Ask AI Coach

It’s great that you’re taking the initiative to evaluate your financial situation and prioritize savings at such a young age. Based on the information you’ve shared, here’s a detailed analysis and tailored advice:

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1. Income vs. Expenses

Monthly Income

• Hourly rate: $22
• Hours per week: 30 (average)
• Monthly pay:
  • $22 × 30 hours/week × 4.33 weeks = ~$2,855 (before taxes)
  • After taxes (15% estimate for federal, state, and payroll): **$2,425**

Current Monthly Expenses

ExpenseAmountPhone$102Car Payment$200Car Insurance$175Karate$150Horseback Riding$200Gas$400Subscriptions$30Total$1,257

• Savings: $500/month
• Remaining for discretionary spending: ~$668/month

While you’re managing to save, your discretionary budget is tight given how much you drive and your extracurriculars.

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2. Debt Considerations

Student Loans (~$30K)

• Since you’re not currently paying, your loans may be accruing interest. Check your loan details to see if interest is compounding while in deferment. If so:
  • Paying even a small amount toward interest (~$50-$100/month) can prevent your balance from growing.
  • Factor this into your monthly budget to avoid future financial strain.

Car Loan (~$4,700)

• You’re overpaying on your car loan, which is smart if your interest rate is high (above 6%). If the rate is low, you might want to direct some of this money toward your student loan interest instead.

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3. Are You Living Above Your Means?

The short answer: No, but your budget is tight, and your current income limits flexibility for unexpected expenses or debt repayment.

Areas to Review:

1. Karate and Horseback Riding ($350/month):

   • If leaving karate or securing a scholarship for horseback riding would free up funds, it’s worth exploring. You don’t have to stop completely but consider reducing frequency or seeking community-based programs to lower costs.

2. Gas ($400/month):

   • Driving 100 miles/day is a significant expense. Explore carpooling, public transportation, or consolidating trips to reduce fuel costs.

3. Subscriptions ($30/month):

   • Evaluate if all subscriptions are necessary or if there are free alternatives.

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4. Savings Goals

You’re saving ~20% of your post-tax income, which is excellent for your age. Keep this up! However, consider earmarking your savings:

• Emergency Fund: Aim for at least $3,000 (1-3 months of expenses) before aggressively paying down debt.
• Debt Repayment: Once your emergency fund is stable, shift some savings toward student loan interest or your car loan.
• Future Savings: You’re off to a good start, and once your income increases, you can explore longer-term goals like investing.

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5. Should You Hire a Financial Advisor?

At this stage, a financial advisor might not be necessary. Your financial situation is straightforward enough that you can handle it on your own with some guidance. However, consider free or low-cost resources:

• University financial aid office: They can offer advice on managing student loans.
• Nonprofits like NFCC (National Foundation for Credit Counseling): They provide free or low-cost financial counseling.
• Books or tools: A personal finance book like “The Simple Path to Wealth” by J.L. Collins or a budgeting app like YNAB (You Need a Budget) can help you refine your approach.

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6. Next Steps

1. Reevaluate Extracurricular Costs:

   • Decide if karate or horseback riding is worth keeping or if you can replace them with lower-cost alternatives.

2. Track Expenses:

   • Use a budgeting app (e.g., Mint or YNAB) to get a clearer picture of your spending. This helps identify areas to cut back.

3. Start Paying Student Loan Interest:

   • Even $50/month toward your loans can save you significant money in the long run.

4. Build Emergency Fund:

   • Prioritize getting your savings to $3,000 for emergencies before accelerating debt payments.

5. Plan for Income Growth:

   • Focus on completing your education and increasing your earning potential. Any future raises can be directed toward debt repayment and building wealth.