r/povertyfinance • u/k1ranell • 1d ago

Saved my first $5k at 26 pls clap 🥹 Success/Cheers

I also have some $820 in acorns and <$1500 in a rollover IRA I have yet to move to a ROTH but putting it off for tax/wuss reasons. However, I have $772 in CC debt. But a win is a win, I can pay it off with time 😁

Gonna try to save $10k next year

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287

u/91271 1d ago

Is there a reason you’re carrying a $772 CC balance? You should never carry a balance if you’re not having 0% APR.

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u/k1ranell 1d ago

Emergency cat surgery due to blockage (CareCredit) and Christmas (Capital One). I've decided that this year is the last Christmas I'll be spending lots of money on gifts. I have 5 younger siblings, so if I feel generous, we'll all draw names out of a hat lol

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u/m00ndr0pp3d 1d ago

Why not use the 5k to pay that off?

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u/k1ranell 1d ago

Good idea, this is also the first month I got the Capital One so I may as well pay that off before the interest hits

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u/m00ndr0pp3d 1d ago

Yeah, you have enough to cover it and it will save you interest

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u/Gaitville 1d ago

Yep credit card should always be the first debt one pays off (unless they have like utility debt that’ll get shut off or housing payments they’ll be kicked out of). Credit card interest is like the highest interest out there besides payday loans.

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u/Pyro_raptor841 1d ago

Seriously, pay that shit off.

There are many reasons to do so, your credit score (ie chances of getting a mortgage) is the least among them.

The other reason is the ~28% average interest rate, worse than literally any loan you could get except pawn shops and loan sharks.

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u/Foreign_Sky_5441 1d ago

Not just might as well, rather, absolutely should. Literally nothing dumber than frivolous CC debt (not that your cat surgery is frivolous, but you now have the means to pay for it, so you should pay for it).

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u/BeBopNoseRing 1d ago

I'd suggest using the Acorns to pay it off, leave the more liquid savings for emergencies. And then start reinvesting with Acorns if you want after the CC debt is wiped.

Also, in case you weren't aware, you can request a "hardship" account from Acorns instead of the default one. It will remove some functionality like the "Later" accounts and some other things, but the basic account remains and it costs $1/mo instead of $3.

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u/Huge_Cap_1076 1d ago

That is definitely the way to go, the savings you have accomplished shows your diligence in controlling unnecessary expenses; keep that up, payoff the credit card debt - as it truly eats up more money than you should allow it. Once doing that, as it is obvious you know how to control the many wants we normally have, simply live your life within your means, and be proactive in using the credit card only for your necessary expenses, paying the charges off before its statement cycle closes. If/when in an unexpected emergency requiring more money that cannot necessarily be paid off before interest charges, stop using the card (pay with cash) until the balance is paid off - and NEVER pay only the minimum monthly payment.

Good luck, you seem to be in a good path for your future with family; nothing wrong with Cosmetology skills, but I strongly suggest you consider an education path that will give you a job with benefits, e.g. nursing, technical skills' education, or similar that will enable you to work for a big enough company that offers benefits, to help your (and family's growth).

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u/just_posting_this_ch 1d ago

I rolled a credit card debt for a bit when I could have paid it off. Similar to what you're doing, I regret it. They're such shitbag institutions. I messed up a payment and they charged me a late fee. Then either I turn into an asshole and get my late fee back, or pay it. I did it to "build my credit" because I have heard "having credit and not using it decreases your credit score".

Good job on the quality finances!

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u/TheCygnusWall 1d ago

I have heard "having credit and not using it decreases your credit score".

This is the opposite of the truth, having low utilization increases your credit score.

See #2 under factors:
https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-affects-your-credit-scores/

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u/wetballjones 1d ago

Never ever let the interest hit. The credit card should only be viewed as a debit card where you instantly pay it off and get a little bonus reward as a result.

Don't spend money you don't have, and never let interest accrue on a credit card. Don't make any excuses for this rule and you'll be good. Keep those savings. Don't blow it on expensive gifts.

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u/Raise-Emotional 1d ago

Never carry an interest gathering balance on a credit card. Definitely USE credit cards but be disciplined like you are with the savings. Charge and pay. Charge and pay.

My wife and i have gotten into travel Hacking and free travel is our reward now for being disciplined. Let the undisciplined pay for my plane tickets with their interest.

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u/crazy1david 1d ago

Pay it off immediately and study what you're supposed to do with money. You are wasting it on purpose if you pay interest. Money in this account is earning 4% and gradually going down in value to inflation, also -4%. So it's doing nothing for you, meanwhile you also have credit cards probably around 20-30% interest absolutely working against you. The point of having 5k is to be able to pay these bills immediately every month. The credit card just gives you a month to pay.

In my opinion you put most of the money in SPY and now you're making 25% instead of giving it to a bank. What do you think the bank does with your 5k to pay you interest. They profit and feed you the crumbs.

When you need something you always buy with credit, then pay it off transferring from your investments.

So now your money is actually working for you instead of against you. You spend $100 but by the time you pay it your $100 investment is worth $105. You pay and earn another 1-5% in points.

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u/iambecomesoil 1d ago

It should be your stated goal to never pay a cent of credit card interest for the rest of your life.

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u/1800deeznutzz 1d ago

Never take hard earned cash that could make you money and pay off CC debit. Just work harder and pay off the CC debit.

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u/cryptobro42069 1d ago

Ah, I totally respect what you’re doing but you can do better than that interest rate. Do a Roth IRA if you’re doing post tax. 401k if you’re doing pre-tax and expect to make around the same for the entirety of your career.

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u/GoldenScarab 1d ago

Credit card interest is one of the best ways to stay poor. Pay it off in full every month and it's ok. If you can't afford to do that, then you can't afford a credit card.

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u/ramiro-cantu 1d ago

Think about it like this: if the apr on a credit card is 28% you paying off that credit card is always going to be better than putting the money in savings because youre getting a 28% yearly return

If you could invest your money in a 28% guaranteed return account I’m sure you’d do it in a heartbeat.

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u/ginger_and_egg 1d ago

If you have automatic payments that pay the full statement balance before the due date, you avoid any and all interest. Just don't ever spend more than you have

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u/MyOtherAvatar 1d ago

This calculator will give you an idea of what it costs to carry a balance on a credit card.

https://itools-ioutils.fcac-acfc.gc.ca/ccpc-cpcc/CCPCCalc-CPCCCalc-eng.aspx

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u/pasteisdenato 1d ago

You haven’t saved 5k if you’ve got debt. You need to get into the mindset that debt always comes first.

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u/WorkingOnAFreshName 1d ago

Do this before LITERALLY any other payments. And once you’re back to 0 debt, do everything you can to stay that way.

If you absolutely direly must go into debt again, attack that balance as soon as possible.

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u/Skylon1 1d ago

I can’t speak for OP but I usually have around 500-1000$ on my card that I make payments on monthly to avoid interest. For me I just like having a clean number in my savings, so rather than use my $5000 as long as I’m not paying interest on the credit card amount I don’t dip into savings.

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u/ForzaShadow 1d ago

Yes, I am the same way, it’s literally beneficial to use your credit card for every purchase you make as long as those purchases are needs and not wants. If you pay it off in full each month there’s no harm done.

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u/Academic_Cabinet_994 1d ago

If you pay it off in full each month there’s no harm done.

You also want your utilization below 30% typically, otherwise it can negatively affect your credit.

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u/GrandmaOatmeals 1d ago

This is sort of but not fully true, and the creditcards subreddit has a whole sticky over this myth.

Basically utilization has no memory. So if you have 99% utilization every month, and then you go down to 1% utilization in the month you apply for new credit, you'll have the exact same odds of acceptance as if you have 1% utilization all the time.

There's no tangible benefit to always keeping your utilization below a threshold, only on the months you need new credit.

This is different from payment history, where if you have a late payment, that is gonna hurt your score for 7 years to come.

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u/quiteCryptic 1d ago

Not important unless you're actively trying to get a house or car loan, credit score will recover quickly once utilization is lower again.

It doesn't hurt to keep it low though if you can, or get more credit available to you to automatically keep it low (as long as you won't be tempted to use that credit available to you...)

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u/Skylon1 1d ago

Yeah the cash back does add up sometimes usually like 50-75$ every couple months or so. It doesn’t exactly help your credit to do this but it doesn’t really seem to hurt it much. I think I sit around 760-775 credit score. They are mad at me that I don’t use enough credit.

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u/Chrznble 1d ago

I always suggest using a cash back card. I get ~3% on everything I purchase. Between work trips, bills, everyday spending, and everything else, I make around $1,000+ $2,000 a year off my credit card. No interest as everything is paid off monthly.

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u/NarrowMonth8202 1d ago

Make payments on monthly. Do you mean you pay off the statement balance each month in full otherwise how are you not paying interest (aside from a zero apr card).

If you have the cash to there is no reason not to pay off the full statement balance each month.

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u/Skylon1 1d ago

Yes I pay the statement balance in full, and usually some stuff that’s not on that statement will be there that just goes over to the next pay period and so on that isn’t due yet.

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u/No_Veterinarian1010 1d ago

That’s not carrying a balance then and it’s how you are “supposed” to use a credit card

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u/Skylon1 1d ago

When I say carry a balance I just meant the new stuff that’s not in the previous statement stays there. Sorry if my terminology isn’t accurate.

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u/NarrowMonth8202 1d ago

No worries I just want to be clear for the OP.

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u/m00ndr0pp3d 1d ago

I do the same thing but in the post they said they can pay it off with time, indicating they would probably pay interest on it. I use my credit card for everything I buy, no reason not to really

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u/Eeor_is_High 1d ago

'a clean number in savings' is strange considering how variable the cost of life is.

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u/anusthingispossiblez 1d ago

This is what I do. Take advantage of credit card point but never pay interest

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u/TiredOfRatRacing 1d ago

Stay consistent with how you save. Generosity is nice. But if you have savings goals, stick to them. If you can, plan ahead to set aside specific amounts to go towards a "fun" or "gift" fund.

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u/ColdBeefBrian 1d ago

I'd suggest secret Santa. You all save money, still get a present, you have fun guessing who it was and you don't have the stress of running around trying to sort gifts out for everyone.

This is the third year my family have done it and honestly it just helps so much without feeling like anyone is being a grinch.

Just decide a budget you're all happy with and take it from there.

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u/ShankThatSnitch 1d ago

Pay off the CC debt, use the savings for that. Ask yourself if you would take out credit card debt to fund your savings account? If the answer is no, then pay off the debt. If the answer is yes, that slap yourself in the face, and pay off the debt.

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u/------__-__-_-__- 1d ago

did you kiss your cat on the nose?

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u/TributeBands_areSHIT 1d ago

Gift cards with 20$ is the way for younger siblings

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u/PM_ME_HENTAI69 1d ago

If you don’t have it go get pet insurance

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u/hoxxxxx 1d ago

we quit with that automatic christmas stuff years ago and it's a huge weight off our shoulders. we only buy presents now if it's something that they really need or just a great gift idea. happens about every other year with different people in our lives.

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u/Infinite-Ad-3947 1d ago

Do secret Santa!!! My siblings and I do that for Xmas and it's so nice. We do a 50-70$ limit depending on how everyone is feeling financially. We always talk about how we wish we could do it with all of our different family members lol.

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u/Heroinkirby 1d ago

I feel that. 30 year old me is still paying for my for 20s me's mistakes

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u/DickHz2 1d ago

That’s rough, buddy

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u/Domolisher 1d ago

For 0% APR, are you getting a revolving door of intro 0%? I don't think I have ever found a card with permanent 0%.

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u/Princecuse13 13h ago

Sometimes it's hard to catch up. I wish I hadn't been dumb about my CC a couple years back because I'm nowhere near paying it off now 🥲

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u/Critical_Bed163 1d ago

That really isn't your business and not what OP was looking for by sharing this. You might mean to be helpful, but it comes off as having to be critical instead of supportive. Congrats on a great milestone, OP!!!