Emergency Fund Destroyed. Back to the Side Hustles?

[BackInTheGame78]

I do not agree that paying off debt (with the exception of real estate) is a broke mindset. Nor do I think someone with a less than a seven figure net worth should prioritize investing in the market over eliminating personal debt.

Again...it depends on the type of debt. How do you think many of these people made their millions?

By leveraging their debt to take on more debt and make more money.

 

[RickTheToad]

Seizing of assets is not a concern unless one is engaging in fraud or tax evasion.

Wrong. Civil suits/forfeiture/liens/judgments. Tax situations also hurt the value of the 401k. There are also RMDs on several retirement vehicles, forcing most in retirement to at least pull the min. amount of RMD due and face tax consequences.

 

[nicksaiz65]

I did not know contract workers got 401K matching. I'm glad you do that, and glad BeExcellent mentioned it.



That's fair, this job is very new. +50% higher salary means you have a lot more money coming in, even over those few months. If you're tempted to rent a new place, consider delaying that until you've paid off credit card debt and personal loans.

I've noticed other posters discussing investing, which I have deliberately avoided. Investing comes after your personal finances are in order, and is not worth stressing about now. I mentioned paying down debt partly to improve your finances, but also because I suspect it will lower your stress level (which you said is a problem at your new job).

I will respond to all of the messages in this thread, but very briefly wanted to touch on this point before my break is over.

No interest in upgrading my living costs. Getting rid of this debt trumps that because having all of these payments is so stressful. I would get a roommate before I raised my rent expenses even higher.

I'm definitely not ready to invest(other than the 401K match that I'm already getting) until the high interest debt is out of the picture. If my investments are growing faster than my debt in the future I am ok with that, but I have to get more financially stable and take out all these high interest debts before I am ready to do that.

Yes, part of the reason my stress level is so high is these debts, and that I know 2-3 back to back emergencies could take me out of the game. If I have to take out another loan(more debt) with my current credit score, it is going to make it so much more difficult to get out of this rat race. However, if I paid off my high interest debt and had $10K+ in the bank, I wouldn't feel that pressure. That's part of why it felt so scary when I quit my side job to focus on programming. Even though programming pays literally 6x more, it felt like that extra side job income was helping keep me safe in a way lol.

 

[EyeBRollin]

Again...it depends on the type of debt. How do you think many of these people made their millions?

By leveraging their debt to take on more debt and make more money.

Real estate and/or inherited. Some through business ventures. Very few through market investing to the extent you are suggesting.

 

[jaygreenb]

This is the broke mindset that many people have when it comes to money which is similar to the scarcity mindset that many men have when it comes to women.

You cannot become financially successful with a broke mindset anymore than you can become successful with women with a scarcity mindset.

If a person wants to have an average life and be averagely financially successful then sure, they could do that.

If they want to be financially wealthy they simply wouldn't.

People don't understand that if they want to change their life they have to change their mindset first. They cannot get to where they want to go using that same mindset that has gotten them to where they currently are and more importantly KEPT them there.

You are missing some major pieces of the puzzle with this. The wealthy are not getting there by carrying consumer debt to have more money to play in the market. Most who get and stay there like @BeExcellent are pretty conservative financially in their personal lives. They get there by owning and building assets like business's and portfolio's of real estate. I have very rarely seen it ever by just buying stocks or trading. If there is risk and leverage used it is not on personal consumption but on income producing assets that they own. That is the key. The average person is not going to get rich by carrying personal debt to have more money to invest in the market. That is actually a recipe for disaster.

 

[jaygreenb]

Yes but one must first be fully convicted and be allowed for the appeals process to finish. Watch the Kevin O'Leary interviews. In the criminal courts a killer is only executed after exhausting all appeals. Otherwise we'd be executing killers right after initial conviction and that is not the law or due process in the US. You can disagree with Trump all you like. The case law being established can affect any of us, and that is a very troubling development. It is refusal of due process.

There is also another law that hits this year on all small businesses using an LLC, Corp structure etc. requiring full disclosure of all officers or people with decision power in any company under 5M annual revenue. The law exempts larger companies and offers protection to the very rich (making more than 5M annually) and larger employers and seeks to exploit those trying to build wealth through tax advantaged and asset protective strategies. Under the auspices of sussing out financial crimes. So the Enrons of the US can flourish unimpeded but the little guy (who can't afford to defend himself) gets crushed.

So if you salary yourself a low W2 salary and your company pays you rent or owner distributions, which are entirely legal and more tax advantaged? The feds can start questioning and dictating and seizing. And the law for not filing the paperwork is terribly punitive. Fine of $500 PER DAY not filed and asset seizure. It is an asset grab. And you probably haven't heard of it because it is not well publicized. So the Feds can come down on hard working business owners and seize them into bankruptcy.

The law has already been struck down by a Federal court as being unconstitutional under the 14th amendment (equal protection under the law) but the appeals court simply reinstated it without due process, and holds that ONLY the plantiffs in the case are exempt from compliance while it is litigated.

Every small business person should be very afraid of the current climate of assault on property rights, assets and asset protection.

This is definitely somewhat of a concern and always been on my radar. It is a big reason I keep a healthy percentage of my net worth in some form of self custody outside of the traditional system. Probably a little overkill but I do not have faith in the govt and it helps me sleep better at night.

 

[BackInTheGame78]

You are missing some major pieces of the puzzle with this. The wealthy are not getting there by carrying consumer debt to have more money to play in the market. Most who get and stay there like @BeExcellent are pretty conservative financially in their personal lives. They get there by owning and building assets like business's and portfolio's of real estate. I have very rarely seen it ever by just buying stocks or trading. If there is risk and leverage used it is not on personal consumption but on income producing assets that they own. That is the key. The average person is not going to get rich by carrying personal debt to have more money to invest in the market. That is actually a recipe for disaster.

Again...it depends on the type of debt. Anybody who thinks it is smart to pay off a 3% interest loan versus actually investing that money needs to take 3rd grade math again. I can almost guarantee you there would not be one rich person that would do it. If anything they would try to leverage that debt to buy more assets.

 

[jaygreenb]

Again...it depends on the type of debt. Anybody who thinks it is smart to pay off a 3% interest loan versus actually investing that money needs to take 3rd grade math again. I can almost guarantee you there would not be one rich person that would do it. If anything they would try to leverage that debt to buy more assets.

I know a lot of very wealthy people 10M+ who bought their personal residence in cash or live in a paid off home when they could have or had those rates. Most entrepreneur types that have staying power are conservative in their personal lives because of the volatility in their income/business/investments etc. Not a knock, but I don't think you can guarantee anything because you do not actually have personal experience with these people on that level and from my understanding are not wealthy yourself

 

[Millard Fillmore]

Again...it depends on the type of debt. Anybody who thinks it is smart to pay off a 3% interest loan versus actually investing that money needs to take 3rd grade math again. I can almost guarantee you there would not be one rich person that would do it. If anything they would try to leverage that debt to buy more assets.

If you are referring to a mortgage then yes, by all means take your time. Some mortgages even penalize for fast payment.

A small business loan or student loan might be another example where patience pays.

Other than that most personal debt should be paid quickly. I don't know the % for an auto loan but as a depreciating asset it wouldn't make sense to me to stretch that out.

OP is not Warren Buffett trying to flip a factory, he's a typical American with some financial straits to navigate. Owing money with interest is never ideal.

 

[nicksaiz65]

If you are referring to a mortgage then yes, by all means take your time. Some mortgages even penalize for fast payment.

A small business loan or student loan might be another example where patience pays.

Other than that most personal debt should be paid quickly. I don't know the % for an auto loan but as a depreciating asset it wouldn't make sense to me to stretch that out.

OP is not Warren Buffett trying to flip a factory, he's a typical American with some financial straits to navigate. Owing money with interest is never ideal.

Really, what's stressing me out is the credit cards/personal loans and lack of a fully-funded emergency fund. I guess the car loan too, but that is fine for the time being because reliable transportation is mandatory.

Once I get rid of those issues, I'm fine. Having student loans and a car loan is very typical: I can knock those out and then get onto the path towards building wealth.

Regarding the subject of a side hustle: I've decided that I need to just take the path with the least amount of risk possible. I had already done the math explaining the opportunity cost of me being in a kitchen/spending that time being better at my job. In my opinion, it is a larger risk to have a side job and lose time that could be going towards my $120,000 tech job than risk emergencies coming up that outgrow my current savings(a side job wouldn't offset that too much anyways.)

I just need to be pretty tight about my budget/frugality, and pay off as much of the high interest debt as I can before the next emergency comes up. It wouldn't be a bad idea to keep developing my skills and getting more certifications because my skillset is the main weapon that I am going to use against the high interest debt.

Like @FlirtLife said, I can't even be thinking about investment strategies other than 401K until all of my high interest debt(over 7% interest) is eliminated, and I have a sufficient liquid savings. I am finding the different viewpoints quite interesting though.

 

[Divorced w 3]

Wrong. Civil suits/forfeiture/liens/judgments. Tax situations also hurt the value of the 401k. There are also RMDs on several retirement vehicles, forcing most in retirement to at least pull the min. amount of RMD due and face tax consequences.

You can’t lose your 401k in a lawsuit. Its creditor protected.

 

[Millard Fillmore]

Really, what's stressing me out is the credit cards/personal loans and lack of a fully-funded emergency fund. I guess the car loan too, but that is fine for the time being because reliable transportation is mandatory.

Once I get rid of those issues, I'm fine. Having student loans and a car loan is very typical: I can knock those out and then get onto the path towards building wealth.

Regarding the subject of a side hustle: I've decided that I need to just take the path with the least amount of risk possible. I had already done the math explaining the opportunity cost of me being in a kitchen/spending that time being better at my job. In my opinion, it is a larger risk to have a side job and lose time that could be going towards my $120,000 tech job than risk emergencies coming up that outgrow my current savings(a side job wouldn't offset that too much anyways.)

I just need to be pretty tight about my budget/frugality, and pay off as much of the high interest debt as I can before the next emergency comes up. It wouldn't be a bad idea to keep developing my skills and getting more certifications because my skillset is the main weapon that I am going to use against the high interest debt.

Like @FlirtLife said, I can't even be thinking about investment strategies other than 401K until all of my high interest debt(over 7% interest) is eliminated, and I have a sufficient liquid savings. I am finding the different viewpoints quite interesting though.

I didn't read every post on the thread - if you are making 120k how much debt are we talking about?

Are you able to join a credit union? I was able to transfer high interest CC debt to a lower interest loan via my credit union. They're nonprofit and have competitive rates (also for autos etc). Your university/alma mater or employer might have a credit union affiliated with it.

Zero percent interest CC's can be useful too, but be careful, they often have balance transfer fees that are a percentage of the balance. So you'd have to do the math and see if it's equal or less than what you'd pay in interest over the 0% period. Banks don't like losing money.

 

[Divorced w 3]

Really, what's stressing me out is the credit cards/personal loans and lack of a fully-funded emergency fund. I guess the car loan too, but that is fine for the time being because reliable transportation is mandatory.

Once I get rid of those issues, I'm fine. Having student loans and a car loan is very typical: I can knock those out and then get onto the path towards building wealth.

Regarding the subject of a side hustle: I've decided that I need to just take the path with the least amount of risk possible. I had already done the math explaining the opportunity cost of me being in a kitchen/spending that time being better at my job. In my opinion, it is a larger risk to have a side job and lose time that could be going towards my $120,000 tech job than risk emergencies coming up that outgrow my current savings(a side job wouldn't offset that too much anyways.)

I just need to be pretty tight about my budget/frugality, and pay off as much of the high interest debt as I can before the next emergency comes up. It wouldn't be a bad idea to keep developing my skills and getting more certifications because my skillset is the main weapon that I am going to use against the high interest debt.

Like @FlirtLife said, I can't even be thinking about investment strategies other than 401K until all of my high interest debt(over 7% interest) is eliminated, and I have a sufficient liquid savings. I am finding the different viewpoints quite interesting though.

If you’re young making that kind of money and have significant debt you can always try to settle with your creditors. They’ll need you to not pay for a long time and they’ll crush you that entire way with interest. With that said, they’ll eventually stop and you can lump sum them around 60 cents of whatever that final number is, or you can do monthlies on a number that’s not accruing. Yeah your credit will sting for a bit but if you’re not buying property anyway now and you’re young who cares. Learn your lesson and in like 7-10 years you’ll be in great shape. Just use the period wisely to grow your money.

 

[nicksaiz65]

If I really wanted to max out my income to clean up this mess, then I would

I didn't read every post on the thread - if you are making 120k how much debt are we talking about?

Are you able to join a credit union? I was able to transfer high interest CC debt to a lower interest loan via my credit union. They're nonprofit and have competitive rates (also for autos etc). Your university/alma mater or employer might have a credit union affiliated with it.

Zero percent interest CC's can be useful too, but be careful, they often have balance transfer fees that are a percentage of the balance. So you'd have to do the math and see if it's equal or less than what you'd pay in interest over the 0% period. Banks don't like losing money.

Consolidating my debt with a credit union would be great. I just wonder if, with my trash credit right now(due to the ran up credit cards) if they’d approve me. I don’t think I qualify for too many 0% interest credit cards, but I could look again.

 

[RickTheToad]

You can’t lose your 401k in a lawsuit. Its creditor protected.

Not from divorce.

 

[Divorced w 3]

Not from divorce.

Not necessarily accurate either.

 

[RickTheToad]

Not necessarily accurate either.

You're wrong dude.

 

[Divorced w 3]

You're wrong dude.

No, it’s called equitable distribution for a reason.

 

[nicksaiz65]

How does your fulltime job not offer dental insurance to cover the tooth? Shouldn't be cosmetic. Anyway's that's besides the point.

Don't listen to BackInTheGame about not paying off the debt. That is the first thing you should prioritize when you don't have your finances in order. Now if you have your finances in order, stable job, savings, etc. You can "manage" your debt but when your finances are out of whack, you need to tackle them head on.

Keep side gig's while maintaining FT job. Suck it up and put in the time. Ditch all extra-curriculars and leisure from dating, eating out, happy hour, etc. Cut them all off to focus on the priority of paying off debt and building up a safety net.

See if you can consolidate debt. Find those short term 6month-12 month interest free credit cards. Transfer your existing debt onto one of those cards to stop the interest from crushing you. Expedite payment on that credit card and when time is running out on that card and you haven't paid it off yet, swap to another interest free card for 6-12 months.

If that is not an option, focus on paying off the debt well above principle payments ASAP.

If you need to move into a cheaper place with room mates, etc. Do it for a year. Lowering rent payments can significantly help.

I did all these things for almost 5 years and paid off $50k in debt to become debt free. It was a really boring/sad 5 years but removing those shackles really changed things for me. It also teaches you responsibility, prioritization, and goal setting which are all equally important in life.

GL.

I realized I never elaborated on the tooth issue. The problem was I had recently changed jobs, and my dental insurance wouldn't have kicked in until I worked the job for a month. Right after that, I cracked my tooth. Murphy's law lol. Without insurance, that would've been a very hefty bill, but I needed to do something to fix it.

This might sound crazy, but I booked a cheap flight and a hotel room, crossed the border to Mexico, and got my tooth fixed there. The prices were much more reasonable.

I will be chatting with a Credit Union to see if there is anything I can do to stop getting slammed by this interest. If not, we'll just tackle it the old fashioned way.

 

[nicksaiz65]

I didn't read every post on the thread - if you are making 120k how much debt are we talking about?

Are you able to join a credit union? I was able to transfer high interest CC debt to a lower interest loan via my credit union. They're nonprofit and have competitive rates (also for autos etc). Your university/alma mater or employer might have a credit union affiliated with it.

Zero percent interest CC's can be useful too, but be careful, they often have balance transfer fees that are a percentage of the balance. So you'd have to do the math and see if it's equal or less than what you'd pay in interest over the 0% period. Banks don't like losing money.

It is BAD, I think I've made it up to $80K in consumer debt. A big chunk of that was for my education and car at the very least. I don't have to become 100% debt free, I just need to eliminate the toxic high-interest debt that is keeping me from investing, and have a safety net so I can have peace of mind.