In the Financial Peace University program (taught by Dave Ramsey) that I went to, there are the 7 Baby Steps that are supposed to get you out of debt and help set you up financially for life. I just finished Baby Step 2 (pay off all debt other than the house) and I'm feeling great! This I was able to do because of my tax return, so this topic is pursuant to how old and boring we are.
I've summed up the steps here and I highly highly recommend taking this class and learning the program. But for the TL;DR-ers:
1. Establish an emergency fund ($1000). Don't touch it except for emergencies!
2. Debt snowball. Pay off your smallest debt first (in a perfect world it'd be your highest-interest debt first but the theory here is that you build momentum and feel better about paying off debt if you knock line items out quicker) and then use the amount you were putting toward that, toward your next smallest debt. Repeat until all debts are paid off except the house.
3. Bigger emergency fund, this is to cover losing a job. 3 to 6 months' worth of expenses.
4. Begin investing 15% of your income, generally into mutual funds.
5. Begin putting away money for your kids' college.
6. Pay off your house.
7. Build wealth and give generously to something(s) you believe in.
"Debt"? What is this "debt" you speak of? Well, okay, I would have a student loan except my parents paid it down when they sold their apartment, and probably the only reason I don't have a car loan is that I can't drive. As for houses, I think I prefer renting, but renting a house I expect to say in for decades, once I'm on the tenure track, admittedly might not be wise.
My current emergency fund is my parents. Shame on me, I know. But actually, I'm doing my saving in a Roth IRA, which has no penalties for withdrawing contributions early, so it can be raided as necessary.
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Is it weird that I'm already around #5? But then again, I'm a college student that hasn't started paying off loans...and I'm REALLY not looking forward to that...
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Well, there is a new accent of n00b language. It's called: Vet LUEser goes Foreign!-MegaSpy22
Those must be the pants of the gods!-Digitalpython
Nah that's cool LP1, just make sure you circle back around to #2 when you graduate and do it before moving on! Or at least that's what Dave would say and he's pretty smart.
All my debt is student debt. Yayyyy student debt!
As I will continue saying until 2068.
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Willis, it seems like every other time you post, I need to look up a word that's in the OED or Urban Dictionary but not both.
-Mimir
Some of that debt is from grad school, isn't it? You poor non-doctoral saps. At least James got help from Math for America (I assume).
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Yeah. Anihoo, huzzah for Alex and Co.
Co here = blood family
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Willis, it seems like every other time you post, I need to look up a word that's in the OED or Urban Dictionary but not both.
-Mimir
Thank you sir. Now, to responsibly complete baby step 3 instead of spending our newfound monthly money on crap!
I just got a sort of real person job, with like, health insurance, so I suppose I'm at something of a step 0. But, my student loans are pretty reasonable and at this point I could see myself through a small disaster or a short period of unemployment, so that's comforting.
We need a topic about something excessively juvenile.
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Ocarinakid