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Thread: Debts and Savings

  1. #1
    Moderator Miss_McKenna's Avatar
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    Question Debts and Savings

    I was wondering if someone here could offer some advice on how best manage your money in terms of savings and debts? I'm really into learning how best to handle my finances and I've been reading up on various 'finance for women' books, but sometimes it seems so overwhelming! I have a budget for my bills, groceries etc and I'm really trying to stick to it, but I'm unsure where to go next, past that.

    A bit of background, I'm 23 and graduated from university in December, and I'm currently dancing. I have private student loans which go into repayment in June, which are lets just say, very high. I'd like to consolidate them to try and lower the monthly payments but the people who co-signed my loans then are not willing to co-sign the consolidation now.

    I also have about $5000 in credit card debt (average APR), owe my parents $500 and I have a little list of things I will soon need to pay for, like going to the dentist, taking my cat to the vet, getting my car tuned-up etc. My car is fully paid off and my bills are relatively low so I'm looking towards paying other things off now. I don't know if I should be paying off my loans or credit cards first, or putting some money aside for savings, or putting it all towards the costs I have coming up so I can clear those (like the vet etc)

    I have no savings or emergency fund which I know is a bad thing, but at the same time I feel bad having money sitting around while my debts build interest. I thought perhaps I could work towards paying off my credit cards first, and then have them as a potential 'emergency fund'.

    I also want to save up $2K for an apartment deposit as I'm planning to move to NYC at the beginning of summer. My plan is to get a 'real job' now that I've graduated and put most of that money towards my loan, while dancing once or twice a week for general living money. But right now, I just don't know how I should be allocating my earnings.

    Thank you SO much in advance, wise people!


  2. #2
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    Default Re: Debts and Savings

    1) can you afford to live in new york if you have no savings and are in debt? ny is one of the least fun places to be if you're poor.

    2) can you start pulling doubles at work? i can't imagine not having savings, but it doesn't take long to save money if you are busting your ass and working at a decent club. and if you are working all the time, you'll have less time to spend money. can you spend the next couple of months working your ass off, getting out of debt, and building a bit of a nest egg before you move?

    you can try to save half of what you make, and put the other 50% toward bills. so if you work 5 days a week, $200 a shift average (i'm using a low average just in case you are in a part of the country where money is terrible), you can put $500 a week toward bills, and $500 toward savings. or you can adjust this as you see fit.

  3. #3
    Banned Melonie's Avatar
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    Default Re: Debts and Savings

    trying to put all of this in some kind of priority order ...

    'emergency fund' - the most basic principle behind having an 'emergency fund' is having the means to pay for 'emergencies' ... which most typically means a fairly expensive car repair, or surprise medical bills, or being unable to work for several weeks for whatever reason. Over the past decade, many people became so accustomed to the availability of 'easy credit' that the didn't bother to accumulate cash savings for their 'emergency fund'. Instead they relied on the instant availability of additional 'credit' via a credit card or whatever. However, in the last year or two the instant availability of additional 'credit' is now history ... at least for a young dancer with 'unverifiable' income and few assets who is very likely to have her credit limit reduced to the actual outstanding balance of her credit card at any time. Therefore, in order to insure the availability of enough cash to pay for an unexpected 'emergency' these days I would place the creation of a cash 'emergency fund' i.e. a savings account with a balance of at least a few thousand dollars, as a #1 priority ( even though it means carrying a credit card balance a bit longer).

    Beyond that, the least productive place to spend money is on the payment of interest. This is particularly the case when the interest rate is comparatively high, and the interest payments must be made with 'after tax' dollars. Therefore, I would place the paying down of credit card balances to zero as a #2 priority.

    Student loans are a different animal in both a good and bad way. On the one hand, the interest rate is typically low and it's usually possible to glean at least some income tax credits / reductions from tuition / student loan payments. On the other hand, if and when the s#it hits the fan, student loans are not dischargeable via a bankruptcy filing. So I must recuse myself on the subject of student loans because every individual situation is different re amount of loans, interest rate charged, tax credits / reductions produced, other financial priorities etc.

    As to moving to NYC, and saving up for rental deposits, these days there is usually a lot more involved in renting a 'decent' apartment than walking in the manager's office and plunking down cash. First off, the manager is going to want to see some verification of income ... which is difficult for dancers ( unless they also have a full time 'straight job'). This usually requires showing past years' tax returns, or at the very least showing bank statements listing regular cash deposits. Additionally, this will also usually involve a credit rating check - which may be a significant issue if co-signers will still be required to refinance existing student loans into a new consolidated loan. While it might be possible to avoid some of these requirements by renting a suburban apartment from a 'mom and pop' operation, that isn't going to happen in a downtown environment where the property is corporately owned and 'professionally' managed.

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    Default Re: Debts and Savings

    Debt should go toward an investment, such as a mortgage or a student loan or a true business (eg working capital). Having a debt from spending more than one makes on "expenses" is unwise.

    Moving to NYC in search of a job is pretty hazardous; moving to NYC because in your current job, you get a promoition involved in the moving is a differnt story. Remember NYC is an immigration port and so is always full of low-wage earners fro that source. Living expenses are extremely high to boot.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  5. #5
    Moderator Miss_McKenna's Avatar
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    Default Re: Debts and Savings

    Thanks so much for your advice! I think I should have made it more clear in my earlier post; I don't plan to move to NYC in search of a job, I only plan to move there after finding a job. Currently dancing is keeping my bills paid but now that I am out of school I am applying for career jobs aiming at those located in NYC. I would never move there until I had a job secured as I know that savings which would do me well here in my little town would be snapped up in a second with New York living costs, if I didn't have a salary coming in to replace it. Similar to that, I also plan to secure a 'proper' job before putting my name on an apartment. I have a friend whom I can stay with while visiting the city for interviews and for a few weeks between finding a job and an apartment.

    Tonight I've been poring over various financial advice websites and come up with some guidelines for myself. It seems the 'living on 60% of your income' model is really recommended and with sticking to my budget, I can keep my living expenses under 60% of my dancing income and contribute the 40% 'surplus' to an emergency fund, even accounting for bad nights etc. I'm going to stick rigidly to this, and also put anything over my 'minimum $ needed' per shift, and any extra shifts I choose to go to, into my emergency fund. Once that has built up, I'm going to stick to the 60/40 model, but putting 30% of the surplus towards my credit cards and the last 10% towards adding to my savings. I like that I'll have a set amount going towards paying down more than the minimum on my debt, with the additional opportunity to work more shifts, have better-than-expected nights etc and put these towards it as well.

    Does this seem like a good way for a beginner in financial planning to get on her feet? I haven't included anything in terms of retirement etc, but once I get that 'proper' job I'll take full advantage of 401k's and such. I also broke my plan up into earnings/living expenses/savings goals per week so I can put it on my calendar to motivate myself to keep boosting the numbers by working more.

    I'm so grateful to you guys for taking the time to help out with your advice


  6. #6
    Banned Melonie's Avatar
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    Default Re: Debts and Savings

    ^^^ this sounds like a workable plan ... providing that you have a good credit rating ( and thus have reasonable probability of having an available credit limit on your credit card if an emergency should arise ), and provided that you are taking your Social Security tax / medicare tax / income tax liabilities into account as the very first priority.

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    Default Re: Debts and Savings

    Also do the best you can to fulfill the terms of your current credit card payment plan.

    There is not much diffrence between the current credit card outfits and payday loan outfits and the corner loan sharks, except the cc companies don't try to aim for your knees.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  8. #8
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    Default Re: Debts and Savings

    You should pay your highest interest loans off first. As far as an emergency fund, you should consider what options you have for an emergency. If something happened where you were unable to work, do you think your parents would help you out? Also, with the passage of Health Care Reform, you can now stay on your parents health insurance plan until you are 26, if you have that option. If you have high interest loans to pay off, you should try to minimize the money you keep in a low interest or zero interest bank account. If having a few bad weeks at work means you're going to end up on the street, you should keep some money lying around for emergencies, but if you think you have other options, the faster you pay off your high interest loans, the better off you will be in the long run.

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    Banned Melonie's Avatar
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    Default Re: Debts and Savings

    ^^^ again Eagle and I are in complete agreement !!!

  10. #10
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    Default Re: Debts and Savings

    I mostly agree with the high interest rate ones down first. But there is something to be said about getting rid of low balance ones to feel some accomplishment.

    Also, some creditors are still playing games. If it is a game player, there really isn't much benefit in paying that one off because they will always have interest and fees to fuck your balance again.

    Credit is becoming a dirty word in this country.

  11. #11
    Moderator Miss_McKenna's Avatar
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    Default Re: Debts and Savings

    Thank you guys so much for your advice!! I feel so much better now that I have some sort of plan to follow - my OCD self has written up a detailed plan for dividing my earnings and such. Melonie, I definitely hear ya about not falling behind on my taxes... when I split my income into different sections and such, I mean my after-tax income. I put my tax money aside immediately after getting home that so I don't miss it in the first place.

    My credit rating is good, it is brought down by the fact that my credit cards are full and I have high student loans, but I have never been late for a payment on anything, have never had any judgments or claims against me etc. In the past I have not had any trouble putting my apartments in my own name without a co-signer. I hope that now I will be able to get it up higher by paying off my credit cards and such pretty quickly, as well as saving a lot of money on long-term interest by not carrying the debt any longer than I have to.

    My parents would help me out financially, but only if I was at the point of eviction or something. I've had situations where I've had to borrow money in the past (hence the $500) I owe them, and although I pay it back, we don't have a good relationship anyway and every time I ask makes them more resentful about it. I am no longer on their taxes, health insurance etc and so I'd love to be permanently independent from them. My living expenses are low, and so once I have saved up a few months expenses, I will put most of my surplus money towards my credit cards and hopefully paying it aggressively will get it down quickly.

    *fingers crossed*


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