Monday, May 01, 2006

A Conflict of Interest

Am I trying to save too aggressively?

I've talked a little about my outstanding debt in some other posts. I still have a ways to go on paying that down. Unfortunately, in the past I have had MANY opportunities to use refunds (school/tax) to significantly reduce my debt, but instead I used the money in ways I shouldn't have. Now that tax season is over and refunds are long spent, I'm trying to figure out what my next step should be. Right now I sort of feel like I'm 'blindly saving'. I'm putting some money away, but I'm not very educated on what it's doing, so I know it's probably not working for me.

Anyway, I have about 6000$ in debt (yes, it increased a bit) which I'm slowly paying down through a debt management program. I'm not entirely sure if is the best way to handle it, but I know that had I not joined it, I wouldn't be paying at all. Right now I send them 275$ a month ( that's probably why its not doing much) and putting 6% of my pay in 403b, which my employer matches half. I also have two accounts through sharebuilder - which I really don't know much about at all. My dad opened the accounts for me in 2002 and I just started to use them. One account is and IRA and the other account is just a couple of stocks. I try to put 50$ into each every month. Again, because I have no idea what these account do or how they work, I'm hesitant to use them. Today, I decided to open an HSBC online savings acct (4.50% APY) but I'm not even sure what to with it.

So I guess, here are my questions:

I don't have alot of money right now in general. I want to save every month in addition to my 403b, but I'm not sure what is a good amount to save and what type of accounts to put that money in. I want to save for the long term (30-40 years), the semi-long term (5-15), and of course short term (next year or two).

Am I trying to do to much right now?
Where do I put my money? What type of accounts would work best for me right now?

Perhaps I should be emailing Suze?


Blogger young guns said...

take a deep breath....breathe out...

Now, not that I know much, but just thinking and worrying about this is a good step.

I am just starting out as well and this is what I would do in your situation. You have 6000 in debt. You probably feel very bogged down about this and it is a monkey on your back. Attack it!!!

It is good to have at least 1,000 set aside for an emergency fund. Do this first. I don't know how much you are making off of your sharebuilder accounts, but I would look at it and see. I bet your interest on your debt is higher. I would stop putting that 50 bucks into each account and use that extra 100 dollars to build up my 1,000 emergency fund and after you have that, start putting that 100 dollars towards attacking your debt. You can use your HSBC account as your emergency funds account.

As far as how much you need to save for right now? as much as you can. Take some time to look at creating a budget. You don't have to start off with one that tracks every single cent of everything and maps it out for a year.
What I found helpful was to track and categorize my spending through Quicken for 1 month. From that I had a place to go. I chose to focus on eating out and recreation first. I know I spend too much money there and those are costs I have total control over. Make a goal and put that extra money towards your emergency fund and then debt. Baby steps.

3:06 PM  
Blogger Jessica said...

First let me say, thanks for commenting. Feedback is always much appreciated!

You brought up a good point when you mentioned tracking spending. That's something I really would benefit from. I know that despite what I TELL myself, my spending is quite out of control (a main reason why I'm still in debt). I was talking to a friend last night and she told me that it helped put alot of things into perspective for her.

If I can cut back on my 'allowance' and put the majority of it into my debt, I think I would feel alot better. It's funny how this cycle works. I'm upset because of my debt, so I'm shopping, which is ultimately keeping me from moving forward in my life. I guess the first step is admitting you have a problem. :)

Thanks again!

2:04 PM  
Blogger Caitlin said...

word! young guns beat me to it! Again, I am NOT an expert, but a good place to start is just having $1000 set aside like a cushion so you can handle unexpected expenses without having to carry more credit card debt. And having that in a savings account that pays a decent amount of interest (a few extra bucks a month aint much but it feels good to earn it doing nothing!) AND is linked to a checking account for emergencies is a great place to keep money with that purpose (I also like HSBC)

It's also really important to understand what you bring in each month and what you spend. I know we all shy away from budgets but you need to understand your fixed and dedicated expenses most importantly. do you want to divide up what's left?

What really helped me was having specific goals and what helped me set the goals was a high level analysis of where money was going (so i could set reasonable timeframes etc)

You can do it!

2:22 PM  
Blogger Tschepsit said...

I meant to comment on this post a while back, but then I forgot about it after the browser crashed and I haven't found my way back to your blog until today. Anyway, early in our marriage, my wife and I had some issues with the whole blind-saving attitude as well. I'm a natural saver, so I didn't need to have an excuse to put money away, but my wife is more of a spend-it-now type. We ended up using MS Money to track our income/expenses, and I discovered an interesting trick about how you can save for specific items but only use one savings account. It's a lot easier to justify how much money you're saving when you can see with a couple of clicks exactly what you're putting that money towards. For us, one of those items is a car, and we know that between the two of us, we'll probably need to replace a car about every 5 years. We paid cash for a very nice 2-year old vehicle last July because we didn't steal any of that money out of our savings account before that.

Basically, we use the "designation" field in MS Money to note what savings are for whenever we transfer money to a savings account. We do the same thing when transferring out. We found out about this from a post on an MS Money support forum somewhere that explains it in more detail, but I can't seem to find a link to it at the moment. Quicken has similar capabilities, if I recall correctly. Feel free to email me for more detail if it sounds like something you'd want to try. If I still can't find the original link, I'll send some more specific instructions on it.

5:43 PM  

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