Author Topic: Getting Started Question  (Read 2125 times)

rav

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Getting Started Question
« on: May 24, 2018, 10:26:00 PM »
So I am still browsing through this great site, but I had some questions about my own scenario and what I have read so far.

Bit of background: I woke up last year and saw my apartment renewal, I saw the increase, and thought to myself why am I living in an apartment alone, with a round trip drive of 52 miles... So I moved, rented just a room 16 miles round trip from work and cut my rent in half and was able to drop power\water\cable. I only have the phone plan now (still expensive..will look at that..). I love the idea of a bike, but its just literally not safe to ride bikes in South Florida. Plus my job requires that I travel at a moments notice up to 120 miles away so gotta have a car.

Goal: Cut costs. Learn about investing and make better use of current money.

I have about $7000 sitting in the bank.
Card 1: paid in full each month. I put pretty much everything on it so that I get the bonus points. I figure on average I can net back $500 a year in points.
Card 2: $600 (0% interest)
Car loan: 2016 civic $17500 left (2.9% I think? 6 year loan)

Income after tax: $3600
401k contributions: $100 monthly employer matched.
Expense monthly: $3200

Firstly, I know I need to increase the 401k. Then I need to cut costs. Groceries are killing me taking up roughly $750-850 per month so glad I found the article on that. So we will see if I can make that happen.

Should I take half(since the other half is to cover monthly card) of the $7000 and start a vanguard investment? Or keep the 2 month cushion and focus solely on diverting the $400 monthly savings to the 401k? Or some sort of mix?

koshtra

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Re: Getting Started Question
« Reply #1 on: May 24, 2018, 10:42:27 PM »
Welcome!

For where to stash, this is where you probably want to start:

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

Not really enough info to answer the question about emergency fund, but $7,000 seems like a lot to keep just sitting around in a savings account. You just need to think through what the potential emergencies are, and what your options would be if the likeliest ones happened. You can't budget for everything. It's not the end of the world if you have to pull money back out of a tax-sheltered account & pay the penalty.

For the cost-cutting -- just pick one area at a time, identify the biggest villains, and punch them out. It gets to be pretty fun after a while. I treat it pretty much like a game. You don't have to fix everything at once.

slappy

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Re: Getting Started Question
« Reply #2 on: May 25, 2018, 06:49:17 AM »
So I am still browsing through this great site, but I had some questions about my own scenario and what I have read so far.

Bit of background: I woke up last year and saw my apartment renewal, I saw the increase, and thought to myself why am I living in an apartment alone, with a round trip drive of 52 miles... So I moved, rented just a room 16 miles round trip from work and cut my rent in half and was able to drop power\water\cable. I only have the phone plan now (still expensive..will look at that..). I love the idea of a bike, but its just literally not safe to ride bikes in South Florida. Plus my job requires that I travel at a moments notice up to 120 miles away so gotta have a car.

Goal: Cut costs. Learn about investing and make better use of current money.

I have about $7000 sitting in the bank.
Card 1: paid in full each month. I put pretty much everything on it so that I get the bonus points. I figure on average I can net back $500 a year in points.
Card 2: $600 (0% interest)
Car loan: 2016 civic $17500 left (2.9% I think? 6 year loan)

Income after tax: $3600
401k contributions: $100 monthly employer matched.
Expense monthly: $3200

Firstly, I know I need to increase the 401k. Then I need to cut costs. Groceries are killing me taking up roughly $750-850 per month so glad I found the article on that. So we will see if I can make that happen.

Should I take half(since the other half is to cover monthly card) of the $7000 and start a vanguard investment? Or keep the 2 month cushion and focus solely on diverting the $400 monthly savings to the 401k? Or some sort of mix?

Can you post a full case study? $750-$850 a month on groceries for one person (?) is a ton. Would you consider selling the car and getting rid of that payment? That's a lot of car for your income.

acroy

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Re: Getting Started Question
« Reply #3 on: May 25, 2018, 07:18:40 AM »
Income after tax: $3600
401k contributions: $100 monthly employer matched.
Expense monthly: $3200

Welcome!!
-That is great after-tax income, congratulations!
-Kill those expenses. Not sure how you're blowing 3200/mo on a single person while renting a room. that must be a hella phone bill ;)
-MAX 401k. MAX!! This will help shield your income from the taxman and is a huge investment in your financial future.
-set up Vanguard account for after-tax moneys and chuck it all into VTI or similar

good luck!!

fuzzy math

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Re: Getting Started Question
« Reply #4 on: May 25, 2018, 08:38:08 AM »
Increasing your 401k will help you cut costs as you will have less taxes taken out on your paycheck. And yes we need more info on how you're spending $3200 a month if you're just renting a room. Is that figure from before you moved?

rav

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Re: Getting Started Question
« Reply #5 on: May 25, 2018, 02:30:39 PM »
Okay I rechecked and noticed that mint double counts certain categories when you have the main category and sub categories in the budget tracker. I think my actual expenses per month is actually $2700ish. I thought that 3200 didn't make much sense...


Housing                $740
Transportation       $768
Utilities               $164
Groceries               $700
Debt payments       $120
Gym                       $33
Sports               $60
Personal Care       $100
Total expenses       $2,685


So the debt payments are from Card 2. A laptop I bought for side work and such, should be fully paid in 4 months or I could just pay it off and be done with it. So that would bring my expenses down to $2565. the above budget does not include any entertainment or misc shopping. On average Ill spend less than $40 a month on entertainment and misc can vary based on need.

Food and phone are probably the two biggest areas to try to cut costs. My phone has to work for work, which is why I switched to a plan that was more expensive because the cheaper one wasn't working in all areas. Personal care could possibly come down by 40%. Theres no way I can cut my own hair... I play hockey and golf, like the two most expensive sports around, so that gets tricky to even keep it on budget.



koshtra-
thanks for the link. I saw some good ideas about alternative banks. And Im still reading through it.


slappy-
The $700-750 is dining out and food in general. I am going to be heavily looking at cutting that cost. I am slightly attached to the car, although I understand the points behind the concept of used and payments. I think fixing cost spent on food is a bigger benefit to me right now than changing the car. I can't not have a car, and this one has already had so much paid into it Im not sure it would be worth swapping for just a smaller payment. The above budget for transportation includes $354 car payment, 236 insurance and 170 on gas\tolls. In a typical month I will be reimbursed at least $100 extra for travel expenses.

acroy-
I found out today my max employer match and I'm going to increase my 401k contributions to be at that limit. They will only match $236 monthly if I did the calculations correctly. So I will increase to match that. Also see above about the expenses.
« Last Edit: May 25, 2018, 02:35:05 PM by rav »

slappy

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Re: Getting Started Question
« Reply #6 on: May 25, 2018, 03:11:50 PM »
On the car-how much is it worth? If you can sell it and get a couple thousand dollars out of it, you can use that to buy a cheap car that you wouldn't have payments on. In doing so, you could also reduce the insurance you have on it. $236 per month in insurance is crazy. That's more than twice what I pay to insure three vehicles. What are the deductibles? Do you have a limited/bad driving history? 

Even if you sell the car and break even, you can get a much cheaper car and definitely lower that payment by a ton. It really depends on how much you are willing to do.

What are utilities? Is that your phone? $164 is certainly high for one phone line. I assume that includes electric, cable or other things your split with the person you rent a room from.

Is there any reason you couldn't pay that $600 off in one month?


rav

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Re: Getting Started Question
« Reply #7 on: May 25, 2018, 03:26:09 PM »
On the car-how much is it worth? If you can sell it and get a couple thousand dollars out of it, you can use that to buy a cheap car that you wouldn't have payments on. In doing so, you could also reduce the insurance you have on it. $236 per month in insurance is crazy. That's more than twice what I pay to insure three vehicles. What are the deductibles? Do you have a limited/bad driving history? 

Even if you sell the car and break even, you can get a much cheaper car and definitely lower that payment by a ton. It really depends on how much you are willing to do.

What are utilities? Is that your phone? $164 is certainly high for one phone line. I assume that includes electric, cable or other things your split with the person you rent a room from.

Is there any reason you couldn't pay that $600 off in one month?



I could probably pay the $600 over 2 months to keep it safe. Im not as disciplined at my purchases to save the full $700 every month. I usually end up with $200-300 in excess purchases which I hope to stop doing.

The car is valued at more or less the same that I owe so trading\selling it in would net zero $. I do value the car, I was driving a 98 accord for 7 years as my first car, and swapped to the new car when the cost was getting too out of hand for the accord. I plan to keep this car until it dies. Im not one to change cars often.

On the insurance; deductible is $500. Also has renters insurance built in, but thats like $15 a month. I can go get some new quotes, I have not changed my insurance in a few years, and last time there were some accidents that may have increased it, might be able to get a little lower now. But I probably won't get under $200. Being Male under 30 in Florida just seems to have a high required cost.
« Last Edit: May 25, 2018, 03:30:08 PM by rav »