Please help me not die in a ditch
May 16, 2017 4:51 AM   Subscribe

I’m almost 30 and I have about $600 in my savings account and $3000 in credit card debt and a couple thousand in a 401k and that’s it. Can you recommend some sort of financial advice that won’t make me want to hurl myself into the fucking sea? Because everything I see on 'financial planning for 20somethings' starts off by telling me that I should start have started socking away hundreds of dollars a month from the time I graduated college and have 30K in savings by now, and then my brain just shuts down and I go into hyper-avoidance mode because I have clearly already ruined my life and will die in a ditch so what’s the point?

I have never ever been careful with money and now that I’m getting older I am increasingly terrified about this fact, so I’m trying to get better, but there does not seem to be a lot of financial advice for massive fuckups. I need a Unfuck Your Habitat for money, something that doesn’t assume you can just become a responsible person overnight or shame you for being a dumb idiot jackass, which I definitely do feel like I am (and yes the irony of me shaming myself while asking for no-shame resources is not lost on me).

I track my necessary expenses in an excel sheet and I never spend so much that I can’t pay my bills, so there’s that I guess.

After paying slightly above the minimum for a long while, I now have a plan in place to pay down the credit card debt before the end of the year, but after that I don’t have a plan. Save more, duh, I guess?

The deets: after taxes I make about 2,900 a month. I live in NYC. My rent is 950, bills around 125, phone 50, student loan payment (the minimum) is 170. So then I’ve got about $1600 for the month. Previously I was spending almost all of this and putting maybe $100 a month toward the credit card and $100-$200 in savings (when would then get eaten up by stuff like plane tickets 2-3 times a year, etc). For the past few months I’ve been trying to put $600 on the card and $150 in savings. I haven't been tracking my money well enough to hit this goal every month. I don’t know if this is too much or too little, I don’t know if my spending before was completely out of control or just pretty bad, etc etc.

The entire thought of even vaguely trying to address all this sends me into a goddamn panic spiral. But the knowledge that I have no safety net and no ability to move or anything like that is also panic-inducing, and basically I just can hardly bear to even think about all this. Help.
posted by anonymous to Work & Money (42 answers total) 49 users marked this as a favorite
 
A friend of mine with zero savings was able to save about 1k in a year using the Acorns app, which very easily rounds up your pocket change from your debit card spending and puts it in a portfolio of your choice (low risk, moderate, aggressive, etc). It was created to solve for the situation like you described - stressing about how to even begin saving - and it's basically throwing your pocket change in a" jar" that is actually index funds or REITs or what have you.

It's not gonna magically make you have 30k, but it's harm reduction all the same and would still be a *huge* win to go from saving $1200 a year which is what you're tracking now, to $2000+ a year. Barring any emergencies and sticking to your current [corrected] spending habits, your savings could be at 8-10k in four or five years doing this alone - you'd have an actual, realistic nest egg and emergency fund, and you would be better off than a majority of Americans (there is some horrifying statistic that over half the population doesn't have 1K in savings for emergencies).
posted by windbox at 5:18 AM on May 16 [10 favorites]


I was in a very similar position at about the same age, and many people are. Paying down the credit card debt is a great place to start. Once that's done, my suggestion is to really focus on the savings until you reach a goal (you'll want to decide what that goal is - for many people it's 3 months of living expenses).

I used learnvest to get access to a financial advisor to look at my financial situations and help me make a plan. I found it really helpful.
posted by bunderful at 5:20 AM on May 16 [2 favorites]


Relax, this is much more an anxiety problem than a financial one. Would you have been better off of you started saving earlier? Sure. Are you worse off than average? Is everyone around you doing everything right? No. Have all the dice been cast already because you're nearly 30? Don't be silly.

My specific financial advice is to stop thinking of rotating credit card debt as a normal thing. The only time you should be carrying a CC balance from month to month is if it's the result of a short-term emergency. Also, there's no point in socking money into savings if the interest rate you're earning on the savings is smaller than the interest rate you're paying on the debt. Stop doing that. Eliminate the debt, then save what you can and save it in the best way that you can.

Notice that the above financial advice is just common sense. You are clearly smart enough to figure this stuff out if you can just deal with the anxiety, which is the real problem.
posted by jon1270 at 5:30 AM on May 16 [34 favorites]


PM me for a rec.
posted by fritillary at 5:37 AM on May 16


(I'm not a professional financial advisor etc. This is more of a layman "what I would do in your shoes" post.)

First of all: you are not a massive fuckup. At least you have income and are net positive!! You've got $1600 per month to do something about this. This is so doable! There is time to start saving. Even if it is a little, it'd still be way more progress compared to the current situation. Embrace incremental change! So take a deep breath, and get ready to change things one step at a time.

By the way, I sympathize with your feeling of panic--just today I heard that my current project (and main source of income) will end soon, and despite saving for this eventuality, I'm still feeling the insecurity and fear of never saving enough for retirement.

First: I would say the credit card debt is the first thing to take care of as it is the most "bang for your buck." You do not want to be paying interest at such high rates unnecessarily. Pay it off completely as quickly as you can from the $1600 per month you have, even before the end of the year if possible. And then get into the habit of paying off the monthly balance every time. You can keep using the credit card but just make sure to pay it off. The point is to stop bleeding money into interest.

Second: Set up an emergency fund. Opinions differ on what the right amount is, but the most common rule of thumb is the total of your expenses for 6 months to a year. In other words, the amount you would need to live on for at least 6 months if you hypothetically lost your job today.
The format of this fund is up to you--cash, checking account, etc. But it has to be easily accessible, not something like a retirement account or CD that involve wait times and penalties/fees for moving the money. If you haven't already, I personally would open two accounts with an online bank like Ally: one checking, one savings. Why online savings? They tend to offer much better interest rates than either checking accounts or brick-and-mortar banks. Why both a checking and savings accounts? Savings accounts earn you more interest but limit the number of times you can take out money without a fee. What I do is keep most of the money in the savings and move over chunks of it to checking to pay expenses as needed.

Bonus to step 2: You could look into automating your saving. The idea is that you set up automatic transfers in your accounts to minimize the hassle of managing or tracking money and the temptation for frivolous spending. Direct deposit your paycheck into your main account, and set up transfers into other accounts designated for specific purposes (like emergency fund).

Those two are top priority. Pay off the credit card, and fund your cushion. After that, you can look into setting up a retirement fund (look into Roth IRA vs traditional), other ways to make a little more money (CDs, stocks, etc.), cutting expenses (it doesn't seem like you have huge unnecessary expenses...), how to become more frugal, etc. I hope this isn't overwhelming--I tried to include specifics because I get overwhelmed by choice sometimes and just want someone to point me to a specific thing to look into.

It may take some austerity at first but from your post it sounds like the mental relaxation from improved financial health would be a good motivation and payoff :)
posted by Sockin'inthefreeworld at 5:45 AM on May 16 [10 favorites]


I don't know if this helps, but when I started saving (a little earlier than you but not a lot), I'd already heard plenty about how I should've already been saving for...the entirety of my life, basically. And it was a big mental barrier - why try, when I'm already behind? - but ultimately you're only going to end up even further behind (whatever *it* is - 100% successful performative grownuphood?) if you let that be a big blocker.

Small amounts is fine (I love the sound of the app that rounds up your change from debit card spending) - I started out saving way less than 10% of what I made each month because that was all that I could afford on a low-ish salary in a high-cost-of-living area. Now I make a bit more and it's closer to 10%, which feels about right - but I'm definitely glad I started even when I couldn't make the aspirational numbers that the generic advice on this stuff suggests you should aim for, else I might never have started at all.

The only thing that worked for me to guarantee I would save was setting up an automated monthly payment for the amount I'd committed to saving into a separate savings account. If I had to transfer the money myself...I just didn't. My balance always looked too pitiful or I'd think of what else I could use the money for that month; there was always a compelling reason not to save when I was the person who had to push the button. When it just happens, I don't even think about it (it's just another bill, except I'm paying me in the future) and then get a pleasant surprise when I look at the savings account every so often.

I think the other thing to be aware of is that you're probably going to have to dip into that money from time to time (emergencies happen, and if you don't have a separate emergency fund this pot is basically your life savings + emergency fund until you build up enough to split the two things up a little more), and that's okay. I spent the savings from my first two years of saving (about £1600, so not huge money) on a used car, and it was quite hard mentally going from a small cushion to no cushion again. What helped here was knowing that if I left it a few months (assuming nothing went wrong, etc.), I'd be back closer to that number again. I find it quite soothing whenever I have to spend money from this pot thinking, "well, if I just do nothing, I'll be back there in x months". It's the habit that's important; if that habit breaks, you go back to being someone with no savings and no plan.

Anxiety nearly put me off altogether, but in the long run it's been good for my anxiety to know I can weather a crisis that's roughly the size and shape of my savings. Everything feels less tight and panicky. I was in a cycle of basically losing all the money I had every time I moved (rentals - deposit, cleaning fees, agency fees etc.), and starting to save meant that the last time I moved it didn't feel back-breaking, and I could afford slightly better services (movers etc.) than the absolute cheapest.

I subscribe to the theory that most people are either cost-averse (would rather put in lots of personal effort rather than spend money to solve a problem) or hassle-averse (would rather spend money to make the problem go away than sort it out themselves) and I am definitely hassle-averse by nature; having more money means less stress overall 'cause I can afford pay to make more of my problems go away these days.

If you do choose to get financial advice, ask around other people who you feel have a similar profile to you - I found my financial adviser through a friend who has a lot of similar anxiety about money, and it was really reassuring ahead of time to know the person wouldn't be judgemental, that it wasn't about being "good enough" in the eyes of A Real Adult Who Knows Stuff About Money, etc. I think there's a massive gap in the market for realistic financial advice for people who aren't likely to have anywhere near the same financial security their parents'/grandparents' generation did, and so many of the profiles I looked at seemed like they would be a great fit for my mother and a terrible fit for me. But good, realistic ones do exist - see if anyone you know who can recommend one.
posted by terretu at 5:48 AM on May 16 [4 favorites]


Forgot to add: If your employer offers matching for 401k, opt in and start making more contributions as soon as you can.
posted by Sockin'inthefreeworld at 5:55 AM on May 16 [2 favorites]


Check out this blog/website: Nest Egg Chick (aka Julie Morgenlender)- it's very much a "start where you are" kind of approach and she also does one-on-one coaching. She will guide you through things like "how do I come up with $300?"
posted by mskyle at 5:56 AM on May 16 [2 favorites]


As others have said, pay off the CC debt first, and never carry a balance again unless it's a short term emergency because those fuckers bleed you for every cent you are worth.

Strongly thirding the recommendation that once that's gone, you set up automatic transfers to a savings account that is easy to access but not one you rely on for routine expenses.

You are not fucked. You can do this.
posted by canine epigram at 6:12 AM on May 16 [3 favorites]


Also, there's no point in socking money into savings if the interest rate you're earning on the savings is smaller than the interest rate you're paying on the debt.

Wouldn't it be a good idea to throw at least a little into savings at the same time though? Otherwise, if a small emergency comes up, OP will just have to put more money on the credit card...
posted by showbiz_liz at 6:27 AM on May 16 [3 favorites]


I know I'm very much going to echo what other people are saying, but I think it's important you hear over and over again that you are absolutely not a fuck-up! You are doing fine, you absolutely can start now.

The first thing I'd suggest you do - before giving you advice on what to save up first or what to pay off first - is to start a real budget. I mean with an app or a spreadsheet or something, something that you can track over time.

I'm anxiety-prone too, the kind of person who wouldn't look at grades of tests I suspected I did poorly on and refuse to answer the phone if I thought it could be bad news (which, of course, is not sensible - not knowing doesn't change the outcome). It's the same kind of thing here. I know it will seem scary to do this because it will force you to confront your situation and spending head-on, and it's tempting to bury your head in the sand, but it has helped me SO MUCH with managing anxiety about money.

It's better because you won't have to guess at how you're doing, you'll know. It's better because you'll be able to anticipate problems rather than being surprised by them. It's better because you can watch your progress over time. I strongly suggest "swallowing the frog" on this one.

I like to use YNAB classic, but I've also heard good things about new YNAB (which is a subscription service that has a 30+ day trial) as well as PocketSmith (which has a free version). A spreadsheet can work too, but honestly I like the cute UIs.

The point is NOT to have a strict plan and burn yourself out trying to stick with it . For the first couple months, you can literally just put in wild guesses for how much you think you want to spend on groceries or booze or whatever. The more important part is to track your spending and get to know where your priorities are versus where you want them to be.

And then, again for emphasis since other people have already said the same: focus on your credit card first, then a small emergency fund. The rest, cross that bridge when you get to it. One day at a time.

If you do choose to go with YNAB, PM me, I'm a huge evangelist for their method.
posted by one of these days at 6:29 AM on May 16 [1 favorite]


Hmm. These numbers are not bad at all. Yes, you should have money saved, but you should also be exercising for 30 minutes a day and eating tons of fiber and yadda yadda most people don't do these things. Credit card debt that could be paid off with a few months of ramen is not too bad.

To start with, you want to figure out what works for you, not for some nebulous Other Person That Saves Money. You seem to lack much data on where your money goes, which is really common among folks I know that have difficulty saving money. They don't know how their wallet got empty, the money fairy just takes it sometimes. Knowing what you spend your money on doesn't mean berating yourself for it, it's just information. So, start by tracking your spending for a couple of months without any particular changes, and see if you can get it accurate to within maybe 20 dollars.

Make some categories-- say, "groceries", "eating out", "travel", "clothing", whatever ones make sense to you. And then look at those numbers, and think about whether you value them as much as they cost. The answer might be yes! Brown bagging it means listening to your annoying coworker on the phone rather than escaping for a few minutes, and that daily expense keeps you working hard. Or the answer might be no. Going out for lunch every day is a hassle, you wait in line and hardly have enough time to shove something in your face, and feel bloated and logy all afternoon. I find that just knowing what I'm spending money on, making that a conscious choice that this work outfit is worth as much as two weeks of eating out for lunch, makes me spend a lot less.

(Another way to do this is to figure out how much money you're willing to spend in a month, take out 1/4-1/5 of that in cash per week, put the credit card in your sock drawer, and just be hungry and don't have fun if the money runs out before the end of the week. This worked really well for me for a long time, but I knew where my money was going to start with, and I think that's an important first step.)

From there, you can make it a goal to pay off the credit card, and you'll know how much money you'll have at the end of the month to do that. Putting some into savings at the same time is fine; once you have a month of living expenses in savings I'd probably throw all the money in the monthly "savings" pot into the credit card. When the credit card is paid off, your goal is to have the balance be 0 at the end of every non-emergency month. When the credit card is paid off, you can go back to putting that $150 (or whatever it ends up being) into savings until you have 6 months of living expenses in savings. The remainder from what used to be the credit card pot can go into the student loans to pay them off faster.
posted by tchemgrrl at 6:41 AM on May 16 [3 favorites]


You are fine, you are not a fuck-up, you are totally normal. If you can start this process by the time you are 30, that gives you, conservatively, 35 years before retirement. That's longer than you've even been alive so far!

Deal with that credit card, as soon as you can. I'm kind of a fan of the bandaid approach (I have anxiety around money too and this is something I've done that actually helps with the anxiety because I feel like I'm really doing something rather than just frittering around at the edges) where you just tell all your friends "for the next two months, I am going to be incredibly boring and extremely poor, don't even ask if I want to go out for sushi because the answer is no" and eat beans and rice and ramen and drink Miller Light and just crank that cc debt down to triple-digits right off the bat. It won't be fun, but you'll feel so good when you have done it. And spend that couple months really thinking about what's important to you and your happiness, and what's just frivolous spending because hey why not. What do you miss? What do you really not miss at all? Then plan a budget accordingly and set up savings auto-deposits, and turn the dial up on your 401k contributions.

That's kind of an extreme approach, so take it or leave it, but it did help me a lot with my anxiety to really just cold turkey everything and then slowly add things back in in a more mindful way, while paying down debt in a more substantial fashion.
posted by soren_lorensen at 6:42 AM on May 16 [5 favorites]


Ok here's a piece of financial advice from the queen herself Helen Gurley Brown. I read it in Sex & the Single Girl when I was like 9, and it stayed with me and I love it and it helped me a LOT over the years, as goofy as that sounds:

Don't buy anything you don't need.

I know that sounds simple and obvious but it's not. The idea is that every purchase needs to be considered: is this something that I will regret or suffer if I don't get? So, for example, shoes that fit and look pulled-together for work: necessary. An additional pair of cool and funky shoes to express my cool and funky feelings? No. Food that is tasty and nutritious? Yes. Spending $7 on a burger and fries and soda because I don't feel like cooking the chicken that's in the fridge? No. A trip to see family when I'm lonely and sad? Yes. A restaurant dinner out for someone's birthday that I don't really care about? No. Etc.
posted by fingersandtoes at 6:56 AM on May 16 [9 favorites]


Yeah, your situation is totally normal, at least going off of all the friends I know in their late twenties living in large American cities. Personal finance advice is a very niche, very specific world and the assumptions they make apply to a very minute percentage of people. This article in the Atlantic that I read a year or two ago gave me a bit more perspective on what saving is actually like for most people in America. I agree that this is an anxiety issue, not some sort of devastating, life-destroying problem and you will not die in a ditch. America's weak social safety net makes it easy to catastrophize about this stuff. But that applies to everyone. I know very wealthy people with tons of savings who are fearful of dying in a ditch.
posted by armadillo1224 at 6:59 AM on May 16 [1 favorite]


Much like the Acorn app mentioned above, Bank of America has a program called Keep the Change. It rounds up your card purchase amount to the nearest whole dollar, and transfers the "change" into your savings account.
posted by emelenjr at 7:05 AM on May 16


When I was in your place, I found Suze Orman's The Money Book for the Young, Fabulous, and Broke book helpful. I'll caveat that by saying that book was written in 2005, and this was about 10 years ago, when the book was new, so stuff may have changed enough that it's not that useful. But I found it a good primer and super non-judgemental about having credit card debt from buying groceries and metro cards and other necessities, but also fun clothes.

Seconding suggestions about 401k and automated savings - those are really helpful.

It sounds like you're spending $250-400 a week. In NYC for someone in their late 20s, presumably going out and having fun, needing work clothes, buying lunch and coffee, etc, that doesn't sound outrageous to me at all, so I don't think your spending is out of control at all! Sure, you can save more, but you are in no way a fuckup.
posted by john_snow at 7:18 AM on May 16 [1 favorite]


First, take a deep breath. You are doing better than many people your age! Those "financial planning for 20somethings" article a) assume someone starting at 22, not 29; and b) have a tendency to ignore the massive student debt that many people come out of college with these days.

But the knowledge that I have no safety net

You do have a safety net!!!

a) You can borrow money out of your 401(k) if you need to (dependent on your employer's policies, so check those, but most employers allow this). You have to pay it back into your 401(k), with interest, so it's less than ideal, but it's generally at a much lower interest rate than your credit card.

b) Whatever the difference between the credit limit on your credit card is and your current balance is also available to you.

Now, both of the above should be considered only for unavoidable emergency expenses; but they're available to you if you need them. Add up those numbers if it makes you feel better. That's your current safety net, so stop thinking you don't have one. Deep breaths.

As for priorities, I'd apply money in this order:
a) basic living expenses and minimum payments on all debt
b) Does your employer match 401(k) contributions? Fund as much as you can that your employer will match. Free money!!
c) As much as possible of the remaining money towards CC debt. (Should you allocate some towards savings along with some towards CC debt? No, or a very minimal amount; see below for response to this.)
d) Once your CC is paid off and you're paying off anything else you charge in full every month, increase the payment on your student loans above the minimum. This time, you do need to balance it with savings in order to build up more of an emergency fund. (Unlike your CC or your 401(k), you can't go back and borrow against your student loans for emergency expenses once you've made payments on it.)
e) After your student loan is paid off, take the money you were putting towards that, pat yourself on the back and apply some of it towards increased discretionary spending towards yourself, but most of it into increasing your 401(k) contribution, and if you're lucky enough to run into the limit for that, then an IRA (we won't get into the nuances of Roth vs. traditional here), and then other savings vehicles if you run into the limit for the IRA.

Now, as for how to do these? Automatic deductions or payments are your friend. You can set those up for all of the above. For example, it's easier to pay $600/month on your credit card if it happens automatically every month, than if you have to do it manually and start asking yourself if you can really pay that amount this month. Same for all the other payments/contributions.

Wouldn't it be a good idea to throw at least a little into savings at the same time though? Otherwise, if a small emergency comes up, OP will just have to put more money on the credit card...

No, because even then there will have been a few months where the amount on the credit card was less and correspondingly less interest was charged. The "more money on the card" OP has to put on in a small emergency in that case is better than having carried that balance on the card all along, for the sake of the pitiful interest one earns on a savings account these days.

[In an earlier draft of this comment I had a long detailed example showing exact numbers demonstrating this, but decided OP's question was as much "how do I not be anxious about this" as "what should I do financially" so it wasn't that helpful. Try the math both ways and see for yourself if you're interested.]
posted by DevilsAdvocate at 7:32 AM on May 16 [3 favorites]


Okay, yeah, this is totally doable and your numbers are very good! That you've been able to put $600 toward the card each month recently is super encouraging. Can you continue that rate? If so, you'll be free and clear in just five months.

Once that's done, the Acorn app sounds awesome. In a similar vein, may I also recommend Digit? It's an app that links to your bank account and monitors your income and transaction patterns, and then based on that information pulls out small amounts of money into a savings account (usually around the cost of a lunch out). A good friend of mine who is legendarily terrible with money managed to save $1200 via Digit in just a few months, and she didn't miss a cent of it.
posted by anderjen at 7:33 AM on May 16 [1 favorite]


When I was in my mid-20s, I sold off my (small) 401k to pay down credit cards. Then I kept racking up the credit card debt. It took a long time, but I'm debt free and was finally able to really start hammering money into retirement. You can do this!

Step 1, as others have said, eliminate that CC debt. Don't worry about where you should be or what others your age are doing. Get rid of that debt, keep up on your student loans, and get an emergency fund. It doesn't matter if it's "only" $1000 socked away somewhere.

Just start! Don't compare yourself to anyone else.
posted by getawaysticks at 8:16 AM on May 16


For the past few months I’ve been trying to put $600 on the card and $150 in savings. I haven't been tracking my money well enough to hit this goal every month.

I think I've spotted your problem here.

Savings and debt repayments need to be line items on your budget, as fixed and firm as your utilities or phone bill. You say you have a goal to set aside $600 for let's say credit card repayment. You do that by sending that money to your credit card the second you get paid. Pay yourself first!

Your breakdown of your outgoing expenses misses a ton of stuff. What about groceries? Clothes? Lunches at work? 'Walking around money'? How much money do you feel comfortable spending per week? Those are the kind of expenses you could try tracking to get a more accurate idea of your day-to-day costs.

Here's the super empowering thing about budgets: money is one of your most important resources. When you make a budget, you're making very conscious choices about where you want those resources to go. Is your wardrobe short of work-appropriate clothes? You make a budget to set aside the resources you need to rectify that, and cook at home more/eat out less/have more pizza-and-beer nights at home with your friends rather than restaurant meals. Have a trip coming up in a six months? Spread that cost out ahead of time so you're not tanking your savings.

But, more importantly, your financial situation really isn't that bad, and you shouldnt' beat yourself up about it .
posted by nerdfish at 8:23 AM on May 16 [1 favorite]


Dude. At 32 I was in way worse shape than this. At 42 things are looking much rosier. You'll be OK.

If it's specifically retirement you're worried about, one easy thing that I do is, I have a Fidelity Roth IRA and the Fidelity 2% Visa card, which gives me 2% back on all my purchases straight into my Roth. It's literally giving me money, straight into my retirement fund. As long as you can pay it off in full every month and not pay interest, take the free money that credit cards give you! Which I could never do before the other thing:

The other thing I use is You Need A Budget (YNAB), which helps me see exactly where my money is going and helps me plan my spending. It was really a game-changer and helps me feel completely in control and relaxed about money -- even when going through financial rough patches. I could never use credit cards until I started using YNAB -- the nice thing about YNAB is even when using credit cards, you're still only spending the dollars you have, so it's much harder to overspend and not be able to pay off the card every month. Once you've got your budget ratcheted down on YNAB, you can just set your credit cards to autopay in full every month because the money to pay them off in full is always there.
posted by rabbitrabbit at 8:51 AM on May 16 [5 favorites]


People get into this weird moral hysteria about debt because it's easier to do that than to face the systematic economic injustices that, especially when compounded with ordinary human needs and weaknesses, put people in the position where they accumulate debt. Avoid these people/sites. Really, fuck those people. They're shame-eaters. Shame will not take one penny off your debt, but it will discourage you from really grappling with the problem. (And, as others have said, it's not as huge a problem as you fear.)

the most common rule of thumb is the total of your expenses for 6 months to a year. In other words, the amount you would need to live on for at least 6 months if you hypothetically lost your job today

I mostly agree with the advice given by this poster, but this is too much (and it's not really the most common rule of thumb, either, though that doesn't matter much). The money you save for emergencies should be in a very easily accessed and liquid asset--for you, that's going to be an online savings account that pays around 1% (at the moment). 1% is a very low return, though. It would take you a very long time in your present situation to save that much, and, in the meantime, you wouldn't be saving for retirement at all. I would aim more for about three months--especially if your employer does any kind of 401(k) match, because that's free money that you won't be picking up for as long as you're focusing on building an emergency fund.

No, because even then there will have been a few months where the amount on the credit card was less and correspondingly less interest was charged. The "more money on the card" OP has to put on in a small emergency in that case is better than having carried that balance on the card all along, for the sake of the pitiful interest one earns on a savings account these days.

This relies on the assumption that the OP will never need to take a cash advance on the card. Cash advances on many cards come with both fees and eye-watering interest rates. It's less likely than it used to be, but I still think OP should have a little bit more of a cash cushion against that possibility. Needing to come up with $1000 in cash on short notice in NYC is not that unlikely a possibility. I would aim to get $1000 in that savings account before completely prioritizing paying off the CC debt.

So, I would say, the steps would be:

(1) Build that $600 you have now up to $1000 in emergency savings, while paying cc normally (sounds like that should only take a couple of months)
(2) Then prioritize paying off the cc debt
(3) When that's done, prioritize getting that emergency savings up to three months' income, unless your employer does a 401(k) match, in which case I would probably split between 401(k) contribution (free money!) and emergency savings
(4) At three months' income saved, prioritize 401(k) contribution

Finally, OP, if you haven't already done so, please look into whether you are eligible for an income-driven repayment plan for your student loans. You may make a little too much money, but checking your eligibility is free. (Don't pay anyone to do it for you.)
posted by praemunire at 9:12 AM on May 16 [4 favorites]


YNAB YNAB YNAB. I cannot express just how much better I feel knowing that all my money is accounted for and everything that needs to be paid is going to get paid and exactly how much I can spend on frivolity.
posted by corvine at 9:13 AM on May 16 [3 favorites]


First of all, long-term, you're fine. You may have to delay retirement, but that's a much better situation than most people are in.

That said, you need to start saving more. The hardest part is adjusting spending is admitting to yourself that if you can't afford to save, you can't afford to spend. Maybe you thought of yourself as the "kind of person" who could afford to take a couple trips a year, but from what you describe, you may not have the means right now to do that. Of course, it's a knotty problem when our identity is tied up in vacations and premium cable, but the important thing is to start turning the ship. Today. Set up a plan to start paying off that debt, starting with the smallest balance first. This is called a debt snowball, because you get the early win of seeing a debt paid off, even if it might not be the highest interest rate. Sure, in theory you'd be financially better off by paying the highest rate, but when your own proven tendencies meet financial theory, psychology wins every time. Increase the amount every month if you think you'd do better with an adjustment period. Then when all your debts are paid, celebrate! But take that money that was going to debt and put it in a low-cost target date index fund where you can forget about it.
posted by wnissen at 9:50 AM on May 16


There's free financial counseling available in NYC - you can call 311 and they can hook you up with a non-profit counselor in your neighborhood. It might be helpful to have an accountability mechanism or some in-person support as you're working on this.

Otherwise, I'd follow praemunire's plan!
posted by snaw at 9:56 AM on May 16


31 year old married mom of a 5 year old with $51 in savings and $6 in my checking account until next payday. Following your thread for advice!
posted by Sara_NOT_Sarah at 12:12 PM on May 16


Start now. Don't sweat the mistakes of the past-- failure is cheapest when you're young, but if you don't learn from this stress and anxiety you're experiencing now, then it's gonna get really really expensive in the future. I know the powerless feeling, but it's just a feeling; you aren't powerless to fix this; rather the opposite.

In 5 years you'll be 35, and thinking back to that time when you were 30 and you asked MeFi for help on your finances. Are you going to buckle down and take the advice and help out that 35-year-old you, or are you going to screw that person even harder than you feel you're screwed now?

I don't have particular advice; I could use some myself, but I am saving; something like 20% right now, which is indeed hundreds per paycheck. Do I wish I did more of this in my 20s? Shit yes, there's a lot of things I wish I did more of in my 20s, but I can't solve that problem.

I started late, but I started, possibly when I was older than you. You can too. Today, if you can, or block out (really, block it out) Saturday, and sit down, and use the tools mentioned above. Like with Unfuck Your Habitat, sometimes you gotta fade away for 20 minutes to collect some gumption to get back on it, so do that, with a timer.
posted by Sunburnt at 12:36 PM on May 16 [1 favorite]


N-thing YNAB – it’s a budgeting software and a way of thinking about money that really works for me and a lot of people. It kind of is like UFYH in that it breaks down something overwhelming into something manageable. I’ve been using it for about a year and a half, and this is the first time in my life that I’ve felt like I’ve understood money and budgeting and not been so anxious about it that I couldn’t even think about it. Also, I’ve paid off $6,000 CC debt.

What I would do if I were you (basically what I did do, sadly a decade later than you):

1. If you qualify, and you probably do, transfer your credit card debt to a 0% interest account. You may be able to qualify for one with no transfer fee, but even if you have to pay a fee, it will likely be around 3% (i.e. $90 to transfer $3,000). Then you will have 15-21 months interest free breathing room to pay it off. If you send about $260/month, you will have your debt paid off in a year.

2. Using YNAB, start allocating the rest of your income to future expenses – this is the same as savings, but with an awareness of what you are saving *for.*

3. As part of that budgeting, figure out what you can send to your 401K. Based on your description, $200/m seems like it would be a comfortable start until you get the debt paid off, but you'll figure it out as you fill in the budget. You should not wait until the debt is paid off before putting money away for retirement.
posted by Kriesa at 12:43 PM on May 16


Start now. Don't sweat the mistakes of the past-- failure is cheapest when you're young, but if you don't learn from this stress and anxiety you're experiencing now, then it's gonna get really really expensive in the future. I know the powerless feeling, but it's just a feeling; you aren't powerless to fix this; rather the opposite.

Not that this adds all that much, but my Uncle Harry the CPA's crackerbarrel formulation of this advice was "[Saving/Investing/Whatever financially sensible thing you're thinking of]? The best time to start that was ten years ago. Second best? Right now."
posted by LizardBreath at 12:52 PM on May 16 [3 favorites]


The panic spiral is SO REAL. But you can turn this around! And LizardBreath's uncle is correct--there is (almost) no time like the present.

Your plan to pay off the credit card debt is a good one--interest on credit cards is nearly always so much higher than any investment returns you'll get, so knocking that out will put you in a much better place financially. Might be worth it to look into applying for a new card with a promo for a 0% interest rate for balance transfers--it could save you some money in the long run.

If the budget spreadsheet works for you, I'd just keep with it. YNAB is a powerful tool, but it is far too fiddly for my tastes. YMMV. Personally, I like to account for my non-negotiable spending and leave the rest fluid so I can put it where it makes the most sense month by month. Holidays, that might be credit card balance; other times, an extra car or student loan payment, maybe an IRA deposit.

Also: good for you for thinking ahead past paying off your CCs. There is a very real tendency to have a "now what?" reaction with discretionary income, and it can manifest as charging more to your card simply because you're so used to having a credit card payment. No good! Having a money goal will help you avoid that.

Some things you can do with your newfound money:
-Buff up your savings even more (but be careful not to hoard it--savings accounts have mega-low interest rates)
-Max out your 401(k), or at least up your contributions (especially if there's an employer match!)
-Pay off other outstanding debts (student loans, car, etc.)
-Open up a RothIRA and max that out as well
-Save for a specific big ticket item (vacation, down payment, etc.)
-Investments*

*I am only just now trying to learn about any of this junk, and it's scary and messy to me still, but my favorite resources so far have been the Money Girl book and podcast and, even though the macho, "hack-your-finances!" tone is occasionally grating, the Mr. Money Mustache blog.

Good luck! You probably won't die in a ditch, barring some extraordinarily bad luck.
posted by helloimjennsco at 1:18 PM on May 16


I was in a similar spot for the first few years out of college. I'm not great about following a strict budget like some folks so I figured out how much rent, utilities, and loans cost and subtracted that from monthly income. I then set aside $500 a month to pay off credit cards, paying a little more than minimum on one while paying off the other more aggressively. I really wanted to feel the success of zeroing one of them. (Aside, once I paid it off, they offered to let me transfer my other balances to them and pay no interest for 18 months, this was a huge bonus.)

Now here comes the part where I really found what worked for me. I took half of what remained out of the ATM as cash and only allowed myself to use that. Is there enough money to go out for drinks? Peek in the wallet. No money? Guess I'm eating pasta at home.
posted by advicepig at 1:25 PM on May 16


You might try looking at "get out of debt" resources. They are often aimed at people who have much more debt than you do and are digging themselves out over multiple years, and comparing yourself to those people might be less scary. They're also pretty low on the shaming.

I would also suggest an Uber-Frugal month. Frugalwoods.com do a guided version, but I never got the emails, so I have no idea if they are useful. But pretty much, you spend as little money as possible for a month. You cut out every unnecessary expense, and track the rest religiously. You sell anything you don't want to keep and shop around for savings in your fixed expenses e.g can you get your mobile bill lower than $50? It's only a month, but that can be long enough to really reset the way you look at money.

Definitely throw all your extra money at the credit card, unless you can get a balance transfer. However, if you know you have a large expense e.g. plane ticket coming up, and then I think it would be good to "save" specifically for this.

You don't need to solve all your financial problems at once. Reduce your spending levels, pay off the credit card, and move onto the next thing when that's done.
posted by kjs4 at 7:03 PM on May 16


If you qualify, and you probably do, transfer your credit card debt to a 0% interest account. You may be able to qualify for one with no transfer fee, but even if you have to pay a fee, it will likely be around 3% (i.e. $90 to transfer $3,000). Then you will have 15-21 months interest free breathing room to pay it off. If you send about $260/month, you will have your debt paid off in a year.

This is risky.

With many of these cards, if you don't pay off the entire amount within the promotional period, they will charge you interest going back to the very beginning of the period. The base rate tends to run high. Given OP's somewhat uncertain financial situation, I don't think this is a risk OP is in a good position to run.
posted by praemunire at 10:45 PM on May 16


With many of these cards, if you don't pay off the entire amount within the promotional period, they will charge you interest going back to the very beginning of the period.

That is a deferred interest transfer, not a 0% balance transfer. With a 0% balance transfer, if you haven't paid off the entire amount by the end of the promotional period, you just start paying monthly interest on the remaining balance going forward.

The base rate tends to run high.

I don't see much difference between the rates on these cards vs any other.

Given OP's somewhat uncertain financial situation, I don't think this is a risk OP is in a good position to run.

Uncertain financial situation? $1,600 a month after fixed expenses, with minor debt, for a single person does not read "uncertain" to me. As I read it, they've been putting $750 toward debt and savings for the past few months without hardship, just anxiety about whether they're using their money effectively.
posted by Kriesa at 6:21 AM on May 17 [1 favorite]


tell all your friends "for the next two months, I am going to be incredibly boring and extremely poor, don't even ask if I want to go out for sushi because the answer is no" and eat beans and rice and ramen

IME a fraction of them will say "Oh gosh I need to do that" and a fraction of those actually will, and beans and rice eaten with friends and library books (or doodling, free TV, YMMV) is a feast.
posted by clew at 11:01 AM on May 17 [1 favorite]


Learn how to be frugal. There are plenty of resources for this online. By doing simple things like changing how you grocery shop, changing brands of things you buy, limiting eating/drinking/going out to x amount of times per y period of time, you can save an additional few hundred of dollars a month if not more.

Learn how to have fun for cheaper, like renting a movie instead of going to the theater. Think twice before buying things or sleep on it for a week and then go purchase it. You might be astounded by the amount of money you squander on stuff you really don't need. Obviously I don't mean toiletries or food but general stuff that we all end up accumulating over time.

Put the max amount you can towards the credit card every month. If you are not squandering that $1,600 (which is quite a bit) you should have it paid off in full in a few months. $600/month is a great start. Keep going or ramp it up a bit and you will have it paid off before you know it. After that, make sure to pay off your CC bill in full every month like you do with all your other bills. Don't put anything on the CC that you can't pay for if you didn't have it is a good rule of thumb. And don't start thinking "but I will have the money next pay check" when making purchases, either.

After your CC is paid off, increase the amount you save every month to have a little nest egg and do the same thing with your loans and apply more than the minimum towards the loan every month. Because at that point you will have at least $600 extra every month that you are no longer applying to CC debt.

And very important - stop worrying about the past because you cannot change it. Better late than never. I blew something like $50k in my early 20s that I could have easily saved and have nothing to show for it. But I paid off all my debts and started saving a few years ago and am much happier for it. In a few years you will be in a much better place if you start making better decisions today.

Being frugal/thrifty is the easiest solution to your financial problems. You have $1,600 left over every month. Even accounting for food and fun money and whatever else, you should have plenty left over to apply towards debt and eventually significant savings. Give yourself limits on spending money if you have to, like a $200 fun budget, or whatever amount suits you.

If you want to be a little extreme, you can do a no-spend months where you go for a whole month avoiding buying anything that isn't necessary. I did this one month and spent less than $200 because it was just food, the internet bill, and I only spent a few bucks on fun/frivolousness. Compare that to upward of $1,000 that I'd normally spend with buying clothes I don't need every month, a lot of eating out, going to bars, buying whatever I want as soon as I want it. It might be good for you to try this once just to see how much you really need to spend and how much you esentially blow every month. It can be a real eye-opener.
posted by cokelessrome at 1:03 PM on May 17 [1 favorite]


First, as table takes? Get to a point where you can pay off the credit card in full every month, however you manage to get there. If you use the card for an emergency, yeah, shit happens, but just having money on there without some emergency to explain it... that one, you gotta fix.

Second, unfortunately? If moving ever becomes an option - even if that's an emergency that does rack up some credit card debt - I'd consider it. You're in one of the most expensive cities in the US, and I think you can make about the same loot being a waiter or waitress in a lotta places not as expensive.

That said, $950 rent ain't bad, especially for NYC (!), so moving might not help as much in that case.
posted by talldean at 8:36 PM on May 17


I used to be the exact same way with money; I wasn't ruining myself, but I felt like I was teetering on the edge and would often berate myself for being out of control. But reading the details of your situation, it sounds like you have a good plan. And you have a lot of good advice here already. So, it isn't that you don't know what to do, it's just that you need to make yourself do it. Which, again, is exactly what my problem was.

The one thing that worked for me was forcing my hand with automatic withdrawals and payments. I set an automatic deposit to go to a savings account online (with Ally, but there are plenty of good online banks) that was linked to my local bank account. I have access to the money, but it isn't instantaneous like it is when I had a checking and savings account at the same institution. Keeping my money just one extra step removed really helped curb my thoughtless spending.

Also, I agree that a lot of financial advice books/podcasts/blogs kind of suck. They are either written by people who have investment rental properties with mortgages bigger than my paycheck because of their lucrative financial advice blogging career, or they take a "tough love" approach, something that personally I do not respond to. I wouldn't even bother with them. You are on the right track, just keep going!
posted by Regal Ox Inigo at 3:00 PM on May 18


YNAB is for exactly this! People above have talked about the app but it's really about the system they teach about how to think about money. There are lots of videos and webinars and their support team is incredible. And it's specifically designed for people who are month to month or don't have much savings. See all the success stories marked with "Rave" in the YNAB subreddit.

If you feel like you're "not good with money" YNAB is like a cheat code!

Once you get your day to day spending and saving where you want it, then go look at all the investment advice upthread. But for now just pick one thing and do it. And I strongly recommend making that one thing be watching a YNAB video.
posted by squasher at 11:12 AM on May 20


I agree with everybody that has said it is important to pay off your credit card first. But I am surprised nobody has suggested this yet: Go to your bank (if you are sensible, you should have an account in a Credit Union which doesn't bilk you of your money charing you outrageous fees) and apply for a personal, unsecured loan for whatever money you owe your credit card. Sign up to pay off your bank loan in 2-3 years. Trust me, your bank will charge you a lot less in interest on this loan than your credit card's usurious interest.

Next, maximize your contributions to your 401(k). If your employer makes matching contributions up to a certain amount, make sure you hit at least that amount. Otherwise you are leaving money that should be yours on the table. Putting money into 401(k) is a great way to save for retirement because (a) The money is taken from your paycheck, so you don't even have to see it and make difficult decisions, (b) You cannot (without paying a penalty) take money out of your 401(k), so this ensures that your money stays invested for 20-30+ years growing through the magic of compounding.

Next, invest the money in your 401(k) in a broad, low fee target retirement fund (Vanguard, Fidelity, etc. all have variations of such funds).

Next, build an emergency fund. Start stashing away money in a savings account to cover approx. 3 months of living expenses.

Finally, with the interest rates where they are these days, it does not make sense to put too much money into Savings accounts. Instead, bump up your 401(k) contributions. In the long run, you will get a lot more growth there then in your 401(k).
posted by thaths at 11:26 PM on May 20


Just popping in to say that I was in a MUCH worse financial situation in my late 20s, more like tens of thousands of debt and very little savings, and about 10 years later I have no credit card debt, a mortgage and pretty decent savings for my age. You can absolutely turn it around! First, NYC is ridiculous. Everything is expensive and temptation is everywhere. You've heard the saying that you spend $20 a day just walking out the door in NYC? Yeah. It's tough.

I did the snowball method of paying off my debt - if you have multiple cards it does feel good to just pay off the smallest balance first. The tough thing about debt is that you have such infrequent rewards. Paying it off feels good, but takes a while. I also tracked my income and expenses and net worth each month, so seeing the net worth improve was a reward.

I did a lot of hustling to make more money. I just accepted (finally) that I am a spender and needed to have the funds to support it, so I actively pursued a more lucrative career and some side jobs. That has been valuable. I also married someone who is not a spender, and he manages our budgets. (I do investments because it's my hobby and making money is a reward for me). Some people are better at frugality and make frugal living its own reward. My point is that you need some reward from your money management, either the reward of seeing the money grow or the reward of managing your own spending. It's an individual choice to find what works best.

Again, you are really doing just fine, even really well for your situation. You can do it!
posted by rainydayfilms at 7:35 AM on May 21 [2 favorites]


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