Trying to be more financially smart

[amkxoxo]

So I am just out of college and want to save money. I have been going through money quickly lately and I want to start saving. I have a few credit cards to build my credit. I also have a checking account that I use for everyday expenses, bills, college loan payment, my apartment, utilities etc... I have been thinking of getting a savings account, but am unsure how it works or if that would help me or hurt me. I know you have to put money into like every month and they charge you a monthly fee etc...

 

I was thinking that maybe I should open another checking account. But this checking account I won't be using on the daily basis like my other one. I can easily transfer money anytime I want, into it from the everyday checking account and start saving that way. $100 here or $200 there. I won't touch that money unless its an emergency and I will save up more by having the two accounts and money separated to help me spend less.

 

Any help on what would be beneficial for me?

[d0nnivain]

Don't open a 2nd checking account. Avoid using your credit cards but every 6 months or so charge one small thing on them & pay it back when the bill comes to show you are trustworthy. Never carry a balance.

 

 

First read a bunch of books & on line blogs. Read Suze Orman's Women and Money; Prince Charming Isn't Coming: How Women Get Smart About Money; Think and Grow Rich by Napoleon Hill; Rich Dad, Poor Dad etc. Bookmark places like MSN personal finance; The Penny Hoarder; yahoo personal finance; www.mint.com; www.thefrualgirl.com; www.moolanony.com; www.thestretcher.com

 

 

Make a budget. List all the things you have to pay for every month: rent, car insurance, car payment, utilities, gas, food, student loans etc. Make sure you shop around for the cheapest ones. You don't need the big cell phone plan. Do you really need cable? Are you cooking enough vs eating out etc.

 

 

In your budget include a line item for savings. Learn to pay yourself 1st. Make that $20 per week or whatever amount you set a mandatory deduction & put it in a savings account. Do not hook that savings account to your ATM. Make it hard for yourself to get at that money.

 

 

Have an emergency fund. It should be at least equal to one month's expenses. 6 months to a year is better.

 

 

Think about your retirement now. And plan for it.

[pie2]

So many question, lol .

 

Are you saving for something special?

Are you employed?

Are you saving for retirement?

Can you set up automatic contributions to your savings?

Do you see the downside of credit?

 

Dave Ramsey has a lot of traditional money advice. I think it's advice that has held up through the ages. Basically, credit is bad, budgets are good. These are his 7 Baby Steps.

 

I think dOnnivain is right about making a budget. Another Ramsey suggestion when making a budget (if spending is a problem) is to use cash and envelopes. That way, when the allocated money's gone, you won't spend anymore!

[amkxoxo]

I eventually want to get a new car. My car is old and it won't last forever. I want to get a new car in maybe two years. I have a full time job where I make about 46,000 a year. Half of it goes to my student loans. And some of it for my living expenses of renting an apartment and utilities etc...

 

As of now I am taking no retirement money. I opted for 0% because I needed to get ahead in my student loans.

[d0nnivain]

You are being short sighted. The power of retirement is in the miracle of time.

 

The interest on student loans usually isn't that bad. Pay that each month but don't get ahead now. Take the retirement money now. It's your best long term strategy. Don't try to pay off your student loans early at the expense of your retirement especially if your employer contributes any matches. By forgoing that you are giving up free money.

 

When you get a raise, you can use that raise to pay the student loans while still living on your present salary.

 

Do you have a budget? Make one. Then see where you can cut if you really want to pay more toward the student loans without sacrificing the retirement savings.

[amkxoxo]

I pay a good $1100 on students loans a month. That is three loans put together. I owe 20,000 on one, 20,000 on another and 80,000 on the third. That is what I am obligated to pay each month. I have been putting a few extra hundred on them myself to try and knock them down. Some of the interest is killing me. I calculated I can pay off the two smaller 20,000 loans in 5 or 6 years if I keep up with putting a little extra on them. The higher loan of 80,000 I am going to just pay the minimum for the stretch of 12-15 years.

 

I pay about $1280 for my apartment a month. I pay about 100 for groceries every month. I pay about $65 for gas every month. And I go out to eat sometimes, or shopping, or activities with friends which is about $100 a month.

 

I get $3000 a month for my paycheck. Not bad for someone entry level out of college. I got very lucky with my job. I just keep finding it impossible to save that much money. If I start taking retirement, that is a good $300-400 a month out of my pay. I need the money right now.

Edited July 8, 2015 by amkxoxo

[loveweary11]

I pay a good $1100 on students loans a month. That is three loans put together. I owe 20,000 on one, 20,000 on another and 80,000 on the third. That is what I am obligated to pay each month. I have been putting a few extra hundred on them myself to try and knock them down. Some of the interest is killing me. I calculated I can pay off the two smaller 20,000 loans in 5 or 6 years if I keep up with putting a little extra on them. The higher loan of 80,000 I am going to just pay the minimum for the stretch of 12-15 years.

 

I pay about $1280 for my apartment a month. I pay about 100 for groceries every month. I pay about $65 for gas every month. And I go out to eat sometimes, or shopping, or activities with friends which is about $100 a month.

 

I get $3000 a month for my paycheck. Not bad for someone entry level out of college. I got very lucky with my job. I just keep finding it impossible to save that much money. If I start taking retirement, that is a good $300-400 a month out of my pay. I need the money right now.

 

Ugh... student loans are absolutely criminal, predatory lending.

 

That aside, deciding to pay extra on student loans or use the same money to create retirement savings or regular savings comes down to this...

 

Which costs more?

 

Do you save more $$$ in interest on student loans by paying extra, or do you earn more interest/return putting that money into your retirement plan? (include any matching money your employer might kick in)

 

If you are strictly looking short term to get a car, a savings account can be activated right next to your checking account for free. It costs nothing and typically will reduce your checking account fees to open a savings.

 

The best money management advice there is is the following: Make as much as you can while spending nothing.

 

No person can really achieve this, but the closer you are to that ideal, the easier life gets. I can't even remember the last time I was concerned about money. I have no budget at all because I make way more than I spend. There's always extra money when you live that way and that becomes your savings.

 

Just like eating right, living a fiscally sound life takes discipline and a change in your overall lifestyle.

[d0nnivain]

Your housing costs seem high. Can you lower that by getting a roommate to free up more cash?

 

Read up on a concept called snowballing. That may help with the debt.

 

But with the #s you gave you have $350 a month not accounted for. What happens if you put $50 toward the car you are saving for & $100 toward retirement or vice versa?

[deathandtaxes]

Hey OP, curious as to what your degree is in?

 

Congrats on being employed and wanting to get ahead.

 

BUDGET BUDGET BUDGET! You have to know how much you spend before you can figure out how much you can save. Once you figure your outflows, you can start paring back what you need to to make a difference.

 

donnivain has some great advice.

 

Is that apartment your own or split with a roommate? If that's alone, would you consider a roommate? That rent plus your student loan payments leave pretty much nothing left over. And forget about a new car unless your income goes up drastically in two years.

 

Oh, and you don't need the credit cards for credit purposes. Your student loans do that for you. You keep making those payments, you'll have a decent credit score just fine.

[Ms. Faust]

I use You Need a Budget. I got it on a Steam sale for $20. I believe it was pivotal in helping me break the paycheck to paycheck cycle.

 

I also use one credit card for EVERYTHING. Basically, I use it as a debit card, and it is set up to auto pay the day it is due. I also have a different credit card set up to pay all of our monthly bills, it is also set up to pay automatically, that way I am not charged interest. I use the credit cards because I enjoy the rewards that I get from it, but it only works if you do not pay interest.

 

Have you looked into consolidating your student loans? Are they federal or private? Do you know what the interest rate are on the loans?

 

I wouldn't open up a second checking account, but that is my personal preference. I try to keep it as simple as possible. I know other people are quite comfortable with having several accounts and basically using it as the envelope system.

 

Good luck on bettering yourself financially!

[Satu]

Remember to spend *some* of your money on things or activities that make you feel good.

 

Don't become so focussed on saving that you miss out on the good things in life.

[loveweary11]

Remember to spend *some* of your money on things or activities that make you feel good.

 

Don't become so focussed on saving that you miss out on the good things in life.

 

I nearly wrote this in my post as well.

[amkxoxo]

I do not have a roommate. I live on my own in a one bedroom apartment. I tried to find something cheaper but nothing seemed safe enough. I don't want to share my room with someone else. I'm not in a dorm anymore, you know?

 

Plus I doubt anyone is going to want to share a one bedroom at our age. I'm almost 24.

 

I have a computer science degree, so I do technical support for an office.

 

I looked into consolidating my loans, but it would end up being me paying the same in the end. Not worth it.

 

The unaccounted money is extra expenses. I needed a new car battery one month. I bought a couch for my place another month. I owe my parents money. Leaving me with very little. I do occasionally go out and shop, because I enjoy having a new outfit. I sometimes go to the bars with friends and buy some drinks. I don't want to miss out on having a good time and making memories while I am young, but I also do want a car in a few years and a leg to stand on.

 

I guess I cannot complain. I have some friends who have dead end jobs and who cannot afford to go to the movies some times. I can. I'm also very lucky that my parents sometimes front me money with no interest and I pay them back.

[d0nnivain]

I actually wasn't suggesting you share a 1 BR with another person but if you look around can you find a 2 BR for say $2,000 per month that you can share? Then you would save $280 per month in rent, & possibly more on electricity, heat, etc.

 

I am not suggesting that you are doing anything wrong but since you asked I was trying to suggest ways you could do even better. The "extra" as you call it & the unexpected need for a car battery is part of why everybody needs an emergency fund. There needs to be some money in the budget put aside for that every month until you have at least $1,000, just in case.

 

Have you taken a look at any of the blogs I mentioned? I find new idea each time I search for frugal tips.

[amkxoxo]

Yeah I'm signed into a lease in this place for one year and I just moved in, so looking for something else is impossible right now. I also don't have any friends that need roommates. That is why I had to be on my own anyway.

 

In a year I probably won't want to move out. I really love it here and nothing in this building ever is for rent. The place is beautiful and worth the money.

 

I like the idea of an emergency fund. I am paying off a credit card currently for the next four or five months too. I've been paying $200 a month. Once that is paid off I should have some extra money.

 

When I have time, I will look at the blogs you suggested. I need it for sure!

[pie2]

I admire you so much for paying off your student loans. Keep at it, and you will eventually reach your goal.

 

And having an emergency fund is a must! Just in case you lose your job, have enough to survive for 6 months (give or take).

 

Right now, you basically have an income problem, it seems. I would do a more formal budget, because some of your bills sound a little low (your food...you must barely eat, lol!). But if you really have no wiggle room in your budget, the best way to combat your problem is increasing your income. I imagine your career will have lots of upward movement . Your income should increase before you know it.

 

But in the meantime, I would consider a second job. There are probably many part-time jobs you can do (a couple of evenings and/or weekends a month). It can just be for a short time, until you make a dent in your goals.

[SolG]

Hi OP. It's so good to see a young person like yourself planning to get ahead. Congrats!

 

I have nothing really to add to the basic good stuff already posted. What I will say, however, is now you've started never stop working on your financial literacy. It will stand you in good stead throughout your life.

 

I'd start with reading some of the mainstays like Cramer, Ramsey andKiyosaki. Then branch out according to your interests and preferences.

 

Good luck!

Edited July 11, 2015 by SolG

[lucy_in_disguise]

Find a better-paying job.

 

Maybe that's easier said than done right now, but in a year you will have some experience and can start looking. With a computer science degree, your earning potential is potentially zmuch higher, and I woild encourage you to start thinking now about what direction you will eventually want to move toward, and start preparing for that.

 

Some ideas to improve your marketability: earn some certfociations (programming, project management, industry-specific, etc.), expand your network (professional events, societies, meetup interest groups), improve your punlic speaking skills (toastmasters), improve your interview skills (practice, self-help books), and learn to negotiate.

 

In my experience a little planning can go a long way to help advance your career.

 

To me, your budget seems ok ans you appear to be more organized than average. These are positives. Like another poster I'd also suggest putting away atnleast something into a retirement account. It doesnt need to be as much as $300- most 401k's allow you to pick your own contribution rate, and especiallynif your employer does any kind of match, you should take advantage of that. If thats not a good option, you can also open up an IRA. Remember, retirement contributions are tax-deductible, so not only are you missing out on compounding interest, byt also he tax adcantages.

 

But besides that... its your student loan to income ratio thats killing you, so I would start thinking about how to make more money.