My Master's Degree hopefully will allow me to do other things that I have been wanting to do for a while.
For example, I think I'm ready to buy a house, at least by the end of the calendar year. For a long time, I didn't feel like my financial situation was ever right enough. It's still not perfect, far from it, but I see light at the end of the tunnel of debt that I've been in pretty much since I ended college. I current have about $3200 in credit card debt, which feels manageable. I'd like to pay it off all the way (tuition reimbursement will help... I literally used credit cards to pay for my Towson University classes, and since I got at least a B in them, I get 75% reimbursement) before I start applying for mortgages and stuff like that, and I think I can do it by the end of the school year - or close to it. I also have about $4000 in savings. It's pretty much designated as summer money, but it's not like I'm going to be taking the summer off; I'll be working and bringing in enough to survive on. It's pretty cool that I have more savings than debt (at least non-student loan debt, but I've decided not to count that... I am current, though) for the first time in my life.
My credit rating has jumped about 20 points this year, depending on which credit agency you're looking at. It's in the low to mid 600s, and I think I can get all of them in the mid 600s or higher in the next few months, especially if the aforementioned credit card balance becomes zero.
The two or three hitches are as follows:
1. I will almost certainly need to buy a new car sometime in 2008. My 8-year old car has 130,000 hard city miles on it, but that's not the real reason. The rack and pinion and power steering are shot. I have to add power steering fluid every week or so, or else the steering wheel groans like an old man. It's never hard to turn the wheel, but feel like it would be if I ever let the power steering fluid thing go. The estimate to fix this was $2400. My car also has long-deployed airbags (a $2500 expense to fix), no car horn, no side mirror (just plumb fell off this past summer), and a crack through the middle of the windshield (just appeared overnight), it's probably a bit of a death trap. But it runs really well, so well that the last dealer I brought it to asked if I had had the motor rebuilt. Still, it's certainly not worth the $5500 in repairs or so that I'd have to put into it to really save it. So I've decided to run it into the ground, which will probably be whenever my power steering becomes totally shot (I'm trying to figure out if this is dangerous or not... the last dealer that it was not, but the Car Talk always seem to have a kiniption when anyone calls about power steering). Anyhow, long story short, I'll probably have to buy a new car this year.
2. For my Folger Shakespeare Institute this summer, they highly recommend a laptop computer. I'm thinking I might have to break down and buy one. I kind of hate laptops - think they're too breakable - but have been thinking about one for a while. It might be kind of fun to get one. I haven't yet paid off this desk computer from November, though (that's about $400 of the $3200 in credit card debt, although that one is my Dell Preferred Account, which I'm not sure counts as credit card debt), and it's certainly not money I want to spend heading into the two months of the summer without a real paycheck. Nahmean?
I sort of wish I had a financial advisor right now to help me figure out what to do. I feel like most people's advice of "You've got to buy a house!" is knee-jerk, because they don't/didn't know my credit situation (it's been real bad in the past, and I'm talking 5-digit credit card debt bad). But now I'm ready to hear it more.
Subscribe to:
Post Comments (Atom)
18 comments:
So what makes you want to buy a house? Right now I'm not sure that you aren't financially better off renting, at least until you pay off all the credit card debt (and what's with having $4000 in savings and $3200 in credit card debt? Why not pay off the cards, which are certainly charging you more in interest than you are getting on your savings?") and the market bottoms out. I would think you should pay off the debt and start saving for a larger down payment than $4000 ... right now I suspect that the market won't bottom out for several more moths at the least, so there is no hurry on your part.
All best,
ER
I've learned my lesson about going into the summers and two months without paychecks without any savings, so I can't use all my savings on credit card debt at the moment - or it will just be right back up there by August. Teachers on 10-month contracts have to live a little bit differently.
And I'm not thinking about a house now, as in the summer... just in the next few months, like after the summer when things become secure again. I hope you're right that the market hasn't bottomed out yet, though. I feel like now is the time for the buyers.
I am 19 turning 20 and in this day and age I will be surprised if I ever even move out of my parents house with the way the American economy is going! But Congrats on your next big move, I always hear that owning a house is a privilege and not just something given to you.
- Rob Brulinski
A laptop need not be a super expensive purchase. Especially if you only really need it for the summer. You can easily get one for under $400 if you look around. This assumes you buy a used laptop (or a new Asus EEE PC)
One bit of house advice, try to maintain at least a little liquidity after you close so you can do the little things you might want (like paint or put in a a new ceiling fan, etc.)
Pay off the CC debt, now, and get a summer job. Check out Dave Ramsey's site, listen to the podcast, follow the baby steps and keep renting for a while, or you will probably end up bankrupt. I'm not kidding. Ive read your blog for years now, and just the financial info you have shared (and I'm sure there's tons you haven't) makes me believe that this would be a bad idea.
I was in a similar situation a few years ago. You can compromise. Leave yourself $1200 for savings. Not a huge cushion, but a cushion nonetheless. Pay off $2000 of your credit card debt NOW. Though it doesn't seem worth it at the moment, in the long run, you'll be saving yourself a lot of money...and you'll find that with such a low debt amount you'll be tempted to pay it off at a faster rate in the coming year. Use another $800 from your savings to buy yourself a decent laptop that you will actually use for longer than this summer.(Dell has some nice options.)Trust in your ability to make money this summer and to cut even more corners, as crappy as that is. Don't buy a house, if for no other reason that if something goes wrong, you're not in the best financial position to fix it without going into major debt again. People say renting is a waste of money, but that's only if one has a certain financial situation that allows him to, say, throw down $3000 on new pipes or heating. The feeling of financial independence and "grown-upness" that comes from owning a house is fun and satisfying at first, but doesn't matter after the first two months of settling in.
Another thought, have you read any financial stuff online? you don't need to pay someone to teach you common sense. Go to the library. Go to the internet. Read up on this stuff. Of course, you still have the income problem of martyring yourself to a school and system who doesn't pay a fair wage. (For reference, as a public school teacher I had a 12 month contract, and my tuition was paid in full for my master's, and I never had to be reimbursed, it was just paid.) Shop around for a better job instead of a house. There's a reason most of your colleagues have left -- common sense.
Even if you do run the credit card debt up again over the summer, you still save on the interest between now and your last school system paycheck, plus your debt grows slowly again. You come out ahead even if you end the summer with the same $3200 in debt. Plus, if you pay all the credit card debt off one time, you have the opportunity to start fresh, which means your first month of purchases are interest free until they come due. And if you shop around you can probably find a new credit card with a 6 month interest free deal or something like that, making whatever you need it for over the summer interest free until hopefully you can pay it off in the late fall.
I had a similar thing as you at one point. I had bought a car using my home equity line of credit, and I had a roughly similar amount in my savings. But I wanted that savings for a rainy day fund. My financial advisor pointed out that I was paying 6% on the car and getting 3% on the savings, and if I paid off the car I could still access that Home Equity line if I needed it. Replace car with credit card debt, and that is your situation in a nutshell.
There are 13 houses for sale within 2 blocks of my house. I'm pretty sure that means that the buyers' market will be around for a while! My guess is that if you buy in the next few months you run a substantial risk of having your house worth less than you paid for it soon thereafter. Plus, historically when real estate bubbles pop and then prices finally stop dropping there is often a long period where prices stay level, so it's not like if you miss this window prices are suddenly likely to start sky-rocketing up again.
Best,
ER
Epiph,
I'm sure you are smart enough to take financial advice offered in the comments of your blog with a grain of salt. :-)
Ultimately, you have to handle your finances in a way that makes you comfortable. Me, I'd leave the $ in savings and pay off the credit card debt gradually because of your "summer with no paycheck" situation. (Mom was a teacher 30 years, I understand.) Unless the interest rate is insane, then you might want some sort of middle position.
From what I've read, I think housing will continue to be a buyers market for a while and even if you don't hit it at the very bottom of the trough, you'll still be able to get good value.
Owning your own home offers a tremendous amount of security and peace of mind, but yeah, it always feels like somthing needs to be done annually. That's the trade off.
It's just like you to jump right to the next difficult thing. Take a whole week off--not from work just from life-improving projects.
Wait a while. Pay off those cards and then enjoy living debt free for a bit before you put yourself back in the hole. Even if a house is much better debt than a credit card, it can still take a toll on your psyche, knowing that you owe so much more than you have.
Also, keep an eye on this site for good deals on laptops: http://www.stealdeals.net/
Don't worry everyone, I'm not rushing into anything. I said by the end of the calendar year, and it's something I've pondered for many years, and I'm not even sure if it's what I want. But after lots of pressure to do it, I'm finally really ready to start listening.
Thanks for all the advice, and we'll see what happens. I finally feel financially secure for the first time in my life, though, and I think it's time to start building some equity in the next few months.
Most annoying comment here was the first anon. Someone who has read my blog for years would, hopefully, know that not only have I never gone without a summer job, that I usually have 2-3. This summer is no different. I have three lined up. Get a job, or you will probably end up bancrupt. Wow, the nerve.
Other folks were real nice, though! I'm still going to do what I'm comfortable with, and that's continuing doing what I'm doing - saving around 10% of my income, paying off the cc debt as quickly as I can while maintaining my savings (cc debt down to $2600 since I posted last night, and am still awaiting my tuition reimbursement - will certainly be paid all the way down to zero by the end of June without sacrificing any savings).
Sorry, meant 'get a job that doesn't also involve spending that income on a vacation you can't afford.' It's pretty typical epiphany to think that CC debt is "financially secure," too. Of course you're comfortable! You've never been debt free!
Also, it's bankrupt. No C.
www.daveramsey.com
Seriously.
Dude, I'm not spending it on a vacation I can't afford. It's not like I'm "taking" a vacation. I'm a 10-month employee. I'm working throughout the 6 or 7 weeks I'm not being paid. Where do you get the idea that I'm taking a vacation I can't afford?
Your sanctimoniousness does not make me want to follow your advice at all. I've spent a good chunk of the last 2 years working (and researching and reading, though I prefer Suze Ormann) my butt off to get out of debt, and now that I'm within a month of it, now that my credit rating has raised a couple hundred points and is now in the "good" range, now you're giving me financial advice and telling me I'm setting myself up for bancruptcy? Seriously, where do you get off?
Too late now, but I would've bought the laptop instead of the desktop as the laptop can serve as both (desktop AND laptop) and the reverse is not true. Why have two?
Get a car, pay off your debt, cut those damn credit cards up. Maybe get a second job in the summer waiting on tables sometimes doesnt cut it. Wait until next year, save for a down payment of atleast 10 percent or best 20% to save on PMI insurance. extra 100 a month on top of your house insurance, taxes and house payment.
as a reader of your blog for years epip your like a cool MTV show on the internet.. your not getting younger buy a house
First of all, thanks for sharing. Many of us out there are in, or have been, or will be in, the same boat. My DH and I are soon to be graduates (bachelors) who have always rented and want to teach. We are also determined to buy a house in the city whether or not we work there. There are SO many houses for sale in Balt. right now it's thrilling. I am so excited to start looking, but it has to wait until late next year or early 2010. One thing to consider is the opening of Fort Mead and the people that will bring to the area. That anon. is a jerk, btw. Though, my first instinct (also love Suze Ormann) is to not have savings when there is debt, except for 401K savings which Suze pushes. Still, way to go on paying down the CC debt. I'd def. put the cards on ice for a while now that you have your masters. There are MANY insentives for buying in the city especially if you work in the city and especially if you're a teacher. So, check those resources out.
Post a Comment