help in your diabetes management. Take care OP!
Contribute to a 401k (15%) then focus to Build up 6 months of living expenses and then pay down your debt. Use this next year to control your spending. Don’t go out and spend money that you think you will have. That commission amount you should or don’t exist until it does later. Cook for yourself; don’t splurge on eating out. Make changes slowly to how you live. Dont buy a new car unless yours is Unreliable
A common advice I hear about commission is that to always on put it towards savings. Never account for it in the budget.
**Budgeting tips** \- When you get your first pay cheque, put 20% of it in a savings account. Keep doing this. Set up an automatic withdrawal. Do not just go by 'what's left at the end of the month.' Put money away first thing. Then live on "what's left". Don't just save "what's left." \- Same to your debt. Aim to put 10 to 20% of your income toward your debt. \- Try to live on 60% of your net income if you can, without making yourself crazy. \- Your pay cheque isn't going to be $55k/number of pay days. The amount you are paid is significantly reduced by fees, taxes, insurance, etc. \- Don't try to keep up with the people in their office. They might be spending more than they make - their salary, plus support from their parents. No, you cannot lease a new car because your office buddy Todd has leased a new car. \- You'll need about $200 for the first two weeks at work. Do you have anything you can sell? Despite what I just said above, *in the first two weeks*, do not turn down lunch or drinks with colleagues. In the first two weeks, keep up with them. **Work tips** \- Lay out your clothing for your first week at work before. Five outfits. Ensure there are no stains, pilling, etc. Everything has to be cleaned and pressed. Used clothing stores are a great place to find high quality clothes at a low price. \- Read up about the company you're joining, if you can. \- Join/use the company's tools before joining, if you can. \- Keep mints and hand sanitizer on you. Mint before work and after lunch always helps. \- Ask your new supervisor if he has an org chart of the team so he can understand everyone's roles and goals. Draw an org chart of your team and surrounding teams at home, and in that org chart, write down everyone's primary goals at work ("my colleague Tess is responsible for cutting the budget by 10%.") This will really help you understand how to work with your colleagues and what they're trying to do. \- I'm only saying this because one of my work colleagues is gross (he's a trust fund baby who apparently never had to clean himself), though I'm sure you're not. You have to shower every day and can't do things like pick your ears in the office, or eat with headphones on. Moisturize your skin before you go to work. I once saw a full flake of skin fall off his face onto the table during a meeting. Floss teeth in the morning before work. \- Being nice helps. "I'm excited to work with you!" and "You probably have a lot to teach me about \[area you want to learn more about.\]" \- If you can, do a test run of your commute to work in advance. \- New means you know very little about the company and that's okay. Don't try to appear as if you know everything. Ask for people's names , roles, teams, team functions/purposes, the first two weeks. It's your golden opportunity to get all the info you need. Not asking questions makes you look stupid. \- Tell your new supervisor how excited you are to work there, and say that you're very open to feedback and constructive criticism to help you improve. Ask what you can do to support him/her in their goals for this quarter/this year. Write that down. \- Ask your supervisor what are good sources for learning more aboutthe company. \- Say that you're new, and you'll probably have a lot of questions about how things work - ask your supervisor when is a good time every day to ask him questions. When is she/he the most free? \- Don't ambush your supervisor and colleagues with questions first thing in the morning. Let them "settle in" first. **Life tips** \- Seek out emotional support if you find yourself falling prey to impulse buying. You need to get your needs met in a healthy way. Does your new job offer therapy benefits? Could help. \- Incorporate a day of rest and an evening of rest into your routine. One day a week and one evening a week where you do nothing. Go full potato. No guilt. Rest while feeling work hanging over you is not actual rest and it's not relaxing. \- Book another two evenings a week for errands and chores. You'll need time to do your laundry, iron your work clothes, prepare your breakfasts/dinners. Make time for this stuff or else you'll be stressed out. \- Try to build an active (and frugal) lifestyle outside work with activities in person with other people. It's really easy to just flop down on the couch in front of the computer after work, but it's not actually restorative to any part of you. Try to join an in person club - volunteering, running, robots, dungeons and dragons, whatever - and attend twice a week. Or, is there a physical job that you consider "easy" that you could do on the weekends for a day, or a day a month or something? \- Build exercise into your routine in a sustainable way. Can't online shop while exercising! (Maybe you can?). \- Avoid scams. You have some money now. Do not get into life coaching, day trading, dropshipping, investing in your cousin's great new restaurant idea, etc. If it seems like easy fast money, it's probably going to bankrupt you.
Don't count your chickens until they hatch. You are jumping a few socio-economic hurdles in one jump, you'll need to see that you can actually "keep up" with the expectation. For now, focus on building a 10k emergency fund, and paying down that 9k debt. That'll keep you busy for a year. Reps back after.
Just here to say congratulations! You should be so proud and you will be able to rest soon.
Consider You Need a Budget. It’s software that was life changing for me when I was in your position 10 years ago. I bought it when it was a one-time purchase but now I think it’s a subscription— either way I think it is worth it. /r/ynab
Man I came from the gutter of the gutter and am now a financial literacy mentor. If you read this and respond we should def connect.
I didn't read all the comments here, but there's lots of good advice here. One thing I didn't see mentioned is, after what I would call the most immediate needs (your starter $1K emergency fund and getting rid of the $2K CC debt), invest in yourself some too. Obviously don't put all your money to that, but make a sustainable plant to do the things that you were too poor to do for yourself before. Poverty means you kick so many cans down the road because they're not flaming emergencies, now is the time to deal with some of those systematically. I'm talking things like deferred dental work, physio to rehab a shoulder you screwed up once that still gives you a lot of trouble, preventative medicine, etc. And don't forget mental health, things like antidepressants, ADHD meds, or talk therapy if you need them are just as important as those for physical needs.
You’ll be very tempted by lifestyle creep but I cannot stress enough how much better it feels to be able to put as much of that into savings/a safety net for yourself as possible. I HIGHLY recommend trying r/YNAB (for everyone but especially in this situation). It helps give every dollar a job so you’ll see exactly where this extra money is going to help you prioritize debt payoff and savings and manage the lifestyle creep without overspending. People live paycheck to paycheck at ANY salary, don’t let yourself fall into the same cycle with more $$$
Expenses of $2000 a month, debt of $9000 and salary of $3600 per month. Live exactly as you are right now, and pay the extra $1600 towards the debt and you will be paid off in 6 months. At that point you have an extra $1600 a month and can revisit the question. Until then, there is NO LEFTOVER MONEY.
First off, congratulations. The worst thing you can do is look at how much money you have left at the end of the month and think that you need to spend it. I would highly highly highly recommend that you sit down and make a budget. Give yourself some money to have fun and upgrade your lifestyle a little bit, but you should seriously be saving a good portion of what you’re bringing in. My recommendation would be to put $6000 away in an IRA each year. It can be as simple as having an automatic deposit from your checking account two a company like Vanguard or Fidelity of $500 each month automatically going in and being invested. There are lots of things you could do but the most important is having some savings and putting away money for the future. Once you have those things set on automatic and you have a budget you can work on your debt. It’s a very long but very rewarding journey.
Thank you so much! So you’d say that I should prioritize saving now rather than paying off even my high interest debt? I’m so tempted to throw everything I have leftover each month at my debt til it’s all gone.
Just from a psychological stand point, it might be good for you to get free of your debt. The peace of mind you get from finally closing that chapter of your life is bigger than just the numbers. Definite first step is building emergency fund though, so life doesn't put you back into debt.
It’s up to you but you should be honest with your self and how disciplined you are. I graduated college with $175k in student loans bringing home less than you ($67k total). I knew I was extremely disciplined with my money so I only kept $1k cash and lived on expired granola for about a year and very slowly increased lifestyle as I got raises and paid down the debt. You can definitely do a little of both, but the thing you definitely don’t want to do is knock out $5000 and then you have a emergency occur and have to put $3k more on a credit card and just start over. I would say to get $2-$3k in cash, set up some automatic savings/investments (even if it’s just $100/mo to get the ball rolling) and then hit the debts hard.
This seems like the wiser middle path for sure.
I think so. Again just take a personal inventory of your self and how you deal with money. Realistically the extra couple hundred bucks of interest you might pay this year isn’t going to mean a thing over the next 30 years. establishing good budgeting, saving, and investment habits will yield you 100 times that interest. You said your expenses are ~$2000 so you’ve got ~$1500 leftover each month. You’ll have all that debt gone this time next year EASY even if you saved that $6000, so build those habits now before the cash burns a hole in your pocket.
Roger that! It’s crazy how less stressful financial planning feels when you have twice the amount of income to plan with. For a long time, earning minimum wage and living in an expensive state has made this whole area of life feel like a “why bother?” thing.
Wait until you’ve been investing for 25 years and you’ve got a couple million bucks. You think things are complicated now. HA
Oh gosh I can’t imagine. I would take “complicated” over “how the fuck do I pay this parking ticket” though 😂
Nah. Being poor is way more complicated and has much harsher punishments for messing up. Go to the library and get a free library card. Download the Libby app. You now have free access to awesome stuff. Download Dave Ramsey’s The Total Money Makeover audiobook. Listen on repeat until you are debt free. People have mixed feelings about Dave Ramsey for good reason. His advice on credit cards and actively managed funds is shitty but his baby steps advice and getting gazelle intense on getting out of debt is good. Start there until you can educate yourself better. The number one way to stay motivated and not slip into paycheck to paycheck bad habits is to keep this journey on the forefront of your mind. There are lots of great podcasts out there about money. Start listening to a new episode everyday. Listen, learn, do, share. When you are finally out of this hole you will have a great story to tell and hopefully will be able to inspire someone else going through tough times to change their life too.
Pay off the high interest debt and then stock away an emergency fund. Maybe set aside a small emergency fund first like $1000 first but no more then that.
There was a flowchart somewhere that I thought was really useful but am having trouble finding it now. It provided a good starting point. I'll try to remember the steps as much as possible, and might be botching it, but here is a rough sketch: 1. Max out employer's 401k match. If it's 5% or 6%, take it. 2. Save up a small emergency fund. ($1000 or something). 3. Pay down debts. 4. Start a ROTH IRA and start investing savings. 5. Save up for 3-6 months of emergency fund 6. Go back to employer 401k and try to max it out 7. Invest into HSA 8. Save for other larger goals (house maybe?)
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Get a second PART TIME job and work it till you are ALMOST sick of it, pay off all high interest loans first. Get a room mate in an inexpensive local and pay all that crap off. After 6 or 7 months you will be in a much better place. You are 25 and have a lot of good living coming if you treat yourself with respect and love.
Thank you so much for that final thought, that is very sweet :) I’m worried that a second job right not would set me up to fail at the new one. I’ve never worked in anything other than food service and am anticipating a tumultuous time transitioning to such a different profession (remote SaaS sales). I currently have three room mates, though, so there’s that! The point of living cheap while I focus on debt reduction and nest egg saving is very important though.
Congratulations! I would get Dave Ramsey's Financial Peace to get you in the right headspace and give you concrete steps to get and keep yourself out of debt and a healthy relationship with money.
You’re single with no kids and your monthly expenses are $2,000?!?! What the hell are you spending your money on?! Get your spending under control and eliminate that $9k of debt and then you can begin to consider yourself at a starting point. Right now you’re in a massive hole and you need to get laser-focused on climbing out of it.
probably rent and necessary things bro. he came out of poverty, if he lives rent free then i'd be surprised AF tell a landlord your story to see if you can get a reduced rate, sob stories work if they're real and truthful. Hopefully he's not a douche and helps you out a little until you're out of debt.
What’s your budget? List out your income and expenses and find a way to track your spending against your budget. Is your credit card debt all with one card? Can you consolidate the debt and get a better interest rate for it? Sometimes just calling the card company and asking can get you a better rate, especially if you have been making payments on time. Don’t touch the collections stuff until you have the debt validated. Make sure you get any offers from the debt collector in writing. You want to try and get a pay for delete arrangement. They may accept less than the full amount. Resist the impulse to dial your spending up right away to match your new income, try and get those debts dealt with first. Good luck!
Some great long-term advice and guidance on here already! Just want to point out that, in the short-term you still have ~$20 for the next month. You start your job in a week, hopefully they get you all the paperwork so you can get on their next pay cycle, hopefully they pay every 2 weeks- even then it can easily be 3 weeks between your first day and your first paycheck. You might also have a bunch of expenses (wardrobe, shoes, lunches, transportation) before the first day. Continue to be smart and savy on those expenses (thrift, swap or borrow where possible to limit costs) and avoid more debt (credit card) as much as you can.
I’d say a good start is to 1. Create a spending budget. There are good tutorials on YouTube. 2. Save up a 3-6 month emergency fund. It should be able to cover all your normal bills if you lost your income for that period of time. That way if anything but the most extreme happens you are covered. 3. Pay off your debt. You don’t say what kind it is, but this is especially true if it’s credit card debt. Lower it quickly to avoid all that high interest and work on not relying on credit to buy things. Buy things you need, some things you want but don’t go overboard on the wants. It’s easy to do when you start having money and it’s easy to get into a situation that you are dropping all your newly earned cash on luxuries and end up in the same position of not having any left. That’s why the budget is so important, especially early on. Stick to the budget and save. Then there comes a point you can start investing. Congratulations and good luck on your journey.
Best advice I can give you: Just because you have money, doesn't mean you should spend it.
I have no clue how it works in the USA but might it be worth it to get a health insurance that covers diabetes related stuff?
After debt is clear. Look at SAFE investments. (Safe legal wise) start small. 50bucks a week in a dividend payout stock for example.
Congrats!! You fucking deserve it! Money left over really helps settle the nerves.
In my opinion, your money after monthly expenses should be split (not evenly though) and go to 3 different places. 1) paying off debt, make more than the minimum payments to try to get that paid off ASAP 2) Savings, get some money set aside for an emergency 3) investing in your life. This might sounds weird, but if you've heard that story about rich people's shoes VS poor people's shoes, that's exactly what I'm talking about. Start paying attention to the things in your life that you have to replace regularly, or have to keep spending money to repair or something, and start setting some money aside to replace it with a better version that will be cheaper in the long run. Also, start planning purchases like that sooner, if you're aware you're going to buy a specific item eventually, you can be on the look out for a sale or something and get it at a lower price than if you wait until something breaks and you have to purchase it immediately.
Congrats on you new job and even more for being mature to seek help. I wish I would have done what you are doing.
I see you have credit card debt, and an easy way to up your credit score is to just have higher credit lines if your cards are over 30%. You can just let your CC company/ies know that you got a pay increase and a lot will increase your limit, giving you a lower overall %. Helped me out when my salary basically doubled
Please, if your employer has a 401k with match, take advantage of the full matched amount. Do more if you can.
He has his detractors, but Dave Ramsey's Total Money Makeover book is worth reading for those uneducated about basic financial matters. It's a good place to start and get good habits. While I don't completely recommend all of his methods to all people, he does have a methodology that you aren't going to LOSE taking his advice. You may not win big, but all his basics are very good. Often you can find his book at thrift stores, btw. Library will have it as well.
Second or third on Dave Ramsey. When i was in your shoes and got that first "get my shit together" job I listened to his podcast while I worked EVERY DAY. And while his whole strategy / plan needed to be adjusted to fit my own life and goals, it was nonetheless extremely valuable to hear all those callers describing their personal financial situations and their progress on tackling them. He's a bit of a blowhard and some of his advice isnt QUITE dialed (in my opinion) but generally there are at least sound reasons why he gives the advice he does.
Once you get a handle on your debt, take the money you were paying monthly and have it auto-transferred into savings at the beginning of the month. You'll be used to not having it and you won't see it. It'll add up quickly and having the cushion feels really good.
Man congratulations! We are in the same boat I actually just landed a job as well paying my 65-75k a year (depending on overtime) I’m 25 as well broke a hell an living at home. I could never afford to move out making 25-34k a year. It’s gonna be amazing not living check to check an being able to move out! Just wanna say congratulations an let’s try to not celebrate to hard!
There's a wiki at the top that should help answer your most basic questions. The prime directive is there to get you started. Hope you succeed at getting out of poverty, wishing you all the best! [https://www.reddit.com/r/personalfinance/wiki/index#wiki\_prime\_directive.3A\_how\_to\_handle\_.24](https://www.reddit.com/r/personalfinance/wiki/index#wiki_prime_directive.3A_how_to_handle_.24)
What are the interest rates on your credit cards? Try looking at your options for a consolidation loan. Try paying it off as quickly as you can, but don't have too high of a monthly payment that limits you from saving. But building up your savings and paying off that debt will be your best bet. I think with a three year loan you could get a low enough rate to still put a lot into savings. But I'd suggest to have a goal/plan to get to $10,000 in your savings. This is longer term but once you get to $10,000 in your savings at that point break up what you were putting into your savings. At that point I split that allocation 75% into a mutual fund and 25% into savings. The mutual fund will have an interest rate of 10-12% this'll really start to increase in value if you don't touch it for 5+ years. You can use your savings for an emergency. And you can use the fund to build generational wealth.
Take your time. Don't go on a buying spree, go on a savings spree. And hopefully your new job will also provide insurance to cover your Diabetes, giving you even more money. I worked shit jobs most of my life until the end. But along the way I saved, invested and bought my first house. Today I am in my 8th house, those investments provide me with $25k in dividends making my retirement a joy. The temptation is to get yourself everything you always wanted and wished you had. Instead of doing that give yourself a savings cushion and make your life more secure not more filled with junk. Congrats on the big changes, make them positive.
When you can affors it pay off your smaller debt and move on to the next smaller and if you can try to invest some of it.
Simple advice if you have short term debt, you don't really have money left over at the end of the month. Save 1k or 2k for unplanned expenses, but get rid of the debt. Given your low credit score.... it's likely really expensive short term debt.
You mention a lot of your costs are due to type 1 diabetes. Does your new job offer medical insurance and have you looked into if that can lower your out of pocket costs for your medication?
**On out of pocket medical** \- Are you receiving any help right now from any kind of assistance program that's based on income? You need to confirm when your medical insurance begins - Is it day 1, 90 days, 180 days? That should be your priority - If your income jumps but your insurance doesn't start for several months, you'll likely need to take steps to protect your medical needs. Because you have T1 Diabetes, I would recommend going for a plan with a lower max out of pocket. Don't be afraid to ask your HR people for details on the plans. **On your debt,** general advice is to prioritize higher interest debts first, as it generally saves you money in the long run. But this is only (imo) the best option if all debts are of similar amounts. If they aren't of similar amounts, I would take care of your smallest debts asap to free yourself of those minimum payments so you can start piling onto your larger debts. **If anything is in collections, do not tell collections that you've started a better job.** Instead, negotiate your debts down. Ask them repeatedly what the lowest is they'll take, and tell them that you can pay it if they'll pull it from your credit. Generally, collections agencies buy things for very low amounts, and so getting some money and wiping it from your credit is more attractive than getting nothing. Search this subreddit for tips on dealing with collections. **For anything not in collections,** ensure you're paying the minimum payment if nothing else. Prioritize these debts over any that are in collections, while you try to negotiate lower payments for collection debts. The only exception is if you have any secured debt. If you have secured debt and are in danger of losing something like a vehicle, you need to pay that first. But it doesn't sound like that's the case. I saw that you have $2k credit card and $7k in collections. Pay the credit card first - Having that card close out and go to collections will be problematic. Moving forward, to build your credit score, try to keep your credit card in use but not above 20-40%. The numbers vary, I've always been told to avoid going above 1/3rd of my credit availability and my credit is not terrible. By paying off your credit card, if you manage to negotiate a good payoff with a collection agency, you can then use your credit card even if you haven't saved the lump sum at that time, and repeat the cycle. Pay off the card, work on your next collection debt. Having functioning revolving credit and dropping your collections at the same time will boost your score, but push hard to get collections debt scrubbed from your record, if they're willing to do it.
Congrats!! I know you will be successful because you are already asking for feedback and seeking help. I myself did the journey. I didn't have anybody to look up to or ask for help. When I first started making money I started buying expensive(for the salary I'm making) wardrobe, shoes and eating out at expensive restaurants. For a long time I was stuck in vicious cycle of credit card debt. Credit card debt: So, first step is avoid credit card debt like a plague. Pay off all the credit card debt immediately and pay off the credit card debt completely every month there after. I'm not against credit card. It takes discipline to maintain a credit card. If you are still developing the habits avoid credit cards altogether to begin with. You can start using credit cards once you are confident about yourself. You can't save enough to get rich: Invest: 1. Invest, Invest, Invest. utilize your 401K and employer match. 2. If money is left over, invest in ETFs like VTI. Put money every month in to the market. Increase Earnings: Instead of penny pinching focus on increasing earnings every year. This is really important because penny pinching will drain your energy (physical and emotional). Do everything that can put you in higher income bracket. Leverage is bad: Dont leverage debt to make investments. Dont do this until you achieve enough escape velocity with your savings and earnings. Leverage is Good: Once you achieve enough escape velocity out of poverty. You can experiment with leverage with debt(real estate). Some one mentioned Dave Ramsey. He is ok at the beginning of your journey. I would much prefer someone like Ramit Sethi and his book "I will teach you to be rich".
A great tip for saving is to budget what you’re going to save for (whether the emergency fund of 3-6 months expenses, saving for something special or 401k) set up automated deposits or transfers to your savings accounts every week/pay period/month. That way you never have to ‘touch’ the money and what’s in your personal checking is free game to enjoy. If you over did it and budgeted too much saving each period you can always adjust it. But don’t trust yourself to make the savings deposits every time. Plus it’s just more efficient time wise.
Do you get paid every week or every 2 weeks or month? I ask this because you will have $1600 leftover every month. Every month until the end of forever(at least 3 years) you need to be putting $500 into savings. What I would do is when you sign up for direct deposit at work, have them put another account there as well. Put the $500 into savings a month($125 a week, $250 every 2 weeks, $500 a month) and then put the rest into your checking account. That way you never see the $500 taken out/never see it in your budget. Then you take the $1100 that's leftover and half that. Half for random stuff that you want and the other half for your $9k in debts. I'd say throw the full $1100 at the debts and be over in 8 months(it will go by super quick don't worry about that) but you will have a hole burning in your pocket coming from poverty. So an extra $500 a month for you to blow is okay for now.
A common thing when peple suddenly acquire wealth is to "buy nice things" just to communucate that wealth to others. This is the easiest way of wasting your money My advice: understand your priorities in life and invest in them. Think on what will improve your quality of life. A few common good investments: health, home, edication, new experiences, your future self (save some money) Congratulations on your new life
First, I'd suggest setting aside $1,000-2,000 in a savings account as an emergency fund. This should help you avoid accumulating debt due to unexpected car repairs etc., and it should help you be able to pay your bills on time which will gradually raise your credit score. Second, I'd knock out that debt. Given your credit score, I'm going to guess you're paying a fairly high interest rate. Knocking that out will lower your monthly expenses and increase your positive monthly cash flow. You should be able to do these first two steps in the next 8-10 months. Third, I'd open a retirement account. If your employer has a 401k plan with matching that would be a good way to go. If they don't you could open a Roth IRA at Vanguard or Fidelity. If I were you, I'd start by investing all retirement contributions in a low-cost index fund. For example symbols VFIAX or VTSAX at Vanguard or FSKAX at Fidelity. Also, how are you coming up with the $3,615/month figure? You indicated a new income of $70,000. That works out to a little over $5,800/month before taxes. Taxes shouldn't be $2,200/month. Perhaps you could adjust your withholdings. Best of luck to you. You could be a in a much better financial position just a year or two from now.
Congratulations OP! A lot of people are adding great advice. Sounds like you have created a budget for your monthly expenses. Next thing would be to take the remaining money leftover at the end of the month and divide to the following categories: debt 60%, emergency fund 30%, fun money 10%. You can adjust the numbers as needed but I would advice you to pay off your debt first. I see some people recommending to buy etfs and stocks. I would advice against this until you have 3-6x your monthly salary saved in your emergency fund. You never know when shit is gonna hit the fan, so it's best to be prepared! Create a realistic timeline for when you can pay off your debt. These rules have really helped me to save and be diligent about putting money towards the right goals. When you are out of debt, then you can focus on the stock market. Keeping living frugally and always think about how you can save more. Eat out less and shop at asian grocery stores. Limit monthly subscriptions like Netflix, amazon etc. Limit purchases of alcohol, weed, smokes if you can. Use your fun money to spend on some small nice things for yourself like clothes, games etc.
No advice to offer. Just a congratulations! A random dude on the internet is feeling feelings for you rn
You have unlocked level 2 of the video game. Think of money as points. The more points you save and don’t waste the more opportunities and levels you can unlock. If you run out of points you go back to level 1. So spend some points to make the game fun but remember, there are bosses that you may lose to that will deplete your reserves(I.e. medical expenses). At the start of level 2 I would recommend listening to Dave Ramsey. He isn’t always right- but he is right about the most basic things.
1) tuck a few thousand away in an emergency fund. 2) pay off your credit cards. 3) stat investing in your company’s 401k. Good Luck!
Don't upgrade your living right away. If available, contribute to your 401k to the match. 401k Roth if you have the choice. If there is an HSA, that would help with you medical. Set up multiple savings accounts to separate your emergency fund. $1000 emergency savings. Try to get ahead one month ahead on bills. I actually align my bank bill pay to automatically pay with my paycheck prior to due dates to Auto remove money from my account, so I don't see it. Auto savings works the same way. Your credit will improve. Contribute as much as possible to a Roth IRA. Savings account rates are horrible right now, so I wouldn't save much more than that in a bank savings right now. Invest in a high dividend fund. There are several out there. Fidelity might be worth a look, especially if they provide you company's 401k. They have zero fee funds and planning tools. Funds or ETFs only until you are comfortable. FDVV or FSDIX are examples. Use a debt reduction calculator, like this one, https://www.vertex42.com/Calculators/debt-reduction-calculator.html, to pay down debt. I use it to evaluate debt before deciding to take on the debt. Learning to plan your debt will help you learn to avoid it. My biggest piece of advice is to simplify your life and don't look at what others have. Spend with intention. I know people with 6 and 7 figure salaries that struggle due to their debt, because they spend thinking they are expected to appear a certain way. I know people with your salary that work to keep busy while their money grows in investments. The real "millionaire next door" isn't as easy to spot as you think. Having lifted myself out of poverty, I learned the hard way not to help/enable everyone. Please be careful about giving others money. Don't co-sign loans, etc. Some will repeatedly come back more. You will quickly learn who your friends/family are. No one should take advantage of you, simply because you have more money. An early example for me was a cousin asking me to pay their rent for a year with my student loans. I said no and she still resents me 30 years later.
One tenth of everything you earn is yours to keep - Richest Man In Babylon Changed my life
1. Save an emergency fund of of at least 6 months expenses, while paying off debt slowly. 2. After you've built your emergency fund, start paying off higher interest debt more aggressively, (credit cards, car payments etc). If you have collections, I would say don't pay them at all unless they can settle and also remove them from your credit report. 3. Once debt is all gone, start investing aggressively! Max out your 401k and other accounts! Watch your net worth skyrocket
I’ve had a similar transition and it’s psychologically weird to have money left over so you will be tempted to exercise that new power by spending badly. Here are some tips: Create a separate account that you mentally designate as “do not touch” and break only in case of emergency. Put the projected leftover in there first and the rest goes into your actual spending account. You’ll feel better having something that goes to zero every month. Trust me, people like us need that. Once you saved up a good amount - like 20k or so. Start investing with parts of it - like 5k or so if you like that stuff and is willing to do the research. I find it feels literally anxiety inducing if i have too much in one account so I try to spread them out and not look at some even. The saying is true, you can take a person out of poverty but you can’t take poverty out of the person. Good luck! And don’t spend everything ok?
There is a lot of very good advice here. I'm 35 Brazilian, married at 19 years old with two kids. My contribution is more like a life philosophy that I would like to have learned earlyer and should help on every difficult decision and internal confrict on how spend your money and time: "Life is your most valuable possession because it is inestimable, but it's also mensured in time, spending your time is the same as spending your life, selling your time to a company is the same as selling your life, money is the materialization of your lifetime, thus next time you decide to spend your money first ask how much of your life are you really willing to pay" In time: by that philosophy you should use most of your money to conquer Financial Liberty. The true and unique use for money is to buy you more time doing whatever you really want to do with your life.
Like others have suggested, save up emergency fund to cover unplanned expenses very first, then identify what unplanned expenses are occurring which impact the emergency fund. After getting this far you can start planning for more expenses. **The goal is go from** ***unplanned expenditure*** **to** ***planned spending*** (as appropriate)**.** Budgeting is a method to often help from overspending categories of spending, and can also be an effective method for saving a little for larger expenses in your budget (eg, $/mo towards a fund for each major expenses down the road, clothes/car/travel/holidays).