Be good or have fun?
January 10, 2006 1:59 PM Subscribe
Yay it's bonus time. Advice on spending a significant but not life-changing chunk of change.
After paying for what I consider "one-off" debts (ie: car insurance for the entire year, remaining balance on a couch I bought, etc.) what should I do with what I estimate to be about $3000? I know putting it toward my credit card would be wise, but I don't think it would make a good dent as the debt is about 3x that amount (I know, I know). I also still owe $14k on my car.
Should I put it into an emergency fund? I'm tempted to take a nice trip (maybe to New York) and then stash the rest. And then the totally frivolous side of me wants to really treat myself to stuff I've been just wanting forever (new digital camera, nice leather handbag, snowboarding helmet, etc)... and then again stash the rest. I know I want to do something that "feels good" because I think I worked hard for this bonus and I deserve some sort of treat.
Or do I suck it up and grow up (I'm 26) and consider paying off my debts my treat (just like how oatmeal is a treat)? Maybe a combo approach?
After paying for what I consider "one-off" debts (ie: car insurance for the entire year, remaining balance on a couch I bought, etc.) what should I do with what I estimate to be about $3000? I know putting it toward my credit card would be wise, but I don't think it would make a good dent as the debt is about 3x that amount (I know, I know). I also still owe $14k on my car.
Should I put it into an emergency fund? I'm tempted to take a nice trip (maybe to New York) and then stash the rest. And then the totally frivolous side of me wants to really treat myself to stuff I've been just wanting forever (new digital camera, nice leather handbag, snowboarding helmet, etc)... and then again stash the rest. I know I want to do something that "feels good" because I think I worked hard for this bonus and I deserve some sort of treat.
Or do I suck it up and grow up (I'm 26) and consider paying off my debts my treat (just like how oatmeal is a treat)? Maybe a combo approach?
Put it toward the debt, buy an ice cream, and pat yourself on the back for saving your future self more money and more trouble. Financial discipline will make you more happy than spending your windfall now.
posted by letterneversent at 2:03 PM on January 10, 2006
posted by letterneversent at 2:03 PM on January 10, 2006
If you don't already have $1000 in an emergency fund, do that before you do anything else. The most practical thing to do is to use the other $2K for credit card debt. I'm a big fan of the rule of thirds with windfalls, which lines up nicely for your amount- 1/3 to the past (credit card debt), 1/3 to the future (emergency fund), and 1/3 for right now (take a nice trip).
posted by bobot at 2:04 PM on January 10, 2006
posted by bobot at 2:04 PM on January 10, 2006
Do you have any savings currently? If not, I definitely suggest putting $1000 toward that emergency fund. Then, sad to say, I think you should put the rest toward your credit card debt. Keep in mind that credit card minimum payments are due to increase this month. Taking away a chunk of your balance would help keep your payments from increasing too much.
If you want a treat, splurge more to the tune of $100 as opposed to $1000. Then promise yourself a bigger treat when you're got your credit card paid off.
posted by boomchicka at 2:05 PM on January 10, 2006
If you want a treat, splurge more to the tune of $100 as opposed to $1000. Then promise yourself a bigger treat when you're got your credit card paid off.
posted by boomchicka at 2:05 PM on January 10, 2006
You *should* have 6 months of living expenses saved - rent, car payments, insurance (COBRA), food, incidentals. $1000 sounds off by a factor of 10. I'm with letterneversent.
posted by kcm at 2:06 PM on January 10, 2006
posted by kcm at 2:06 PM on January 10, 2006
A treat? Are you serious? Suck it up. Interest rates are heading up, and I sure as hell wouldn't want to be holding ANY credit card debt six months from now. Don't pay off the car insurance or car loan -- those rates are fixed. Pay off the credit card, and once that's done, save as much as you were paying every month. When that builds up, then you can have a treat.
posted by _sirmissalot_ at 2:06 PM on January 10, 2006
posted by _sirmissalot_ at 2:06 PM on January 10, 2006
And once you have that emergency fund set up, get on a monthly budget and pay off your goddamn debt already. Carrying a balance on a credit card is one of the stupidest things you can do to yourself, and I know because I just paid off over $20K off credit card debt. It sucks.
posted by bobot at 2:06 PM on January 10, 2006
posted by bobot at 2:06 PM on January 10, 2006
I've never understood the function of these 'emergency funds.' Why not pay off the credit card, save on the interest, and then in some hypothetical 'emergency' use the credit card again? That seems much more effective.
But, yeah. Pay off the card. Save $100 aside and take yourself and a friend or lover out to a fabulous dinner.
posted by miss tea at 2:07 PM on January 10, 2006
But, yeah. Pay off the card. Save $100 aside and take yourself and a friend or lover out to a fabulous dinner.
posted by miss tea at 2:07 PM on January 10, 2006
I think you should treat yourself, but don't blow it all on a treat. It's a bonus, so you are entitled to a little fun with it, IMHO. :-) But I agree w/ prev. posters that at least $2k should go towards either your debt or an emergency fund. Honestly, I'd put it all on your CC - you'll save more by not paying interest on your CC than you would earn in interest in the bank account, and in the event you really do have an emergency, you can always put the emergency on your credit card anyway. But it's better to make a dent (and 1/3 or even 1/6 is a significant dent!) in your credit card bill.
Can you limit yourself to a smaller treat? If you spend less than $250 on something totally frivolous that you can enjoy, you'll feel good about being able to put the rest towards your credit card debt.
posted by catfood at 2:09 PM on January 10, 2006
Can you limit yourself to a smaller treat? If you spend less than $250 on something totally frivolous that you can enjoy, you'll feel good about being able to put the rest towards your credit card debt.
posted by catfood at 2:09 PM on January 10, 2006
"I've never understood the function of these 'emergency funds.' Why not pay off the credit card, save on the interest, and then in some hypothetical 'emergency' use the credit card again? That seems much more effective."
Because you're re-digging the hole you just started to dig yourself out of, and paying someone else for the priviledge?
What I think: the point of a "baby emergency fund", as Dave Ramsey calls it, is to carry you through the inevitable failures of your first attempts at budgeting without resorting to hitting the cards again.
posted by bobot at 2:09 PM on January 10, 2006
Because you're re-digging the hole you just started to dig yourself out of, and paying someone else for the priviledge?
What I think: the point of a "baby emergency fund", as Dave Ramsey calls it, is to carry you through the inevitable failures of your first attempts at budgeting without resorting to hitting the cards again.
posted by bobot at 2:09 PM on January 10, 2006
Response by poster: Woah, that is the quickest I've seen responses pile up. I just stepped out to do some debt calculators and I realized putting it toward the cc would shave off a year of payments (not to mention a boodle on interest). And then I come in here and see everyone voice what I just know in my heart is the right thing to do. I guess Visa will be getting a fat check next month. I'm still going to put $1000 of that into an emergency fund as everyone suggests.
Thanks everyone for the obviously necessary swift kick in the butt. =) I think I can feel satisfied with just $100 toward a concert or something in the future.
posted by like_neon at 2:10 PM on January 10, 2006
Thanks everyone for the obviously necessary swift kick in the butt. =) I think I can feel satisfied with just $100 toward a concert or something in the future.
posted by like_neon at 2:10 PM on January 10, 2006
Hi. I'm not a fiscally responsible individual (although I do not have any debt to speak of).
Blow the whole damn chunk on something fun. I suggest a trip to Paris. Or, perhaps just go for one of the widgets you mentioned in your question.
Save it? Pfft.
Although, if I had significant credit card balances, I could definitely see spending down a chunk of that. Why not put $2k in that, and then drop the remaining grand having fun. You can get a decent hooker and a big bag of blow for around $1k.
posted by Netzapper at 2:15 PM on January 10, 2006
Blow the whole damn chunk on something fun. I suggest a trip to Paris. Or, perhaps just go for one of the widgets you mentioned in your question.
Save it? Pfft.
Although, if I had significant credit card balances, I could definitely see spending down a chunk of that. Why not put $2k in that, and then drop the remaining grand having fun. You can get a decent hooker and a big bag of blow for around $1k.
posted by Netzapper at 2:15 PM on January 10, 2006
like neon, way to go on your decision! a whole year of payments shaved off is awesome, meaning you'll be a year closer to not having to put $ towards your cc, meaning you'll have that much more $ to spend, save, or invest. you are super responsible & my new hero. for today.
posted by catfood at 2:18 PM on January 10, 2006
posted by catfood at 2:18 PM on January 10, 2006
if i were you, i'd put it all on the credit card, then use the available funds on the credit card to buy one of the things you want... say a $300 canon elph, a $300 handbag (on clearance, of course, so it was really worth $900) or something like that. you shouldn't feel bad spending 10% on yourself if you're putting the rest towards your debt and maybe it will give you a little more motivation to continue responsibly paying off all that debt if you have a new toy.
posted by booknerd at 2:25 PM on January 10, 2006
posted by booknerd at 2:25 PM on January 10, 2006
Why don't you give yourself 10% of what's left to blow, and with the rest establish an emergency fund and pay towards the highest interest rate loan.
posted by JamesMessick at 2:26 PM on January 10, 2006
posted by JamesMessick at 2:26 PM on January 10, 2006
If you do spend $300 on yourself, don't do it booknerd's way. Pay cash for it, so it doesn't end up costing you $360 after credit card interest.
posted by mbd1mbd1 at 2:30 PM on January 10, 2006
posted by mbd1mbd1 at 2:30 PM on January 10, 2006
mbd1mbd1: booknerd's method actually makes economic sense, since it avoids a month's worth of interest on the $300. The $300 is going to be on the card no matter what, but booknerd's method gets rid of it briefly.
posted by brain_drain at 2:35 PM on January 10, 2006
posted by brain_drain at 2:35 PM on January 10, 2006
Response by poster: Thanks everyone, the encouragement makes paying off my debts a more positive experience!!
10% does sound reasonable ($300 sounds like a lot to me actually!) and I've decided to use it as a budget for my upcoming trip to Stitches West. I wanted to have a good time and wondered where I was going to find that money.
Thanks for the suggestion Netzapper, but if you know what Stitches West is, it's obvious I'm not the type to indulge in hookers and blow. =)
posted by like_neon at 2:39 PM on January 10, 2006
10% does sound reasonable ($300 sounds like a lot to me actually!) and I've decided to use it as a budget for my upcoming trip to Stitches West. I wanted to have a good time and wondered where I was going to find that money.
Thanks for the suggestion Netzapper, but if you know what Stitches West is, it's obvious I'm not the type to indulge in hookers and blow. =)
posted by like_neon at 2:39 PM on January 10, 2006
If you don't already have an emergency fund, put it in there. If this will cover 6 months of expenses, then use the money to pay off your highest interest debts. If your car insurance ends up being one of those, start putting what you were paying into a savings account. Next year, you can pay the insurance balance in full and start saving for the next year. This way, you get the interest on that money, instead of the bank. If you have paid off any debts, also put those payments toward savings for a home.
None of that sounds very fun, but it will help you move toward a lifetime of lower stress and opportunities for fun. If you can't stand the idea of putting all the money away, why not tie rewards to paying off each loan? For example, if you pay off your $14,000 car loan, you could designate what would have been the next 2 payments (say $350x2=$700) for a weekend getaway. Paid off your couch? Use the $30 for an upscale lunch. This way, you still get a reward, but you're getting to visualize (and experience) the benefits of not having all your disposable income tied up in debt payments.
posted by acoutu at 3:21 PM on January 10, 2006
None of that sounds very fun, but it will help you move toward a lifetime of lower stress and opportunities for fun. If you can't stand the idea of putting all the money away, why not tie rewards to paying off each loan? For example, if you pay off your $14,000 car loan, you could designate what would have been the next 2 payments (say $350x2=$700) for a weekend getaway. Paid off your couch? Use the $30 for an upscale lunch. This way, you still get a reward, but you're getting to visualize (and experience) the benefits of not having all your disposable income tied up in debt payments.
posted by acoutu at 3:21 PM on January 10, 2006
Oh, yeah. If your balloon payment on your CC reduces the amount of the payment, why not continue making the payment at the same rate? If it was $200 a month but it's now $150, keep paying $200. You'll shave off another chunk before the end of the next year.
posted by acoutu at 3:23 PM on January 10, 2006
posted by acoutu at 3:23 PM on January 10, 2006
Oh.My.God. Is Stitches West -- knitting camp? Seriously, a friend of mine just told me recently that she went to what she called "knitting camp" at some hotel in Minnesota a couple of years ago. That is so crafty-geeky cool.
(Ahem. Yes, tithe yourself a little treat and put the rest into emergency funds and those lethal credit cards.)
posted by maudlin at 3:25 PM on January 10, 2006
(Ahem. Yes, tithe yourself a little treat and put the rest into emergency funds and those lethal credit cards.)
posted by maudlin at 3:25 PM on January 10, 2006
Response by poster: It's not really "camp" like we all sleep in a cabin and sing about knitting around the fire, but more like a fiber arts convention where they have a lot of vendors with booths as well as courses on knitting techniques. This will be my first one, but the girls I'm going with say it's really fun.
As a side note, it's amazing what the internet can do, these fiber arts conventions have also become a way for knit bloggers (yes there are a TON) to meet up! Amazing.
Anyway, not to derail my own thread but I can't help but comment on my favorite pastime. =)
Acoutu - Yup, I've been doing that for a while now so that my normal payments take up more and more principal hopefully causing an avalanche effect on reducing debt. But that's a good suggestion about hoarding what I would have kept paying on the car insurance to use next year.
posted by like_neon at 3:47 PM on January 10, 2006
As a side note, it's amazing what the internet can do, these fiber arts conventions have also become a way for knit bloggers (yes there are a TON) to meet up! Amazing.
Anyway, not to derail my own thread but I can't help but comment on my favorite pastime. =)
Acoutu - Yup, I've been doing that for a while now so that my normal payments take up more and more principal hopefully causing an avalanche effect on reducing debt. But that's a good suggestion about hoarding what I would have kept paying on the car insurance to use next year.
posted by like_neon at 3:47 PM on January 10, 2006
For $3000, you're probably better off having fun. In the long run, $3000 isn't going to help you much. Your debt load isn't too bad and if you're already in the habit of making monthly payments, and you're not under any sort of financial stress, then just keep on doing that. The long term value of paying off the $3k in debt now just isn't significant. On the other hand, buying a bunch junk isn't a good idea either. New gadgets and clothes rarely improve the quality of your life unless you're really hurting for them in which case there'd be no question. The reason you've been wanting these things forever is because you don't really want them. So, put the money in a savings account and think about putting it towards something big that'll make you significantly happier. That might mean an extended vacation (instead of a weekend in NYC, think a week in Paris) or whatever your next major luxury purchase happens to be... feel free to take some time to consider it. You don't have to spend the money right away. When you consider the bang for your buck, concentrating the money on one really nice thing for yourself is likely to do a lot more than paying off your debts or buying a bunch of small nice crap. Saving your money is great and all, but money is there to be spent and really, the thing about money is that you can always make more.
posted by nixerman at 3:47 PM on January 10, 2006
posted by nixerman at 3:47 PM on January 10, 2006
Nixerman, $3000 will help a lot in the long run.
If you have $3,000 in credit card debt at 20%, paying it off would prevent you from accumulating an extra $4500 of debt in 5 years, $15,000 in 10, or $110,000 in 20.
In a retirement savings account at 8% for 40 years, that money earns you $62,000.
Paying interest of 7% on your car insurance? You just saved yourself $210. If you put the money aside ahead of time, too, and get 3% annual interest, you'll have another $90 every year. $300 a year is nothing to sneeze at. In 40 years, that's $12,000.
Wiping out debt and moving to a scenario where you pay cash means you get to earn the interest on things, rather than paying the bank. You can still choose to leverage for important things, but who wants to be paying for that biere they had in Paris for life? If like_neon avoids accumulating $4500 in credit card debt over the next five years (by paying off $3000 now), s/he'll have technically saved enough to pay cash to go to Paris.
posted by acoutu at 4:17 PM on January 10, 2006
If you have $3,000 in credit card debt at 20%, paying it off would prevent you from accumulating an extra $4500 of debt in 5 years, $15,000 in 10, or $110,000 in 20.
In a retirement savings account at 8% for 40 years, that money earns you $62,000.
Paying interest of 7% on your car insurance? You just saved yourself $210. If you put the money aside ahead of time, too, and get 3% annual interest, you'll have another $90 every year. $300 a year is nothing to sneeze at. In 40 years, that's $12,000.
Wiping out debt and moving to a scenario where you pay cash means you get to earn the interest on things, rather than paying the bank. You can still choose to leverage for important things, but who wants to be paying for that biere they had in Paris for life? If like_neon avoids accumulating $4500 in credit card debt over the next five years (by paying off $3000 now), s/he'll have technically saved enough to pay cash to go to Paris.
posted by acoutu at 4:17 PM on January 10, 2006
What acoutu said, but a different twist:
If you put the $3000 towards your credit card debt, you will save $570 per year at 20% interest p.a.
If you put $2700 towards your credit card debt, you will save $540 per year.
Therefore, my advice is to put $2700 towards your debt, use the $300 to do something fun, absorb the first year's $30 interest as a penalty for spending money you really should be using to pay off your debts, and - this is important - continue making the exact same monthly payments you're making today on your credit card. At this time next year, congratulate yourself on having reduced your overall debt by a substantial amount.
posted by aberrant at 4:29 PM on January 10, 2006
If you put the $3000 towards your credit card debt, you will save $570 per year at 20% interest p.a.
If you put $2700 towards your credit card debt, you will save $540 per year.
Therefore, my advice is to put $2700 towards your debt, use the $300 to do something fun, absorb the first year's $30 interest as a penalty for spending money you really should be using to pay off your debts, and - this is important - continue making the exact same monthly payments you're making today on your credit card. At this time next year, congratulate yourself on having reduced your overall debt by a substantial amount.
posted by aberrant at 4:29 PM on January 10, 2006
Also, you mention that this amount of money is not life-changing. Spent wisely - that is, to reduce the amount of money you're paying just to carry your debt burden -- it could very well be.
If you're worried about that $1000 emergency fund, you'll have it in less than 2 years with the above plan.
posted by aberrant at 4:32 PM on January 10, 2006
If you're worried about that $1000 emergency fund, you'll have it in less than 2 years with the above plan.
posted by aberrant at 4:32 PM on January 10, 2006
acoutu, she won't really save herself an extra $4500. Her financial state is constantly changing, and it's likely improving. Over time she'll make more money, have less debt, and earn more bonuses. The economy will also change a great deal. You can make all sorts of projections out into the future but they'd be equally simplistic. In the short term, over the next year or two, the $3k will save her a few hundred bucks. (Also, don't forget inflation when you make such calculations!) That's it. She can get far more enjoyment out of the money by focusing it one one large, luxury expenditure. And, heck, she's worked hard and earned this bonus. It's important she get a significant reward and not just some $300 gadget. Working hard means you should get to play harder.
posted by nixerman at 4:53 PM on January 10, 2006
posted by nixerman at 4:53 PM on January 10, 2006
Nixerman, all projections call for interest rates to rise. Interest rates are tied to inflation, although credit card interest rates often outpace inflation. So 20% could become 22% or even more. And we can't assume she'll continue to receive bonuses. Perhaps this is a corporate revenue attainment bonus -- a fluctuation in the US dollar could affect overall revenues, despite the company's strong performance. Or perhaps it's a corporate or group performance bonus, which is tied to the results of the aggregate. Or maybe she'll get a new boss who decides like_neon could do better. The company's great performance may lead to a buyout which declares her position redundant. A great economy is no guarantee.
But it is important to have rewards. That's why I'm saying like_neon should put aside some money for small rewards. If she can get rid of her high-interest debts and turn those payments into savings, she can afford to go on a big trip, buy a plasma TV, throw a major party or whatnot EVERY year for life.
With that in mind, like_neon, what is your highest interest debt? If your couch and insurance are at lower rates, it's better to focus on the CC debt.
posted by acoutu at 5:17 PM on January 10, 2006
But it is important to have rewards. That's why I'm saying like_neon should put aside some money for small rewards. If she can get rid of her high-interest debts and turn those payments into savings, she can afford to go on a big trip, buy a plasma TV, throw a major party or whatnot EVERY year for life.
With that in mind, like_neon, what is your highest interest debt? If your couch and insurance are at lower rates, it's better to focus on the CC debt.
posted by acoutu at 5:17 PM on January 10, 2006
Nixerman: I respectfully suggest that yours is an irresponsible course of action in the long term.
Assuming $9k in credit card debt, she's currently paying $150 per month in interest charges alone. If she does nothing, then she continues to pay $150 per month in perpetuity just to maintain the debt.
Let's assume for the moment that she can pay $175 per month without the bonus. The credit card debt will last 117 months, and she will have paid $20,475 to discharge that $9000 debt .
If she immediately reduces her debt by $3k and continues to make the $175 per month payments, she eliminates her credit card debt in 52 months. That may seem like a long time, BUT she will have paid "only" $12,100 to discharge the debt. This provides a REAL savings of $8,375 over the 117-month plan.
To look at it another way, if you average that savings over the full 52 month period, you're looking at a cost avoidance of over $160 per month for just over 5 years.
She will avoid even more cost if she is able to increase her monthly payments over time.
And while she may likely see add'l bonuses and increased ability to pay down existing debts, what happens if she can't (for one of any number of reasons, including illness or other catastrophe, unemployment, etc.)? She would be compounding an already large problem.
Bottom line: unless you've got something else that's paying better than 20%, start paying down your CC.
posted by aberrant at 5:21 PM on January 10, 2006
Assuming $9k in credit card debt, she's currently paying $150 per month in interest charges alone. If she does nothing, then she continues to pay $150 per month in perpetuity just to maintain the debt.
Let's assume for the moment that she can pay $175 per month without the bonus. The credit card debt will last 117 months, and she will have paid $20,475 to discharge that $9000 debt .
If she immediately reduces her debt by $3k and continues to make the $175 per month payments, she eliminates her credit card debt in 52 months. That may seem like a long time, BUT she will have paid "only" $12,100 to discharge the debt. This provides a REAL savings of $8,375 over the 117-month plan.
To look at it another way, if you average that savings over the full 52 month period, you're looking at a cost avoidance of over $160 per month for just over 5 years.
She will avoid even more cost if she is able to increase her monthly payments over time.
And while she may likely see add'l bonuses and increased ability to pay down existing debts, what happens if she can't (for one of any number of reasons, including illness or other catastrophe, unemployment, etc.)? She would be compounding an already large problem.
Bottom line: unless you've got something else that's paying better than 20%, start paying down your CC.
posted by aberrant at 5:21 PM on January 10, 2006
Over time she'll make more money, have less debt, and earn more bonuses. The economy will also change a great deal.
Maybe she'll earn more, maybe she'll earn less. And the economy could get a lot worse. If she has a chance to get herself ahead financially, it makes sense to take it. (My husband just got his bonus, and we divvied it up similarly: most of it went to his credit card debt but we also got a couple of things for the house that make day to day life much more pleasant.)
She seems fairly happy with giving herself a small treat and paying off her debt, so it's not as if we're poking her with sticks and making her eat from dumpsters.
posted by maudlin at 5:21 PM on January 10, 2006
Maybe she'll earn more, maybe she'll earn less. And the economy could get a lot worse. If she has a chance to get herself ahead financially, it makes sense to take it. (My husband just got his bonus, and we divvied it up similarly: most of it went to his credit card debt but we also got a couple of things for the house that make day to day life much more pleasant.)
She seems fairly happy with giving herself a small treat and paying off her debt, so it's not as if we're poking her with sticks and making her eat from dumpsters.
posted by maudlin at 5:21 PM on January 10, 2006
Assuming $9k in credit card debt and an interest rate of 20%
posted by aberrant at 5:23 PM on January 10, 2006
posted by aberrant at 5:23 PM on January 10, 2006
Paying off debts is for boring people. You don't want to be boring, do you?
Spend the cash on a nice vacation. Good stories beat "responsibility" any day of the week.
posted by cmonkey at 5:26 PM on January 10, 2006
Spend the cash on a nice vacation. Good stories beat "responsibility" any day of the week.
posted by cmonkey at 5:26 PM on January 10, 2006
A debt reduction pile-on. Oh oh oh, pick me pick me!
My first [real] job out of college was lucrative in small furious spurts, and one month I paid off my entire $12K credit card debt with one check.
Six months earlier I had paid off my $12K debt to my Mom (fifth year of four year degree) in two checks.
Have a little savings, but then always throw the money at the highest interest rate. Pay off low-interest student loans as SLOW as you can. When you start to get your head above water then have $50-$100 per paycheck get direct-deposited to savings; when that balance gets above $3K or $5K or whatever your comfort level is, push the excess over to a mutual fund. Maximize your 401K if it's offered. But that's all well in the future ... for now, be sure to do the first two sentences in this paragraph.
posted by intermod at 8:17 PM on January 10, 2006
My first [real] job out of college was lucrative in small furious spurts, and one month I paid off my entire $12K credit card debt with one check.
Six months earlier I had paid off my $12K debt to my Mom (fifth year of four year degree) in two checks.
Have a little savings, but then always throw the money at the highest interest rate. Pay off low-interest student loans as SLOW as you can. When you start to get your head above water then have $50-$100 per paycheck get direct-deposited to savings; when that balance gets above $3K or $5K or whatever your comfort level is, push the excess over to a mutual fund. Maximize your 401K if it's offered. But that's all well in the future ... for now, be sure to do the first two sentences in this paragraph.
posted by intermod at 8:17 PM on January 10, 2006
Spend the cash on a nice vacation. Good stories beat "responsibility" any day of the week.
Until you're seventy with no retirement plan, and then you discover you can't eat stories.
posted by kindall at 9:31 PM on January 10, 2006
Until you're seventy with no retirement plan, and then you discover you can't eat stories.
posted by kindall at 9:31 PM on January 10, 2006
It looks as though like_neon has already found a very sensible balance between being fun and being responsible, but just to add my own (interest-free loan of) 2 cents...
I'm careful to save money and avoid credit card debt, but it's not so that I can live a boring, risk-free life. Instead, it's so that I can take the risks that are most meaningful and exciting to me.
In the past decade, I've ignored stable job possibilities in order to pursue my much riskier dream job, and then, when I was finally established in that job, I gave it up and followed the woman I love to a foreign country where I had no contacts or immediate job prospects. Both these gambles have resulted in a far more meaningful and satisfying life (and in plenty of good stories to tell when I'm old!), and neither gamble would have been sustainable if I had been saddled with high-interest debt.
I guess cmonkey thinks people like me are boring. Personally, I think it's more exciting to spend my money on funding my dreams than to throw it away by paying any more in interest than I absolutely have to.
As aberrant points out, if like_neon pays off $3,000 of her credit card debt today, it'll save her more than $8,000 over the next five years. I don't know what like_neon dreams of accomplishing over the next decade of her life, but I bet $8,000 gets her closer to it than $3,000 would.
Financial Freedom = Personal Freedom. Tattoo that equation on your forehead if you have to, folks, but don't forget it.
posted by yankeefog at 1:57 AM on January 11, 2006
I'm careful to save money and avoid credit card debt, but it's not so that I can live a boring, risk-free life. Instead, it's so that I can take the risks that are most meaningful and exciting to me.
In the past decade, I've ignored stable job possibilities in order to pursue my much riskier dream job, and then, when I was finally established in that job, I gave it up and followed the woman I love to a foreign country where I had no contacts or immediate job prospects. Both these gambles have resulted in a far more meaningful and satisfying life (and in plenty of good stories to tell when I'm old!), and neither gamble would have been sustainable if I had been saddled with high-interest debt.
I guess cmonkey thinks people like me are boring. Personally, I think it's more exciting to spend my money on funding my dreams than to throw it away by paying any more in interest than I absolutely have to.
As aberrant points out, if like_neon pays off $3,000 of her credit card debt today, it'll save her more than $8,000 over the next five years. I don't know what like_neon dreams of accomplishing over the next decade of her life, but I bet $8,000 gets her closer to it than $3,000 would.
Financial Freedom = Personal Freedom. Tattoo that equation on your forehead if you have to, folks, but don't forget it.
posted by yankeefog at 1:57 AM on January 11, 2006
Response by poster: Wow, I'm amazed so many people have taken a serious interest in my question. AskMe Rocks!
Anyhoos, I thought I should add some notes. My highest interest rate is about 16%. I'm going to call and ask for a reduction in a couple of months (it worked 6 months ago). I actually pay much more than the minimum every month and I plan to add $100 to that since it won't be going toward the couch anymore.
I don't have any student loans (AMAZING parents) so it's just the car and cc. I decided to use some bonus money for the couch and insurance cause they are relatively small balances and it will be two less bills to pay.
Yes spending 10% on yarn sounds boring, but when else could I spend such a ridiculous amount on a personal hobby? Believe me, I've already done my share of partying and I think I'm ready to look to more lasting happiness.
Thanks for all the maths.
posted by like_neon at 9:44 AM on January 11, 2006
Anyhoos, I thought I should add some notes. My highest interest rate is about 16%. I'm going to call and ask for a reduction in a couple of months (it worked 6 months ago). I actually pay much more than the minimum every month and I plan to add $100 to that since it won't be going toward the couch anymore.
I don't have any student loans (AMAZING parents) so it's just the car and cc. I decided to use some bonus money for the couch and insurance cause they are relatively small balances and it will be two less bills to pay.
Yes spending 10% on yarn sounds boring, but when else could I spend such a ridiculous amount on a personal hobby? Believe me, I've already done my share of partying and I think I'm ready to look to more lasting happiness.
Thanks for all the maths.
posted by like_neon at 9:44 AM on January 11, 2006
Do you have a decent income? Phone your bank and ask if you qualify for a line of credit and what interest rate they can offer. If it's a better rate than you credit card offers, transfer your credit card balance and maintain the same payments.
posted by acoutu at 11:59 AM on January 12, 2006
posted by acoutu at 11:59 AM on January 12, 2006
This thread is closed to new comments.
posted by kcm at 2:03 PM on January 10, 2006