I’m 29 and make $83k a year, after taxes, health insurance, and retirement I bring home about $50k.
My work retirement takes 12% of my pay and then I also contribute $200 a month to a separate retirement account. Right now I have about $40k in retirement. The 12% is not optional, it’s mandatory. The $200 I contribute separately is optional.
The downside is I have a lot of debt. I have $13k in credit cards and a $15k debt to the irs. My early 20’s was just poor financial decision after another and I’ve been paying the price since.
So I bring home a little over $4k a month but rent prices are high where I live, I pay $2k in rent. So 50% of my take home pay is gone. That leaves me with $25k a year to spend on everything else. Debt, food, bills, vehicle (no car payment thank god), etc…
I get by but it’s definitely stressful.
The only thing that makes me feel some what okay is the fact that I have a pretty solid retirement.
Feeling strange with my finances
byu/Confident_Local_2335 inpersonalfinance
Posted by Confident_Local_2335
13 Comments
Credit card debt should be your first priority.
Not always the most popular but Dave Ramsey setup may be worth looking into to work your way out of the debt issues you have.
Roomate could be a solid option to free up a significant portion of your income.
Consider a roommate or finding someplace cheaper to rent.
Definitely stop the extra retirement contributions and put it toward the credit card.
From there, figure out what else you can cut from your expenses. Consider a job on the weekend maybe.
I dont think it is legal for an employer to mandate that you must contribute at least 12% to your retirement. I would challenge this with HR and reduce down to the match you get and use the bump in paycheck to pay down the debt. Also, that extra 200 should go toward debt rather than retirement right now. Just my 2 cents. Good luck!
Get a roommate ,
pay off your debt first. Pay off first dont contribute the $200 until debt
How much your company match for your 401K contributions? If it is lower than 12% just lower to match what your company offer.
If you have a mandatory pension acct I would stop contributing into the second retirement account asap and put it toward your debt….
You dont want to over contribute to retirement if you cant pay your bills…..
also get on a payment plan with the IRS asap.
Pay the debt off!
Get that from around your neck and you should be feeling better.
I like your honesty . You made some poor choices and usually when people admit them they are less likely to repeat them . You are headed in a better direction & doing things right . This is refreshing because Reddit is full of “ life isn’t fair , it’s a rigged system, no one can get ahead “ talk that fixes nothing. I think you are spot on in getting a roommate. Since you are already contributing 12% to retirement take that extra $200 and apply it to the highest interest rate debt . Once you get a roommate take whatever savings you have from that and apply that to the highest interest rate debt too . You will get to where life isn’t more comfortable because interest isn’t eating up so much if your pay . Best wishes to a bright future .
Priority 1 is getting full company match on your retirement contributions. That’s a 100% immediate ROI that you aren’t going to find anywhere else. Priority 2 is paying down high interest debt. Anything you are currently contributing to retirement that isn’t being matched, stop and dedicate that money towards the debt until paid off.
Agree with everything said so far, OP. Dave Ramsey philosophy is great for prioritizing debt repayment and ending credit card use.
Stop the $200 to retirement and put it towards your debts. If you want even more realistic help, go to the budget sub and post actual numbers/breakdown for how to improve your situation.
You have plenty of time to make up the retirement if you stop all of it until your debt is paid. Once the debt is gone you’ll have so much more budget room and less stress. Then crank out the retirement contributions. You’ll be 31-ish at most and still have 20-30 years to do retirement. Kill the debt!
Honestly, the retirement balance is the bright spot here. I’d just be careful not to let it emotionally cancel out the credit card and IRS debt, because those are both expensive in a way retirement contributions usually can’t outgrow. You’re not doing horribly, but it does sound like one of those situations where the numbers look decent on paper and still feel tight every month for very real reasons.