Micathgrl is debt free -- now what?

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Joined: Thu Jun 12, 2008 8:25 am
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Micathgrl is debt free -- now what?

Postby micathgrl » Sat Aug 02, 2008 7:36 am

Two years ago I was making $21,000 a year and had $20,000 in debt (including 10K in CC with 25% interest!)

I got a higher paying job two years ago this month (well, I'm self-employed). I got debt free in April of 2008. Then there was, I have this money, what do I do now? Spend it? (That's what I would have done before?)

No. I found Dave Ramsey on my radio and started looking for other sources. That let me to GRS. GRS let me to ING. ING and its high interest led me away from Chase for my bank accounts (3% vs .15% on savings, plus $300 minimum in savings? Please!) and to a local CU. I ended up paring down again my cell phone bill and got rid of my storage unit. I've got Mint. I started working for ChaCha very PT in order to help beef up the emergency fund even quicker.

So, I currently have $1300 in my FFEF. I made a budget. My mom has cancer and is scheduled to have surgery (it's been back up nearly two months already) sometime (she's still having chemo). Anything that's come under budget on food and gas gets socked away before she'll be in the hospital for several days and it'll be 1+ hour drive.

The plan is to get the FFEF up to $2500 and switched my individual insurance to an HDPD. Another local credit union has no fees and a great interest rate on the HSA.

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Postby 144mph » Tue Aug 05, 2008 3:31 am

FFEF = Emergency Fund?

I was in the same position as you 2 years ago. I kind of became awakened to the concept of saving for retirement (and an early one if possible) and I wanted to know the standard path.

From what I've been able to discern, the steps are the following, though there may be a lot of disagreement about the order I have presented here:

1. Build up an Emergency Fund (sounds like you've got a start)
2. Get rid of prohibitively high interest rate debt (you've taken care of that 25% CC; Good one!)
3. Save for retirement in tax deferred accounts
a. 401K
b. IRA (Roth or traditional)
4. Pad your Emergency Fund to a very healthy amount
5. Invest in a taxable account
a. Stocks
b. Bonds

There are many books out there about the specific mix, allocation, strategies, and path presented here, but I think it covers the basics. Of course, you're going to have other stuff that needs to get folded in to this, like buying a house (if the market situation warrants).

You've got a great start, so keep up the good work. The blogs, books, and online community are all fantastic resources for information, encouragement, and support.

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Location: Sunny Florida

Postby Sam » Tue Aug 05, 2008 7:43 am

Great job on killing that credit card debt!!

If you have other debt, I'd work on killing that as well while also adding to your emergency fund. If you can start saving for retirement in your 20s you will be so much better off so try to work that into your plan in a tax advantaged account (401k or IRA).

(Follow Sam's financial and real estate adventures.)

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Joined: Tue Aug 05, 2008 12:40 pm
Location: East Coast, USA

Postby Sandra1979 » Wed Aug 06, 2008 12:26 pm

I'm getting close to retirement, so it's a matter of urgency for me to open an IRA (in addition to my 401k.)

Think I'm gonna get there. :D

BTW...Dave Ramsey rocks!

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Joined: Tue Aug 05, 2008 3:22 pm
Location: Northern CA

Postby sandi_k » Wed Aug 06, 2008 1:57 pm

I agree with 144mph in the overall view. The only thing that's missing is insurance.

Do you have medical insurance? Do you have disability insurance?

As someone facing surgery within the year, this has become a much-appreciated part of my portfolio. :)


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