** OFFICIAL FINANCE THREAD ***

[jEct2]

As stated in previous posts, I now have a real job after graduating from college just this summer.

I want to carefully manage my finances the best ways possible. This includes book-keeping, to mapping out my finances and strategically paying off debts.

Please contribute to this thread if you have a good money saving tip.

My current situation:
Income- $32,000/year starting September 12th
Debt- $2,500 in credit card debt & $15,000 in student loans

Several questions:
1. How should I prioritize my income? Is it better to immediately pay off CC at all costs, while ignoring 401k contibution?

2. How wise do you think it is to live without health insurance to save some $$? My employer provides basic health care. How 'basic' is it?

3. My insurance rate sucks due to stupid teenage speeding. If I simply don't drive by giving up my insurance and license (I can live all on public transportation). Would that drive down points or it's only eligible for 'driving period'?

4. Any little tips the bachelors here do to save $$? I got a very spacious place including full kitchen and living room thanks to my friend's parents. $600 a month including water and heat. (this is right off Boston too.)

 

[axelfox]

1. CC debt first, 401K, and then put money away in a 6 mos emergency fund. Then take the balance and pay your bills.

2. Living without health insurance, IMHO, is not good. Because all it takes is a car accident or whatever to put you in the hole.

3. If you can live on public transportation, go for it. Its good exercise to walk everywhere and it'll save you money on all car related things

 

[mugs]

If your employer matches your 401k contribution (which I assume they do or you wouldn't have brought it up), then you're basically getting an instant 50% or 100% return on your money vs. <20% from your credit card. I think I'd still try to get rid of the credit card debt first though.

 

[jEct2]

Originally posted by: axelfox
1. CC debt first, 401K, and then put money away in a 6 mos emergency fund. Then take the balance and pay your bills.

I can may CC debt in small increments as long as APR stays at 0%. In the meanwhile wouldn't it be wise to contribute to 401k minimally (6-10%) because starting early pays off BIG time due to crazy compounding rates?

 

[mugs]

Originally posted by: jEct2

Originally posted by: axelfox
1. CC debt first, 401K, and then put money away in a 6 mos emergency fund. Then take the balance and pay your bills.

I can may CC debt in small increments as long as APR stays at 0%. In the meanwhile wouldn't it be wise to contribute to 401k minimally (6-10%) because starting early pays off BIG time due to crazy compounding rates?

Once you hit your employer's match limit you should fill up your IRA before continuing to contribute to your 401k. Be careful with the 0%, make sure you fully understand the terms so you don't screw up and have it revert back to full interest early. How soon does the 0% end? You should pay it down ASAP after that.

 

[kranky]

You're exactly right about getting started early in your 401k. So my advice is to start saving in your 401k now and scrimp madly for a while so you can get the $2500 paid off and get your emergency fund set up. That won't take but a few months. Remember that a three- or six-month emergency fund doesn't need to equal three or six months worth of income, and it doesn't need to cover everything you're spending today - it needs to cover the essentials but not the extras. For me, a six months emergency fund is equal to about 2 months worth of my normal expenses. In a crisis, those expenses would be cut deeply.

Remember that you don't want to use a 401k for every penny of savings you have. It's a very valuable piece, but it's only one piece. Try very hard to put in at least the amount that your employer will match.

If you know where you're spending your money, you'll stay out of trouble.

The most important thing I can tell you is that if you learn right away how to live below your means while setting aside money for the future, you will be ahead of 98% of the rest of the people. Most people think they are doing well if they stay out of debt, but it's more than that - it's staying out of debt PLUS saving for the future PLUS not wasting your hard-earned income. So many people waste their money but never realize it since they are still covering their expenses.

I don't know the answer to your insurance question but I think your points will come off your record over time whether you drive or not. You shouldn't have to give up your license. And if you don't own a car, you shouldn't need to buy any type of car insurance. A question to ask your agent is that if you "take a break" from driving, how hard will it be to get a policy later. And a car definitely eats up a lot of income - giving it up could be a very easy way to get your savings charged up.

The best money-saving tip for bachelors is: learn to cook. It's too easy to just hit a restaurant of fast-food joint on the way home from work and that adds up to a lot of money.

 

[mugs]

Originally posted by: axelfox
2. Living without health insurance, IMHO, is not good. Because all it takes is a car accident or whatever to put you in the hole.

I think medical bills from car accidents are covered by car insurance, but you should still look into the details of your health insurance. It's probably adequate.

 

[jEct2]

Where's the best way to store the emergency cash?

I'd expect ING Orange savings account... pretty good interest rate eh?

 

[kranky]

They have good rates, yes.

 

[jEct2]

ttt