In general, when I share reader questions, I try to keep them as broad as possible. I get a lot of requests for advice about specific situations, but I try to steer those to the Get Rich Slowly discussion forum. I like for the questions on the blog to be relevant to a lot of readers.
Here’s a small exception. Christine wrote for help with her specific circumstances. She’s a twenty-something student overwhelmed by her finances. Her concerns are representative of many e-mails I receive.
I am an avid reader of your blog and have been trying to follow your advice but can’t get any of it to stick to my personal situation.
I am twenty-four years old, working a full-time job earning around $33K annually and attending college part-time a couple evenings a week. I’m single, no kids or roommates. My main problem is my fixed expenses are just too high and I cannot dump them anytime in the future.
- My rent is $595/month (including all utilities & internet).
- My car payment is $200/month and insurance costs me another $220/month (the cheapest I could find).
- My cell phone is $100/month.
- I pay an additional $200 in debt payments to my grandfather for a loan for school.
I’m enslaved to contracts for each one of those fixed expenses. I am barely making ends meet currently, and have taken drastic steps to save money, but I never have enough to last till payday. Furthermore, I graduate college next year and have taken out a few student loans, which will have to be repaid.
Because I don’t have time for another part-time job between working 9-5 and going to school in the evening, I’ve been exploring alternative methods of increasing income (babysitting, etsy, selling unused things). While these afford me minor relief, they are few and far between and I cannot really rely on them. I’ve also been avidly using coupons, which helps, but I honestly don’t buy that much of anything to make a difference.
A lot of the advice I read on saving money involves economies of scale and planning fun nights at home. What do you do when that doesn’t apply? How can I manage to have a fulfilling twenty-something life while managing my finances? I am lost, please help.
Christine is experience the pain of pinched cash flow — her expenses are too high and her income is too low. (Going back to Monday’s discussion of the balanced money formula, Christine’s needs are too high, cramping the other aspects of her financial life.)
In David Copperfield, Mr. Micawber astutely describes the thin line between joy and despair: “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
When I was in debt and living paycheck-to-paycheck, I was perpetually $50 or $100 behind. It felt like I was drowning. But once I managed to lift my income over my expenses, even by just a small amount, I felt like I could breathe again. I believe that this is what Christine needs to do, too. But how?
- When her contract is up, Christine should ditch the cell phone. Find a cheaper alternative. If possible, live without a telephone at all. That’s $100/month in savings right there. (From my own experience, $100/month can be huge.)
- Depending on her relationship with her grandfather, Christine could ask if he’s willing to temporarily accept reduced payments: $100 or $150 per month.
- Though I don’t know her circumstances, $220/month for car insurance seems astronomical. She should shop around again, but she should also look at her current coverage to see if there are ways to cut costs. (Here are 10 expert tips for saving on car insurance.)
These steps (and others like them) will increase Christine’s cash flow, which should make a huge difference. However, it’s important for her to maintain any surplus she generates, and not just to sink it into other expenses. Christine is locked into contracts, and it may be a while before she’s able to improve her cash flow significantly, but I believe this is where she needs to start.
Do you have any advice for Christine? Do you have any suggestions for her current situation? Any general recommendations for twenty-somethings who might find themselves in similar circumstances? How did you cope with these sorts of problems when you were just getting started in life?
Update: Christine added a comment answering a few questions, including additional expenses. Your encouragement has already helped her drop her insurance to $116/month! Also, I’ve marked a couple great comments in the thread. I especially like this comment from Jonathan.
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I would say that if she lives in an area that has good public transportation she should seriously consider selling her car and trying public transportation or a bike for a little while. That would result in huge savings.
If not that, maybe sell the car and get a cheap used car.
Also, negotiate with Gramps, I’m sure he’s willing to help…
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Sell the car and buy a clunker. Get back what you need to repay the entire loan, plus a few hundred bucks to find a rusted out shell. That will save your payments and the insurance. (Often if there is a loan on the vehicle, the lender requires comprehensive insurance – but if it’s yours and paid for, you just need liability.)
Get a roommate. Find somebody else in your situation and let them move in. Even if you just have one bedroom, you can make it work with futons, duct-tape divisions in bedrooms, etc. Even a sibling, painful as it may be.
Reduce every option on the cell phone. $100/mo – that’s ridiculous.
Get a small job at a place that has food for employees. Even just a couple of hours a week at a pizza place will put a few bucks in your pocket and provide you with a couple of meals. (Yes, you do have time. Plenty of people do it – it just sucks.)
Alternatively, if you don’t want to spend that time working, spend it applying for better-paying jobs or looking for roommates, either of which would save you right now.
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I am surprised by you asking her to get rid off the cell-phone. How can anybody (specially 20 somethings) live without a cell phone today? Better is to downgrade the plan.
Christine’s rent sounds really cheap (including internet). I doubt that is for one bedroom apartment, but if it is, she can consider living with a roommate for a while.
I agree that insurance is VERY high. If she is driving an expensive car, consider trading that in for a cheaper car- which will reduce both -monthly payment and insurance.
Good luck!
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I agree that cell phone and insurance are the two major items that seem extremely high. Even a fee to cancel the contract might be worth it depending on how long you have left. You can get a plan for $35 or spend even less with a prepaid plan. A $200 cancellation fee would pay for itself in 3 months if you could save $65 a month on a different plan.
Definitely shop around for car insurance. My rates are less than half that and I am the same age with an accident and a ticket, so you definitely can do better.
Think about getting a roommate, selling the car for a cheaper one, cook at home, etc. Instead of going out, get together with your friends for a potluck and movie or games at home. If family lives nearby, mooch a couple meals off them. They will be happy to get to spend some time with you.
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@LC — Finding a roommate is a great suggestion. I hadn’t considered that.
DollarDream$ wrote: How can anybody (specially 20 somethings) live without a cell phone today?
It can be done!
I’m not suggesting that Christine live without a phone permanently. But if her financial situation is causing her stress, then living without a phone seems like small price to pay to get things right. There are plenty of alternatives, including pay-as-you-go cell phones, a landline, and internet telephony.
A phone isn’t a required part of modern life — it just sometimes seems that way.
Caveat: This advice is coming from a man who will be 40 in March. If you’re in your twenties, keep in mind that I’m old.
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That cellphone plan seems very high. I have a $35/ month plan that basically only allows me to have long conversations after 8 p.m. or on weekends. I can still get important messages during the day, but I have to save my long catch-up calls for evenings or weekends.
Her rent seems fairly cheap but I’m sure she could find a roommate situation and save even more. It might even be worth paying a small fee to break her current lease. As J.D. says, even $50/month less in fixed expenses would give her some breathing room.
Personally I would go the roommate route rather than the extra job route if her priority is enjoying her 20s. If she can find an easy-to-get-along-with roommate, she will have a built-in person to spend a cheap evening with. You and your roomie can rent a movie, order some pizza and have some friends over instead of going out to a bar and spending 3Xs as much. With the exception of a couple of people, I always enjoyed living with roommates and have a lot of fond memories of those experiences.
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$100 a month for a cell phone?? That’s just nuts, what kind of plan is that?
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I did some math real quick
33,000 annual salary, assume 25% tax rate (I know this is high). SO…
24750 annual net salary
-15708 annual fixed expenses (listed anyway)
= 8970 / 12 months = 747.5
how are you spending the other 747.5 per month? what is your food budget?, How much do you spend on gas? How are you paying for school/books/supplies?
Perhaps the real question is, what do you consider a fulfilling 20-something life?
Tips: Find new insurance, 220 is ridiculous. I don’t think getting rid of the car will help much, 200 is already a pretty low car payment. Ask grandfather to reduce/suspend payments until your situation improves
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I don’t have much advice that hasn’t already been given, but I have been there. I’m now 33 with wife and 2 kids (3rd on the way). Unfortunately, I make about the same income you do and I’m trying to get my wife through nursing school as well (1 year to go!).
I take the bus when I can, we use coupons and the library a lot, and I supplement our income with eBay and the occassional student loans. I guess my main message to you is “hang in there…” I remember when the 2 of us lived off of my salary of $11,000!! (only 10 years ago.) We’ve made it so far and we’ll keep tightening our belts until that additional income comes in.
Just remember to keep using all the money-saving tips you learn on here, and as your income grows with you, your sense of financial freedom/security will slowly expand, too.
Best wishes in this tough economy!
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I would really get aggressive on lowering car insurance. Progressive and Geico are usually reasonable. I was paying $100/month and I had an accident on my record when I was with Progressive by myself.
Next, I’d negotiate for a better rate on the cell phone plan.
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I agree with getting a roomie if moving to a cheaper place is not possible (even though that is a very reasonable amount she pays). Prepaid cell phone is also a good idea. I wonder how much she is spending on non-fixed expenses and if there is any way to make further adjustments there.
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I’m a 30-something, and use my cell phone for outgoing calls only. It’s on a prepaid plan, and in total I spend about $150 per YEAR on it. Cutting back on the cell phone is definitely possible. $100 a month is absurd for somebody with a limited budget.
If possible, sell the car and pay off the loan, and replace the car with a beater or use public transit (better yet, a bike!). A lot of this will depend on where she lives, but cheaper transportation options are available.
When I was a broke 20-something going to university, I got by with no cell phone (just a land line) and no vehicle (just a bike and a bus pass). It can definitely be done, and the payoff later in life is huge. Depending on the climate, a bike is an exceptional value for transportation – you can equip yourself with everything you’d need including a GOOD bike for less than $500, and not have to worry about insurance, gas, or car payments. Oh, and you won’t need to pay for a gym membership either since your transportation becomes your daily exercise…
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If she’s worried about breaking her contract I know I was able to optimize my Sprint plan for a better rate without getting a new contract. I bet other phone companies offer similar options – call them up and say you want a better deal.
I’m also voting for public transportation. I got rid of my car two years ago and I barely ever miss it.
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Ask for a raise, times are tough but you never know…
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I echo the others who say to drop the car and reduce the cell plan. Cash flow is a killer in your 20s.
If your insurance is $220/mo, you’re looking at $1320 every six months. This is ludicrous. This means that either you’ve had accidents, tickets or are driving WAY too much car for your phase of life.
Take public transportation and sell the car and get a bike. Buses may not go everywhere you need, but “bus + bike” can get you most places in most cities. (And if there’s a place you drive to that you don’t feel comfortable biking to… maybe you shouldn’t be going there anyway.)
Once you finish college, your full time salary should jump. That’s when you can start to enjoy yourself. For now, you should lower your expectations and focus on completing college as quickly as possible. That’ll do the most for you over the long term, so get it out of the way ASAP.
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I’m a young 20-something myself. I’m living at home but not paying rent. I also don’t have a car payment because the car I have was paid off and given to me by my grandparents when I started college (I graduated in May).
I agree with everyone else that the car insurance and cell phone seem really high. I have a Verizon plan that gives me 450 anytime minutes, 250 text messages a month, and unlimited nights and weekends. I can also text or talk to anyone with Verizon for free anytime. This costs me $55 a month.
As for car insurance, my car is a 2001 with less than 100k miles on it, so it’s not exactly a clunker. I’m only paying $60.89 a month through USAA (my dad and grandpa were members). Mine is cheap because my car isn’t new and they give incentives to younger family members (and I’ve never had an accident), but the difference between $220/month and $60/month can’t just be because of the different cars we have…
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I’d be curious what she’s spending the rest of her money on. A $33k salary is a little over $2000 a month take home. Subtract those recurring monthly expenses and she has $685 left over for discretionary spending. That’s a lot of money for one person to go through on discretionary items.
Outside of that, I’d strongly suggest getting rid of the car. That will recover $420 of recurring monthly expenses. Some of that will have to be spent again on a beater and insurance, but it would surely be less than the current $420.
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The cell phone would be the easiest way. Every provider has an entry level plan at $40/month. If you can get by just having a phone for emergencies, Virgin Mobile has a plan the is pre-paid, $15/90 days, and all leftover minutes roll over. That is what I have been using for 5 years.
Roommates are a great idea. The rule that 2 can live as cheaply as 1 is true. Leave grandpa alone. You took the money on good faith and must pay as agreed. That is why you never lend money to relatives.
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Everyone has been giving great suggestions!
I also noticed that she never mentioned why she *had* to have a car. Saving $440 a month would be huge for her! Another option if she really does need a car but doesn’t use it a ton every month is to look into whether zipcar would work for her. For $440 she could get ~55 hrs of car use a month. If she uses less than that she would start saving $$.
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I second the get a roommate suggestion if you don’t already have one (It will drop the cost of rent and utilities) and if you have internet access at school and work then you can get rid of it at home! It might be a little inconvenient, but it will save you money.
It is hardest to make those descisions that will make your life a little more inconvenient/uncomfortable at first… but in the long run you will get used to those changes and they can pay off financially.
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I find it really shocking that her car insurance is $220/month. At no age has mine ever cost that much. I’m only two years older than her and I pay just under $400/six months. I’d recommend switching to paying half-yearly or annually, that should significantly lower the cost. (For me, Progressive auto insurance has without exception always had the best rates.)
Also agree with switching the cell phone plan. Again, I’m not sure how it’s so high. I pay extra for my plan to get calls in all of North America (I travel to Canada very frequently because my husband lives there) and it’s just under $100. Before I switched to that plan, my bill was just under $70 (would have been cheaper, but I pay for extra features like internet and whatnot). Lots of cell phone companies offer discounts for employees of certain companies (Boeing, Microsoft, &c. and even smaller ones as well, if her current provider doesn’t offer it, she ought to consider looking around to see if another provider does). She ought to check to see if they offer a discount for the company she works for (my discount is 20%, it makes a big difference). If she finds another company that is cheaper, it could be worth cancelling — lots of cell phone companies lower the cancellation fee depending on how far into your contract you are so it may not be as bad as it used to be.
I think the other things, while possible to change, would be considerably more difficult, but I think these two would definitely be the easiest to change to free up some more money, along with (as other people suggested) asking her grandfather to reduce her monthly payment and extending the length of the loan. I imagine if he’s kind enough to loan her money in the first place, then he’ll probably be kind enough to allow her more flexibility so she doesn’t drown in debt and find her self ultimately unable to pay back the loan.
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Hmm.. for even some different advice. She’s 24… and single. This might sound a little wacky, but besides being able to save money with downgrading her cellphone plan and getting better insurance and maybe cutting down how much she’s given to her grandfather (it depends on if he really needs the money), she could definitely find other ways to save like err.. never eating out, making her own meals.. and how about maybe finding a special someone. I know.. easier said then done, but let’s face it having a partner is a huge plus; dual income, 2 people paying for the rent of one (if you’re cool with that), 1/2 your electricity bill. The other person might pay for dinner more. So that’s something to consider.
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Perhaps she should think about getting a roommate to cut expenses in half if she has a two bedroom apt
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It seems to me that it’s not necessarily the fixed costs that are the main problem here. The amount of income that Christine has after housing, transportation, utilities and debt payments seems to be about: 33000*.80-1315*12 = 10620 (assuming a tax bracket of 15% with no deductions, which is probably too high, and a 5% state income tax). This means that Christine has $885 per month after her fixed expenses. This needs to cover food, gas, clothes, and entertainment. Clothes and entertainment can be cut to a minimum, and food doesn’t cost that much unless you eat out a lot. I think Christine should focus on those expenses in addition to seeing if she can reduce her cell phone bill and car insurance.
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If any of her family is in the military, tell her to look for insurance and banking at USAA…their car insurance is EXTEREMLY low (mine is $50 a month and I have a horrible record) and their banking is great, you get interest, cash rewards, AND atm fee refunds on all checking accounts with no fees. That could help a lot too.
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She should sell the car. If she needs to take out a small loan to cover the difference between the value of the car and the selling price, so be it.
Buy a really cheap car for cash and insure it for liability only.
Then save up money to upgrade in car over time. Never pay interest on something that goes down in value.
Paul
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I am 22, my husband is 26, and we are both grad students. We make around 25k a year combined. We have $600 rent, $300 car payment, $50 insurance, and $65 family plan cell phone bill. And we get by just fine.
$200 in debt payments is pretty serious. That needs to get knocked out. Sometimes we work ourselves into tough situations, and need to realize that it will take hard work, determination, and resolve to get ourselves out. Sometimes our previous choices prevent the fun we want to have now. That’s life, and that is part of being an adult. Get a roommate, ditch the phone, get better insurance or sell the car, and stop having so much fun until you have the money for it.
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Two things:
1)
Negotiate with Gramps. Every dollar less that he lets he pay is is dollar she might not pay on a charge card or something.
2)
That’s crazy on the cell phone. Call them. Tell them you are a loyal customer (if you are), etc. (get loyalty discounts). Many will let you renew contract with a different plan but no cancelation fee (get a plan with less minutes). If they don’t help, call back and get someone else. Ask for cancelation department (then ask again).
A cancelation fee of $300 will pay itself back in 6 months if you can find a good plan for $50.
I’ve heard whenever they change contract terms on your plan you have the right to cancel your contact (it’s not the terms you agreed to).
Check out some different forums on-line and see what plans other people are bragging about. I don’t know your cellular company so I have no specific tips.
Get less minutes on your phone and pay $3 a month to Skype for unlimited outbound calling to US & Canada and make some of your calls from your computer at home. This is unlimited calls to phone lines (land or cellular).
c)
And the insurance seems crazy high.
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1. She needs to reduce her cell phone plan DRASTICALLY. She needs to get rid of all media, texting, and web services she may already subscribe to. Additionally, she needs to evaluate her phone habits. Is she going over her allotted minutes? Does she have far more minutes than she needs? You can change a plan w/o breaking a contract.
2. That car insurance rate is astronomical, and there is no reason in the world that one should pay more for monthly insurance than you do for your monthly car payment. Switch down to liability only, find another company, or (as a last resort) sell that car and buy something that doesn’t cost $220/month to insure. Ridiculous!!!
3. I don’t agree w/ negotiating the loan repayment to grandpa. She made a commitment and should stick to it. Also, trying to shirk her responsibility to him may have future consequences (he may not want to help her next time).
4. She needs to draw up a strict budget and stick to it. It sounds obvious, but having a ruler by which to measure your spending is important. There may be some hidden money leaks that she would find from living on a real budget.
5. Finally, I think she needs to rethink what it means to lead a “fulfilling life.” Very rarely do truly fulfilled people attribute their life satisfaction to money, and indeed some of the happiest people don’t have a heck of a lot of money.
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Two easy things:
1. If possible, find a roommate
2. Lower the cell plan ($100 a month!? My partner and I together spend that, and with a data plan too!)
With #2, there may be a short-term penalty for doing that. However, if you can get a $50 plan, and have to pay $100 fee to make the change, your payback is still 2 months. Long-term thinking is the key.
Some other possibilities:
* Still in college? Student loans can be used for transportation expenses, and may have a lower rate than your car loan: use a student loan to pay off the car loan if that’s the case. Short term, you’ll have better cash flow, and long term you’ll pay less (and you’ll pay it back when you’ve graduated and have better income).
* Consider barter. For example, as your landlord if there’s something you can do in order to reduce your rent. I once reduced my rent by about 8% simply by agreeing to spend 30m a week mowing the lawn!
* In fact, negotiate often. Others have mentioned speaking with your grandfather about lowering the rate of payment. Other creditors are often open to such negotiations as well. Don’t stop there: I was able negotiate a 20% discount on my haircuts by promising a year’s worth of business. Lots of local businesses are willing to deal, and even some national ones are.
* Apply for grants, scholarships, etc. Some grants and scholarships are available that don’t pay tuition, and instead help you with living expenses.
* Ditch the car; even if you need a car a couple times a month, it could be cheaper to rent (esp. from friends) or participate in something like HourCar.
Above all, buck up! Most college students don’t even make ends meet, and leave school with piles of credit card debt.
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I would suggest electricinsurance.com. I found it when I worked a summer internship at GE (the insurance was originally only for GE employees, but has now opened up to everyone). I have two cars and a condo with full coverage and I am paying $150 a month. They also do a good student discount.
Call your cell phone company and negotiate a lower plan, it can be done pretty easily in most cases if you just ask. If you post your cell phone plan and carrier on here I am sure all sorts of people will be willing to help you find the lowest price. I pay $53 a month for two phones with unlimited text/data and 500 min each.
For some short term cash you can always open up a free checking account and get a bonus (Bank of America, Chase and ING do this all the time).
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As a 20something female I’m going to disagree with the roommate idea. Anyone who is this age has thought about it and those who think they can do it probably already are. I am consciously paying a premium to not live with a nutjob or a friend I’ll end up falling out with over something stupid. It’s a quality of life issue.
As for the cell phone, that is way, way too high. Unless you’ve been with your carrier for a number of years, don’t call the sales department (if you have been, call and ask for loyalty or retention – they’re usually separate from regular sales). Go into the store and get one of the commissioned sales people to sign you up for a new plan. You’ll have to extend the contract but most commissions seem to be structured in a way that doesn’t penalize them for this. Being at work all day I do fine with a 200 minute/mo sprint plan ($30) with $5 for buying my nights and weekends down to 7 p.m. and $5 for texting.
I’m also curious what’s eating up the extra $550-$700. If it’s a cc you have my sympathy, just got out of that myself. Otherwise maybe look at where it’s going. Maybe try to structure some time on weekends to cook and pack meals so you have something to eat between work and school if going out to eat is the problem? This helped me a bit in grad school, although I still hit up Taco Bell way more than I should have. Good luck!
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As an alternative to selling the car outright, she should consider alternate transportation (bike, walking, bus/public transportation) and call her company to lower the mileage she’s driving in a year. Also, she should ask for a full breakout of what her deductibles are and what she’s paying for them, and have them run an alternate quote with different numbers. Any change would help.
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@Heather:
Renegotiating a payment isn’t necessarily “shirking a commitment”. As someone who’s lent to struggling students, I have some experience on the receiving end.
When I had one of my debtors come to me and say “I want to take an extra class, but if I do, I will have fewer hours at work and couldn’t make all my bills — can we renegotiate for a longer term and a lower bill”, I was happy to hear them out. It shows a lot of responsibility to discuss the issues rather than constantly dread them.
In this case, a “I’m paying all my bills, but I’m really trying to save for the future; I’ve cut out every expense I can, but I can’t reach my goals — is there something we can work out to lower my payment to you?” would probably work pretty well. Depends on the grandpa, I guess.
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Wait a moment… $33k/year is $634/week. I’m no accountant, but I estimate roughly $5797/year income tax on that without considering any deductions. (She’s just barely in the 25% tax bracket.)
Medical Ins. (if she pays that) for a single person is not typically very much, but let’s assume about $35/paycheck.
So, again, rough numbers, but that’s about $488/week (27202/52 (weeks)).
*4 = ~$1953/month net.
The expenses she cites add up to $1350/month.
~$765/month left after taxes, insurance, and her cited bills.
I agree she’s paying way too much for auto insurance and mobile phone, but where is the other ~$765/month going?
Even if my numbers are a bit off, her remaining money is most certainly being blown somewhere.
So, in addition to finding alternative, cheaper ins. and cell phone providers, etc., I’d suggest using some software to track her other expenditures to see where the rest of her money is going and plug those holes.
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I am in almost an identical situation, only slightly younger with a slightly lower income.
I think the tips in the post and comments are solid. Lowering the insurance costs, phone bill, and asking to pay less for the loans would give her a little extra room in the budget. $100 a month for a phonebill sounds like an Iphone or a similar data plan, which really isn’t something it seems she can comfortably afford.
I think exploring outside income more seriously (or finding a better paying job) is really the best way to make this situation better. If you are babysitting sporadically, look for more families. I steadily babysat all through college and continue to work with three regular families. Try to arrange for a standing day once a week, instead of unreliable or infrequent dates. This way the income can be more dependable.
Other things I think twenty-somethings should do: keep in mind long-term goals, delay purchases (if I had gone with my gut I too would have an Iphone and a 100/month cellphone plan), be mindful of where your money goes, and keep reading about personal finance. It’s easy to get discouraged saving and being frugal at our age. Not a lot of people care about it or even really discuss it, but by absorbing information from blogs and articles I feel motivated.
Goodluck!
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Here are some general suggestions that may (or may not) help you out:
1st – Have you talked with your boss about a pay increase? Many companies offer yearly merit increases after your probationary period. If not, perhaps asking for a couple of hours of overtime if there is the opportunity. Even an hour a day (10 hours total on a 2 week pay period) would add up to another fifty to a hundred bucks.
2nd – Obviously people have talked about getting a cheaper phone or getting rid of the phone all together, selling the car and using public transportation, getting cheaper car insurance, roommates, etc. For me, what helped was starting to really see where my money was going and if any of it was falling through the cracks. I found that one month I spent $20 on just bottles of soda from the soda machine at work….It was crazy. Now that I have tightened up with my lunches (not going out and instead bringing my lunch – especially leftovers), I’m able to see more money for paying off debts and sock into our emergency fund. The best thing was that I am still spending the same amount of money each month on groceries and yet buying small plastic bottles of soda (when they’re on sale) and bringing them with my lunch. I could have gotten rid of the soda altogether but I work in a high stress job and it helps me to relax during lunch.
Good Luck!
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I use a pre-paid cell phone plan and have been getting by with a cost of $70 per year for the last few years.
Until about a year ago, for over five years I rented a room in a private home at a very low rent. Something like this might be an option, especially since she is at work or school much of the time.
In my experience having a clunker car contributed more to expenses than it saved. I’ve been amazed how much more economical it has been since I changed to a better car.
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Try using the cell phone to make calls only (no texting, surfing the web, sending pics) and maybe you can get on a family plan. I am still on my parents plan (it doesn’t cost them any more, and it saves me $50/month). My fiancee did the same thing a year ago, his parents had cell phones from separate companies, so he signed them up for a family plan and joined it as well. It saved them $10/mo and him $60/mo. Even if you agree to pay part of the bill it could be cheaper…
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My thoughts echo those who mention that the fixed costs might not be the root of the problem here. I’m in a similar boat — early 20′s, and low cashflow (I’m a grad student, I make less than Christine states, and I live in an area where rent is more expensive). The question she asks, “How can I manage to have a fulfilling twenty-something life while managing my finances?” provides a bit of a clue as to what might be going on. Dinner out with friends and lunch at the deli with co-workers adds up quickly, not to mention the occasional night out on the town and cab ride home.
Ditching the car, even if it means moving somewhere where rent is a bit more expensive so that one can bus/bike, is definitely worth it. As for the contracts, the one-time hit of buying out the remainder of the terms (if the contract allows) might be worth it, as long as one doesn’t pick up new contracts with the newfound breathing room.
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I think there is a lot of information missing here. For one, I’m curious as to what makes the cell phone bill so high. Is that the minimum plan or are there add-ons? If the second, then, hey, no-brainer. I live in an expensive city, and I still pay about $50/mo for cell phone.
Two, why is the car insurance so high? Christine, if you don’t know, then you should ask. It might also lead to negotiation. Again, I live in a crime-ridden large city, and paid about $400 every 6 months (before I just sold the car and stopped worry about it).
Three, what about the difference between these expenses and income flow? Where is the rest of that money going? Is there a budget in place where there can be room to find some flexibility?
Four, do “utilities” include cable?
Five, you say your main problem are fixed expenses. That is usually the case for most people. But the solution generally lies in the discretionary and non-fixed expenses.
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You can change your cell phone situation by posting on craigslist. Offer your current cell phone for free (you may have to offer them some additional cash if your cell phone isn’t very good) the only catch, of course, is that if they want the phone and cash they have to take over your contract.
We did this recently with my b/f’s cell phone so he could switch carriers and it took less than a week to find someone.
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I’ll nth the suggestion of trying public transportation if at all possible. Since giving up my car in January and switching to biking and busing I’ve saved a ton of money and gotten a lot of exercise, both of which have been a huge impact on my life. And when I bus somewhere I bring along a book or my DS with BrainAge, so I’m not just sitting and staring out of the window.
How much time is left in the cell phone contract? I’m 26, but myself and my siblings all still share a family plan with our parents, and we have for at least 6 years. I think an extra line is only $10/month above the base rate with T-Mobile, which has led to great savings for all of us. As Gary mentioned above, a $300 cancellation plan, if it leads to a reduced cost of $50, makes up for itself in 6 months.
Good luck, Christine.
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I would not recommend selling/trading your cell phone contract. There is no binding contact between you and the person. The bills will still be your responsibility if they fail to pay. Haven’t you ever seen daytime court shows?
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Her insurance rates are likely so high because she’s under 25. When I learned how to drive at age 24, my insurance agent strongly encouraged me to not acquire a car until after my 25th birthday, because my car insurance would drop by about 50% at that point. Christine should remember to call her insurance agent on her birthday and ask if her rates can go down.
Alternately, yes, look into selling the car and using public transportation.
Definitely look at reducing that cell plan–you can generally do that with the same cell company without paying a fee to break the contract. I wouldn’t recommend going without a phone at all, honestly–you really do need one for emergencies and if you’re hunting for a new job at all.
I remember what it was like being young and poor, and you have my sympathies. It gets better, though.
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* I frequently use my car for work, although I take the bus whenever I can so I drive very little.
* I live in a one-bedroom apartment and internet is provided by my apartment and included in the rent price. I also don’t have an apartment that could be shared by two people.
* At the suggestion of practically everyone, I found a much better deal through Progressive ($116/month) — I’m very excited about both of these since it will save me $129 a month without having to do anything. My car is a 2007 and my payments are low because I put down a substantial payment, but it makes insurance rates higher.
* Tuition, books and education expenses are around $500/month.
* My cell phone plan is high because I got an iPhone as a gift which required me to switch carriers and plans. I’ve reduced to the basic plan they have but it’s still $75/month.
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I haven’t read all of the other comments, but here’s my $0.02:
1. Most of the major US carriers will let you change *plans* within a single *contract*. She can drop from a plan full of minutes and unlimited texts to a smaller, less expensive plan. Most US carriers also have discounts for schools and employers (I get 20% off of Verizon through my employer). Look into that.
2. $220/mo for auto insurance is absolutely too high. Assuming that she’s been accident free for a few years, has Bs or better, and has renter’s insurance (she should!), she should be able to get that well below $220. My wife and I pay less than that for comprehensive coverage on both of our vehicles combined. Try raising your deductible to $1000 and trimming some of the junk out of your insurance plan.
3. Re-negotiate the monthly payments to her grandfather, if possible. He’ll probably want to hold her to their agreement, on principle, but family is family and he’ll probably relax a bit on the details.
The most important thing, for me, was to drop the idea of “Keeping Up With the Joneses”. Once I learned to evaluate my wants and needs, satisfy those, and feel happy, my overall expenses plummeted.
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What about flatmates? To live with a friend and share the rent .. it’s a good idea.
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I agree with ditching the car. It’ll be the easiest way to save a whole lot of money, if she can make it work.
Location is key to making this work. If you are poor, you need to live in a place where you can take public transportation to both work and school, or where you can bike or walk to both locations.
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If she’s had a DUI or even a couple of speeding tickets, $220/month for insurance is probably the best she’s going to do. (Speculating here, not enough details to really offer sound advice) And with a $200/month car payment, she may already be driving a clunker. I’m assuming that’s for a used car unless she put down a large deposit on a new car. If you buy a used car, you could easily be paying $200/month on year 5 of the loan for a car that will barely start. Depending on where she lives, public transportation may not be an option. (I live in the suburbs, and the closest bus stop to my house is 5 ¼ miles away, and the bus doesn’t go anywhere near my place of work.) I’ll echo everyone else in saying that $100/month for a cell is ridiculous for one person.
She needs to start off by writing down every single penny she spends for the next month. I don’t care if it is a $.50 pack of gum, write it down. Put it into a simple spreadsheet, and then tally up each category of expenses. The biggest hidden money-pit for most people is the sum total of small expenses, not the larger bills. Once she accounts for every penny of her income on paper, she’ll be in a position to see what can be eliminated or reduced.
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