Managing Credit/Debt

I’ve set a goal this month of 50% of my income going to savings and debt repayment.  If you include my apartment deposit of $250 as savings I had 46.4% of my income go towards savings and debt repayment last month.  Without the deposit I was still at 35% which I consider to be pretty good considering I don’t make that much money.  Since I have fewer unusual expenses this month I should be able to make over my 50% goal.

My final credit card payment should go through today leaving me with no credit card debt.  I can’t get too excited about this since I still have about $57,000 in student loans but it is progress.  One positive thing is that I  now know that I won’t run my credit card debt back up with frivolous purchases.  Another thing is that I won’t have a generic debt expense anymore, it will all be student loans.  My credit card debt was a mixture of a student loan debt balance transfer and miscellaneous expenses such as food, clothing, gas, etc. so I wasn’t sure what I was paying off.

Now that I have my credit card paid off I have two new goals for my money.  One is to pay off my private student loan that has an interest rate of 11.75% and a balance of just under $2000.  The other goal is to fully fund my Roth IRA.  The maximum contribution is $4000 for this year and I’ve only contributed $150 so far.  I have until April of next year to get this funded.  For now my plan is to split any extra money equally between the two goals although I’m considering just focusing on one goal and completing it than focusing on the other.

Now that I have my emergency fund established I am tempted to spend it on non-emergencies. My credit card debt is down to $724 and I could eliminate it if I tapped my emergency fund. That isn’t what the emergency fund is for though and since the credit card debt is at 0% and my emergency fund is earning 5.05% it wouldn’t make sense to pay off the debt.

I do however have a private student loan that has 11.75% interest. That loan balance is almost $2,000 so I couldn’t pay it off with my emergency fund but it would certainly help me pay it off faster. It does seem somewhat illogical to keep money in savings at 5.05% when you are paying 11.75% but I like knowing that I have the emergency fund available. I’m considering being even more illogical and paying off my credit card before the private student loan simply because I can pay off the credit card faster and have one less debt. As long as I am making progress I’m not going to be overly concerned with whether I’m doing the thing that makes the absolute best financial sense.

I set up a transfer from my checking account to my Emigrant Direct account yesterday that will finish the funding of my baby emergency fund. I’ve had a goal of saving $1000 for an emergency fund since I started working in late April but it has taken me much longer than I anticipated to complete it. Extensive dental work and car repairs hampered my ability to save money. Now that I have this emergency fund established I am going to concentrate on paying off my credit  card before my 0% interest expires and possibly increasing my Roth IRA contribution.

Now that I’ve been budgeting for a few months I’ve noticed that every month has unusual expenses. In May I had my oral surgery which was expensive and limited how much I could pay down my debt and contribute to my emergency fund. I figured that in June I’d be able to put a lot more money towards these since I wouldn’t have the oral surgery bill. However, things didn’t turn out that way. I had an unexpected car repair which took quite a bit of money. Also I had to pay for three months of health insurance when I thought I could pay one month at a time. I also had to pay my personal property tax, renew my license and registration on my car, and pay for the next six months of auto insurance. While those expenses were expected when combined with the unexpected expenses I didn’t have nearly the surplus I expected.

This month is starting off the same. I knew I would have some dental expenses but they are already higher than I thought they would be. I think I need to budget $100-$200 a month for unexpected expenses. If it turns out I don’t actually have any unexpected expenses in a month than I can go ahead and contribute that amount  towards my debt or savings. I’m not sure if this is the best solution but it is what I came up with. I’d be happy to hear any suggestions any readers would like to contribute.