"SHOW ME THE MONEY" VIEWS on HOW to make MONEY GR

[retailguy]

Would you recommend given that this is supposedly a "once in a lifetime" opportunity for investing? At the very least should I do the roth?

It's all student loans, so I'm considering consolidating. That's what my parents recommend. What do you think?

State tax: 6.25% + 1042 =3855
Federal tax: 11250
Fica: 3465
total taxes: 18570

After taxes should have about 35k left over. Absolutely no reason that I can't pay off debt and save 8-10k easily this year I would think.

Do the roth after you pay off the debt. Just get rid of it.

Welcome to the wonderful world of taxes... they get the little guy first.

If there are any fees at all, don't consolidate. You'll pay it off in less than a year, what's the point? Just start paying, and paying quick. Then save and invest. Follow Dave's plan, don't deviate.

[MJZiggy]

I thought you were supposed to arrange the debts from highest interest rate to lowest, not biggest to smallest?

[Patler]

Alright Gents, I have some questions on how a 23 year old (24 in August) should handle their money.

I've got an income of 57k before taxes as a W-2 employee.

I have 14k in debt. I have 2.5k in the bank.

My living situation is free of charge.

I will have about 500 a month in fixed expenses every month. This includes food, health insurance, living situation (I'm squatting free of charge), gas, etc.

My parents want me to get outta debt asap so they're covering my cell phone and car insurance.

With that said, how would you guys go about attacking this to maximize the earnings?

RG, Bretsky, Freakout, etc, any thoughts?

Geeze Partial, if you actually have questions about "what to do" given your situation you will really be in trouble when you have to manage a real budget with real expenses. This is a no brainer, pay off all your debt, AND contribute to an IRA/Roth

Monthly income - $4,750
Monthly tax liab.- $1,550 (I think your Fed calc. might be just a little high, check it.)
Monthly expenses-$ 500

Net disposable income - $2,700/month.

I don't know when your job starts, but there is absolutely no reason not to make the IRA/Roth contributions in 2009 and 2010 while still paying off the debt within 12 months.

Student loan consolidation costs nothing (at least it has not in the past) and includes the added benefit of establishing a fixed interest at a blended rate of your existing loans at the time of consolidation. I assume your loans have adjustable rates? Even though you should have them payed off in a year, there could be a rate adjustment late this summer or early fall. If you expect a rate increase later this year, consolidate now. If your best guess is a decrease, don't consolidate. It won't make a lot of difference for you because you will pay the loans off quickly, but a dollar saved is a dollar you wouldn't have otherwise.

Time to grow up. Tell Mom and Dad, "Thanks" but you want to pay your own cell phone and insurance. Accept the gracious offer of a place to live, but pay your own expenses. Take Mom and Dad out for dinner, lunch or brunch at least once during each pay check cycle. Insist on it. Make it a habit or ritual. After all they are paying your rent, utilities, etc. They will appreciate it more than you will ever know, even if they try to talk you out of it.

Make reasonable contributions to help others, whether through your church if you have one or charities you believe in and support. Helping those in need, who aren't as fortunate as you have been, is a good habit to get into even in just a moderate way.

[Scott Campbell]

Alright Gents, I have some questions on how a 23 year old (24 in August) should handle their money.

I've got an income of 57k before taxes as a W-2 employee.

I have 14k in debt. I have 2.5k in the bank.

My living situation is free of charge.

I will have about 500 a month in fixed expenses every month. This includes food, health insurance, living situation (I'm squatting free of charge), gas, etc.

My parents want me to get outta debt asap so they're covering my cell phone and car insurance.

With that said, how would you guys go about attacking this to maximize the earnings?

RG, Bretsky, Freakout, etc, any thoughts?

Geeze Partial, if you actually have questions about "what to do" given your situation you will really be in trouble when you have to manage a real budget with real expenses. This is a no brainer, pay off all your debt, AND contribute to an IRA/Roth

Monthly income - $4,750
Monthly tax liab.- $1,550 (I think your Fed calc. might be just a little high, check it.)
Monthly expenses-$ 500

Net disposable income - $2,700/month.

I don't know when your job starts, but there is absolutely no reason not to make the IRA/Roth contributions in 2009 and 2010 while still paying off the debt within 12 months.

Student loan consolidation costs nothing (at least it has not in the past) and includes the added benefit of establishing a fixed interest at a blended rate of your existing loans at the time of consolidation. I assume your loans have adjustable rates? Even though you should have them payed off in a year, there could be a rate adjustment late this summer or early fall. If you expect a rate increase later this year, consolidate now. If your best guess is a decrease, don't consolidate. It won't make a lot of difference for you because you will pay the loans off quickly, but a dollar saved is a dollar you wouldn't have otherwise.

Time to grow up. Tell Mom and Dad, "Thanks" but you want to pay your own cell phone and insurance. Accept the gracious offer of a place to live, but pay your own expenses. Take Mom and Dad out for dinner, lunch or brunch at least once during each pay check cycle. Insist on it. Make it a habit or ritual. After all they are paying your rent, utilities, etc. They will appreciate it more than you will ever know, even if they try to talk you out of it.

Make reasonable contributions to help others, whether through your church if you have one or charities you believe in and support. Helping those in need, who aren't as fortunate as you have been, is a good habit to get into even in just a moderate way.

Terrific. I agree with all of Patler's advice - especially on the Roth. The IRS will let you make your contribution for 2009 as late as April 15 2010. So you could pay the debt off and still have plenty of time to work your Roth magic.

It's all about discipline at this point in your financial life. For someone your age, you are off to a great start.

My nephew is your age and has $120K of student loan debt. Ouch.

[Scott Campbell]

Geeze Partial, if you actually have questions about "what to do" given your situation you will really be in trouble when you have to manage a real budget with real expenses.

This I disagree with. I think Partial will do just fine when it comes to personal finance. He's certainly well ahead of where I was at that age.

[retailguy]

I thought you were supposed to arrange the debts from highest interest rate to lowest, not biggest to smallest?

Sometimes you can make the math too fancy. We're not talking about a long enough timeframe that the savings are even meaningful. I would build a case that rarely does focusing on the interest rate matter, but that's another discussion.

Plus the "sense of accomplishment" is more important than the few dollars of interest savings. You want the person working towards a goal to experience success as soon as possible. Paying off that smallest balance debt is very important to the overall "feeling" of progress.

[Scott Campbell]

One more thing P. Start using Quicken.

[retailguy]

Geeze Partial, if you actually have questions about "what to do" given your situation you will really be in trouble when you have to manage a real budget with real expenses.

This I disagree with. I think Partial will do just fine when it comes to personal finance. He's certainly well ahead of where I was at that age.

Scott, I agree with you. Seeking advice is never a bad thing, even when you think you know the answer. Partial is on his way, I think. I wasn't even thinking about paying off my student loans when I was his age. I was just grateful to be done with school and working.

Those days came later, in my later 20's.

[Patler]

Geeze Partial, if you actually have questions about "what to do" given your situation you will really be in trouble when you have to manage a real budget with real expenses.

This I disagree with. I think Partial will do just fine when it comes to personal finance. He's certainly well ahead of where I was at that age.

Perhaps my sentence was poorly worded, but I think isolating a single sentence from a lengthy post is a bit misleading as well.

What I was trying to state was that he really shouldn't have any indecision based on his situation. If he can't see what to do now, in this highly advantaged situation, how will he know what to do when he has real expenses, obligations and needs? I'm not sure why he thought he needed help or advice, given his situation. If he really felt he needed advice now, he needs to study and learn because it is likely to get a lot more complicated in the very near future. If he was just looking for confirmation, fine. If that were the case, I would have liked to see a detailed plan from him, asking for comment. I almost suggested that to him.

Asking for help in his situation now is kind of like having to ask for help on how to fry an egg today when you will have to prepare a full dinner party menu in the very near future. I was just trying to warn him and make him think for himself. I didn't mean for it to sound like a criticism for asking for advice, just a firm warning about the future.

That is also why I didn't recalculate his tax obligations for him, even though I think he might be off a bit. I encouraged him to look at it himself.

[Scott Campbell]

Geeze Partial, if you actually have questions about "what to do" given your situation you will really be in trouble when you have to manage a real budget with real expenses.

This I disagree with. I think Partial will do just fine when it comes to personal finance. He's certainly well ahead of where I was at that age.

Perhaps my sentence was poorly worded, but I think isolating a single sentence from a lengthy post is a bit misleading as well.

What I was trying to state was that he really shouldn't have any indecision based on his situation. If he can't see what to do now, in this highly advantaged situation, how will he know what to do when he has real expenses, obligations and needs? I'm not sure why he thought he needed help or advice, given his situation. If he really felt he needed advice now, he needs to study and learn because it is likely to get a lot more complicated in the very near future. If he was just looking for confirmation, fine. If that were the case, I would have liked to see a detailed plan from him, asking for comment. I almost suggested that to him.

Asking for help in his situation now is kind of like having to ask for help on how to fry an egg today when you will have to prepare a full dinner party menu in the very near future. I was just trying to warn him and make him think for himself. I didn't mean for it to sound like a criticism for asking for advice, just a firm warning about the future.

That is also why I didn't recalculate his tax obligations for him, even though I think he might be off a bit. I encouraged him to look at it himself.

I guess my point was that he'll be just fine. My own deep thoughts on personal finance at his age were pretty much confined to "How much beer can I get for $7?"


Again, I agreed with 99% of what you wrote.

[retailguy]

Patler - It is good to see you back here, I missed your contributions earlier in the month...

I think Partial is looking at his expected paycheck witholdings, not necessarily his net tax after refund....

I also agree with most of what you wrote, I think it may just be a generational difference. Most of us wouldn't ask for help until the wheels were about to fall off, especially when it comes to personal finance, but I have found that my younger tax clientele are much more willing to ask "what if" questions than the older ones.... Maybe it's just my clientele? Not sure, but I still have a few clients that hold their info very close to the vest, and wouldn't even show me their w-2's if they didn't have to do that.

[Patler]

Patler - It is good to see you back here, I missed your contributions earlier in the month...

I think Partial is looking at his expected paycheck witholdings, not necessarily his net tax after refund....

I also agree with most of what you wrote, I think it may just be a generational difference. Most of us wouldn't ask for help until the wheels were about to fall off, especially when it comes to personal finance, but I have found that my younger tax clientele are much more willing to ask "what if" questions than the older ones.... Maybe it's just my clientele? Not sure, but I still have a few clients that hold their info very close to the vest, and wouldn't even show me their w-2's if they didn't have to do that.

Thanks RG. I have been posting on the Brewers and other boards here at PackerRats, I just haven't been too active on the Packers part of it. I guess I need an off season too!

Sometimes my "old goatedness" makes me a bit gruff with those who have very simple situations! Then too, when I was his age, I literally had to count my pocket change on a daily basis to make sure I met my obligations (which I always did). That perhaps has made me less tolerant than I should be.

I figured Partial was probably looking at withholdings on his taxes, but he can adjust those to anything he wants, even a defined amount (at least you could in the past). For years I have looked at it as a game of "The Price is Right" both when I had withholdings and when I have been paying quarterly estimated tax payments. How close can I get to the actual tax due when the return is filed without underpaying so as to invoke penalties or interest?!

I should probably edit my first post about it, because I really didn't intend to discourage or ridicule him for asking questions. But I wanted to impress on him that he really has an extremely uncomplicated, simple financial situation. He has a very good net income after withholdings, and basically just two items of expense, "miscellaneous" of $500/mo and his loan payments. There aren't a lot of decisions to make in his situation. He should really understand why it is good to eliminate debt, but also why a single "extra" year in the beginning for an IRA can mean so much 35 years from now. It should be fairly clear to him that with his situation he can do both. Its not a question of one or the other. If he can't see that, I would encourage him to do some studying, because his financial world may not always be so rosy, and there are a lot of schmucks out there who will give advice, but very bad advice; and he needs to have a feel for that as well.

The next time I will ask him to propose his own plan, then we can critique it for him. That is how I have always trained those under me (after an initial instructional period) and I find it gets most people up to speed very quickly. Continually relying on others to propose the solutions for you slows the process. Asking for verification, and modifying if necessary is well and good, and should be encouraged.

[Scott Campbell]

There aren't a lot of decisions to make in his situation.

When it comes to personal finance, this is very often the case. The first 4 or 5 moves are typically "no brainers". You don't get into the high degree of difficulty stuff until after you've taken advantage of the easy no brainers. Unfortunately, most people haven't yet mastered the easy stuff. I think you can make a pretty strong case that all you ever really have to do is master the easy stuff. Do that, and you'll end up wealthy enough in the vast majority of situations.

[Scott Campbell]

Sometimes my "old goatedness" makes me a bit gruff with those who have very simple situations!

I've noticed that you can be a little prickly. You should try being more nurturing like me.

[Scott Campbell]

Most of us wouldn't ask for help until the wheels were about to fall off, especially when it comes to personal finance, but I have found that my younger tax clientele are much more willing to ask "what if" questions than the older ones.... Maybe it's just my clientele?

I don't think it's just your clientele. People treat is too personally, and I think they worry about being judged. It's just math.

I wish they did a better job teaching this stuff in school.