I just turned 31 years old. I make 87k a year. I have 20k in credit card debt (split between 20-28% interest rates cards) and 35k left on a truck that I shouldn't have bought (9 point something interest on the loan). No savings. No real assets to speak of.
Just to be clear: my most important goal should be making a budget, sticking to it, and paying down the debt, right? Is there anything else I should be doing? I'm trying to be more responsible. Thanks!
Just to be clear about what my financial goals should be.
byu/The_Actual_Sage inpersonalfinance
Posted by The_Actual_Sage
8 Comments
You should definitely make a budget first, then figure out what you can trim to make your payments and get ahead on debt AND try to save/invest because people fall for the “I’ll do it as soon as ___” and then never get around to it. It doesn’t take much (1k in a Vanguard fund to start and then $20-25 is sufficient to do something.)
You’re young, you have a decent salary, what you do next will make the rest of your life either a lot easier or a lot harder.
Pay the cards off first. Find a zero % interest balance transfer card (s) to help if you can. The truck seems like a bad idea too, but get rid of the cards and then see where you stand with the truck. If you can get out from under the truck by selling it, do so, now, but you’re probably upside down on it, so just get rid of the cards first.
Of course, you need an emergency fund. An emergency fund is what will keep you from going into more credit card debt when life happens. Might just be a $few grand, but this is step 1 IMO.
I can tell you from experience, that being able to say, ‘I have $20,000 in savings ” rather than “I have $20,000 in credit card debt” is one of the greatest things you can say in life.
Goals are what you want to achieve with your money: retirement/rent/vacation/gifts/ debt elimination
Tools are how you achieve those goals: budgeting/automating/buckets or envelope strategies
Mathematically speaking, money goes to the highest rate.
Your credit cards are costing you more than $4800 a year in interest. Your truck is costing you over $3150 a year in interest. Combined interest, you’re paying almost 10% of your annual income.
We all have to take debt sometimes for large purchases, but you’re losing an awful lot of your own money into interest payments..
Mentally, you should budget whatever you can to paying down the CC, then truck, then immediately roll that into savings/investment, so that you don’t get used to having access to spending it.. that money, saved or invested, will buy you a new vehicle outright every couple of years, or be a great down payment on a home. Or even longer term, a much more comfortable retirement.
Get one of the apps like rocketmoney (don’t pay the sub) or credit karma I think does it now, that finds all your subscriptions…and cancel the ones you don’t actively use.
Find your budget, start an emergency fund, pay off the debt, get a roth ira to start donating with your current income to your future life without income, and pay off the truck that will break down before you pay it off.
Then you can work on email inbox hygiene
Pretty soon, you’ll be marketable marriage material.
Your most important goal should be getting out of high interest debt.
A budget might help you get there. Likely you need to cut expenses, increase income and consider a second job.
You do need to live within your means.
No one’s mentioned it yet, but you could look at credit unions to see if you could refinance your truck. It’s probably on the bubble, but even dropping a point would save you like 20 bucks a month (dropping a streaming subscription would do the same and be less work).
Look into consolidating those credit cards into a lower interest loan if you can. You have a decent sized shovel in income, but a very deep hole.