Anyone else living paycheck to paycheck?

[Jimmy Snyder]

Most people would balk at being $20k in debt on a credit card, yet those same people think financing a new $20k car is completely reasonable. In fact, they think, everyone does it, so it's not "real" debt like credit card debt.

Of course $20K of debt for a car is real debt. But it is not the same thing as credit card debt. The interest rate is much smaller and the car has at least some resale value.

 

[gravenewworld]

That ends up being something like 1,700 miles per month!

- Warren

Yup. I'm slated to put about 20-25K miles on my car a year. Work is about 70 miles each day round trip. There is no public transportation from where I live to where I work. This is also why I got a new car. I wanted something reliable for the long commute and something that I wouldn't have to worry about fixing constantly. I also wanted something with good resale value incase I decided to ditch a car all together if I decided to go to grad school. Stupid car does eat a lot of my paycheck, but it really wasn't that expensive, it is only a $18 K car brand new.Plus paying off a new car does give your credit history a good boost.Funny how everyone points out how the car is the bane of my finances, but not the student loans. In many cases a college education is the REAL rip-off. I should have went to my in-state public university for 1/4 of the cost and for the same exact education.

 

[JasonRox]

Um... move closer.

 

[JasonRox]

I also wanted something with good resale value incase I decided to ditch a car all together if I decided to go to grad school.

I'll bring the bad news. The bad news is that NO car will have a good resale value with the mileage your putting on it.

 

[gravenewworld]

Anybody with a regular income should establish a budget (NO credit cards) that allows them to live within their means. If this means driving a 4-5 year old car (or NO car if you have public transportation), doing without cable, cutting back on phone service, buck up and do it. Nobody is going to save money for you. Lots of people are willing to dump on the boomers, claiming that our SS burden will collapse the economy. That's a bunch of crap, and some incremental adjustments could easily make SS healthy, if our congressional representatives would grow a set. BTW, I have been paying into SS every year since I was 14 (maintaining a cemetery by myself at that age). I never spent those early paychecks, banking all of them so I might have a chance to go to college. When I got to college, I kept a little pool of cash around (several hundred dollars) and bought, repaired and re-sold guitars and amplifiers and worked weekends in my band playing frat parties and private parties. Every summer, I worked all the hours I could get at local wood-working mills to fatten up my savings. If I had gone to college on borrowed money, I would have been screwed for years. As it turned out, at the end of every year, after paying for tuition, books, rent, food, etc, I had more money than I'd had the previous year, and I still got to treat myself to the occasional pizzas and beers.

Yeah but kids in college CAN'T pay their tuitions anymore from "summer jobs". The cost of college tuition and textbooks has easily outpaced inflation by a ridiculous percentage every year. You have kids now borrowing 40,50,60, even 70 grand to attend college. The stories of people who were able to work their way through college to pay for all of their tuition and expenses 15-20 years ago no longer applies. I worked full time all summer long and you know how much I was able to make? Just enough to cover the cost of my textbooks every year for both semesters and my rent. Tuition? LOL no way in hell a college student like me was going to be able to come up with $20K per year from working full time in the summer and part time during the year to avoid taking out a loan. It is ABSOLUTELY IMPOSSIBLE these days for a college student to be able to pay their entire tuition and expenses by themselves with summer and part time jobs without taking out some decent sized loans. The cost of education has skyrocketed over the past 20 years.

 

[JasonRox]

Yeah but kids in college CAN'T pay their tuitions anymore from "summer jobs". The cost of college tuition and textbooks has easily outpaced inflation by a ridiculous percentage every year. You have kids now borrowing 40,50,60, even 70 grand to attend college. The stories of people who were able to work their way through college to pay for all of their tuition and expenses 15-20 years ago no longer applies. I worked full time all summer long and you know how much I was able to make? Just enough to cover the cost of my textbooks every year for both semesters and my rent. Tuition? LOL no way in hell a college student like me was going to be able to come up with $20K per year from working full time in the summer and part time during the year to avoid taking out a loan. It is ABSOLUTELY IMPOSSIBLE these days for a college student to be able to pay their entire tuition and expenses by themselves with summer and part time jobs without taking out some decent sized loans. The cost of education has skyrocketed over the past 20 years.

I agree 100%!

 

[EnumaElish]

Living from paycheck to paycheck isn't the end of the world as long as you have semi-liquid assets; in your case, the car.

My advice is to pay credit cards on time and not accumulate finance charges. As long as you can do this, credit cards can help you to make ends meet by smoothing out your spending (same as the year-round average payment plan for utilities). But if you want to save more, then you need to spend less.

Other solutions are to renegotiate for an increase, find a higher paying job, or a second job (e.g. tutoring -- if you have a car, you can use it a little more to make a little more money).

 

[gravenewworld]

I'll bring the bad news. The bad news is that NO car will have a good resale value with the mileage your putting on it.

This is where I have to disagree. Mazda 3 is well known for retaining its value. An '07 3 with 25 K miles still retains 75% of its value in good condition (which mine is in). Move closer? Possibly, but the housing prices are even higher if I move closer to where I work. Plus I get to live in the big city now while I am young instead of living out in the sterile boring burbs.

 

[ShawnD]

That leaves $820 minus what ever I have to pay off on my credit card.

This part of your budget is critical because the way interest is calculated on credit card debt should be illegal but somehow isn't. When you get financing on a car or a house, interest is usually compounded on a monthly or biweekly basis. Credit cards are compounded daily. When you pay more than the minimum on a mortgage or car payment, the extra you throw in goes towards paying the principle amount of the loan, which lowers the amount of interest charged in the next compounding period. Credit cards are the opposite, that extra money goes towards paying the interest, and the principle is not paid at all until the entire amount of interest is paid first. Car and house loans have (somewhat) fixed interest rates, so the agreed amount of 5% on a car loan is what the interest is for the entire duration of the loan, or having something like 10 year fixed on a mortgage means the interest is fixed at that rate for 10 years. Credit cards have no locked in rates and can be arbitrarily raised at any given time. You can sign up for a card at 20% interest and they're allowed to jack it up to 30% with no warning or reason.

Find a way to refinance. Talk to a debt consolidation company, try to get a bank loan, try to borrow money from your parents if you need to. Get out of credit card as soon as possible, even if that means you eat nothing but rice for the next couple of months.

Usually need to fill up 1.5 tanks of gas per week so that is 6 tanks x 13 gallons x $3.05=$240 per month on gasoline.

Would it be possible to move closer to work without spending significantly more on rent?

That leaves around $500 a month for food. If I spent all that on food that would be about $15 per day/$5 per meal. That assumes I spend $0 on entertainment every month also.

That's an incredible amount of money to be spending on food. I'm not sure what the difference in PPP is between our two cities, but where I live that would be enough to eat t-bone steak for every meal. My own food expenses are around $100 per month and I think I eat fairly well. I eat toast with peanut butter or jam in the morning, I usually don't eat lunch but sometimes I bring leftovers from the previous night, and my supper is something simple like poached eggs on toast, macaroni and cheese, or chili. Milk is my biggest food expense.

If the cost for electricty is less than for gas or oil (it is much cheaper where I live), he could save a lot by going electric. Also, it would allow heating each room depending on it's use, which could also help cut down.

Localizing the heat really helps. My bedroom has about 500W worth of stuff running, and it keeps this room at least 10C warmer than my kitchen which has nothing running. There's no sense in heating the entire apartment when you're the only person there. Keep an electric heater in the room where you spend the most time, and just heat that one room, and only when you're there. You can get a 1500W heater from Home Depot for $20.Get a second job too. I work at McDonalds on weekends; it's projected to bring in an extra $9,000 per year edit:

Anybody with a regular income should establish a budget (NO credit cards)

I would disagree with this part because using the card builds your credit rating. It's free to use as long as you pay the entire thing on time. It should be used under the assumption that you currently have enough money in your bank account at that time to pay the entire balance on the card. Most people don't think of it like that, but they probably should.

There was one month when the payment dates were screwy and somehow I ended up underpaying the balance by about $50 for a period of three days. The bill was something like 500, I paid 450, then a few days later I paid the remainder. Over the course of 3 days, at 20% annual interest, compounded daily, Visa found a way to charge $12 in interest. If you scale that rate over the course of a year, it's pretty close to 3000% interest.
$12 interest / $50 principle / 3 days * 365 days per year = 29.2, or 2920% yearly interest. Pay that sucker off!

 

[JasonRox]

Get a second job too. I work at McDonalds on weekends; it's projected to bring in an extra $9,000 per year

Smart! I was thinking of doing the same thing for like 6 months after graduating. I don't think I'd want to do it for longer than that. I also plan on doing tutoring services at nearby colleges and stuff.

The extra money can help pay off debts quick.

Note: I'd rather work at a grocery store though.

 

[Cyrus]

I sell drugs. I don't recommend it.

 

[ice109]

That's an incredible amount of money to be spending on food. I'm not sure what the difference in PPP is between our two cities, but where I live that would be enough to eat t-bone steak for every meal. My own food expenses are around $100 per month and I think I eat fairly well. I eat toast with peanut butter or jam in the morning, I usually don't eat lunch but sometimes I bring leftovers from the previous night, and my supper is something simple like poached eggs on toast, macaroni and cheese, or chili. Milk is my biggest food expense.

dude not that 500$ a month isn't a huge amount for food but you must be malnourished to be living off 100$.

 

[drankin]

If you didn't have car payments and what you pay in gas right now, you could rent a decent ($950/mo) apartment close to work and get ahead. But that's just logic talking.

 

[drankin]

I sell drugs. I don't recommend it.

I hear the dental plan sucks.

 

[gravenewworld]

If you didn't have car payments and what you pay in gas right now, you could rent a decent ($950/mo) apartment close to work and get ahead. But that's just logic talking.

No that would just be simply shifting one expense in the form of car payments and transferring it into another form of expenses--higher rent. But that is just logic talking.

That's an incredible amount of money to be spending on food. I'm not sure what the difference in PPP is between our two cities, but where I live that would be enough to eat t-bone steak for every meal. My own food expenses are around $100 per month and I think I eat fairly well. I eat toast with peanut butter or jam in the morning, I usually don't eat lunch but sometimes I bring leftovers from the previous night, and my supper is something simple like poached eggs on toast, macaroni and cheese, or chili. Milk is my biggest food expense.

$500 a month is not that much money at all to be spending on food. It breaks down to only about $5 per meal. Also, the $500 figure also assumes I spend $0 on entertainment or medical costs. You must look like a refugee if you can live off of $100 a month for food. That means you are only spending $1.10 per meal-- IMPOSSIBLE to live off of.



Also what is the point of using a space heater if your roommates are just going to blast the heat anyway?


I'll just end up moving back to my parents' house and live there rent and utility free and get all my stupid student loans paid off.

 

[Cyrus]

Man, $42k in loans is a freaking LOT Of money to owe, and its just for a piece of paper. You can't resell it like a house or car. I am lucky my parents paid for my school, I always bought my own books, which was nearly $1k per semester! I worked at an internship during all 4 years and saved my money (which I spent on flying lessons, but worth every penny. Education is priceless). Now that I am going to be in grad school, I could actually finish debt free and with money in the positive from the money they pay grad students. (But keep in mind, I lived at home during college because I saw no reason to give 10k a year when I live a 30 min drive away. It has its +'s and -'s.) I also transferred from a CC my first two years, which was even cheaper. So I only really paid for 3 years of University tuition (due to taking winter and summer classes, which are MAD expensive). And to be honest, I am glad I did NOT take my first two years at University becuase the classes are huge and the teachers don't care squat. They just weed people out.

Life is about chioces. I have a 10 year old honda accord going on 140k miles. Runs fine. Need to change the front spring though, its starting to squeek. I have no plans on buying a new fancy car when I start working. They just depreciate. My only real goal is to get a bangin appartment in downtown DC when I start working (if possible). That would be MUCH more fun than a dorm, IMO, and money better spent for a life experience.

Thats exactly why I only went to grad school if they would pay me. I am done giving money to school.

 

[gravenewworld]

Man, $42k in loans is a freaking LOT Of money to owe, and its just for a piece of paper. You can't resell it like a house or car. I am lucky my parents paid for my school, I always bought my own books, which was nearly $1k per semester! I worked at an internship during all 4 years and saved my money (which I spent on flying lessons, but worth every penny. Education is priceless). Now that I am going to be in grad school, I could actually finish debt free and with money in the positive from the money they pay grad students. (But keep in mind, I lived at home during college because I saw no reason to give 10k a year when I live a 30 min drive away. It has its +'s and -'s.) I also transferred from a CC my first two years, which was even cheaper. So I only really paid for 3 years of University tuition (due to taking winter and summer classes, which are MAD expensive). And to be honest, I am glad I did NOT take my first two years at University becuase the classes are huge and the teachers don't care squat. They just weed people out.

Life is about chioces. I have a 10 year old honda accord going on 140k miles. Runs fine. Need to change the front spring though, its starting to squeek. I have no plans on buying a new fancy car when I start working. They just depreciate.

Education may be priceless, but that doesn't give the universities the right to rip off their students. My kid is absolutely going to an instate public college. Private universities are NOT worth it.

 

[Cyrus]

Yep, I agree. Unless its (1) Harvard, (2) Princeton, or (3) MIT, (4) Stanford, (5) yale, its not worth it IMO. Besides, you can always go there for grad school. But for certain majors, having that name like Harvard Business, means a LOT in the business world and opens doors for you.

 

[Greg Bernhardt]

Education may be priceless, but that doesn't give the universities the right to rip off their students. My kid is absolutely going to an instate public college. Private universities are NOT worth it.

The only big difference between good public schools and good private schools are connections and company recruiting. I know a kid who went to Boston University and went one to be very successful. Another of my friends went to Harvard and was equally smart. Both ended up at great companies and successful, but one just paid ALOT more so she had better connections when she graduated and the opportunity to be heavily recruited and woo'ed. But again in the end both successful.

 

[ShawnD]

$500 a month is not that much money at all to be spending on food. It breaks down to only about $5 per meal. Also, the $500 figure also assumes I spend $0 on entertainment or medical costs. You must look like a refugee if you can live off of $100 a month for food. That means you are only spending $1.10 per meal-- IMPOSSIBLE to live off of.

With $5, you can buy one of the following:
-3lbs of ground beef, the regular fatty kind
-5L (~quarts) of milk (milk is very expensive where I live)
-1.5lbs of butter
-10kg of rice
-8 boxes of kraft dinner (5 if you get brand name Kraft Dinner)
-5 Junior Cheeseburger Deluxe from Wendys
-2kg of Doritos

3lbs of hamburger, at 75 calories per ounce (give or take), is 3600 calories.
5L of 2% milk, at 130 calories per 250mL, is 2600 calories
1.5lbs (~675g) of butter, at 740 calories per 100g, is 4995 calories
10kg of white rice, at 170 calories per cup (let's just assume it has a bulk density of 1), is 6800 calories.
8 boxes of KD, at 720 calories per box (dry mix only, no milk/butter), is 5760 calories
5 cheeseburgers from wendys, at 300 calories each, is 1500 calories
2kg of Doritos, at 250 calories per 50g, is 10000 calories

So as you can see, $5 alone is more than enough to exceed the daily recommended caloric intake of ~2000 calories by up to 5x. The other lesson is that Doritos are a fantastic source of not-dying when you're strapped for cash. Keep that in mind, any college students who may be reading this

I'll just end up moving back to my parents' house and live there rent and utility free and get all my stupid student loans paid off.

That's not a bad idea. People can call you fruity all they want, but you'll be that fruity guy who isn't up to his eyeballs in debt. I said earlier in this thread that it took me 6 months to pay for a brand new car, and that was only possible because I was living with my parents at that time. Debt goes away incredibly fast when 50-60% of your gross income is "disposable".

 

[Jimmy Snyder]

When you get financing on a car or a house, interest is usually compounded on a monthly or biweekly basis. Credit cards are compounded daily.

Interest has to be stated in terms of APR which allows you to make comparisons between different kinds of loans.

When you pay more than the minimum on a mortgage or car payment, the extra you throw in goes towards paying the principle amount of the loan, which lowers the amount of interest charged in the next compounding period. Credit cards are the opposite, that extra money goes towards paying the interest, and the principle is not paid at all until the entire amount of interest is paid first.

Actually, credit cards, car loads and mortgages all work the same in this regard. For a credit card, the minimum payment covers interest and a little of the principal. Any amount you pay above the minimum goes directly to principal and lowers the interest in the next payment period.

In fact a mortgage can be the worse deal because sometimes there is a penalty for early payoff. That clause in some mortgages is one of the problems feeding the current subprime crisis.

 

[momentum_waves]

that is a bi weekly pay check. $1160 is a biweekly check after tax, 401 k contribution, health, and dental.
Mid month is
-$420 for car payments
-$250 student loans
-$ whatever balance I put on my credit card at the beginning of the month to help me last until mid month's pay check.

Chinese advice:
Earn 5, save 2 immediately, spend sparingly, try to save a further 1.

Basically, your way forward:
1. Cut up your credit card - it is expensive money.
2. Hand back the car - it is too expensive.
3. Get a cheaper form of transport until you have saved enough to buy a 2nd-hand vehicle - cash.
4. See if you can reduce the Student Loan payments, or spread things out a little - these are usually 'cheaper money' than credit-cards. Go & talk to your bankers - nicely.

Principle:
Get out of debt & work on cash. Live within your means.

 

[ShawnD]

Interest has to be stated in terms of APR which allows you to make comparisons between different kinds of loans.

How is APR stated? I see lots of things that will say "5% compounded monthly" or when you buy dividend stocks it could be "4% quarterly dividend", while my Visa Green card is 20%, and when I called them, they said it was compounded daily. It's incredibly dishonest when they're allowed to compound daily and still claim it's 20%. Go into Excel and type "=(1 + (0.2/365))^365" and it will give you something like 1.221335858, which means 22.13% interest. That's over 10% more interest than what they're claiming. That shouldn't even be legal.

Actually, credit cards, car loads and mortgages all work the same in this regard. For a credit card, the minimum payment covers interest and a little of the principal. Any amount you pay above the minimum goes directly to principal and lowers the interest in the next payment period.

Sorry, but I should have stated that my last post was based on word of mouth from a friend who worked for a seedy credit company. Apparently there is some kind of law that prevents a company from charging compound interest, but there's a way around that. Rather than charging interest on interest, the balance on a credit card is split into two separate accounts. One account is the interest, and one is the principle. The company sets the minimum payment to be slightly lower than the interest, which is generally about 30%/year for people who have bad credit, compounded daily. With a potentially never-ending loan in place, the company simulates compound interest by adding user fees. If you pay late, there's a feed. If you pay less than the minimum, there is a fee. Rather than sticking the fees in the interest account, which cannot be charged interest, those fees are thrown into the principle account, which does have interest. You start with $100 principle and you pay interest on that $100. Then you get a $10 service fee to make a $110 principle, and you pay interest on $110.

Basically it's a scam.

In fact a mortgage can be the worse deal because sometimes there is a penalty for early payoff. That clause in some mortgages is one of the problems feeding the current subprime crisis.

Very true.

edit: I think the minimum payment for credit cards varies quite a bit between companies, and even different cards from the same company. My last credit card bill for a Visa Green card at 19.75% interest and a limit of $2,000 was for $1,544 and the minimum required payment on the statement is $47, which is roughly 3%. I've seen statements for my mom's Visa Gold card, and her required minimums are incredibly high. For a statement of about $600, the minimum payment was around $100, which is about 17%. Her credit limit and credit score are much better than mine, so maybe that has something to do with it.

 

[ice109]

meh my rent is 250$ a month. if i was hard pressed for money i would just stay in this college town.

 

[Gokul43201]

That leaves around $500 a month for food. If I spent all that on food that would be about $15 per day/$5 per meal.

You need to consider the possibility of not eating EVERY meal out. Groceries are a useful concept.

 

[Gib Z]

My sister is in her second year of University now, and she has things extremely easy, and that's in comparison to most other people, not just you (sorry if that sounded harsh =[ ).

She still lives with the rest of my family, who pay for her phone bill, food, internet, student fees etc etc She borrows their car's, doesn't pay for the gas, and doesn't even need the cars to go to Uni because the public transport here is pretty cheap and fast, almost no matter where you live. She works at a clothing store where she gets twenty-four dollars, which is a crazy amount for someone her age. Basically, my parents pay for all her entertainment expenses as well, ie going out to dinners and lunches with friends. The only thing she actually uses the money she works on are larger entertainment expenses, like Concert tickets. The rest goes straight into her savings.

The fact that someone is living paycheck to paycheck while someone close to me has it so easy gives me the most guilty feeling of disgusting unfairness.

P.S My parents have already said they won't be able to completely fund a school like Harvard for my post-grad, so I'm going to be living as tight as you are in a few years :(

 

[animalcroc]

Assuming youre single, I am surprised you live paycheck to paycheck with that income.

 

[Jimmy Snyder]

How is APR stated? I see lots of things that will say "5% compounded monthly" or when you buy dividend stocks it could be "4% quarterly dividend", while my Visa Green card is 20%, and when I called them, they said it was compounded daily. It's incredibly dishonest when they're allowed to compound daily and still claim it's 20%. Go into Excel and type "=(1 + (0.2/365))^365" and it will give you something like 1.221335858, which means 22.13% interest. That's over 10% more interest than what they're claiming. That shouldn't even be legal.

APR is the annual interest rate with no compounding. This way you can easily compare rates. Two loans may be stated at different rates depending on how often compounding is done, but if the APR is the same, then it doesn't matter. Lenders must state what the APR is and this is the figure you should use for comparisons.

Sorry, but I should have stated that my last post was based on word of mouth from a friend who worked for a seedy credit company. Apparently there is some kind of law that prevents a company from charging compound interest, but there's a way around that. Rather than charging interest on interest, the balance on a credit card is split into two separate accounts. One account is the interest, and one is the principle. The company sets the minimum payment to be slightly lower than the interest, which is generally about 30%/year for people who have bad credit, compounded daily. With a potentially never-ending loan in place, the company simulates compound interest by adding user fees. If you pay late, there's a feed. If you pay less than the minimum, there is a fee. Rather than sticking the fees in the interest account, which cannot be charged interest, those fees are thrown into the principle account, which does have interest. You start with $100 principle and you pay interest on that $100. Then you get a $10 service fee to make a $110 principle, and you pay interest on $110.

Sounds fantastic to me. Credit card companies normally do charge interest on interest, they don't keep separate accounts. If you pay less than the interest accrued in a given month, the unpaid interest becomes principal for the next month.

 

[gravenewworld]

With $5, you can buy one of the following:
-3lbs of ground beef, the regular fatty kind
-5L (~quarts) of milk (milk is very expensive where I live)
-1.5lbs of butter
-10kg of rice
-8 boxes of kraft dinner (5 if you get brand name Kraft Dinner)
-5 Junior Cheeseburger Deluxe from Wendys
-2kg of Doritos

3lbs of hamburger, at 75 calories per ounce (give or take), is 3600 calories.
5L of 2% milk, at 130 calories per 250mL, is 2600 calories
1.5lbs (~675g) of butter, at 740 calories per 100g, is 4995 calories
10kg of white rice, at 170 calories per cup (let's just assume it has a bulk density of 1), is 6800 calories.
8 boxes of KD, at 720 calories per box (dry mix only, no milk/butter), is 5760 calories
5 cheeseburgers from wendys, at 300 calories each, is 1500 calories
2kg of Doritos, at 250 calories per 50g, is 10000 calories

So as you can see, $5 alone is more than enough to exceed the daily recommended caloric intake of ~2000 calories by up to 5x. The other lesson is that Doritos are a fantastic source of not-dying when you're strapped for cash. Keep that in mind, any college students who may be reading this

Whew! If I had a diet like that I'm sure my doc would want to slap me. When it comes to food, I absolutely refuse to be cheap. I don't mine shelling out extra $$ for fresh fruit and vegetables, more lean meats, and higher quality fish.


In reality, I probably spend about $300 a month on buying groceries. That leaves me with $200 for 4 weeks=$50 a week which I spend on going to the movies or hanging out with my friends and drinking beers at the bar.

 

[ice109]

Whew! If I had a diet like that I'm sure my doc would want to slap me. When it comes to food, I absolutely refuse to be cheap. I don't mine shelling out extra $$ for fresh fruit and vegetables, more lean meats, and higher quality fish.


In reality, I probably spend about $300 a month on buying groceries. That leaves me with $200 for 4 weeks=$50 a week which I spend on going to the movies or hanging out with my friends and drinking beers at the bar.

stop eating fish. it's a waste of money. i refuse to skimp on lean meat too but fish is just plain stupid. so is the beer and the movies considering bittorrent.