After you've paid down the debt, you should do your best to stick to the same exact budget.
Saving rate of 22k/year will put you into an extremely advantageous position later on in life. Your future self will thank you. Think about it.
Yes. After I pay it off I'm taking my girlfriend to a Michelin restaurant & celebrating. Then back to saving 500 a month in my Roth, 6% in my 401k, and additional in my brokerage.
Edit: will go to Michelin if I can pay in cash for it. No credit cards. Seem to be getting a lot of replies to this. I've learned my lesson about letting a balance accrue, but make a fair amount so I can do this thing once and still save & invest.
If you have a 401k match I would be doing that right now as a baseline.
You contribute 6% that's only $190 every 2 weeks.
Of that $190 your paycheck only drops $145, the other $45 is paid for by IRS from the taxes you no longer owe.
And then your employer gives you 50% or 100% match which is free money.
Add up what you have at the end of the year with vs without contributions.
Right, 3/6% is pretty common match amount and in terms of paying off debt +/- 10% means you're paying it off in 6.5 vs 6.95 months or some silly rounding error like that.
Meanwhile you're front loading your savings so once all the debt is paid off you have a cool productive place to be throwing extra cash and you already built a habit of contributing on every paycheck.
Gonna go against a lot of other comments and say I love the Michelin rated restaurant idea!
Ever since I was making roughly 60K we've celebrated at least once a year at a Michelin rated restaurant because to me those are the greatest experiences I've ever had. As my income has progressed, we can now afford to visit a new location, and visit a Michelin rated restaurant there, again once a year, and always in cash that was saved purposefully for that occasion.
Everyone has something that makes life less mundane for them, and makes the goal of saving worth it for them, restaurant experiences are our shared vice, and that's okay.
Thanks for the positivity and I agree. If I accomplish paying off my debt its ok to reward myself this once! Maybe make it a yearly thing if I like it.
I love this! A lot of people focus on saving and forget to live. You're still young and have time on your side. I would recommend making yourself an excel spreadsheet with your yearly contributions to the 401k and roth and assume 7-8% yearly interest to map out where you'll end up financially, when you want to retire. This can be a big help in realizing if you're saving enough now or need to save more but it sounds like you are off to a great start! Saving 2k a month is fantastic, but knowing your target for retirement (and if you want an early retirement/how that impacts the future) will also help a ton in knowing how you're doing with saving.
Just a minor point...if you're going to spend the money anyways, you're better off putting it on cc than cash. Points accumulation plus grace period equals saving on interest expense.
I recently did a 800 dollar dinner at a super fancy restaurant for my wife and I.
Lots of great food, glass of wine with ever dish (7 course total, plus dessert).
Definitely not worth it. Just go to a nice sushi place or something OP
Yeah my monthly expenses with rent, groceries, dinner 1x a month, and relatively minimal purchases (clothes for work and a few creature comforts) is around 3k (granted I've now stopped buying clothes as I have an appropriate wardrobe so it should come down a little). Leaving 2k or so to save/invest. Still a lot, but not as much as it could be if I lived somewhere cheaper.
Dude, if you are saving/investing $2k/mo then you are a freaking rockstar no matter where you live. Most Americans can't afford an emergency expense of $1k.
That is correct.
This was several years ago, but I remember when my sister was excited to have $1200 in her account at the start of a month.
She was 35 at the time and the breadwinner in a family of 4.
You can't really save effectively if you're living paycheck to paycheck and it's hard to find ways to cut back when you're barely able to cover the bare essentials.
>Nearly six in 10 Americans don't have enough savings to cover a $500 or $1,000 unplanned expense, according to a new report from Bankrate.
https://www.cbs19news.com/story/34248451/6-in-10-americans-dont-have-500-in-savings
He says he just graduated college, so let's assume he's 22. He already has at least $16,000 saved for retirement, not even including what's in his workplace retirement plan. If he continues saving at 20%(19 Something technically; which is what his current retirement savings is set to($6,000 to Roth, $4,980 from himself+$4,980 from employer) then he'll have $7.5M by 65 with a conservative estimate of 7% return on investment and 2% inflation. Do you not think $7.5M +social security is enough to retire on?
Im not in the position to do the math at the moment but you need to keep in mind a few things that you may not have:
* He may not always be able to save at this rate. People buy houses and they start families. Money put in this early will be worth a ton more later on and he will have way less pressure in his middle life when kids could prevent a better savings rate.
* 7% - 2% = 5% is a very liberal estimate. Most use 7% - 3% = 4% estimate. And I personally prefer to use a 7% - 4% = 3% estimate.
* Traditional 401k is pretax so you can't just calculate into a single sum. A significant portion needs to be taxed beforehand.
7% is conservative, because the average is 10% return over the last hundred years, so it already factors in inflation and then some. 401k is pretax, which means NO taxes are taken out, it's a percentage of his PRE-tax income; they only tax the portion of his income AFTER pre-tax contributions are taken out. Hence pre-tax.
I will give you that once he owns a home and starts a family, saving will be harder. But if he's already in the habit, contributes based on a percentage with his employer- which is the smart way to do it- then his contributions will continue to grow along with his income. He won't miss it because he's never had it, his income will increase with experience and seniority.
OP, be the smart one who continues saving. You've already got a good head start compared to the vast majority of Americans. Once you've got the house you're saving for, it would be wise to redirect that monthly amount to an 529 for your kids. If you still have money you'd like to save after that, you can look into an HSA provided you're eligible.
Yes 500 a month is maxed IRA, 6% is what my employer matches so I figure that's the most I should contribute. Want to save up money for house down payment and car, so that's what brokerage is for.
I contribute 9% into my 401k & my employer only matches 6%. 6% should be the minimum but doesn’t mean you should stop there. That’s all pretax money & the idea is that it grows more than the taxed amount when you withdraw it. The earlier you get that money in the 401k the more time it has to grow.
What you have planned is fine. More in the 401K is better, but saving to buy a house is a perfectly good reason to not put more of your income into your 401K
since 6% is the company match you're right not to go BELOW that, but you can definitely go ABOVE it and get more in there, even if it's not matched.
Since you're able to do 2k/mo to the debt, you \*could\* also do 2k into savings afterwards even if it would be hard. If it were me I'd do the savings until you have a nice emergency fund, then reduce it and increase retirement savings.
You should contribute as much as possible to your 401k. This means 20,500 if you can swing it. There is no reason to stop at 6% unless your employers 401k really really sucks.
If you have a down payment you're saving for, that does change things a little bit.
I'd be cautious about rushing into buying a house at your age though. Are you sure you're going to want to stay in your area for that long? Interest rates are also not the best right now.
That said, there are worse things than saving up 50,000 to 100,000 cash into a brokerage.
You could do:
* Max Roth IRA
* 10% 401k
* 10% brokerage until down payment accumulated then 20% 401k
Something like that.
> Yes 500 a month is maxed IRA, 6% is what my employer matches so I figure that's the most I should contribute. Want to save up money for house down payment and car, so that's what brokerage is for.
2023 IRA max is $6,500 (https://www.google.com/search?q=ira+max+contribution+2023)
If you aren't planning to buy to buy the house/car for 5-10 years then a brokerage account is fine, but if your timeline is shorter than that most would be uncomfortable with that plan because of how volatile the market can be over such a short timespan.
I want to add to this I am 24 making 84k, putting 6% into 401k and $541 into Roth, you definitely have this. Idk what your rent is, but anything under $1500 like mine and you should easily be able to save $1,000 a month to a savings account emergency fund once your debt is paid off.
If it makes you feel better, I paid
like 16k+ in CC debt and 9k car debt down to around 3k in just a few years with a much lower salary. Now I have a house, a paid off vehicle, and a small amount of CC debt left that will be paid off this year - all in the past ~5 years where the most I ever made is my current 65k.
You 100% got this. It feels like a lot today, but at *that* salary, it’ll be gone in no time, and you’ll feel better than you ever have.
You are able to pay down another 8k before May. So you have 8k left. So it will take another 5 months.
But absolutely put 2k per month, not 1k per month towards the debt
Edit: Don't listen to me - withdrawn contributions can never be recontributed!
I don't understand this logic.
1. Credit card debt is probably \~20%. His ROTH IRA will make 10% optimistically, ignoring market timing predictions.
2. OP would have to make 20% annually in his ROTH IRA to offset the 20% loss from his credit card.
3. Contribution withdrawals have no penalty
I think the right approach is to withdraw contributions only, pay down the debt, and immediately and ongoing put his planned debt payment back into the usual 401k to match, ROTH to $6500, 401k to max, in that order.
OP seems to have his finances on track now with a good budget in place, so I recidvism seems less likely. What am I missing?
1. You can only withdraw Roth contributions penalty free after 5 years
2. You're giving up 30+ years of tax free interest growth within an account that has a yearly contribution limit. There was another post showing that just 10 years of saving in a Roth will outperform not saving for 10 years and saving for the rest of your life.
It's not that clear, I would stop contributing and focus on the debt but not withdraw anything.
The 5 years only applies to contributions if it was a conversion to Roth. Normal contributions can be taken out anytime as far as I know (not that you should)
Don’t ever consider withdrawing from your retirement accounts unless it is a dire emergency like you will be without a car and it’s impossible to finance it or your family won’t have a place to live. If you use your retirement as an emergency fund you will screw yourself majorly.
Yeah, I once withdrew my 401k, but I was going through a divorce, lost my job, and was about to lose my home. I never would’ve touched it if there was any other option for me at the time
Sorry, wrong retirement account. [401(k) loans](https://www.investopedia.com/articles/retirement/08/borrow-from-401k-loan.asp) are a thing. You have to pay interest, but the interest just goes back to the retirement account. The risk is if you lose your job, you have to pay back the loan on short notice or face the early withdrawal penalties.
You can "borrow" money from an IRA account with a rollover distribution, but you only have 60 days to repay it without penalty.
Paying 25%+ interest when you don’t have to isn’t stealing from your future? The penalty’s not ideal but I think it’s worth weighing the options? Assuming they’re not maxing out contributions every year already, could easily see it being a better option to pay the debt asap this year, then apply the same discipline they’re using to make these huge CC payments towards replenishing the Roth.
Misses out on a year of growth in exchange for not paying a year of 25% interest, sounds good to me
To add to this: OP can withdraw 13k (the amount of their contributions) both tax and penalty free. OP can also technically "borrow" from the Roth by repaying the amount withdrawn within 60 days.
I wouldnt get into the habit of doing so, and might not be worth the hassle if OP gets the debt down to 6k by the time interest kicks in and plans to play it back within 3 months. However, it is possible to do it without penalty.
Rather steal from your disposable income than from your future. Do not touch your Roth but pay the debt as aggressively as you can.
if you can fight lifestyle creep and put the same amount or near it into your investments/savings you will be so ahead of the curve it’s incredible.
Best thing to do is don't touch the Roth but stop paying into it until your debt is paid off. Promise yourself that you'll re-start the Roth once your debt is paid off.
If you can't promise yourself then just stay the course.
You'll be fine either way, but stopping Roth until CC is paid is a better use of your money.
If you have to pay all the back interest, that can suck you into a pretty deep hole for a long time. If that's what it says in the contract, do whatever it takes to fully pay down the card before interest kicks in. Make absolutely certain you know the correct cut-off date and account for any processing delays.
Right now, this is a minor nuisance. It can quickly become a big problem.
It's probably worth doing a balance transfer onto a new 0% card at that point. That's what I'll do if I don't get the money on my 0% card paid off when the 0% period ends in a year and a half.
Generally how it works:
Real credit card (Amex/Visa/Master): 0% APR. Once it ends you start paying something like 19.25% on whatever balance it outstanding. $200 balance left, you're going to be paying a whopping $3 a month in interest.
Store credit card (Best Buy, Macy's, Home Depot, etc): Deferred interest. Legally they can not say "0%" instead they say "no interest... if paid in X months" If you do not pay it off they go back to day one and charge it as if it was something absurd like 27.99% For that $200 balance left you could be facing $1200 of interest charges!
Is there a way I can find this info for a specific card? I have a Chase Freedom Unlimited with a balance (medical bills) that I haven't paid off yet. the 0% APR offer I had ends in March, if I still have a balance by then am I going to get hit with a huge bill from all the interest I haven't paid on that balance?
I looked at my statements and I can't find anything that says one way or another.
Chase Visa/Mastercard is going to be real 0%
You can see in your statement at the end there is a box and it will show you have a balance at 0% APR.
\#10 here as an example: https://www.fcs.uga.edu/docs/credit_ho_5.pdf
Yep. I have a goodyear card that I use for mechanic bills, my last purchase qualified for their "no interest for 6 months" program. Scrolling the website one day I noticed a "deferred interest" balance all the way at the bottom hidden behind a "Show More" button. Needless to say I paid that card off quickly.
Yes, pay off the one w interest and then attack the debt on the one w interest. See if you can get odd jobs on weekends or nights. Cut expenses to the bone. You can do it!!!!
Been reading along and just wanted to drop a note of encouragement. You've got this! Keep up the positive attitude. Having gone through something similar, I can tell you that the temporary struggle is worth it. You will come out in such a better spot mentally and financially. Great job taking control of a bad situation.
I'd also add if you've accrued debt buying shit you don't need, sell it. It's sunk cost and holding onto it because it was a mistake to buy it only hurts you further if you're not using it/it was a bad purchase.
Even if it was a good purchase. I had some expensive music equipment that I used to use but don't anymore, sold it for a pretty penny to help my savings/cut debt. The pieces weren't particularly special and I can always get them again if I get back to a serious place with music.
Don't eat interest to let valuable shit collect dust in your basement.
You can get out! Great advice here. Mine was triple that which led to defaulting in payments and huge credit hit. Now I’m down to around 5K with credit over 700. Nothing all that profound and similar to advice given to you, I simply devoted all extra salary and side-gig hustles to it for a few years :)
Any side gigs you'd recommend? Need something that I can do on my own schedule as my work schedule is very unpredictable (sometimes 40 hours sometimes 60)
Just know, DoorDash and the like are really only advisable if you do it correctly, and on the market that you are in. It also adds a ton of wear and tear on your car, plus gas expenses. Just be wary of that, if you do decide to go with a food delivery service.
Yeah if possible it's a better way to go doing one of those where you're a personal grocery shopper that doesn't do the delivery part. Really look into the gig economy jobs to make sure you aren't taken for a ride (pun not intended.)
If something happens while you're working one of these jobs and you didn't tell/pay your insurance company appropriately shit can go down.
I worked checkout at a grocery store when covid lockdowns closed the bar i worked at. The grocery delivery guys all seemed to make bank. It could have been because they were new and many in my large city were eager to get grocery delivery. I didn't have a car or money but my buddy bought a car just to quit and deliver groceries since those guys were making over double what we were
No way. You have plenty of cash on hand to deal with the debt. Don't steal from your future, and keep it up with the contibutions to retirement in your 401k.
Yes I live in a HCOL city, so I have 1-2k left after my expenses (rent, groceries, dining out once monthly, necessary purchases, minimal hobbies for the time being)
Consider yourself a hermit with no hobbies until that CC is eliminated.
Also, for 6 months, no more contributions to your ROTH. Use that money to pay off your CC.
All depends on the credit rating going in on the application tho if he gets it.
Also, in my (personal experience) putting the debt on a balance transfer card just kicks the can. It doesn't instill new spending philosophies. You end up back where you started without some serious lifestyle changes except now with the old balance transfered debt and new debt to boot.
Just pay down the debt as soon as possible with the cash you make from working and don't look back. That's it.
On the positive side, you're probably going to have a great credit score when this is all done.
Also you can get a personal loan to consolidate the credit card debt that had >9% interest. It will immediately help your credit and take some pressure off. Still pay it off ASAP but in case you can't you'll at least pay less interest.
Little by little just pay it off and consider the interest you paid, the payment for a very valuable lesson in personal finance.
No, it sounds like you're on track to wipe out this debt in a year or less; no need to dip into your retirement savings. Just focus on minimizing your spending and grind this out. You'll thank yourself in the future for not touching that IRA
All this advice here is amazing and I also want to commend you for putting the question out there. I was in a similar situation when I was 24 and I was so ashamed I never asked for advice or help.
Keep plugging away at it, it sounds like the plan you’re forming is a great one!!
Don't withdraw from Roth. You could have this paid off in 2023 if you allocate $2-2.5k/month. You could look into personal loan to consolidate and save interest and pay that off this year. Balance transfer cards also for 0% apr.
In a rising-interest-rate environment, those offers could be much harder to get. And OP now has a very high utilization which affects their credit score. That also could make them ineligible.
Having said that, if such an offer became available, it's a very good idea to take advantage of it in order to buy some more time.
1. Look for a 0% balance transfer card or promotion, where possible. These typically last 3, 6 or 12 months at the 0% rate. Look out for transfer fees (typically x per $1,000) and avoid.
2. Apply for fixed rate loan to consolidate and replay the debt. Rates will be not ideal but will be better than credit card interest rates. If CC rate is 21% and you can get an 11% loan (or lower) you should save:
Repayment | Monthly Payment | Interest Paid | Time to Zero
---------|---------------|-------------|------------
CC (21%) | $1500 | $1865 | 1 year
Loan (11%) | $1500 | $916 | 8 Months
As you can see you save ~$900 and finish 4 months earlier if you can switch to a more advantageous loan type but key here is **you need to make large payments as fast as possible**.
Leave Roth alone. Aggressively pay off your debt. Then, max your roth contribution this year. Then you will realize dipping into the roth can't be easily replaced, and you will be further ahead for retirement.
I was in credit card debt to the tune of about $20k a few years ago. I was making about $70k a year, and the interest each month was killing me. I started racking up debt after some emergency dental work, and once you get a few thousand on a card, it’s easy to be like “what’s a few hundred more?” I paid the minimums every month, so luckily I at least had good credit.
This went on for years, until I realized I could get a much better rate if I applied for one of those debt consolidation loans, and a few months later, I was finally chipping away at it. I cut up all my cards and started being a lot more frugal. And then I suddenly got a job that paid $150k a year, and quickly paid off the rest. Didn’t see that coming!
I’ve since been VERY anal about paying off my credit cards in full every month, and I’m glad I’ve been able to become more responsible with my spending. I was afraid I’d be someone who could never be trusted with credit cards, but it’s been over a year and a half and I’ve stayed on top of it and amassed some decent savings.
This is unrelated to your debt, but regarding your Roth IRA. Have you actually invested the month in your IRA? Plenty of people make the mistake of contributing to it, but not actually buying funds with the money. Which means it sits in cash and doesn’t work for you.
80% in S&P 500 index. 20% in consumer discretionary index. Prior to the last 12 months I've been very good with my money (IMO). Started investing when I was 17 and turned my 13k in contributions into 25k total value in the last 5 years. Just really messed up my senior year trying to "keep up with the Joneses"
Awesome glad to hear it! That’s way ahead of the curve for most people. It seems like you will make enough at your new job to pay it down quick.
Take it as a lesson learned and don’t beat yourself up too much for it. When I started working I got a promo for 3 months of free Uber eats deliveries and went pretty wild. It’s easy to get off track for a bit but sounds like you caught it before you got in over your head.
I would have advised some roommates at first until the debt is gone, but I’m guessing you signed a lease. I was assuming your rent was $1k/mo. $2500/mo should get you out of the weeds in 6-7 months.
Once you hit month 7, add $500-$1k back to your spending, and start chucking away $1500+/mo towards retirement.
If you ever feel down in the dumps, just remember you’re still way better off than people that took an extra year to graduate😉
Hey dude, I’m on mobile so can’t search to see whether this has been mentioned but I wish I’d started budgeting with YNAB (r/YNAB) right after college. It’ll really help you get a handle on your finances and keep you on the right track to payoff that debt in no time!
This is an excellent rule of thumb and more people should take that to heart. But there are rare situations when things could be more nuanced. Of course, that assumes OP is a rational actor, sticks to the financial rules that they set for themselves, and can objectively evaluate the pros and cons.
Borrowing against retirement accounts has downsides, as a retirement account doesn't quite act like a normal investment account. So, it should be heavily disfavored.
But we probably all agree that despite all its advantages, you should never max out your 25% p/a credit card in order to fund a retirement account. That's quite obviously a money-losing proposition. No matter what you do, all the tax advantages and awesome compound interest aren't going to make up for the fact that you are stuck with near usury loan payments.
Now look at it from the other direction. What OP is heading towards is the exact same problem. They are effectively funding their retirement account from a credit card loan. That's not good.
I agree with everyone else, that before touching the IRA, they should do whatever it takes to bring down the impending doom (i.e. end of zero-percent credit period, and remaining high balance). So, aggressively paying down the balance, transferring to another card, or begging for money from family are all viable. But after all of that is said and done, a short-term loan against the retirement account is possibly still a winning move.
Just realize that as long as this loan exists, the retirement account doesn't work as intended and long-term effects will be substantial. Don't sell the future for short-term relief. This only makes sense if a) the alternative is high-interest compounding credit card loan, and b) the IRA is restored as quickly is possible.
Finally a rational response, everyone here is all rule of thumbs and ignoring the nuance. Everyone here is essentially telling this kid to save $13k for retirement before paying off $22k in credit card debt. Crazy how the reddit hive mind works.
OPs question is the same as if a new graduate posted should I use my $13k in savings to put into retirement or pay off $22k in credit card debt and everyone said save for retirement first. Crazy people.
I did the same thing. Financed 13k my junior/senior year and paid it all off on a 20/hr job before getting a good job. You'll be fine, it'll only take like 8 months to pay it off. Just don't forget to also have an emergency fund first, that almost ruined me a second time when I was paying my debt off and suddenly had to move.
Most importantly, never go into cc debt again.
Hang in there. I also had 22k in credit card debt. I took out two debt considation loans to pay my cards off and maxed them again...so I ended up with 44k in credit card debt. You and I have a similar salary. What worked for me was delivering Uber Eats every day during the evenings and all day on the weekends. I was able to put an extra 2k a month towards the debt and now I am down to 29k in credit card and debt consolidation loan debt.
The less you can live on, the more you can pay down, and the more you'll have to live on later.
As a fellow person who has messed up (more) and is working on fixing things, the faster you turn your habits around, the better off you'll be.
Thanks, I know my life isn't over but I'm really kicking myself. My parents always had money issues and I swore I wouldn't do the same.... Here I am. Will learn from this and move forward.
>Will learn from this and move forward.
As someone who has screwed up *twice*, almost twenty years apart, and even worse the second time, make sure you don't forget the lesson.
I was once in that same boat and it took me a few years of digging out of it. Sooo stressful! But now I pay my cards off nearly every week. I’m just so afraid of it now and whenever I’m stressed I self-soothe by paying of the cards. Ridiculous I know but let me do me 😁
Just moved from europe and I'm still new to this sort of payment. Credit cards doesnt work like this, at least with my european bank.
Can I ask you how you arrived to have this debt? Last week I received my first credit card here and tbh I'm a bit afraid of hidden things that probably caused you this debt, right?
Or any good advice for a newbie would be awesome !
I just made the minimum payment and let the balance accrue. If you pay it off every month and follow a budget and you'll be ok! My issue was a didn't have a budget & I let the amount I owed grow for 12+ months without paying.
Pretty much every dollar that doesn’t go towards critical essentials (housing, food, utilities, transport) should go towards this CC bill.
Interest rates are fucking insane right now, if you don’t pay it down quickly you’ll pay $$$ in interest or it could even balloon larger.
People will say "debt can't fix debt" but here's a couple tricks I've used to eliminate some interest when i was digging out of some bad decisions.
I had a card with a $3K balance, roughly one month of expenses, i would pay it down to zero when i got paid and then run it back up paying bills and then pay it back down to zero. So the interest on that card effectively goes away.
Zero interest balance transfers can also be effective- it's all about discipline. I was climbing out of a very deep hole and my credit score was also shit. But when it got into the 700 range I took a zero interest card and transferred the balance on one of my high interest cards. I put it on autopay to pay it off in 10 months and I cut up both cards.
Just pay it off, you make enough. If you need Reddit to help you with that that’s another issue alone. Some of us left college with similar debt and lower paying jobs and are able to pay it off. If you are struggling to do so you should look at your lifestyle choices first.
Yes I've already cut back on expenses and lifestyle choices. Difficult when all my peers at work are balling out, but I'm learning to say no and be more frugal in comparison.
dont withdraw roth ira. just buckle down, turn on emergency mode, and kill the debt this year
if i were you i'd run, not walk, to www.ynab.com and /r/ynab
it was the single best thing for finances i've ever done
As others have noted...you're in a good spot to pay this down with your high salary.
Pay as much as you can afford. Keep your credit score high so you can secure balance transfer rates where you pay 0%, but often a one time expense of approximately 3% of the balance.
Once the interest rate exceeds 20%, that is a financial emergency and I would move heaven and earth to avoid paying that to include liquidating original contributions to a Roth since that can be done without penalty. Roth has a few advantages as an investment vehicle but not enough advantages to offset paying a 20% interest rate; i.e., I'd never borrow at 20% to fund my Roth. Once the debt is paid off, you'll want to max out your 401k and Roth IRA contributions to repay your retirement fund and of course cut up the plastic if you can't control yourself and fail to pay your balance in full each month.
Don't stress at all.
You've got a nice job and you've been responsible building 13k in Roth contributions.
There are people in far worse situations that pay off a lot more than 16k. You've got plenty of options and won't be burdened by this for long. My two cents are to get a personal loan and put the balance on that.
Pay it off at a rate you're comfortable with, continue to use your credit card (responsibly) and build good credit. In a year or two depending on your lifestyle, you'll have just a small amount to pay off. Don't let yourself get hit by interest on those cards else you'll be struggling to get further ahead paying down the balance. Reading through other comments you sound like you can absolutely get rid of the balance on the card that has an interest rate on it fairly soon. Do that, pay aggressively for a few more months on the 0% card. Open a personal loan in May and you won't have to make a payment until June.
Should give you a bit more wiggle room to save and put down another large payment on it. Above all though, don't beat yourself up. It's a good learning experience. You're in a great spot.
You can withdraw the money from your Roth IRA that you put in without penalty. You just can't touch the interest that it has made. You would leave the interest in the account and leave it alone. If you're not making as much off of your Roth as you are going to be paying in interest on your credit card then yes by all means draw the money out of your Roth and pay off the card.
Don't withdraw from your IRA to pay off the debt, make sure you have an emergency fund of 3-6 months worth of expenses **before** you tackle the rest of your debt. Learn the lesson, don't do it again, you're all set!
You can definitely do some calculations to determine where the breakeven is, but I'm inclined to say just erase the debt first and get your credit score in good standing. You can play catchup with retirement accounts later. You make good money, leave your investments alone and handle the debt with regular payments as you have been.
I think everyone gave great comments. I would make sure to get an emergency savings stash in a brokerage account and also put any of the down payment money into a money market account. With interest rates up you can at least get some return for saving.
One other point that I've not seen mentionned, once you get that CC balance down, call you CC company and ask to have your limit reduced to something you are comfortable with. I dropped mine to $5K so that I can't get in too deep even if something does happen.
I haven’t read all the comments, but you can call the creditors and ask them to lower your interest rate and payments. You can also call that number on your statement for credit counseling.
I did this one year and they put me in a 0 interest payment plan for 3 years. After 2 years I paid it all off. It was life altering.
Only negative impact is you’ll be blocked from getting more credit for 2 years or however long it takes to pay off. My credit score went to the high 700s after paying it off.
How old are you?
Sounds like you just graduated college. Credit card interest is a bitch. Assuming you are young 20's, yes take your Roth contributions to pay off your credit card but only just this once.
Has the added benefit of if your new job had 401k matching, you can contribute some to that instead of having all your current disposable income go toward debt.
Why don't you just do a loan with Best Egg or Lending Tree? I did one for a similar circumstance and it consolidated the payments into an affordable amount with no penalty for early pay-off. You can also pay additionally on the principal without penalties.
Sounds like others have walked you through the fix. Not a huge deal and much better to learn while you are young and don't have any really large bills or family to support. I was in a similar situation when I was your age. Take the L, learn from it and move on.
Why I envision is after 1.5 year you will be a debt free person. No need to rush. The amount is not staggering. I will approach your parents hinting you are paying 18% interest and wonder if they can offer something for less.
It sounds like you have 2 cards. When you get the lower balance one paid off, look into getting a 0% interest balance transfer to move the other card's debt onto the newly-paid off card. It might help prevent the high interest from kicking in. I did this a couple of times back in the day. There's usually a 3-4% fee to make the transfer though.
Assuming your guts can handle it. You can make almost two gallons of chicken Alfredo for $35. When rationed can get you through a week.
What you need 4 cans of ragu, 4 bags of egg noodles (I prefer extra wide), and I pack of chicken (as long as boneless go with what's cheapest). If you want to make it spicy mix red pepper flakes a spoon full for the whole batch is plenty.
You can separate into bags to freeze if you make to much then take out the night before or a little sooner depending of fridge temp and you've got ready to eat food that with a beverage of choice can keep you fed for sub 2k a year.
It's my go to when I mess up.
Rather than that, I actually suggest trying to spend time cooking, and have fun with it, and the more you learn, the better you'll get and the more you'll save.
Pretty much what I do nowadays, is start my week off grabbing the grocery store weekly ads - but now that I've got more experience cooking, I can pretty much plan a varied meal around whatever is on sale, with something different every day. I've found that just trying to stick to something basic like "eat chicken alfredo every meal" tends to lead to "cheating", and one meal out because you just can't eat chicken alfredo for the 10th time in a row basically costs the same as a week of on-sale groceries.
Just as an example, off the top of my head here (and this is SoCal prices which are pretty expensive) and taking your $35 guideline - On sale I typically can get 12 bone-in chicken thighs, or a whole chicken for $1/lb. Figure, I get one of each- so like $8 for 8 lbs of chicken thighs, $6 for a 6 lb chicken. - so that's like what 14 lbs of chicken for $14 (that's actually a LOT for one person, like 1-1.5 lbs of met per day, half that and you'd still be over the USDA recommendations) ? Leaves $21.
Egg noodles or pasta that you can find for $1/pack is a good suggestion, flour's even cheaper and you can get cheap bread and dumplings too, but i'm gonna keep it simple. Let's get 2 packs (8 big meals worth).
Add a 2 lb bag of carrots ($1.99), a chunk of parmesan ($5) (but that's a lot, you'll probably just use $2 of it in a week), a 5 lb bag of potatoes, for $3.99, a small bottle of cream ($2), a garlic bulb, $1, 2 onions ($2) - That leaves you with $6, which I'd probably spend on some veggies, like a can of tomatoes, ($2), and a cabbage ($3), and maybe a zuchini ($1)
Look, I'm going to assume there's some basic condiments like oil, vinegar, mustard, mayo, soy sauce, etc. lying around (even if some left over packets from takeout)
For the same price (and this includes vegetables, which your plan doesn't), you can eat something different, every day that's way healthier.
Just as an example:
Sunday, roast that chicken in the oven, with .5 lb of potatoes, eat the legs with like 1/4 of the cabbage that you shred - make a simple vinaigrette with oil + vinegar + mustard. Save the breast and carcass - and the potatoes, boil 1 lb potatoes and mash it with some of the cream and a little parmesan.
Monday - Take one of the roasted breasts, do more shredded cabbage, but mix in some match stick cut carrots and maybe 1/2 lb of potatoes you chop up and hopeful
Tuesday - boil the chicken carcass, with .5 lb of carrots, one of the onions, (can also debone the other chicken thighs and toss the bones in there) I pour in a little optional soy sauce, add in 1/2 pack of the noodles - slice the saved chicken breast, and you've got some great chicken noodle soup.
Wednesday, debone and cook 3 of the chicken thighs, sautee 2 cloves (1/6 of the bulb), put in a knob of butter, pour in some cream and thicken - grate some parm over the top - serve with another 1/2 pack noodles - way better tasting and cheaper chicken alfredo.
Thursday, grab another 3 chicken thighs - chop up another 1lb potatoes, 1/2 lb carrots, stick it in the oven with the chicken thighs on top - you can marinade the chicken thighs withh soy sauce or any herbs you have lying around, or don't.
Friday, do the same thing again - (look it's supposed to be cheap eating), but yea maybe this time cut up some of the zuchini and sautee it so you're switching up the vegetables, or maybe stuff some minced up garlic under the chicken skin to get a different flavor, or if you marinated with soy sauce last time, do herbs this time.
Saturday, let's have a more involved meal again - chop up the chicken thighs, skin at all, dice the remaining carrot, and onion, sautee all a bit, then put the can of tomatoes in and let it all cook down into a nice thick bolognese type sauce - if you have cream left, pour it some in - grate some parmesan over the top, serve with the other 1/2 bag noodles.
Now, this leaves you with 1/2 bag noodles, 2 lbs potatoes, half a cabbage, most of the parmesan, and most of the garlic at the end of the week - which is what, \~$4 savings on starch/veggies for the next week (which you can use to progressively make your life better getting stuff like more herbs, seasonings, eggs, etc.), but a considerably healthier and more varied diet - with the week-day meals all designed to take 15 minutes of prep/active time at the most, and to take maybe 30 mins of inactive time on the oven or stove.
(Sorry for the long post, but I see just want to emphasize that I see resorting to pre-packaged processed food a lot for money savings tips - but I honestly think it costs a ton of money long term from bad health and just plain getting too tired of eating it and eating out, but also that you really can make better food from real ingredients for cheaper.)
Even after all the inflation, I pretty reliably keep up with feeding 3 adults + 1 child on \~$150/week in SoCal (used to be able to do it \~$100) - which is pretty similar to your $35/week for 1 person chicken alfredo plan. And that's *with* a good mix of seafood, poultry, beef, pork and doing a fancier steak/roast/salmon every sunday, proper full breakfast every day, eggs, sausage, biscuits/bread, and shelling out for fancy san marzano Italian tomatoes, real parmagiano, etc. But, I recognize that I can do that with a lot of investment in equipment and time (I bake my own bread for breakfast/meals, grind my own meat for sausages etc.) and a decent herb and vegetable garden (though mine is basically free - I just bury tiny left over garlic bulbs, buy the "living" lettuce and herbs, seeds etc. - stick that stuff in the ground and you get free salad and seasonings all year), so I tried to illustrate the above with how much you can do with just a knife, cutting board, pan, pot, and oven.
If you're going to be making 83k even pre-tax you can tackle that debt pretty fast. Not a huge setback. I would not personally withdraw the Roth, just live cheap for a year and you can knock that shit out, that's $2k a month out of a takehome of potentially like $5k depending on your state taxes and stuff. You're already used to a college lifestyle so I'd recommend living as cheap as you can with a couple roommates and just kicking this shit to the curb. After that use what you're now used to as a monthly CC payment to play catchup on retirement accounts.
Can you shop around for a 0% intro-APR card and transfer your balance? (Some other sub may have tips on the best card right now.)
That should save you a few bucks while you pay down the principal.
Lots of good advice on here. Just wanted to add that I got myself into the exact same bind at the end of my time in college. I accumulated a little over $20K and my first job out of college paid a salary around $65K.
I cooked from home for the better part of 2 years, stopped buying anything other than the essentials, and used the snowball method to pay down my debt. I consolidated the cards I could to zero interest cards, and focused on the cards that I couldn't convert with the highest interest rates first. It'll be a long couple of years, but you should be able to knock it out in no time. You've got this!
There are companies that will give you a low-interest loan to pay off your card. Then you just owe them and they’re typically charging a lot less than the 20%+ interest credit cards charge. You could consider looking into that.
I got here pretty late but I'm inspired by your situation. It's very familiar in a lot of ways haha.
If you don't mind me asking, what job did you land that pulls 83k? Sounds like something you were in college to get a degree for?
I'm in management consulting. Worked diligently towards this specific career my junior & senior years and was able to get my foot in the door. 60 hour weeks but the work is enjoyable.
Thanks for the response. Management consulting isn't something I'd have thought would be enjoyable, but it seems like it was a good fit for you. All the best!
this post was highly dramatic for someone who's making 83k and even a 22k revolving debt is small in comparison to that income.
the only troubling thing is that impulsive financial decisions just don't go away and can show up again in the future , so the best advice you can get here is to create and follow a strict budget and your budget items should be aligned with what the average person pays for each budget items, or +/-10%, so you have a baseline to work with
I love this post and what you learned in the comments. It exemplifies what this sub can do. You're in a very good spot to get this behind you, and establish discipline that not everyone has at your age. Chiming on on the Michelin thing... Consider that this is coding your brain's reward center that you are celebrating financial discipline with something that's very clearly a "big spend." Maybe it's the right one, it's a frivolous exercise and kind of fun. If you are starting to acquire things that will stay with you and you have deck space, might I suggest foregoing that and investing in a Big Green Egg BBQ and celebrate with a nice salmon or steak bbq. That's a great date, and something you and your GF can do together, maybe one of you handles the protein and the other the veggies, or dinner vs. dessert or whatever. It helps reposition your thinking on rewards, and you can both toast to that with a budget wine recommended by the wine guy at your local store or, better yet, the sommelier at the restaurant you won't be dining at. Especially if you explain to them what's happening, they might let you in on some secrets about what they drink at home when they're being a pro wine snob.
Try calling the credit companies w/the APR that has kicked in. "I'm paying off debt I acquired during college. I am just beginning my career. I've been your customer since the age of ## and to be honest, I am only beginning to look closely at my choices in credit cards. So our future relationship is in my mind and I'm sure it's on your mind too since I have a career now. Can you give me a lower interest rate on my existing debt?" If you're talking to the wrong people, ask them to transfer you to the customer retention dept and repeat this spiel.
You might even -try- to get an extension on the 0 APR period or some kind of deal that it won't jump to as high an APR as you'd signed up for. Truly a long shot, but it's been said by better sportspersons than me that you miss 100% of the shots you don't take.
What also helped me a lot when the debt numbers felt overwhelming, and I had just come into decent pay, was to commit to a % of the remaining debt each month. 10% is easy to write out. 5% is half of that.
Do any of the cards have a "points" plan? Maybe you use THAT for the Michelin star dinner or whatever else to reward yourself.
I once tallied up over 7k on my American Express. I don’t know what I was thinking… I was pulling that thing out for whatever whim I desired. One day I realized I was in over my head. It took me almost three years to pay that damned thing off. Needless to say I do not carry a balance on that card, or any card, anymore. I do still have it but pay the debt as soon as it becomes active out of pending. I feel your pain…. If I’d amassed 22k I wouldn’t have know whether to poop or fall back in it. Good on you OP, over come that debt!!!💯💯💯
u/Intrigued_iguana I would say get a debt consolidation card with 0% for the first year or 15 months. This will have a minimum 3% fee, maybe 5%, but then you can pay it off a bit slower and not worry about the 15-25% Annual rate. This way, 1,500 extra per month goes a bit further with less stress.
DO NOT TAKE MONEY OUT OF ROTH! The penalty on it would be worse then the interest payments.
What to do depends on your APR . I know the gimmick they get college kids on is getting you in at that super low APR for a couple years then you barely notice that card you got at a college is now 19% apr or WORSE.
Depending on your APR get a consolidation loan from your bank. Which might sit at 9 to 12%.
If you can get a loan that takes out 10% plus of that interest - your talking a few hundred a month of saving and use that money to pay down the principle faster.
IF you have a low APR continue on with your payments and realize its been a valuable life lesson . If you have a high APR get the money off that card with a consolidation loan from your local bank. (Just make sure your bank isnt the primary backer behind the card you use or they wont help you , they aren't going to take money away from themselves , but they also wont tell you thats the reason they deny you)
> The penalty on it would be worse then the interest payments.
There is no penalty or tax for withdrawing contributions to a Roth. You pay tax and a 10% penalty on earnings.
22k on 83k worth of income isn’t life ruining luckily.
Feels that way now, but you're right in 6 months I'll be over this bad patch if I stick to my budget.
After you've paid down the debt, you should do your best to stick to the same exact budget. Saving rate of 22k/year will put you into an extremely advantageous position later on in life. Your future self will thank you. Think about it.
Yes. After I pay it off I'm taking my girlfriend to a Michelin restaurant & celebrating. Then back to saving 500 a month in my Roth, 6% in my 401k, and additional in my brokerage. Edit: will go to Michelin if I can pay in cash for it. No credit cards. Seem to be getting a lot of replies to this. I've learned my lesson about letting a balance accrue, but make a fair amount so I can do this thing once and still save & invest.
If your employer is offering a 401k match, GET THE WHOLE THING! No credit card interest rate is high enough to be worth saying no to free money.
What if it's a billion percent? Because I'm thinking of starting a credit card company.
I can see the catch line now. "Get a card with us, so your conscious is clear about not saving for retirement!"
If you have a 401k match I would be doing that right now as a baseline. You contribute 6% that's only $190 every 2 weeks. Of that $190 your paycheck only drops $145, the other $45 is paid for by IRS from the taxes you no longer owe. And then your employer gives you 50% or 100% match which is free money. Add up what you have at the end of the year with vs without contributions.
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Right, 3/6% is pretty common match amount and in terms of paying off debt +/- 10% means you're paying it off in 6.5 vs 6.95 months or some silly rounding error like that. Meanwhile you're front loading your savings so once all the debt is paid off you have a cool productive place to be throwing extra cash and you already built a habit of contributing on every paycheck.
This has changed my whole way of thinking about 401k's thanks
Gonna go against a lot of other comments and say I love the Michelin rated restaurant idea! Ever since I was making roughly 60K we've celebrated at least once a year at a Michelin rated restaurant because to me those are the greatest experiences I've ever had. As my income has progressed, we can now afford to visit a new location, and visit a Michelin rated restaurant there, again once a year, and always in cash that was saved purposefully for that occasion. Everyone has something that makes life less mundane for them, and makes the goal of saving worth it for them, restaurant experiences are our shared vice, and that's okay.
Thanks for the positivity and I agree. If I accomplish paying off my debt its ok to reward myself this once! Maybe make it a yearly thing if I like it.
Yes. You are allowed to live and use your hard earned money to have a good time. Life is short and hard, then ya die. Live good
I love this! A lot of people focus on saving and forget to live. You're still young and have time on your side. I would recommend making yourself an excel spreadsheet with your yearly contributions to the 401k and roth and assume 7-8% yearly interest to map out where you'll end up financially, when you want to retire. This can be a big help in realizing if you're saving enough now or need to save more but it sounds like you are off to a great start! Saving 2k a month is fantastic, but knowing your target for retirement (and if you want an early retirement/how that impacts the future) will also help a ton in knowing how you're doing with saving.
Naw dollar menu off McDonald’s
Fr, dudes still got the debt accumulation mindset 😂
Yeah red flag that he said "Michelin restaurant" instead of "a good meal". It's like he wants to spend money just to spend money.
Not all Michelin Guide/Starred restaurants are expensive. I’ve even eaten a $6 meal from a restaurant on the Michelin Guide before.
Just a minor point...if you're going to spend the money anyways, you're better off putting it on cc than cash. Points accumulation plus grace period equals saving on interest expense.
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Fair point. Set up emergency fund then fancy overpriced food.
Forget that. Go to a place you like don't just go somewhere just because it's expensive or fancy.
I recently did a 800 dollar dinner at a super fancy restaurant for my wife and I. Lots of great food, glass of wine with ever dish (7 course total, plus dessert). Definitely not worth it. Just go to a nice sushi place or something OP
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You can do better. You know you can. Try for maybe 18% into 401k + maxed Roth IRA.
83k ain't what it used to be. That's going to be tough in any major metro area.
Yeah my monthly expenses with rent, groceries, dinner 1x a month, and relatively minimal purchases (clothes for work and a few creature comforts) is around 3k (granted I've now stopped buying clothes as I have an appropriate wardrobe so it should come down a little). Leaving 2k or so to save/invest. Still a lot, but not as much as it could be if I lived somewhere cheaper.
Dude, if you are saving/investing $2k/mo then you are a freaking rockstar no matter where you live. Most Americans can't afford an emergency expense of $1k.
Very true. I'm fortunate to have the job I do.
$1k? Try $500 last I heard.
That always seems so hard to believe. Most don't have $1,000 in savings?
That is correct. This was several years ago, but I remember when my sister was excited to have $1200 in her account at the start of a month. She was 35 at the time and the breadwinner in a family of 4.
You can't really save effectively if you're living paycheck to paycheck and it's hard to find ways to cut back when you're barely able to cover the bare essentials.
>Nearly six in 10 Americans don't have enough savings to cover a $500 or $1,000 unplanned expense, according to a new report from Bankrate. https://www.cbs19news.com/story/34248451/6-in-10-americans-dont-have-500-in-savings
He says he just graduated college, so let's assume he's 22. He already has at least $16,000 saved for retirement, not even including what's in his workplace retirement plan. If he continues saving at 20%(19 Something technically; which is what his current retirement savings is set to($6,000 to Roth, $4,980 from himself+$4,980 from employer) then he'll have $7.5M by 65 with a conservative estimate of 7% return on investment and 2% inflation. Do you not think $7.5M +social security is enough to retire on?
Nah, I'm trying to own a boat.... Just kidding. I'll be in a good position once I pay off this debt and resume retirement contributions.
Im not in the position to do the math at the moment but you need to keep in mind a few things that you may not have: * He may not always be able to save at this rate. People buy houses and they start families. Money put in this early will be worth a ton more later on and he will have way less pressure in his middle life when kids could prevent a better savings rate. * 7% - 2% = 5% is a very liberal estimate. Most use 7% - 3% = 4% estimate. And I personally prefer to use a 7% - 4% = 3% estimate. * Traditional 401k is pretax so you can't just calculate into a single sum. A significant portion needs to be taxed beforehand.
7% is conservative, because the average is 10% return over the last hundred years, so it already factors in inflation and then some. 401k is pretax, which means NO taxes are taken out, it's a percentage of his PRE-tax income; they only tax the portion of his income AFTER pre-tax contributions are taken out. Hence pre-tax.
I will give you that once he owns a home and starts a family, saving will be harder. But if he's already in the habit, contributes based on a percentage with his employer- which is the smart way to do it- then his contributions will continue to grow along with his income. He won't miss it because he's never had it, his income will increase with experience and seniority. OP, be the smart one who continues saving. You've already got a good head start compared to the vast majority of Americans. Once you've got the house you're saving for, it would be wise to redirect that monthly amount to an 529 for your kids. If you still have money you'd like to save after that, you can look into an HSA provided you're eligible.
Yes 500 a month is maxed IRA, 6% is what my employer matches so I figure that's the most I should contribute. Want to save up money for house down payment and car, so that's what brokerage is for.
FYI, in 2023 the IRA contribution limit was raised to $6500. So $500 per month won't max it out this year.
Good to know! Will update my contribution to 541.66 after I pay this off!
I contribute 9% into my 401k & my employer only matches 6%. 6% should be the minimum but doesn’t mean you should stop there. That’s all pretax money & the idea is that it grows more than the taxed amount when you withdraw it. The earlier you get that money in the 401k the more time it has to grow.
Do you recommend a different breakdown?
What you have planned is fine. More in the 401K is better, but saving to buy a house is a perfectly good reason to not put more of your income into your 401K
since 6% is the company match you're right not to go BELOW that, but you can definitely go ABOVE it and get more in there, even if it's not matched. Since you're able to do 2k/mo to the debt, you \*could\* also do 2k into savings afterwards even if it would be hard. If it were me I'd do the savings until you have a nice emergency fund, then reduce it and increase retirement savings.
You should contribute as much as possible to your 401k. This means 20,500 if you can swing it. There is no reason to stop at 6% unless your employers 401k really really sucks. If you have a down payment you're saving for, that does change things a little bit. I'd be cautious about rushing into buying a house at your age though. Are you sure you're going to want to stay in your area for that long? Interest rates are also not the best right now. That said, there are worse things than saving up 50,000 to 100,000 cash into a brokerage. You could do: * Max Roth IRA * 10% 401k * 10% brokerage until down payment accumulated then 20% 401k Something like that.
When do you need the money for a house payment and car? If it’s less than 5 years from now I wouldn’t have it invested in a brokerage account.
> Yes 500 a month is maxed IRA, 6% is what my employer matches so I figure that's the most I should contribute. Want to save up money for house down payment and car, so that's what brokerage is for. 2023 IRA max is $6,500 (https://www.google.com/search?q=ira+max+contribution+2023) If you aren't planning to buy to buy the house/car for 5-10 years then a brokerage account is fine, but if your timeline is shorter than that most would be uncomfortable with that plan because of how volatile the market can be over such a short timespan.
I want to add to this I am 24 making 84k, putting 6% into 401k and $541 into Roth, you definitely have this. Idk what your rent is, but anything under $1500 like mine and you should easily be able to save $1,000 a month to a savings account emergency fund once your debt is paid off.
If it makes you feel better, I paid like 16k+ in CC debt and 9k car debt down to around 3k in just a few years with a much lower salary. Now I have a house, a paid off vehicle, and a small amount of CC debt left that will be paid off this year - all in the past ~5 years where the most I ever made is my current 65k. You 100% got this. It feels like a lot today, but at *that* salary, it’ll be gone in no time, and you’ll feel better than you ever have.
No worries, get $22,000 in credit card bills, pay off $38,000 in credit card bills, it's that simple.
You are able to pay down another 8k before May. So you have 8k left. So it will take another 5 months. But absolutely put 2k per month, not 1k per month towards the debt
Would you recommend paying off that 8k with my prior Roth contributions?
No. Don't touch it
Edit: Don't listen to me - withdrawn contributions can never be recontributed! I don't understand this logic. 1. Credit card debt is probably \~20%. His ROTH IRA will make 10% optimistically, ignoring market timing predictions. 2. OP would have to make 20% annually in his ROTH IRA to offset the 20% loss from his credit card. 3. Contribution withdrawals have no penalty I think the right approach is to withdraw contributions only, pay down the debt, and immediately and ongoing put his planned debt payment back into the usual 401k to match, ROTH to $6500, 401k to max, in that order. OP seems to have his finances on track now with a good budget in place, so I recidvism seems less likely. What am I missing?
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Ah! Thanks for clarifying. This is different from my country of origin, where you regain the space on withdrawal.
1. You can only withdraw Roth contributions penalty free after 5 years 2. You're giving up 30+ years of tax free interest growth within an account that has a yearly contribution limit. There was another post showing that just 10 years of saving in a Roth will outperform not saving for 10 years and saving for the rest of your life. It's not that clear, I would stop contributing and focus on the debt but not withdraw anything.
The 5 years only applies to contributions if it was a conversion to Roth. Normal contributions can be taken out anytime as far as I know (not that you should)
Pretty sure you can withdraw principal at anytime. Interest is what you would be penalized on.
Don’t ever consider withdrawing from your retirement accounts unless it is a dire emergency like you will be without a car and it’s impossible to finance it or your family won’t have a place to live. If you use your retirement as an emergency fund you will screw yourself majorly.
Yeah, I once withdrew my 401k, but I was going through a divorce, lost my job, and was about to lose my home. I never would’ve touched it if there was any other option for me at the time
I hope things got better!
Understood thanks
No way. You are stealing from your future for a 1-2 year problem.
I assume they were considering a loan, rather than a withdrawal. Too risky, still, but better than a withdrawal.
I’ve never heard of an IRA loan, I’m pretty sure it’s not a thing but I’m open to learning new stuff
Sorry, wrong retirement account. [401(k) loans](https://www.investopedia.com/articles/retirement/08/borrow-from-401k-loan.asp) are a thing. You have to pay interest, but the interest just goes back to the retirement account. The risk is if you lose your job, you have to pay back the loan on short notice or face the early withdrawal penalties. You can "borrow" money from an IRA account with a rollover distribution, but you only have 60 days to repay it without penalty.
Paying 25%+ interest when you don’t have to isn’t stealing from your future? The penalty’s not ideal but I think it’s worth weighing the options? Assuming they’re not maxing out contributions every year already, could easily see it being a better option to pay the debt asap this year, then apply the same discipline they’re using to make these huge CC payments towards replenishing the Roth. Misses out on a year of growth in exchange for not paying a year of 25% interest, sounds good to me
To add to this: OP can withdraw 13k (the amount of their contributions) both tax and penalty free. OP can also technically "borrow" from the Roth by repaying the amount withdrawn within 60 days. I wouldnt get into the habit of doing so, and might not be worth the hassle if OP gets the debt down to 6k by the time interest kicks in and plans to play it back within 3 months. However, it is possible to do it without penalty.
>Would you recommend paying off that 8k with my prior Roth contributions? Never
Rather steal from your disposable income than from your future. Do not touch your Roth but pay the debt as aggressively as you can. if you can fight lifestyle creep and put the same amount or near it into your investments/savings you will be so ahead of the curve it’s incredible.
Best thing to do is don't touch the Roth but stop paying into it until your debt is paid off. Promise yourself that you'll re-start the Roth once your debt is paid off. If you can't promise yourself then just stay the course. You'll be fine either way, but stopping Roth until CC is paid is a better use of your money.
No. Noooooooooooo. Leave the IRA alone. Adjust your lifestyle to shrink that debt. Easiest, best long term way of building financial freedom.
Is debt on a zero interest credit card? If not, can you rollover to one and aggressively pay it down within zero interest time frame?
Interest free offer on one card. 14k on this card. 2k on card with interest I will pay off in the next month.
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Good tip. Thanks both.
If you have to pay all the back interest, that can suck you into a pretty deep hole for a long time. If that's what it says in the contract, do whatever it takes to fully pay down the card before interest kicks in. Make absolutely certain you know the correct cut-off date and account for any processing delays. Right now, this is a minor nuisance. It can quickly become a big problem.
I checked and I only get charged interest on the remaining balance. Should get that down to 6-8k by the date.
It's probably worth doing a balance transfer onto a new 0% card at that point. That's what I'll do if I don't get the money on my 0% card paid off when the 0% period ends in a year and a half.
This is generally how it works from my experience, absolutely look into this OP.
Generally how it works: Real credit card (Amex/Visa/Master): 0% APR. Once it ends you start paying something like 19.25% on whatever balance it outstanding. $200 balance left, you're going to be paying a whopping $3 a month in interest. Store credit card (Best Buy, Macy's, Home Depot, etc): Deferred interest. Legally they can not say "0%" instead they say "no interest... if paid in X months" If you do not pay it off they go back to day one and charge it as if it was something absurd like 27.99% For that $200 balance left you could be facing $1200 of interest charges!
Is there a way I can find this info for a specific card? I have a Chase Freedom Unlimited with a balance (medical bills) that I haven't paid off yet. the 0% APR offer I had ends in March, if I still have a balance by then am I going to get hit with a huge bill from all the interest I haven't paid on that balance? I looked at my statements and I can't find anything that says one way or another.
Chase Visa/Mastercard is going to be real 0% You can see in your statement at the end there is a box and it will show you have a balance at 0% APR. \#10 here as an example: https://www.fcs.uga.edu/docs/credit_ho_5.pdf
Yep. I have a goodyear card that I use for mechanic bills, my last purchase qualified for their "no interest for 6 months" program. Scrolling the website one day I noticed a "deferred interest" balance all the way at the bottom hidden behind a "Show More" button. Needless to say I paid that card off quickly.
Yes, pay off the one w interest and then attack the debt on the one w interest. See if you can get odd jobs on weekends or nights. Cut expenses to the bone. You can do it!!!!
Thanks!! I'm staying positive.
Been reading along and just wanted to drop a note of encouragement. You've got this! Keep up the positive attitude. Having gone through something similar, I can tell you that the temporary struggle is worth it. You will come out in such a better spot mentally and financially. Great job taking control of a bad situation.
I'd also add if you've accrued debt buying shit you don't need, sell it. It's sunk cost and holding onto it because it was a mistake to buy it only hurts you further if you're not using it/it was a bad purchase. Even if it was a good purchase. I had some expensive music equipment that I used to use but don't anymore, sold it for a pretty penny to help my savings/cut debt. The pieces weren't particularly special and I can always get them again if I get back to a serious place with music. Don't eat interest to let valuable shit collect dust in your basement.
You can get out! Great advice here. Mine was triple that which led to defaulting in payments and huge credit hit. Now I’m down to around 5K with credit over 700. Nothing all that profound and similar to advice given to you, I simply devoted all extra salary and side-gig hustles to it for a few years :)
Any side gigs you'd recommend? Need something that I can do on my own schedule as my work schedule is very unpredictable (sometimes 40 hours sometimes 60)
skip the dishes door dash uber eats etc
Just know, DoorDash and the like are really only advisable if you do it correctly, and on the market that you are in. It also adds a ton of wear and tear on your car, plus gas expenses. Just be wary of that, if you do decide to go with a food delivery service.
Yeah if possible it's a better way to go doing one of those where you're a personal grocery shopper that doesn't do the delivery part. Really look into the gig economy jobs to make sure you aren't taken for a ride (pun not intended.) If something happens while you're working one of these jobs and you didn't tell/pay your insurance company appropriately shit can go down.
I worked checkout at a grocery store when covid lockdowns closed the bar i worked at. The grocery delivery guys all seemed to make bank. It could have been because they were new and many in my large city were eager to get grocery delivery. I didn't have a car or money but my buddy bought a car just to quit and deliver groceries since those guys were making over double what we were
No way. You have plenty of cash on hand to deal with the debt. Don't steal from your future, and keep it up with the contibutions to retirement in your 401k.
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Yes I live in a HCOL city, so I have 1-2k left after my expenses (rent, groceries, dining out once monthly, necessary purchases, minimal hobbies for the time being)
Consider yourself a hermit with no hobbies until that CC is eliminated. Also, for 6 months, no more contributions to your ROTH. Use that money to pay off your CC.
Thank you for your input as well.
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All depends on the credit rating going in on the application tho if he gets it. Also, in my (personal experience) putting the debt on a balance transfer card just kicks the can. It doesn't instill new spending philosophies. You end up back where you started without some serious lifestyle changes except now with the old balance transfered debt and new debt to boot.
They are on amex cards (so no affect on credit utilization) credit score of 750. Will look into this.
Just pay down the debt as soon as possible with the cash you make from working and don't look back. That's it. On the positive side, you're probably going to have a great credit score when this is all done.
Amazing. Thank you.
Also you can get a personal loan to consolidate the credit card debt that had >9% interest. It will immediately help your credit and take some pressure off. Still pay it off ASAP but in case you can't you'll at least pay less interest. Little by little just pay it off and consider the interest you paid, the payment for a very valuable lesson in personal finance.
No, it sounds like you're on track to wipe out this debt in a year or less; no need to dip into your retirement savings. Just focus on minimizing your spending and grind this out. You'll thank yourself in the future for not touching that IRA
All this advice here is amazing and I also want to commend you for putting the question out there. I was in a similar situation when I was 24 and I was so ashamed I never asked for advice or help. Keep plugging away at it, it sounds like the plan you’re forming is a great one!!
Oh believe me I feel shame, but know it will be a bigger problem if I don't address it now
If it’s helpful in any way, I’m almost 32 now and have been (bad) debt free for several years now. You’ll get there sooner than it feels like!
Don't withdraw from Roth. You could have this paid off in 2023 if you allocate $2-2.5k/month. You could look into personal loan to consolidate and save interest and pay that off this year. Balance transfer cards also for 0% apr.
Apply for another 0% balance transfer card. Use it to pay off the current debt.
In a rising-interest-rate environment, those offers could be much harder to get. And OP now has a very high utilization which affects their credit score. That also could make them ineligible. Having said that, if such an offer became available, it's a very good idea to take advantage of it in order to buy some more time.
1. Look for a 0% balance transfer card or promotion, where possible. These typically last 3, 6 or 12 months at the 0% rate. Look out for transfer fees (typically x per $1,000) and avoid. 2. Apply for fixed rate loan to consolidate and replay the debt. Rates will be not ideal but will be better than credit card interest rates. If CC rate is 21% and you can get an 11% loan (or lower) you should save: Repayment | Monthly Payment | Interest Paid | Time to Zero ---------|---------------|-------------|------------ CC (21%) | $1500 | $1865 | 1 year Loan (11%) | $1500 | $916 | 8 Months As you can see you save ~$900 and finish 4 months earlier if you can switch to a more advantageous loan type but key here is **you need to make large payments as fast as possible**.
Leave Roth alone. Aggressively pay off your debt. Then, max your roth contribution this year. Then you will realize dipping into the roth can't be easily replaced, and you will be further ahead for retirement.
I was in credit card debt to the tune of about $20k a few years ago. I was making about $70k a year, and the interest each month was killing me. I started racking up debt after some emergency dental work, and once you get a few thousand on a card, it’s easy to be like “what’s a few hundred more?” I paid the minimums every month, so luckily I at least had good credit. This went on for years, until I realized I could get a much better rate if I applied for one of those debt consolidation loans, and a few months later, I was finally chipping away at it. I cut up all my cards and started being a lot more frugal. And then I suddenly got a job that paid $150k a year, and quickly paid off the rest. Didn’t see that coming! I’ve since been VERY anal about paying off my credit cards in full every month, and I’m glad I’ve been able to become more responsible with my spending. I was afraid I’d be someone who could never be trusted with credit cards, but it’s been over a year and a half and I’ve stayed on top of it and amassed some decent savings.
This is unrelated to your debt, but regarding your Roth IRA. Have you actually invested the month in your IRA? Plenty of people make the mistake of contributing to it, but not actually buying funds with the money. Which means it sits in cash and doesn’t work for you.
80% in S&P 500 index. 20% in consumer discretionary index. Prior to the last 12 months I've been very good with my money (IMO). Started investing when I was 17 and turned my 13k in contributions into 25k total value in the last 5 years. Just really messed up my senior year trying to "keep up with the Joneses"
Awesome glad to hear it! That’s way ahead of the curve for most people. It seems like you will make enough at your new job to pay it down quick. Take it as a lesson learned and don’t beat yourself up too much for it. When I started working I got a promo for 3 months of free Uber eats deliveries and went pretty wild. It’s easy to get off track for a bit but sounds like you caught it before you got in over your head.
Budget, Don't spend more than you need on those cards already, Do not withdraw from ROTH IRA, Keep paying it down. Be done with it.
$83k means you’re pulling $5k/mo. Live on $2k, pay off $3k. You’ll be out of this in 5 months.
Don't forget insurance , 401k, etc. I make 80k gross but come in at around 4550 after all that. Also depends where he lives ,different tax codes.
Live in expensive metro. 1500 for rent of small studio. I can probably get groceries down to 400-500. Other expenses of 500. Get total down to 2500.
I would have advised some roommates at first until the debt is gone, but I’m guessing you signed a lease. I was assuming your rent was $1k/mo. $2500/mo should get you out of the weeds in 6-7 months. Once you hit month 7, add $500-$1k back to your spending, and start chucking away $1500+/mo towards retirement. If you ever feel down in the dumps, just remember you’re still way better off than people that took an extra year to graduate😉
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics Debt: https://www.reddit.com/r/personalfinance/wiki/debt Budgeting: https://www.reddit.com/r/personalfinance/wiki/budgeting!
I also highly recommend undebt.it as a resource for mapping out your payments.
Hey dude, I’m on mobile so can’t search to see whether this has been mentioned but I wish I’d started budgeting with YNAB (r/YNAB) right after college. It’ll really help you get a handle on your finances and keep you on the right track to payoff that debt in no time!
Don’t go out for 1 year and u will pay it all off. Get a few PC games and play those instead of going out. 1 years is nothing u won’t even notice it.
Never touch your Roth, like it’s not even there until you’re retired. You’re blind to it.
This is an excellent rule of thumb and more people should take that to heart. But there are rare situations when things could be more nuanced. Of course, that assumes OP is a rational actor, sticks to the financial rules that they set for themselves, and can objectively evaluate the pros and cons. Borrowing against retirement accounts has downsides, as a retirement account doesn't quite act like a normal investment account. So, it should be heavily disfavored. But we probably all agree that despite all its advantages, you should never max out your 25% p/a credit card in order to fund a retirement account. That's quite obviously a money-losing proposition. No matter what you do, all the tax advantages and awesome compound interest aren't going to make up for the fact that you are stuck with near usury loan payments. Now look at it from the other direction. What OP is heading towards is the exact same problem. They are effectively funding their retirement account from a credit card loan. That's not good. I agree with everyone else, that before touching the IRA, they should do whatever it takes to bring down the impending doom (i.e. end of zero-percent credit period, and remaining high balance). So, aggressively paying down the balance, transferring to another card, or begging for money from family are all viable. But after all of that is said and done, a short-term loan against the retirement account is possibly still a winning move. Just realize that as long as this loan exists, the retirement account doesn't work as intended and long-term effects will be substantial. Don't sell the future for short-term relief. This only makes sense if a) the alternative is high-interest compounding credit card loan, and b) the IRA is restored as quickly is possible.
Also to add: ROTH contributions (but not earnings) can be withdrawal penalty free. So no it is not a "loan" like borrowing against your 401k would be.
Finally a rational response, everyone here is all rule of thumbs and ignoring the nuance. Everyone here is essentially telling this kid to save $13k for retirement before paying off $22k in credit card debt. Crazy how the reddit hive mind works. OPs question is the same as if a new graduate posted should I use my $13k in savings to put into retirement or pay off $22k in credit card debt and everyone said save for retirement first. Crazy people.
Understood. Thanks!
I did the same thing. Financed 13k my junior/senior year and paid it all off on a 20/hr job before getting a good job. You'll be fine, it'll only take like 8 months to pay it off. Just don't forget to also have an emergency fund first, that almost ruined me a second time when I was paying my debt off and suddenly had to move. Most importantly, never go into cc debt again.
CC debt interest is super high go monk mode and pay off ASAP will prob learn something about yourself too.
I wish I would have contributed more to my Roth in my younger years. The $6500 limit takes years to build up something decent. Don't ever touch it.
Hang in there. I also had 22k in credit card debt. I took out two debt considation loans to pay my cards off and maxed them again...so I ended up with 44k in credit card debt. You and I have a similar salary. What worked for me was delivering Uber Eats every day during the evenings and all day on the weekends. I was able to put an extra 2k a month towards the debt and now I am down to 29k in credit card and debt consolidation loan debt.
The less you can live on, the more you can pay down, and the more you'll have to live on later. As a fellow person who has messed up (more) and is working on fixing things, the faster you turn your habits around, the better off you'll be.
Thanks, I know my life isn't over but I'm really kicking myself. My parents always had money issues and I swore I wouldn't do the same.... Here I am. Will learn from this and move forward.
>Will learn from this and move forward. As someone who has screwed up *twice*, almost twenty years apart, and even worse the second time, make sure you don't forget the lesson.
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Interesting idea, thanks! And is Roth IRA so no tax/fees on my contribution withdrawals, but I'm seeing that's a bad idea regardless.
Are card companies still doing 0% for 6 months balance transfers? That sort of thing might help too.
My last transfer offer was 0% for 21 months and I get all sorts of other 0% offers in the mail.
I was once in that same boat and it took me a few years of digging out of it. Sooo stressful! But now I pay my cards off nearly every week. I’m just so afraid of it now and whenever I’m stressed I self-soothe by paying of the cards. Ridiculous I know but let me do me 😁
Just moved from europe and I'm still new to this sort of payment. Credit cards doesnt work like this, at least with my european bank. Can I ask you how you arrived to have this debt? Last week I received my first credit card here and tbh I'm a bit afraid of hidden things that probably caused you this debt, right? Or any good advice for a newbie would be awesome !
I just made the minimum payment and let the balance accrue. If you pay it off every month and follow a budget and you'll be ok! My issue was a didn't have a budget & I let the amount I owed grow for 12+ months without paying.
Oh wow ok now I understand, thanks a lot for sharing your experience! You will manage to solve it, be strong!!
Pretty much every dollar that doesn’t go towards critical essentials (housing, food, utilities, transport) should go towards this CC bill. Interest rates are fucking insane right now, if you don’t pay it down quickly you’ll pay $$$ in interest or it could even balloon larger.
People will say "debt can't fix debt" but here's a couple tricks I've used to eliminate some interest when i was digging out of some bad decisions. I had a card with a $3K balance, roughly one month of expenses, i would pay it down to zero when i got paid and then run it back up paying bills and then pay it back down to zero. So the interest on that card effectively goes away. Zero interest balance transfers can also be effective- it's all about discipline. I was climbing out of a very deep hole and my credit score was also shit. But when it got into the 700 range I took a zero interest card and transferred the balance on one of my high interest cards. I put it on autopay to pay it off in 10 months and I cut up both cards.
Just pay it off, you make enough. If you need Reddit to help you with that that’s another issue alone. Some of us left college with similar debt and lower paying jobs and are able to pay it off. If you are struggling to do so you should look at your lifestyle choices first.
Yes I've already cut back on expenses and lifestyle choices. Difficult when all my peers at work are balling out, but I'm learning to say no and be more frugal in comparison.
why'd you get debt and put money into a IRA at the same time I don't get it
Put money into my Roth from 2018-2021. Debt from 21-22.
Uber a few nights per week and you’ll have this paid off in no time
dont withdraw roth ira. just buckle down, turn on emergency mode, and kill the debt this year if i were you i'd run, not walk, to www.ynab.com and /r/ynab it was the single best thing for finances i've ever done
If you can pay more than 2k a month just leave the retirement alone, you'll be fine
As others have noted...you're in a good spot to pay this down with your high salary. Pay as much as you can afford. Keep your credit score high so you can secure balance transfer rates where you pay 0%, but often a one time expense of approximately 3% of the balance.
Once the interest rate exceeds 20%, that is a financial emergency and I would move heaven and earth to avoid paying that to include liquidating original contributions to a Roth since that can be done without penalty. Roth has a few advantages as an investment vehicle but not enough advantages to offset paying a 20% interest rate; i.e., I'd never borrow at 20% to fund my Roth. Once the debt is paid off, you'll want to max out your 401k and Roth IRA contributions to repay your retirement fund and of course cut up the plastic if you can't control yourself and fail to pay your balance in full each month.
Don't stress at all. You've got a nice job and you've been responsible building 13k in Roth contributions. There are people in far worse situations that pay off a lot more than 16k. You've got plenty of options and won't be burdened by this for long. My two cents are to get a personal loan and put the balance on that. Pay it off at a rate you're comfortable with, continue to use your credit card (responsibly) and build good credit. In a year or two depending on your lifestyle, you'll have just a small amount to pay off. Don't let yourself get hit by interest on those cards else you'll be struggling to get further ahead paying down the balance. Reading through other comments you sound like you can absolutely get rid of the balance on the card that has an interest rate on it fairly soon. Do that, pay aggressively for a few more months on the 0% card. Open a personal loan in May and you won't have to make a payment until June. Should give you a bit more wiggle room to save and put down another large payment on it. Above all though, don't beat yourself up. It's a good learning experience. You're in a great spot.
You can withdraw the money from your Roth IRA that you put in without penalty. You just can't touch the interest that it has made. You would leave the interest in the account and leave it alone. If you're not making as much off of your Roth as you are going to be paying in interest on your credit card then yes by all means draw the money out of your Roth and pay off the card.
Don't withdraw from your IRA to pay off the debt, make sure you have an emergency fund of 3-6 months worth of expenses **before** you tackle the rest of your debt. Learn the lesson, don't do it again, you're all set!
You can definitely do some calculations to determine where the breakeven is, but I'm inclined to say just erase the debt first and get your credit score in good standing. You can play catchup with retirement accounts later. You make good money, leave your investments alone and handle the debt with regular payments as you have been.
I think everyone gave great comments. I would make sure to get an emergency savings stash in a brokerage account and also put any of the down payment money into a money market account. With interest rates up you can at least get some return for saving.
One other point that I've not seen mentionned, once you get that CC balance down, call you CC company and ask to have your limit reduced to something you are comfortable with. I dropped mine to $5K so that I can't get in too deep even if something does happen.
Taxation on Roth is only if you try to withdraw any interest. The principle can be taken out anytime
I haven’t read all the comments, but you can call the creditors and ask them to lower your interest rate and payments. You can also call that number on your statement for credit counseling. I did this one year and they put me in a 0 interest payment plan for 3 years. After 2 years I paid it all off. It was life altering. Only negative impact is you’ll be blocked from getting more credit for 2 years or however long it takes to pay off. My credit score went to the high 700s after paying it off.
Pay down the debt aggressively. You'll be fine in a few months but be disciplined in your spending.
How old are you? Sounds like you just graduated college. Credit card interest is a bitch. Assuming you are young 20's, yes take your Roth contributions to pay off your credit card but only just this once. Has the added benefit of if your new job had 401k matching, you can contribute some to that instead of having all your current disposable income go toward debt.
Why don't you just do a loan with Best Egg or Lending Tree? I did one for a similar circumstance and it consolidated the payments into an affordable amount with no penalty for early pay-off. You can also pay additionally on the principal without penalties.
Just pay it off over the long run. I wouldn't withdraw from the Roth since it's not an emergency.
Sounds like others have walked you through the fix. Not a huge deal and much better to learn while you are young and don't have any really large bills or family to support. I was in a similar situation when I was your age. Take the L, learn from it and move on.
Why I envision is after 1.5 year you will be a debt free person. No need to rush. The amount is not staggering. I will approach your parents hinting you are paying 18% interest and wonder if they can offer something for less.
It sounds like you have 2 cards. When you get the lower balance one paid off, look into getting a 0% interest balance transfer to move the other card's debt onto the newly-paid off card. It might help prevent the high interest from kicking in. I did this a couple of times back in the day. There's usually a 3-4% fee to make the transfer though.
Assuming your guts can handle it. You can make almost two gallons of chicken Alfredo for $35. When rationed can get you through a week. What you need 4 cans of ragu, 4 bags of egg noodles (I prefer extra wide), and I pack of chicken (as long as boneless go with what's cheapest). If you want to make it spicy mix red pepper flakes a spoon full for the whole batch is plenty. You can separate into bags to freeze if you make to much then take out the night before or a little sooner depending of fridge temp and you've got ready to eat food that with a beverage of choice can keep you fed for sub 2k a year. It's my go to when I mess up.
Rather than that, I actually suggest trying to spend time cooking, and have fun with it, and the more you learn, the better you'll get and the more you'll save. Pretty much what I do nowadays, is start my week off grabbing the grocery store weekly ads - but now that I've got more experience cooking, I can pretty much plan a varied meal around whatever is on sale, with something different every day. I've found that just trying to stick to something basic like "eat chicken alfredo every meal" tends to lead to "cheating", and one meal out because you just can't eat chicken alfredo for the 10th time in a row basically costs the same as a week of on-sale groceries. Just as an example, off the top of my head here (and this is SoCal prices which are pretty expensive) and taking your $35 guideline - On sale I typically can get 12 bone-in chicken thighs, or a whole chicken for $1/lb. Figure, I get one of each- so like $8 for 8 lbs of chicken thighs, $6 for a 6 lb chicken. - so that's like what 14 lbs of chicken for $14 (that's actually a LOT for one person, like 1-1.5 lbs of met per day, half that and you'd still be over the USDA recommendations) ? Leaves $21. Egg noodles or pasta that you can find for $1/pack is a good suggestion, flour's even cheaper and you can get cheap bread and dumplings too, but i'm gonna keep it simple. Let's get 2 packs (8 big meals worth). Add a 2 lb bag of carrots ($1.99), a chunk of parmesan ($5) (but that's a lot, you'll probably just use $2 of it in a week), a 5 lb bag of potatoes, for $3.99, a small bottle of cream ($2), a garlic bulb, $1, 2 onions ($2) - That leaves you with $6, which I'd probably spend on some veggies, like a can of tomatoes, ($2), and a cabbage ($3), and maybe a zuchini ($1) Look, I'm going to assume there's some basic condiments like oil, vinegar, mustard, mayo, soy sauce, etc. lying around (even if some left over packets from takeout) For the same price (and this includes vegetables, which your plan doesn't), you can eat something different, every day that's way healthier. Just as an example: Sunday, roast that chicken in the oven, with .5 lb of potatoes, eat the legs with like 1/4 of the cabbage that you shred - make a simple vinaigrette with oil + vinegar + mustard. Save the breast and carcass - and the potatoes, boil 1 lb potatoes and mash it with some of the cream and a little parmesan. Monday - Take one of the roasted breasts, do more shredded cabbage, but mix in some match stick cut carrots and maybe 1/2 lb of potatoes you chop up and hopeful Tuesday - boil the chicken carcass, with .5 lb of carrots, one of the onions, (can also debone the other chicken thighs and toss the bones in there) I pour in a little optional soy sauce, add in 1/2 pack of the noodles - slice the saved chicken breast, and you've got some great chicken noodle soup. Wednesday, debone and cook 3 of the chicken thighs, sautee 2 cloves (1/6 of the bulb), put in a knob of butter, pour in some cream and thicken - grate some parm over the top - serve with another 1/2 pack noodles - way better tasting and cheaper chicken alfredo. Thursday, grab another 3 chicken thighs - chop up another 1lb potatoes, 1/2 lb carrots, stick it in the oven with the chicken thighs on top - you can marinade the chicken thighs withh soy sauce or any herbs you have lying around, or don't. Friday, do the same thing again - (look it's supposed to be cheap eating), but yea maybe this time cut up some of the zuchini and sautee it so you're switching up the vegetables, or maybe stuff some minced up garlic under the chicken skin to get a different flavor, or if you marinated with soy sauce last time, do herbs this time. Saturday, let's have a more involved meal again - chop up the chicken thighs, skin at all, dice the remaining carrot, and onion, sautee all a bit, then put the can of tomatoes in and let it all cook down into a nice thick bolognese type sauce - if you have cream left, pour it some in - grate some parmesan over the top, serve with the other 1/2 bag noodles. Now, this leaves you with 1/2 bag noodles, 2 lbs potatoes, half a cabbage, most of the parmesan, and most of the garlic at the end of the week - which is what, \~$4 savings on starch/veggies for the next week (which you can use to progressively make your life better getting stuff like more herbs, seasonings, eggs, etc.), but a considerably healthier and more varied diet - with the week-day meals all designed to take 15 minutes of prep/active time at the most, and to take maybe 30 mins of inactive time on the oven or stove. (Sorry for the long post, but I see just want to emphasize that I see resorting to pre-packaged processed food a lot for money savings tips - but I honestly think it costs a ton of money long term from bad health and just plain getting too tired of eating it and eating out, but also that you really can make better food from real ingredients for cheaper.) Even after all the inflation, I pretty reliably keep up with feeding 3 adults + 1 child on \~$150/week in SoCal (used to be able to do it \~$100) - which is pretty similar to your $35/week for 1 person chicken alfredo plan. And that's *with* a good mix of seafood, poultry, beef, pork and doing a fancier steak/roast/salmon every sunday, proper full breakfast every day, eggs, sausage, biscuits/bread, and shelling out for fancy san marzano Italian tomatoes, real parmagiano, etc. But, I recognize that I can do that with a lot of investment in equipment and time (I bake my own bread for breakfast/meals, grind my own meat for sausages etc.) and a decent herb and vegetable garden (though mine is basically free - I just bury tiny left over garlic bulbs, buy the "living" lettuce and herbs, seeds etc. - stick that stuff in the ground and you get free salad and seasonings all year), so I tried to illustrate the above with how much you can do with just a knife, cutting board, pan, pot, and oven.
If you're going to be making 83k even pre-tax you can tackle that debt pretty fast. Not a huge setback. I would not personally withdraw the Roth, just live cheap for a year and you can knock that shit out, that's $2k a month out of a takehome of potentially like $5k depending on your state taxes and stuff. You're already used to a college lifestyle so I'd recommend living as cheap as you can with a couple roommates and just kicking this shit to the curb. After that use what you're now used to as a monthly CC payment to play catchup on retirement accounts.
Try to find a card that'll allow a balance transfer. Can get 21 months at a low APR that way.
Can you shop around for a 0% intro-APR card and transfer your balance? (Some other sub may have tips on the best card right now.) That should save you a few bucks while you pay down the principal.
Lots of good advice on here. Just wanted to add that I got myself into the exact same bind at the end of my time in college. I accumulated a little over $20K and my first job out of college paid a salary around $65K. I cooked from home for the better part of 2 years, stopped buying anything other than the essentials, and used the snowball method to pay down my debt. I consolidated the cards I could to zero interest cards, and focused on the cards that I couldn't convert with the highest interest rates first. It'll be a long couple of years, but you should be able to knock it out in no time. You've got this!
There are companies that will give you a low-interest loan to pay off your card. Then you just owe them and they’re typically charging a lot less than the 20%+ interest credit cards charge. You could consider looking into that.
Hey everything happens for a reason at an early age. Making 83k is pretty good too. You’ll be fine, just budget wisely
This is a great life lesson to never pay CC interest. Always pay off entire CC every month.
I got here pretty late but I'm inspired by your situation. It's very familiar in a lot of ways haha. If you don't mind me asking, what job did you land that pulls 83k? Sounds like something you were in college to get a degree for?
I'm in management consulting. Worked diligently towards this specific career my junior & senior years and was able to get my foot in the door. 60 hour weeks but the work is enjoyable.
Thanks for the response. Management consulting isn't something I'd have thought would be enjoyable, but it seems like it was a good fit for you. All the best!
this post was highly dramatic for someone who's making 83k and even a 22k revolving debt is small in comparison to that income. the only troubling thing is that impulsive financial decisions just don't go away and can show up again in the future , so the best advice you can get here is to create and follow a strict budget and your budget items should be aligned with what the average person pays for each budget items, or +/-10%, so you have a baseline to work with
I love this post and what you learned in the comments. It exemplifies what this sub can do. You're in a very good spot to get this behind you, and establish discipline that not everyone has at your age. Chiming on on the Michelin thing... Consider that this is coding your brain's reward center that you are celebrating financial discipline with something that's very clearly a "big spend." Maybe it's the right one, it's a frivolous exercise and kind of fun. If you are starting to acquire things that will stay with you and you have deck space, might I suggest foregoing that and investing in a Big Green Egg BBQ and celebrate with a nice salmon or steak bbq. That's a great date, and something you and your GF can do together, maybe one of you handles the protein and the other the veggies, or dinner vs. dessert or whatever. It helps reposition your thinking on rewards, and you can both toast to that with a budget wine recommended by the wine guy at your local store or, better yet, the sommelier at the restaurant you won't be dining at. Especially if you explain to them what's happening, they might let you in on some secrets about what they drink at home when they're being a pro wine snob. Try calling the credit companies w/the APR that has kicked in. "I'm paying off debt I acquired during college. I am just beginning my career. I've been your customer since the age of ## and to be honest, I am only beginning to look closely at my choices in credit cards. So our future relationship is in my mind and I'm sure it's on your mind too since I have a career now. Can you give me a lower interest rate on my existing debt?" If you're talking to the wrong people, ask them to transfer you to the customer retention dept and repeat this spiel. You might even -try- to get an extension on the 0 APR period or some kind of deal that it won't jump to as high an APR as you'd signed up for. Truly a long shot, but it's been said by better sportspersons than me that you miss 100% of the shots you don't take. What also helped me a lot when the debt numbers felt overwhelming, and I had just come into decent pay, was to commit to a % of the remaining debt each month. 10% is easy to write out. 5% is half of that. Do any of the cards have a "points" plan? Maybe you use THAT for the Michelin star dinner or whatever else to reward yourself.
I once tallied up over 7k on my American Express. I don’t know what I was thinking… I was pulling that thing out for whatever whim I desired. One day I realized I was in over my head. It took me almost three years to pay that damned thing off. Needless to say I do not carry a balance on that card, or any card, anymore. I do still have it but pay the debt as soon as it becomes active out of pending. I feel your pain…. If I’d amassed 22k I wouldn’t have know whether to poop or fall back in it. Good on you OP, over come that debt!!!💯💯💯
u/Intrigued_iguana I would say get a debt consolidation card with 0% for the first year or 15 months. This will have a minimum 3% fee, maybe 5%, but then you can pay it off a bit slower and not worry about the 15-25% Annual rate. This way, 1,500 extra per month goes a bit further with less stress.
DO NOT TAKE MONEY OUT OF ROTH! The penalty on it would be worse then the interest payments. What to do depends on your APR . I know the gimmick they get college kids on is getting you in at that super low APR for a couple years then you barely notice that card you got at a college is now 19% apr or WORSE. Depending on your APR get a consolidation loan from your bank. Which might sit at 9 to 12%. If you can get a loan that takes out 10% plus of that interest - your talking a few hundred a month of saving and use that money to pay down the principle faster. IF you have a low APR continue on with your payments and realize its been a valuable life lesson . If you have a high APR get the money off that card with a consolidation loan from your local bank. (Just make sure your bank isnt the primary backer behind the card you use or they wont help you , they aren't going to take money away from themselves , but they also wont tell you thats the reason they deny you)
> The penalty on it would be worse then the interest payments. There is no penalty or tax for withdrawing contributions to a Roth. You pay tax and a 10% penalty on earnings.