Emergency Fund Destroyed. Back to the Side Hustles?

[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 think that if I get very intense about this, I should be able to clean up this whole mess within a year or two. I've already been getting my 401K match, so that is good. As long as I turn my focus to investing within the next couple years maximum, I should be on track.

Out of curiosity, who do you follow for your investing advice? Ramit Sethi? In the future, as my salary rises(goal of $200K) I want to get to the point where I'm investing 50+% of my income, investing very aggressively, but that is outside of the scope of this thread.

I also wanted to discuss the rent point you made. The rent in my complex is going up again. I'm not against having a roommate if it can help me dig out of this mess faster.

I think you are 100% right about having the safety net and debt gone lowering my levels of stress. Ironically, even though I quit my side job to focus on my tech job, as of late I've found it quite difficult to focus on said tech job. This is because my mind keeps wandering to thinking about the debt, what emergency will come up next, and if the emergencies will come up faster than the money I'm throwing at the debt to pay it down. Ironically, this is making me a worse programmer. Debt like this affects in many ways. I realize that might not be entirely logical but that is what's been happening lately. It makes me want to run out and grab my side hustle again. I just don't feel completely safe, which is definitely affecting my headspace, which is making me a worse developer. Yet, at the same time, I think that the argument that any side hustle at all would make me a worse dev is still true. My performance at the $120K tech job has to be FANTASTIC. The tech job must stay, because if I don't get renewed, I'm going to be up a creek and will have to declare bankruptcy for sure. But then again, you could argue that it's only two days a week, that if I were to manage my time perfectly I could do both. It's kinda like being stuck in between a rock and a hard place lol.

Things like this make me want to run out and get my side job back, just for the peace of mind lol. I'd almost be willing to cut out my personal relaxation time(except for 30 mins a day) and just deal with it for a few months(as was mentioned earlier) so I can have the multiple jobs again and feel a bit more financially stable. Luckily, I'm not worried about burnout.

 

[jaygreenb]

I think that if I get very intense about this, I should be able to clean up this whole mess within a year or two. I've already been getting my 401K match, so that is good. As long as I turn my focus to investing within the next couple years maximum, I should be on track.

Out of curiosity, who do you follow for your investing advice? Ramit Sethi? In the future, as my salary rises(goal of $200K) I want to get to the point where I'm investing 50+% of my income, investing very aggressively, but that is outside of the scope of this thread.

If you can get to a 50%+ investment rate and do it for 5-10yrs, you can build that foundation to set you up for life and let time and compounding do its thing. That is basically what I did and could stop investing new money all together and be absolutely fine. Would just suggest hold off on the luxuries until you hit goal as net worth number because once you go down that road it is hard to dial back. If you do start enjoying it more, set specific financial goals you have to hit and use those purchases as a reward. If disciplined you can be set by the time you are 40.

 

[nicksaiz65]

If you can get to a 50%+ investment rate and do it for 5-10yrs, you can build that foundation to set you up for life and let time and compounding do its thing. That is basically what I did and could stop investing new money all together and be absolutely fine. Would just suggest hold off on the luxuries until you hit goal as net worth number because once you go down that road it is hard to dial back. If you do start enjoying it more, set specific financial goals you have to hit and use those purchases as a reward. If disciplined you can be set by the time you are 40.

This is my goal. I think that as long as I continue to study and change jobs, $200K salary is completely realistic. I could live on less than half of that. That's basically a FIRE investment rate.

Of course, this is way way down the road. Right now, I don't even have a financial base and I have to make sure that I don't end up going bankrupt lol.

 

[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.

Oh, just realized: if you don't mind me asking, what was your credit score around the time you were able to refinance those loans? I have never missed a payment, but my credit is fvcked right now because of the high credit card usage and all of these hard pulls. It can't hurt to see, but I question if I will get approved by the credit union. The main thing I have going for me is my income, but my credit is absolutely trashed rn.

Because of the low credit score, I don't qualify for a lot of the 0% interest cards, which kinda sucks. It would have to be a lower interest loan. As an independent adult, I don't think I want to ask my parents to co-sign for me. And, I do not want to show them the amount of consumer debt that I've managed to rack up, or the interest rates

 

[BackInTheGame78]

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.

Usually balance transfers under those are 3%

 

[nicksaiz65]

If you can get to a 50%+ investment rate and do it for 5-10yrs, you can build that foundation to set you up for life and let time and compounding do its thing. That is basically what I did and could stop investing new money all together and be absolutely fine. Would just suggest hold off on the luxuries until you hit goal as net worth number because once you go down that road it is hard to dial back. If you do start enjoying it more, set specific financial goals you have to hit and use those purchases as a reward. If disciplined you can be set by the time you are 40.

Was watching some finance vids today, and I'm realizing that there are many many steps that I need to take before we can even start talking about financial independence. A lot of them have already been mentioned in this thread:

1.) Get the max 401K match from my current employer now that it is available to take advantage of match and compounding interest. (Already doing this)
2.) Pay off ALL consumer debt, including my student loans. The only debt that I'm ok with having around is a very low interest car loan(if necessary) that will grow interest slower than my investments, because cars are so expensive these days. I have no interest in buying a house or building equity, for my goals I don't think this makes any sense to do. I don't want to stay in the same spot for years.
3.) Build up a savings that is sufficient enough so that I never have to stress about working side jobs ever again. For me to feel comfortable, this is probably around $20K.
4.) Build up a savings of "fvck you" money so that no emergency, including job loss, could ever touch me. No tech job could ever threaten me once I reach this point, I'm thinking that this number will be around $50K, if not more. Throw this into a High Yield Savings Account.
5.) By this point, my income should have reached $200K or more because I have continued to invest in my education and jump jobs, maybe even do some Overemployed. From here on, invest 50-60% of my income so that I can retire early in 10-12 years.

Getting to Step 5 will take several years alone, so this will keep me busy for a while and on the right track.

 

[Millard Fillmore]

Oh, just realized: if you don't mind me asking, what was your credit score around the time you were able to refinance those loans? I have never missed a payment, but my credit is fvcked right now because of the high credit card usage and all of these hard pulls. It can't hurt to see, but I question if I will get approved by the credit union. The main thing I have going for me is my income, but my credit is absolutely trashed rn.

Because of the low credit score, I don't qualify for a lot of the 0% interest cards, which kinda sucks. It would have to be a lower interest loan. As an independent adult, I don't think I want to ask my parents to co-sign for me. And, I do not want to show them the amount of consumer debt that I've managed to rack up, or the interest rates

That's curious that your credit is bad if you've never missed a payment. Usually they love when you use and pay every month - though high interest balances can be a problem. I don't think my score ever went below 700 though maybe it was in the 600s? But I don't remember it ever being "bad." However if you speak to a credit union and say your goal is to pay off debt they will probably work with you on it. They can approve a loan based on a certain number of months (thus with a somewhat higher monthly payment) and lower interest, but not tied to a card. Just a sum to pay off.

If you can't get approved for any loans or balance transfers right now, the best thing you can do is just aggressively pay that shyt down. You make good money so that's great. If you can reduce your housing cost (roommate, cheaper home payment/rent) that will help a lot. Also - pick your lowest balance and pay that first. I had student loans and they were down to their last 3k or so and so I just paid the balance because that was like $200 a month I could then use on other debts. Then you pay the next lowest balance, etc. (Or the one with the highest interest.) Obviously you have to make minimum payments to all balances but target the one that makes sense to eliminate, it's like a video game.

I also used a platform to see all my totals - Mint, which is gone now, absorbed into Credit Karma, which sucks. But I think there are other platforms you can use like Monarch (?). Or create a spreadsheet. If you can see the sum total and how much you're paying down and reducing each month, it will keep you focused, at least that's what helped me.

 

[FlirtLife]

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.

I assume your highest and lowest interest rates are far apart. You could divide your debt into two: closer to the lowest interest rate is "low", and closer to the highest interest rate is "high".

Are your car loan and student loan closer to your lowest or highest? If they are lower interest rates, try not to focus on them. You can make the required payments, but focus on the other category: high interest debt.

I mention this because I think you should divide that $80,000 debt into the above two categories. Try to stress over the high interest rates, not the lower ones. I suspect that is a much lower number.

Based on the stress I infer from your posts, I'd suggest paying off the smallest high interest rate loan first. You sound overwhelmed, and by paying off one debt completely, you can start to have hope that your debt is under your control.

 

[FlirtLife]

I think that if I get very intense about this, I should be able to clean up this whole mess within a year or two. I've already been getting my 401K match, so that is good. As long as I turn my focus to investing within the next couple years maximum, I should be on track.

Out of curiosity, who do you follow for your investing advice? Ramit Sethi? In the future, as my salary rises(goal of $200K) I want to get to the point where I'm investing 50+% of my income, investing very aggressively, but that is outside of the scope of this thread.

I also wanted to discuss the rent point you made. The rent in my complex is going up again. I'm not against having a roommate if it can help me dig out of this mess faster.

I think you are 100% right about having the safety net and debt gone lowering my levels of stress. Ironically, even though I quit my side job to focus on my tech job, as of late I've found it quite difficult to focus on said tech job. This is because my mind keeps wandering to thinking about the debt, what emergency will come up next, and if the emergencies will come up faster than the money I'm throwing at the debt to pay it down. Ironically, this is making me a worse programmer. Debt like this affects in many ways. I realize that might not be entirely logical but that is what's been happening lately. It makes me want to run out and grab my side hustle again. I just don't feel completely safe, which is definitely affecting my headspace, which is making me a worse developer. Yet, at the same time, I think that the argument that any side hustle at all would make me a worse dev is still true. My performance at the $120K tech job has to be FANTASTIC. The tech job must stay, because if I don't get renewed, I'm going to be up a creek and will have to declare bankruptcy for sure. But then again, you could argue that it's only two days a week, that if I were to manage my time perfectly I could do both. It's kinda like being stuck in between a rock and a hard place lol.

Things like this make me want to run out and get my side job back, just for the peace of mind lol. I'd almost be willing to cut out my personal relaxation time(except for 30 mins a day) and just deal with it for a few months(as was mentioned earlier) so I can have the multiple jobs again and feel a bit more financially stable. Luckily, I'm not worried about burnout.

Is this year or two for all debt, or just the highest interest rate debt? It is not an all or none situation. People with their finances in order may still have a car loan, or student loan (or both). Focus on the worst of the debt, not all of it. That can also prevent feeling overwhelmed.

I believe Ramit Sethi advocates passive indexing, which has historical data to support it. But his focus is on personal finance, which is most important in your situation. It might be better to read other personal finance books now, rather than start thinking about investment approaches. I've read many investment books, and my favorites demonstrate passive investing beating other approaches over many years. After long experience passive investing, I did get very good results active investing - but in a manner others will not replicate. If I trained to walk on tight ropes for years, I wouldn't just tell someone a few tips and have them walk a tight rope with no safety net. Same thing with investing - starting out, go with the lowest cost funds or ETFs in your 401(k) plan. You can optimize later, once the high interest debts are paid off.

I also again encourage you to divide your debt into high interest and low interest, and focus on the highest cost debt. If you don't, you can overwhelm yourself trying to pay off student loans quickly. Those lower interest loans can wait. You don't need to lump all debt together and stress over it equally. The high interest debt is eating up your money faster. Paying down those debts gets you the most benefit.

You might understand intellectually what high interest debt means, but most likely the interest you pay is just lumped in with the total. When you pay down high interest rate debt, no interest is owed on the part that is gone. You will start slowly but build up speed paying down debts. While it is not optimal, Dave Ramsey calls this a debt snowball, and feels it is helpful psychologically. But Mr Ramsey seems to like high cost funds for investing, which is not justified by historical data. There are many personal finance people who lack expertise in investing.

 

[nicksaiz65]

That's curious that your credit is bad if you've never missed a payment. Usually they love when you use and pay every month - though high interest balances can be a problem. I don't think my score ever went below 700 though maybe it was in the 600s? But I don't remember it ever being "bad." However if you speak to a credit union and say your goal is to pay off debt they will probably work with you on it. They can approve a loan based on a certain number of months (thus with a somewhat higher monthly payment) and lower interest, but not tied to a card. Just a sum to pay off.

If you can't get approved for any loans or balance transfers right now, the best thing you can do is just aggressively pay that shyt down. You make good money so that's great. If you can reduce your housing cost (roommate, cheaper home payment/rent) that will help a lot. Also - pick your lowest balance and pay that first. I had student loans and they were down to their last 3k or so and so I just paid the balance because that was like $200 a month I could then use on other debts. Then you pay the next lowest balance, etc. (Or the one with the highest interest.) Obviously you have to make minimum payments to all balances but target the one that makes sense to eliminate, it's like a video game.

I also used a platform to see all my totals - Mint, which is gone now, absorbed into Credit Karma, which sucks. But I think there are other platforms you can use like Monarch (?). Or create a spreadsheet. If you can see the sum total and how much you're paying down and reducing each month, it will keep you focused, at least that's what helped me.

Yeah, if I didn't clarify, my credit cards are basically maxed out due to some very poor spending decisions that I made in the past. That is really hurting my credit. Once I've aggressively paid them off, I doubt I'll have any issues getting my credit score back over a 700. The only other issue is that my credit is pretty new... I've only had credit for about 2.5 years.

I'll still go to see if there is anything that can be done, the worst that they can say is no.

I'm pretty content at my salary for now. I need to hold this job for a minimum of a year and increase my knowledge before I even consider jumping. For now, this will be more than enough, and I just need to focus on being very good at my job and improving my knowledge. I'll be grabbing a couple more certifications too, but that is slightly outside of the scope of this thread.

I'm using CreditKarma and NerdWallet to keep track of these debts. We will definitely snowball them away, I can't really make any big strides towards being rich until I wipe this debt away.

 

[Mike32ct]

There are several schools of thought on debt reduction.

1. Start with the smallest balance to give yourself encouragement or psychological boost.

2. Start with the highest interest rate to minimize the total amount you have to pay out.

3. Start with the credit card that has the highest percent utilization (ratio of balance owed to credit limit) in order to raise your credit score in the most efficient way.

No method is perfect. It’s just about picking one that you prefer and going for it.

 

[nicksaiz65]

I assume your highest and lowest interest rates are far apart. You could divide your debt into two: closer to the lowest interest rate is "low", and closer to the highest interest rate is "high".

Are your car loan and student loan closer to your lowest or highest? If they are lower interest rates, try not to focus on them. You can make the required payments, but focus on the other category: high interest debt.

I mention this because I think you should divide that $80,000 debt into the above two categories. Try to stress over the high interest rates, not the lower ones. I suspect that is a much lower number.

Based on the stress I infer from your posts, I'd suggest paying off the smallest high interest rate loan first. You sound overwhelmed, and by paying off one debt completely, you can start to have hope that your debt is under your control.

Yes, this is correct. I can order the debts from highest interest rate to lowest:

Credit Cards
Personal Loans
Car Loan
Private Student Loans(Sallie Mae)
Federal Student Loans

What is really irking me is the credit cards and personal loans. They are high interest and have to go. Once those are eliminated, and I have a decent emergency fund(the $10-12K that we were talking about) then I'll be just fine, and I think that's not too bad of a spot to be in. My next move then would be to go after the student debt, but this is down the line. I don't plan on taking any additional schooling, I don't think it would increase my earning potential relative to the amount of debt that I would need to take out. I'm lucky that the student loans are pretty low interest.

I'd like to go after the smallest credit cards because those are what is dragging my credit down into the dirt. Plus, as I pay them off, the money from the now gone payments gets rolled into the debt payoff like other posters were saying.

Yes, while the situation I am in has drastically improved(I didn't even have reliable transportation before lol) it is still causing very high amounts of stress. Tbh, what is causing the stress is that I am lacking an emergency fund. I've had strings of emergencies come up before, and I've had to take out loans to cover them(that's what some of the personal loans are.) When the next emergency comes up, if it exceeds my debt payoff, I'm going to have to take out ANOTHER loan, and if that happens I think I'm gonna cry haha. Because of my credit, I know that the interest rate will be miserable too. Every day I think about this, and this is a big part of what is stressing me out. Although my main focus is being a programmer, it makes me want to run out to Indeed and get my side hustle back to alleviate some of this mental stress lol. I seriously don't want to be in the hole any more than I already am.

I guess I have to think about this in terms of risk.. Just to double check, you'd recommend that I continue down my current path of going all in on programming, and if an emergency comes up try to cash flow it/deal with it? As opposed to going back to my old grind of working the side hustle 2x per week and relying on hardcore time management/just dealing with the two jobs. The more I think about it, the more I could make an argument for either side. Once I totally resolve this, maybe I can stay off of Indeed every 10 seconds lol.

 

[nicksaiz65]

There are several schools of thought on debt reduction.

1. Start with the smallest balance to give yourself encouragement or psychological boost.

2. Start with the highest interest rate to minimize the total amount you have to pay out.

3. Start with the credit card that has the highest percent utilization (ratio of balance owed to credit limit) in order to raise your credit score in the most efficient way.

No method is perfect. It’s just about picking one that you prefer and going for it.

Those credit cards are on the top of my hit list. If I had better credit, it's more likely that I could refinance the other debt and save myself a lot of money on interest in the future. Based on the responses, I think that starting a debt snowball with the credit cards is the way to go, if that makes sense. That will significantly improve my credit, calculators say that if I were to pay off all those balances I would get a 70-80 point jump.

 

[nicksaiz65]

Is this year or two for all debt, or just the highest interest rate debt? It is not an all or none situation. People with their finances in order may still have a car loan, or student loan (or both). Focus on the worst of the debt, not all of it. That can also prevent feeling overwhelmed.

I believe Ramit Sethi advocates passive indexing, which has historical data to support it. But his focus is on personal finance, which is most important in your situation. It might be better to read other personal finance books now, rather than start thinking about investment approaches. I've read many investment books, and my favorites demonstrate passive investing beating other approaches over many years. After long experience passive investing, I did get very good results active investing - but in a manner others will not replicate. If I trained to walk on tight ropes for years, I wouldn't just tell someone a few tips and have them walk a tight rope with no safety net. Same thing with investing - starting out, go with the lowest cost funds or ETFs in your 401(k) plan. You can optimize later, once the high interest debts are paid off.

I also again encourage you to divide your debt into high interest and low interest, and focus on the highest cost debt. If you don't, you can overwhelm yourself trying to pay off student loans quickly. Those lower interest loans can wait. You don't need to lump all debt together and stress over it equally. The high interest debt is eating up your money faster. Paying down those debts gets you the most benefit.

You might understand intellectually what high interest debt means, but most likely the interest you pay is just lumped in with the total. When you pay down high interest rate debt, no interest is owed on the part that is gone. You will start slowly but build up speed paying down debts. While it is not optimal, Dave Ramsey calls this a debt snowball, and feels it is helpful psychologically. But Mr Ramsey seems to like high cost funds for investing, which is not justified by historical data. There are many personal finance people who lack expertise in investing.

The 1-2 years would be to be completely debt free. High interest debt would take less time to crush. Once I have that first $10-12K, and all I have is my car loan, student loans, and a decent credit score, my money worries will go away. That way, when an emergency comes up, all I have to do is pause my debt payoff and replenish my emergency fund, then it's like nothing ever happened. This is the place that I aspire to get to.

I like the way that Ramit thinks about things and his mindset. I like Dave Ramsey but I know he has taken some flack over things, like not needing a credit score, 8% withdraw rate, etc.

That tidbit about the high interest debt does make me feel better about it! The credit cards and then the personal loans have to be the first to go, that will significantly free up my mental bandwidth and even some of my time.

 

[nicksaiz65]

That's curious that your credit is bad if you've never missed a payment. Usually they love when you use and pay every month - though high interest balances can be a problem. I don't think my score ever went below 700 though maybe it was in the 600s? But I don't remember it ever being "bad." However if you speak to a credit union and say your goal is to pay off debt they will probably work with you on it. They can approve a loan based on a certain number of months (thus with a somewhat higher monthly payment) and lower interest, but not tied to a card. Just a sum to pay off.

If you can't get approved for any loans or balance transfers right now, the best thing you can do is just aggressively pay that shyt down. You make good money so that's great. If you can reduce your housing cost (roommate, cheaper home payment/rent) that will help a lot. Also - pick your lowest balance and pay that first. I had student loans and they were down to their last 3k or so and so I just paid the balance because that was like $200 a month I could then use on other debts. Then you pay the next lowest balance, etc. (Or the one with the highest interest.) Obviously you have to make minimum payments to all balances but target the one that makes sense to eliminate, it's like a video game.

I also used a platform to see all my totals - Mint, which is gone now, absorbed into Credit Karma, which sucks. But I think there are other platforms you can use like Monarch (?). Or create a spreadsheet. If you can see the sum total and how much you're paying down and reducing each month, it will keep you focused, at least that's what helped me.

I just checked my credit score as well. Looks like it’s slowly rising. That’s good news! Good credit will be very important for me being in a good place financially.

 

[jaygreenb]

I just checked my credit score as well. Looks like it’s slowly rising. That’s good news! Good credit will be very important for me being in a good place financially.

Just avoid the negative marks that stay on your record like late payments, the utilization side will resolve itself as you pay off your debts and you shouldn't need to use it until that is done anyway

 

[nicksaiz65]

Just avoid the negative marks that stay on your record like late payments, the utilization side will resolve itself as you pay off your debts and you shouldn't need to use it until that is done anyway

The key is gonna be to have zero derogatory marks. As long as I can keep doing that, my credit will be in an excellent place to bounce back.

 

[jaygreenb]

The key is gonna be to have zero derogatory marks. As long as I can keep doing that, my credit will be in an excellent place to bounce back.

You're good, I did not get mine together until I was around 30, you can get some of them taken off too if you put in a little work. You got some time before you are going to need it though. I go int trouble with credit cards young, paid them all of a few years later and was done with them all together for years. Wasn't until I started my business I started using them again, I pay them off every month and never carry a balance though

 

[RickTheToad]

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

Hardly equitable.

 

[nicksaiz65]

You're good, I did not get mine together until I was around 30, you can get some of them taken off too if you put in a little work. You got some time before you are going to need it though. I go int trouble with credit cards young, paid them all of a few years later and was done with them all together for years. Wasn't until I started my business I started using them again, I pay them off every month and never carry a balance though

It seems like everyone has to learn this lesson once, and then never again haha.

I’ve learned my lesson about abusing credit cards. Once they’re paid off, I wouldn’t be against putting everything on them and then paying them off at the end of every month just to take advantage of rewards/points.