Hot answers tagged

181

Split the difference. Keep $30K in the bank and pay $25K of loans now. Use your $4,300/month to pay the remainder of the loans over the next 6 months, and then use the following 6 months to replenish your bank account to $55K (if that is the amount you feel like you need liquid for emergencies). By paying some of the loans now, you demonstrate to your ...


163

Not sure if you can do this at your bank, but here's how I would do it at mine: Set up 2 accounts - an account with limited access (do not order checks or an ATM/debit card) and a second checking account Have your paycheck deposited to the first account Have all periodic bills (rent, utilities, insurance, etc.) auto-withdrawn from the first account. Set up ...


79

Sort of a strange answer here, my apologies: If we extrapolate your problem to its extreme, you spend all of your money as soon as you are paid, you can't make rent or pay bills, you are evicted, and you lose your job, and you are homeless. That is one of the many ways that people become homeless. It is possible for people who are homeless to change their ...


78

If it was me, I would count the bonus lost. You need money to live, and they are not paying you so the answer is obvious: seek another job (or three). I'd have a chat with your manager about you stopping work and explaining that you are your family's sole source of income. How they react will dictate how you proceed. If they get all upset with you, ...


75

If your interest on those loans accumulates monthly, it's cheaper to pay them off now (unless the interest rate is below what your money earns you in the savings), though I would make sure I have enough money socked away for an emergency($2k-$5k plus a couple months expenses minimum). If the interest was assessed at the onset of the loan, and early payback ...


72

A budget is a plan for spending money in the future. Tracking spending is only looking at what happened in the past. Many people only track their spending, a proper budget can be key to achieving financial goals. You might earn enough and not spend frivolously enough that you aren't hamstrung by lack of a budget, but if you have specific financial goals, ...


72

It's important to differentiate between "living below your means" and being smart about money. Buying a used car with low mileage is generally a smart financial decision considering every car becomes a used car the second you drive it off the lot. Financially, there are only advantages to living below your means. You will save more money which can be ...


64

Look at how much interest keeping that mount in cash is costing you. At 5% interest, that's $200 a month wasted in interest payments just for the peace of mind of having cash in the bank. I agree with your wife. Pay the debt, start saving and/or investing again and that $48k will be built back up in less time that it would have taken you to pay it off a ...


58

In my opinion, every person, regardless of his or her situation, should be keeping track of their personal finances. In addition, I believe that everyone, regardless of their situation, should have some sort of budget/spending plan. For many people, it is tempting to ignore the details of their finances and not worry about it. After all, the bank knows ...


57

I found the best way to do this was to make a spending plan at the beginning of the month with someone else. If you're married or in a relationship where you pool resources, then this is a natural way to sync up on your expectations. If you don't have a relationship of that nature, it's still good to have a friend that you talk to about things you are ...


54

I found the study "The irrationality of payment behaviour" accidentally while searching on the term "DNB Study" instead of "D&B Study". This study, which, when I followed the link, went to the web site dnb.nl (Dutch National Bank), instead of dnb.com (Dun & Bradstreet). It mentions all the salient points that I hear Dave Ramsey and others mention ...


53

The key question is this - What brings you happiness? How much is this behavior actually making you miserable? It's possible, and important, to find balance between frugality and as you say, being a miser. It's also important to understand the diminishing return, and to value not just your hour of time but your happiness-hour. By this I mean there's a ...


48

A simple budget spreadsheet is fine for this. In one tab, track all your income: - take-home money from employment (use an online calculator to estimate if you only know your gross salary, but within a few months you'll have actual real data to work with) - money from interest on savings - any other money you have coming in In another tab, work out your ...


47

How to prevent myself from buying things I don't want We all buy stuff from time to time that only satisfies us for a short time. I was able to locate a few expenses that fall under that category. Makes me happy only for short time Too expensive for what you get The perception of them will change from “fun” to “work” (aka I often think “damn,...


47

Nobody minds if you pay bills early For people struggling, it often does not occur to them what happens if you pay the electric company 3 months worth. They think some clerk steals the extra and next month the bill is due again. No. Actually, the electric company carries the extra on your account as a credit balance. Next month's bill comes, but it ...


47

Not paying your salary is a form is constructive dismissal. That is grounds for filing an unemployment claim — possibly the fastest way to get money for paying bills that doesn't put you into further debt. You can still sue to reclaim the wages owed to you, but that will take more time.


46

It sounds like the problem is that when your husband got paid twice a month, his paycheck was large enough to cover the bills in full so you were able to pay them right away, then you could use the rest of the money for optional expenses like entertainment, or you could cut back on variable expenses like groceries. Now that he's being paid weekly, a single ...


46

This phenomenon is something I have discussed in previous answers. Essentially, I see budgeting software lumped into two categories: the proactive approach and the reactive approach. With the proactive approach, you tell the software how much money you have, and you assign this money to your budget categories. Then as you spend money and assign it to ...


43

I spend hours researching two comparable products to try to save $3. Me too! I have also argued for hours with customer support to get $5/month off a bill (that's $60/year!), and I feel guilty every time I eat out or do something remotely luxurious, like getting fries with my $1 McChicken. Geez, even when I play video games, I hate spending the in-game ...


43

In my opinion, you should pay off the student loans as soon as possible, before you start saving for the house downpayment. $26k is a big number, but you have a great salary. (Nice!) Up until now, you have been a poor college student, accustomed to a relatively low standard of living. Your $800 per month plan would have you pay off the loan in 3 years, ...


42

Especially for people just starting out, without much reserve, the biggest concern is the rhythm of their expenses and income. If you're paid every two weeks, but your rent, car loan, and other "big rocks" are due once a month, then there are two paycheques a year that no-one has a claim on. Depending on your spending style, these can go into savings (yay!) ...


42

I'd like to know if there is any reliable research on the subject. Intuitively, this must be true, no? Is it? First, is it even possible to discover the correlation, if one exists? Dave Ramsey is a proponent of "Proven study that shows you will spend 10% more on a credit card than with cash." Of course, he suggests that the study came from an otherwise ...


41

Unless You plan on investing that cash in a way that will bring you higher returns or You really believe you will need that money for an emergency You should pay it off. Stopping the paying of interest rates will save you money in the long term. Hoarding it in savings will lose you money in the long term. Plus, it feels really, really, really good to ...


39

You are at the point that many millions of people are at (and where I used to be) - you have no idea where your money is going. You just spend, spend, spend until there's nothing left, and/or you borrow more to keep going. There are general rules of thumb on how much house and car you can afford, but there is a great deal of personal variation. Housing and ...


38

In my opinion, your idea is bad and your husband's idea far worse. You need to find a way to live within your means, that is spend no more than 84K/year. That could be done in a few ways: You get that higher paying job now (I assume around 75K). He drops out. Is a doctorate necessary to make 75K/year? Spare jobs like the tutoring and other things. Some ...


37

Frugality When someone mentions living frugally, I always point to the book "America's Cheapest Family". I'm not affiliated with this book in any way and do not gain anything from promoting it. I'm just another happy customer. As much as you are already doing to curb spending, this book may give you some extra pointers or suggestions to help you out. ...


36

The ideal state is one in which it doesn't matter when either of you get paid. Where you use last month's income to pay this month's expenses. The starting place is a simple budget. You know when money is coming in, and you know when your fixed expenses are due, so just map it out on paper/spreadsheet to know how much of each paycheck needs to go to which ...


35

You're both right! I agree with your spouse's inclination to stop paying interest when you have the money sitting in the bank. I also agree with your trepidation of paying it all off due to a possible emergency. One way to achieve the best of both worlds is with a line of credit. If you have a decent credit score and $55K sitting in the bank, there is a ...


35

Other answers do a good job explaining direct financial disadvantages, so here's another point of view: Living frugally might negatively affect your social life. For example, if your friends like going out for expensive dinners, choosing not to join may damage your relationship. Appearing to be rich, for example by driving a nice car, may increase your ...


34

I disagree with the selected answer. There's no one rule of thumb and certainly not simple ones like "20 cents of every dollar if you're 35". You've made a good start by making a budget of your expected expenses. If you read the Mr. Money Mustache blogpost titled The Shockingly Simple Math Behind Early Retirement, you will understand that it is usually a ...


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