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Advice on Current Financial Situation (Novice)
Old 06-12-2007, 03:58 AM   #1
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Advice on Current Financial Situation (Novice)

I am a recent college graduate and I would like some advice.

As aforementioned, I just graduated from college. During college I had internships every summer and career-related work experience during the year so these paid very well. Thus, I always had atleast $12,000 in my savings and/or checking accounts at all times. My senior year however, my friends and I went on multiple trips (Japan, Miami, Atlanta, etc) and my savings became not so impressive. Being that I am starting work in about a week, I moved from my college apartment and moved back home. So, I had to pay the remainding rent for the lenght of the lease. This was approximately $1,500. I then had to get my living arrangements together for Chicago (where I am moving and working) and this included over $2,700 of expenses. With this being said...my savings is now at approximately $150 overall. Keep in-mind that I have not had a source of income eversince the summer of 2006 when I had an i-banking internship paying very well. I saved alot of money and now it is all gone.

I would like to know from you all. What is the best way to get some money until I get some money coming in. I am looking to receive a sign-on bonus the first week of work, however, I have many things to purchase. Included new work clothes, shoes, misc items for my apartment, etc.

I am not huge into debt, however, I know that I will be able to pay the money back in about a week after I need it. Should I look to a credit card for this and simply pay everything back ASAP (within a month) or are there other alternatives?

What do you all suggest? I am sorry if this is a bad question; however, I am 21 with many questions. I have never had a credit card and I know that it is about time for me to begin building credit. I will be receiving over $9,000 this month and I know that I will only need to purchase a few minor items and I need the money to be able to do that. I am not looking to get into debt.

Thus, given my situation and everything said. What would my best option be? Would it be to take out a loan from my bank? Open a credit card? etc

Thank you in advance for your responses; they are greatly appreciated
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Old 06-12-2007, 06:13 AM   #2
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First of all, congratulations on getting your degree, and double congratulations on doing so without going into debt! You need to realize you are financially way ahead of most young people your age, and asking this question is an excellent example of why you are.

It appears to me you have the financial self-discipline to use a credit card correctly, which for convenience only, paying back the balance owed in full each month to avoid all interest charges. If that's the case, getting a CC and charging your initial expenses is probably the easiest way to go.
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Old 06-12-2007, 06:16 AM   #3
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Avoid debt. Just set a budget that ensures consistent savings rate and LBYM. Consider a low cost DRIP approach on some blue chip stocks to build your portfolio.

When you have built up a sizable nest egg again, consider taking on some debt in the form of a mortgage and buy a house. Rent out the spare rooms to cover the payments. Finally, when your portfolio has reached $10k, consider a margin loan to improve your leverage in stocks that you have learned to buy and hold.
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Old 06-12-2007, 04:31 PM   #4
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Originally Posted by REWahoo View Post
First of all, congratulations on getting your degree, and double congratulations on doing so without going into debt! You need to realize you are financially way ahead of most young people your age, and asking this question is an excellent example of why you are.

It appears to me you have the financial self-discipline to use a credit card correctly, which for convenience only, paying back the balance owed in full each month to avoid all interest charges. If that's the case, getting a CC and charging your initial expenses is probably the easiest way to go.
You should probably get a credit card in any event, as there are many things that are almost impossible without one -- like renting a car, buying an airline ticket and staying in most hotels.
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Old 06-12-2007, 07:21 PM   #5
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You should probably get a credit card in any event, as there are many things that are almost impossible without one -- like renting a car, buying an airline ticket and staying in most hotels.
I'm not meaning to contradict, but I am confused. I haven't had a credit card since my divorce in 1998. Still, I have been able to use my debit card (which looks like a Mastercard) at motels when evacuating for hurricanes such as Katrina and Ivan. Each time it was accepted at the first motel that I stopped at. I was wondering - - is this unusual?
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Old 06-12-2007, 07:52 PM   #6
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I had some of the same issues you did when starting out a few years ago. When I finally moved from home, my student loans were paid off and I had ~ $1,000 in the bank and no credit history to speak of. I wanted to keep an emergency fund of $500 available until I first got paid, but with apartment rent, deposits, and all the other moving expenses, I knew I would go under.

I proudly walked into my bank of 5-10 years, explained my situation of getting a great new job in the big city, and asked for a loan of $1,000 to help fund my dreams. And then I walked out, rejected due to not having a credit history.

It's frustrating. <slight sarcasm warning> Why is rent due when you move in before you've had the benefit of the living quarters, but you don't get paid until after you've given your employer all of the benefits of your work, plus a week for processing?

I'm sorry that I don't have any real suggestions, aside from trying to put off some of the apartment furnishing and clothes purchases for a week. But some of us do remember the pain of starting out, and know that it gets better after LBYM for awhile.
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Old 06-12-2007, 07:57 PM   #7
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And congratulations on spending a bunch of money and having a great time while you're young. You'll appreciate those experiences for the next 60-80 years.

Get a low rate credit card...get your parents or someone close with great credit to help you if you must...and use it sparingly and pay it off. It'll help you build a credit rating. Once you have cash coming in, pay it off and take it out of your wallet. But keep it. Your credit rating will be based in part on the age of your oldest account.
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Old 06-12-2007, 07:59 PM   #8
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I know everyone talks about getting on a savings program early, and if you do the math this is very, very good advice.

But life has a way of intervening. Personally, if I were in my 20s, I'd get myself out of debt, get established in a pleasant if modest living situation (rent or buy), land that best job. Don't worry too much about savings at that point.

All that in place (say at age 29 or 30), I'd then begin saving 10-15% of my gross income and put it in a target retirement fund. Of course, I'd contribute at work to my retirement plan to the max, or at least enough to get the employer match.

When I got a raise or promotion, I'd use half of it to play or buy toys. The other half would be invested.

Do that, and you'll retire at 55 and do whatever you want.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 06-12-2007, 08:55 PM   #9
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Buy as little as you can possibly get away with. Most good savers even fail to retire early. You need to be an extreme saver. Your co-workers need to be making fun of you. Your parents need to think you are crazy. Get a roommate in the low rent district, and save every last penny.

1) save $1000 emergency fund (EF)
2) pay off all debt smallest to largest
3) save 6 month EF
4) Max out your 401k and roth IRA
5) save every last extra cent for a house
6) If you can buy a house 100% down
7) Put your house savings in investments.
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Old 06-12-2007, 10:38 PM   #10
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Congratulations and I hope that you enjoyed your trips.

I would recommend a credit card (although I must disclose that I am in the business). Look for one that offers a sign up bonus and cash back for every dollar you spend (or perhaps airline miles). It sounds like you can handle this and you will start building your credit history for when you want to want to buy a property.

Follow the other advice offered too. Retire early.
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Old 06-12-2007, 11:07 PM   #11
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Originally Posted by Want2retire View Post
I'm not meaning to contradict, but I am confused. I haven't had a credit card since my divorce in 1998. Still, I have been able to use my debit card (which looks like a Mastercard) at motels when evacuating for hurricanes such as Katrina and Ivan. Each time it was accepted at the first motel that I stopped at. I was wondering - - is this unusual?

Just my opinion... and you do as you wish... but I always refuse the debit cards.... they don't have the protections you have with a credit card no matter what anybody says... and, you don't get anything back like cash..

Also, the OP does not have money in the bank, so a debit card does nothing...
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Old 06-12-2007, 11:12 PM   #12
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Originally Posted by Rich_in_Tampa View Post
I know everyone talks about getting on a savings program early, and if you do the math this is very, very good advice.

But life has a way of intervening. Personally, if I were in my 20s, I'd get myself out of debt, get established in a pleasant if modest living situation (rent or buy), land that best job. Don't worry too much about savings at that point.

All that in place (say at age 29 or 30), I'd then begin saving 10-15% of my gross income and put it in a target retirement fund. Of course, I'd contribute at work to my retirement plan to the max, or at least enough to get the employer match.

When I got a raise or promotion, I'd use half of it to play or buy toys. The other half would be invested.

Do that, and you'll retire at 55 and do whatever you want.

I will disagree with this statement big time.... remember compounding...

In a normal return environment.... if someone that is 21 starts to save in an ROTH $4,000 for seven years and then STOPS.... and his friend does not save anything until he is 28 and starts at $4,000 per year until he turns 65, the one who only saved for 7 years has more money....

Now... I don't suggest that you deprive yourself of everything just to save... if costs are tight, then save less... but, always and I mean ALWAYS save to get your match in a 401(k)...
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Old 06-13-2007, 08:51 AM   #13
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Originally Posted by yamasho View Post
I am a recent college graduate and I would like some advice.

As aforementioned, I just graduated from college. During college I had internships every summer and career-related work experience during the year so these paid very well. Thus, I always had atleast $12,000 in my savings and/or checking accounts at all times. My senior year however, my friends and I went on multiple trips (Japan, Miami, Atlanta, etc) and my savings became not so impressive. Being that I am starting work in about a week, I moved from my college apartment and moved back home. So, I had to pay the remainding rent for the lenght of the lease. This was approximately $1,500. I then had to get my living arrangements together for Chicago (where I am moving and working) and this included over $2,700 of expenses. With this being said...my savings is now at approximately $150 overall. Keep in-mind that I have not had a source of income eversince the summer of 2006 when I had an i-banking internship paying very well. I saved alot of money and now it is all gone.

I would like to know from you all. What is the best way to get some money until I get some money coming in. I am looking to receive a sign-on bonus the first week of work, however, I have many things to purchase. Included new work clothes, shoes, misc items for my apartment, etc.

I am not huge into debt, however, I know that I will be able to pay the money back in about a week after I need it. Should I look to a credit card for this and simply pay everything back ASAP (within a month) or are there other alternatives?

What do you all suggest? I am sorry if this is a bad question; however, I am 21 with many questions. I have never had a credit card and I know that it is about time for me to begin building credit. I will be receiving over $9,000 this month and I know that I will only need to purchase a few minor items and I need the money to be able to do that. I am not looking to get into debt.

Thus, given my situation and everything said. What would my best option be? Would it be to take out a loan from my bank? Open a credit card? etc

Thank you in advance for your responses; they are greatly appreciated
Using a CC in moderation would be an OK move. This will help your credit score, and help you obtain credit for larger purchases (house) in next 5 years.

The 9k per month salary is significant. Make sure you put 10% of this into a retirement fund (401k, IRA or similar). In addition fund the savings with a minimal amount each month to build this back up.
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Old 06-13-2007, 08:58 AM   #14
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Originally Posted by Rich_in_Tampa View Post
I know everyone talks about getting on a savings program early, and if you do the math this is very, very good advice.

But life has a way of intervening. Personally, if I were in my 20s, I'd get myself out of debt, get established in a pleasant if modest living situation (rent or buy), land that best job. Don't worry too much about savings at that point.

All that in place (say at age 29 or 30), I'd then begin saving 10-15% of my gross income and put it in a target retirement fund. Of course, I'd contribute at work to my retirement plan to the max, or at least enough to get the employer match.

When I got a raise or promotion, I'd use half of it to play or buy toys. The other half would be invested.

Do that, and you'll retire at 55 and do whatever you want.
I disagree with this... to an extent. paying off debt is important, but not at expense of investing early. When investing TIME is the biggest multiplier, by an exponential factor.

Student loans at 7% (with a tax deduction to boot)
Investing at 9%-10% tax deferred.

The investment in standard equity type investments should win out each time. I started investing 6% into 401k at age 24, and wish I sent more to 401k when younger.
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Old 06-13-2007, 11:52 AM   #15
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Ditto what Texas Pound and jIMOH said. The earlier the start the better. Get used to saving money.... it can be difficult to settle down and tighten the purse strings if you have become accustomed to the $$ flowing in every month.

But I think Rich's point has credence. You don't need starve yourself to save every penny, especially right out of the chute. Balance can keep you sane. Get yourself established a bit and then evaluate where you want to go financially.
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Old 06-13-2007, 02:26 PM   #16
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Read George Orwell's Down and Out in Paris and London (1933). It will give you some practical ideas of how to make ends meet between jobs, and it's a fascinating sociological study, too.
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Old 06-14-2007, 06:38 AM   #17
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Congrats on your exam and job.
Right now, avoid debt. Stuff for your apt. can be borrowed from your parents or purchased at yard sales.
New work clothes are important, but invest wisely on items that have a long life. Buy some more pieces every month and learn how to care for them well.
Never wear leather shoes two days in a row but rotate. Use old fashioned polish. The shoes will appreciate and last forever.
When do you start? Any chance to take a job for the remaining days till then? If not, consider selling blood.
Good luck!
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Old 06-14-2007, 11:59 AM   #18
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...Never wear leather shoes two days in a row but rotate. Use old fashioned polish. The shoes will appreciate and last forever....

Might I ask as to why one should do this?
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Old 06-14-2007, 12:03 PM   #19
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Allows a leather shoe to dry and regain its shape. They'll last quite a bit longer.
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Old 06-15-2007, 03:41 AM   #20
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Yes, they need longer than a night's sleep to dry out. Constant humidity weakens the leather.
The old fashioned polish with fat is better than the new "no need to polish" kind because the ingredients (alcohol?) of the new kind that makes the shoe shine without polishing dries out the leather so that it cracks early.

If really dirty, try saddle soap. Horse riders use this to clean their boots. It does not dry dry out the leather.
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