Zacreth

So..basically i'm asking advice from friends here on S2ki on how to change my life so that I am able to be more financially stable.
I have always been an impulse buyer and pretty much after draining my savings live paycheck to paycheck. I know that's bad..but I'm asking for advice on how to turn things around.
I currently work at a university making only 35k a year. Not much. I'm 26 years old and have a bachelors degree in CIS. I decided to get a job at a university so that I can obtain my Master's degree before setting out for a career.
I have 1 credit card and after being stupid paid another credit card off and closed the acct when I should have left it open. I owe about 2k on the card that I have available.
I have no savings after moving here because of expenses that came up. I just got a roommate so that cuts my bills for rent and utilities in half (thank god). I pay about 500 a month now for rent and things, 320 for car insurance, and whatever I can to the credit card bill when I have money.
My goal that I want to obtain is to be where I can have a saving acct again. And start investing money so that I can be able to afford a house say within the next 3-5 years. I know I can't make hundreds of thousands of dollars in that time frame but I want a solid foundation of invests and a plan to get me on track.
By the way..since I have moved down to AZ my credit score has pretty much hit rock bottom so I'm trying to recover that also.
So any advice would be greatly appreciated as to ways to obtain my goal and to be somewhat stable financially.

Thx,

Curtis

cthree

You pay $320/month for car insurance? That's a problem.

Your first step is to pay off that credit card as quickly as possible. Suck it up and pay $500/month on it till it's paid. I don't know how your credit score is so low but I'll speculate that you missed payments. You must pay off that card and when you do you must not spend more than you can afford to pay fully each month on it, it doesn't matter what the limit is. If you are only able to pay $100/month towards it then that's all you can spend on it. There can be no compromise there.

Eat macaroni and cheese for 4 months if you need to but get that credit card paid off. The same applies for anything else you make consumer loan payments on like your car payments, no money down don't pay till 2010 furniture financing and the like. Your goal should be to owe nothing to anyone by the end of the year and you should easily be able to do it with your income. You must not pay interest of any kind on anything which depreciates, doing so just makes those things more expensive.

Why do you pay so much for insurance? Do you have a car payment? What other expensive habits do you have?

Zacreth

Well just moving to the Phoenix area made my car insurance go up 100 a month. Also it's the speeding tickets I've gotten about 2 years back. I don't owe on my car and it's paid off.
The only other expensive habit is eating out for lunch pretty much everyday and every other day or so dinner. I only owe on the credit card and that's about it. But I tend to spend alot of money eating and spending money on my girlfriend so yea...
It's taken alot to get most of my bills paid for. Oh I do have a student loan but it's in deferrment.

cthree

I still don't see how you can be paying $4K/year for insurance, that makes no damn sense at all. I did a rough online quote with progressive and it comes out to ~ $1200/6 months or $250/month. There is significant savings to be had by paying the bill in full rather than monthly, you should use it. You should also shop around for a better insurance quote. At the moment auto insurance accounts for 10% of your annual income. You/nobody can afford that. Cut back your coverage limits and raise your deductible levels, you are probably over insured. You only need enough liability coverage to protect your assets. Since you don't own a home with equity or any other asset of value there is no need to cover anything but the required minimum.

Most importantly cut back your speed. Another ticket could force you to sell your car because you won't have the ability to insure it.

Paying the bill in full is not that hard but you need to get the money together first. Open a savings account at your bank (one with no fees!!) and shove $20 each week in it. Call it your insurance fund. Keep a plastic container by your door. Empty all your change and $1 bills into it each night. Call it your piggy bank. Take it to your bank each week along with your $20 and make a deposit to your savings account. When you have $1200 together pay your (lower) insurance bill in full. From then on Take $100 from each paycheck and put it in the account to pay your next bill.

The idea of making small but very frequent savings deposits is very powerful and very effective. Don't plan to save $300 each month, plan to save $10 each day. It's easy, just shove $10 in your piggy bank every day along with any change you have in your pockets. You'll never miss it and if you add in the change you'll be stashing $400/month instead of $300/month without any extra effort.

Zacreth

That's actually a good idea about the savings of 10 a week. I do keep all the change I have in a big 5 gallon water jug and just have it accumulate in it.
Do you think it would be wise to drop my coverage to liability at least until Nov when most of my driving points are off my record? That should save me money. And I'm not over covered also...it's just that high for me. My girlfriend pays 120 a month for a Mazda 6 with a clean record and she's 26 also...So it's just high here for some reason.

bat711

$120/mo isn't nearly the $320/mo you are paying. What carrier are you with? Unless you've got a $0 deductible and $1m+ coverage levels that's crazy even with two tickets. Like cthree said, shop around I can assure you you will find a lower rate. Different insurance cos. will use credit scores and driving records to differently to determine your rate.

An easy way to help out your credit would be to see if you can get added on to someone else's credit card with a good credit score and a long credit history like a parent.

cthree

That actually doesn't work. The best way to improve your credit is to pay your own credit card bill entirely and on-time fanatically each month.

sahtt

This isn't that hard to fix or accomplish. In fact, you most likely already know exactly what you need to do. But we are kind people and we'll reinforce it for you. The hard part is the discipline, which is actually quite easy and completely free to obtain.

Let's start with what you already know/have. You are paying a HUGE amount of car insurance which is worse than paying interest IMO.

You say your car is paid off. If it's worth significantly more than 5-7 grand, sell it next week to a private party. I can't imagine you are foolish enough to pay nearly the worth of your car in insurance each year. During the time you are selling your car, look to buy the newest accord/civic/corolla you can for about 5-6 grand. Use the difference to pay off the CC if not get your savings started. You can buy a 2000 accord in great shape for 6 grand pretty easily that will last you another 5 years with minimal issues, and another 5 with the power steering pump, maybe transmission, etc. giving you some really minor trouble [all costs about half of what your single annual insurance fees are].

I know a penta-millionaire whose wife drives a used landrover, his daughter drives a 99 camry, and his other daughter drives some nissan jeep.

You know what he drives? He drives a camry he bought for $500 at an auction about 4 years ago. It looks like junk and still has the auction lettering on the rear window. If he can drive that, you can ride a bike with 1 wheel to work. The car is parked on the large sweeping drivewary in front of a 5500 square feet house worth about 2.2$ million he put 33% down on [that is a lot in Texas, like a mansion]. My girlfriend once asked him [his oldest daughter] why he spends so much on the house and so little on the car.

He said "honey it's very simple, no matter how much I invest in a home, if I do it carefully, I can actually get it back and even a little extra for you girls. The more you spend on a car, the less I get back after we're are done using it. I work too hard for my money to spend in on expensive things instead of investing it in things like our wonderful home. That and I can't afford to".

You want to build wealth? You want to put money in the bank? STOP THROWING IT AWAY! Insurance is an oxy-moron in situation for the most part. What are you insuring? You don't really have anything but a depreciating asset called a car which shouldn't cost more than a couple hundred bucks a year to insure.

On top of that, get liability insurance which should be a few hundred a year or less, not a month.

I wish I could get across to you how fiscally retarded it is to make 35k a year, probably before taxes, and pay 4k a year in insurance on a car. You are 26 years old and probably a smart guy, if you didn't know better before, your excuses have run out now.

I'm going to give you a good nod though for at least coming here asking for help and being honest. Yesterday means nothing. Tomorrow never comes. You have to start this TODAY.

cthree's savings advice is great but only if you DO it.

I want you to see the world how I see it for just a moment. With that 35k, you will need to buy certain things like food that aren't worth anything after you consume it. You'll probably also choose* to pay bills for heating, cooling, etc., and gas for the car you think you need as well. A little will go towards insurance.

Even if that added up to half of your 27k after taxes, you have 13.5$ grand you could be either investing in a appreciating asset like a home [the interest is deductible if you do it right], the stock market, a business, or worst comes to worst a high yield savings account.

Instead, you spend it on an apartment which sometimes seems unavoidable and is 100% money down the drain. Instead, you spend it on a car you don't need, and insurance you don't need on the car you don't need. The list goes and on, credit card interest, etc. etc.

You are getting everyone ELSE rich BUT you! Look around you, the car maker, the insurer, the apartment owner, exxon, fiesta, the fast food joint down the corner, discount tire when you got a flat, everyone is getting YOUR $.

When do YOU get YOUR money? Only when you save or invest it.

13.5$k at 6% over 12 years is 27$k.
It's a more complicated equation(s), but if you were to save 13.5$k at 6% every year over 12 years you'd have roughly 250k money in the bank, taxes aside. That's if you only make 35k for the next 12 years. That's only if you make 6% interest which basically involves 0 risk. If you were to make 12% you would have about 400k. I am far from an expert and I've made 10%+ in the last 3 months using a mostly moderate risk portfolio.

The choice is yours. Don't say it's impossible, 5 years younger than you I know a guy how made 28k net a year from work, while full-time in a fairly expensive university with a little tuition help but paying 300$ a month for rent, owning a 'ok' car and a fairly nice sportbike, etc. who saved/invested 15k$ a year carefully buying used vehicles and refusing to waste money.

tritium_pie

I knew a guy who lived in the SF Bay Area, drove a 2-yr old Dodge Viper, almost definitely had his share of tickets (given the way he drove)... and STILL paid less than you in insurance.

Oh, and he made easily 3x as much as you.

It's high time you downgraded your lifestyle bud, because you're fooling nobody but yourself. $35K/yr is diddly squat, so after living expenses, paying down your debts, then starting to save money, you simply cannot afford whatever impulse purchases you are making. You are poor, so live poor.

And I hate to tell you this but, you cannot afford an S2000. Sell the car. Get a cheap Honda Civic or something-- whatever is reliable. You had your little fantasy, and it has cost you bigtime (and will continue to cost you for several years AFTER you dramatically downgrade your lifestyle). You simply are not in a spot to own a sportscar, it's maintenance costs, insurance, premium gas, etc. There is no two ways about it. Sell the S2000.

Not trying to rip into you, but the sooner you give yourself a reality check, and started living-below-your-means (that means only spending what you already have, and in your situation, only spending what you absolutely NEED), the better off you will be.

$.02

hobbes235

couldn't have said it better than sahtt. you can do it buddy. DISCIPLINE!!!!