Saturday, June 26, 2010

Helping Another Sister Out

First, let me preface this post by saying I am not a Personal Finance expert. I write based on my experiences, my love of personal finance and what has worked for me. But I am so excited that a reader has asked me for advice, little ole moi!!! Why am I excited? Well, because this is what I love to do, help people find a way to reach their goals and make their dreams come true. But enough of that for now. Back to B.C

She wants to know what she should do regarding her credit card debt of $600, when she starts law school in the Fall. Should she

1.Pay of the entire $600 balance with her law school student loan check
2. Pay the over limit amount and set up six automatic payments to establish a good payment history.

Simple enough right?

First I have a couple of questions
1. Will you be going to law school part time, or full time?
2. Do you have any other income coming in besides the student loan check?
3. Is this your only debt besides student loans?
4. Do you have an emergency fund?

Now if I were you I would pay that balance off with my check. Why? I think credit cards are the DEVILLLLLLLLL, and I only use them for what they are worth. I usually pay off all my balances in full and have a really great credit score. I would then put the card in a tupperware dish full of water and freeze it so that I don't use it anymore, or you can cut it up. I am overly dramatic which is why I freeze mine.

Whatever you do, do not close the card!!! Leaving the card open and unused will actually help your credit score while closing the account will damage it.

Next, I would use any other income ( I think you said you were starting a new job in July) I have and build an emergency fund. Start with trying to put at least $1000 in it and put that in a money market account to be used only for emergencies. When you get paid contribute a set amount each month to the account until if reaches 8 months of your expenses.

I hope this helps you. I think if you do this, stay away from debt and live by a budget every month you will be well on your way to becoming a prosperous lawyer one day!

Fellow readers, what advice would you give B.C?

until next time, think prosperous thoughts

YBP






3 comments:

B.C. said...

Thanks for the advice and for stopping by my blog!

I will be going to school part time and working full time. The CC is closed and they will not open it once I pay the balance off. I will use 10% of the check to start a emergency savings (ultimate goal is to save $5000) and car emergency savings ($500). Pay my half of the rent up for the semester. The remainder of the money will help me take care of misc debt and establish a monthly allowance.

Broke by Choice said...

B.C.: I see you completing major financial goals with your student loan money. What are your plans with the money from your full time job?

Chitown said...

B.C.

Two things...

One...don't use any extra financial aid money unless you have to. You still have to pay it back. I did the same thing and ran the debt right back up and now I have to pay the student loans and credit card debt.

Two...Since you will be going part-time and working full-time, don't take out any extra loans that you don't need and if you do...don't spend it!!! Please!!! It adds up quickly and the interest continues to accrue.

Take it from me...$200k+ in the hole.

Okay...three things...less loans and debt gives you more options in terms of the law you practice. It is hard to find a job at a mid to large size firm so you want to keep your debt levels low so you have flexibility in your post grad legal work.

Good luck!!!