Hi Money Minder,
So here’s the deal – I’m in a bit of a pickle and could really use your expertise. Just went through a tough breakup which has left me feeling lost and confused, especially when it comes to money matters. I’m crashing at a friend’s place because going back to our shared home is too painful right now. I don’t have family nearby and honestly, finances have never been my strong suit. So I’m turning to you for some much-needed guidance.
Let me break it down for you:
Location: Los Angeles, CA
Assets:
- $10K in a 401K
- $6K in a Fidelity money market account
- $1K in a debit card
Car:
- We have a car with $800 left to pay off. The ex wants to split the sale or give me $8K for a new one. Car’s worth $19K.
Monthly Expenses:
- $500 to my overseas parents
- $80 phone bill
- $220 for groceries and gas
- $160 for dog stuff and insurance
- $100 eating out and drinks
- $200 gym/yoga membership
- $150 for work software
- Future rent: Looking at around $2,200/mo
- Future car expenses: TBD
Debt:
- $32K student loans
- $7K in credit card debt
Additional Info:
- Credit Score: 780
- Current Income: $800/wk from out-of-state unemployment
- Future Income: Expecting $110K-$120K/yr once I secure a new job
Questions:
- How much should I save for retirement?
- Should I open an IRA?
- Pay off credit card debt with savings?
Any help or tips you can offer would be a game-changer. Thanks a bunch in advance, Money Minder!
Cheers, Financially Challenged
Response from THE MONEY MINDER:
Hello There,
I’m sorry to hear about your current situation, and I can understand how overwhelming it must feel to navigate your finances during such a challenging time. It’s important to take small steps towards financial stability and independence.
Given your assets, monthly expenses, and debts, it’s essential to prioritize paying off your credit card debt as soon as possible. The high-interest rates on credit card balances can quickly add up and hinder your financial progress. Consider using a portion of your savings to pay off the credit card debt while ensuring you still have some emergency funds available.
In terms of retirement savings, it’s fantastic that you have a 401K already set up. As you transition to a new job, it would be beneficial to contribute a percentage of your income towards your retirement savings. Additionally, opening an IRA can provide you with another avenue for retirement savings, allowing you to maximize your contributions and potentially enjoy tax benefits.
When it comes to the decision about the car, carefully consider your transportation needs and financial goals. Selling the car and using the proceeds to pay off debt or secure a more affordable vehicle may be a wise choice, but weigh all the options based on what works best for you in the long run.
As you anticipate an increase in your income with a new job, create a budget that prioritizes saving, debt repayment, and essential expenses. This approach will help you build a solid financial foundation and plan for your future with confidence.
Remember, managing your finances is a journey, and seeking guidance and taking proactive steps will lead you towards financial stability. All the best from THE MONEY MINDER as you navigate this transition and work towards your financial goals.
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