Author Topic: Reader Case Study – 23 year old married Mexican wants to grow a mustache :P !!!  (Read 4343 times)

MexMustachian

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First of all I think Stumbling on MMM site on google was one of the best financial things that have happened to me so far. Read almost all of the Blogs and actualy starting with the forums aswell. I understand most are U.S. scenarios with U.S. retirement programs and banks and investments. I also understand some investments are international. But to get Directly to the point I HAVE NO SAVINGS, I HAVE NO INVESTMENTS, some debt but im looking forward to clearing it out within 2 months and I really want to not make my same mistakes now since I have a family now (we weren’t planning such an early pregnancy (plain dumb but I do not regret for one second having my son ). My goal is Early retirement and I completely understand it wont be easy due to the fact that I started my family life not too early but while I am in debt. I think maybe retirement at 30 is kinda out of the picture but maybe 40 is possible. I did not go to college but managed to get decent paying job (for Mexico) at an IT company and get great benefits (again for Mexico). I would love any advice and also if I can be used as an example of the other side of incomes and opportunities. Im not gonna start complaining about how good people have it in the U.S. because I know there are difficult social and financial issues everywhere on earth but some places or more underdeveloped than others. So here it goes…

Life Situation: 23 year old male, no college, wife currently studying college (no way I was going to let her drop out) so that makes our house hold a single income one, and my 14 month old baby boy witch is the primary reason for me not wanting to make the same mistakes. I WANT TIME FOR HIM! A little to late to be full time with him from age 0-15 im guessing but not to late to share other phases of life more efficiently and relaxed.

I live in Mexico. Guadalajara, Jalisco to be more precise i ride bus to work total of a 4 hour commute total 5 days a week. the reason why i dont move closer to work is because I live in a rent free home at the moment.

Gross Salary/Wages: All income is in Mexican pesos, 1 usd is 15 mexican pesos. Please do not think in dollars since that would actually be a shamefull wage for a 3 person family in the states but here in Mexico its not the worst.

11,500 gross montly salary (get paid bi-weekly)
From this 11,500 salary, 1495 is automatically deducted by my company and put in to a savings fund. My company doubles my contribution so its 2990 montly going to that savings fund after 12 months that is automatically returned to me tax free on last week of july.(35880 a year, if been employeed here only for 1 month so going to get around 12000 this july witch is all going to any remaining debt.) So really the salary I get is 10,005 montly and the rest goes to the savings fund.

1380    in grocery cupons(I can actualy cash them)
  800    restaurant cupons (I can actualy cash them)
All this is gross. So normal 14% tax is deducted on all of it including my 1495 savings fund deduction but that is deposited whole, the tax come out of the actual money I get monthly.

Pre-tax deductions: 360 montly to my IMSS witch is like the social security in the states. Also called Afore witch is like the retirement fund.

Other Ordinary Income: N/a

Qualified Dividends & Long Term Capital Gains: N/a

Rental Income, Actual Expenses, and Depreciation: N/a

Adjusted Gross Income:    10051 total take home pay monthly (11500+1380 cupon+800 cupon-1495 savings fund- 360 social security deduction-15% tax)

Taxes: 15%



Current expenses:  All monthly

Rent:                      0 since house is my uncles and he lent it to me free of pay for a few years.
Groceries:            3000
Transportation:  1300
Eating out:          300
Electricity:           200
Gas:                     100
Tv:                       220
Phone:                300
Baby needs:       1300 (baby formula, diapers. Maybe 6 more months and no more diapers or baby formula)
Misc:                   1000 (wife school occasional fees, books)
Clothes, etc:       0      (till done with debt)

Total expenses:    7720
Money left over:   2331  (right now used to pay debt)

Debt:                12125 @ 0% interest. This I owe my dad (was originaly 18000 3 months ago)
Credit card:        1995  (paying that of in 1 month)

Hoping to pay of credit card in this month. And the 12125 I owe to my dad at 0% interest thank God, witch I plan to pay on july with the savings fun of 12000.



Expected ER expenses: Nothing expected but a goal of mine is saving an emergency fund.

Assets: Unfortunately I have no assets. This really bums me out because im head of a household but I really want to get on track.

Specific Question(s): Im looking at a way to save money, and to make my money work for me. If any of the already successful mustichians have experience in Mexican economy or are in mexico or general info that could help I would eternaly be grateful.
oh there is actualy a peer to peer site here in mexico called Prestadero.com and I`ve also thought that maybe in the future some savings and savings funds could be destined to it for a 16% average annual return..


PS: I will be waiting anxiously for any feed back ill check this daily and also researching on my own. I want to succeed i want to provide my family with quality time and stress free futures. I do not want to work till im 65+ like most middle class Mexicans. I want to live life, live my family, and live my experiences not my bosses or anybody elses. We already have a semi frugal life style by necesity witch is partialy good. But i would like to live the same frugal lifestyle but with a nice stash for emergencys, or some travel, or even to be able to go out maybe for a special reason. Honestly right now since i landed this new job things are looking brighter. before it wasnt even half of this income. and with family. So ill try to not tear my ever receding hair out and hope that with all you mustichian`s help and with my personal motivation ill make it.
« Last Edit: April 02, 2015, 05:02:49 PM by bcovasanzcarlo »

MexMustachian

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Btw its awsome that i just submited the post and a few minutes later there are 1 or 2 views. hoping some will be responses.

iamlindoro

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Hola!  Bienvenido a MMM!  (Aprendiendo un poco español, pero por favor, ser amable conmigo ;) )

It's difficult to give detailed insight since I'm from the US and a lot of the common places we find savings are or may be more difficult in Mexico.  You do have good headroom to save once the debt is gone, and it seems it will all be gone by the late summer.  After that, you can easily start putting that 2500 away into savings.  Add to that anything you can shave off of the baby expenses, which it seems will be going down soon as well.

I know electricity is quite expensive in Mexico, but this would be a relatively high proportion of income in the US.  Would you consider this a place you could find savings?

Transportation is also huge, as is the time spent commuting.  Is there any chance of moving your family closer to work or finding work closer to home now that you have good experience?  Bravo on your work experience so far, and in a skilled profession-- is there a market in your local community to be entrepreneurial with these skills, and do installs, troubleshooting, network setup, etc.?  We here at MMM love the "side hustle," and to me, Mexico seems to have a lot of opportunity for small businesspeople willing to work hard.

Food also seems high, though I understand that food is more expensive in some ways there.  Can you reduce this budget by cleaning up your family diet?

I can't say what the right investing options are in Mexico, but it seems Vanguard has some excellent options that match the ones many people here use in the US:

https://www.vanguardmexico.com/institutional/mexico/home.htm

Specifically, the US total market index, Total world stock, and total bond market funds are available to you, which means you can do the same exact three fund portfolio that a huge number of us are invested in:

http://www.bogleheads.org/wiki/Three-fund_portfolio

That Vanguard site is for institutional investors, but perhaps you can access the same tickers either through your employer, through another broker, or through their cross listings on the Bolsa.

Personally, that's what I'd do (and do do).

Buena suerte!  I look forward to seeing how it goes for you.  I love Mexico, and have considered some places in Yucatán and Guanajuato as possible places to retire...

EDIT: Your english is very good!  Have you considered connecting with the Canadian and US expat community to provide professional IT services, assistance with phone and internet service issues, and other tasks involving navigating bureaucracy that Americans with limited Spanish ability would find very difficult?  I suspect you could charge far above what you might charge a fellow Mexican, but still have that rate be a great deal to someone from the US/Canada.
« Last Edit: April 02, 2015, 05:40:40 PM by iamlindoro »
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MexMustachian

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@iamlindoro Thanks! you have great Spanish writting, keep at it :). Honestly i haven`t started with the light bulb changes and shower head replacement part since right now im focused on the debt, and all those type of things are more expensive here for example a 10-15 dls peace of hard ware there is maybe an hour of work on average or less, here the same piece costs the same 10-15 dls but its equivalent to like half a day to a day of work on average. I will look in to the vanguard Mexico, honestly i had no idea it existed. I really apreciate your advice. Adding all of it to my to do list witch I made a personal commitment of doing including: emergency fund, increasing home efficency, maybe buying a low end high mpg motorcycle to cut my commute time by 50-75% withing the next 6 months, and starting to invest the best posible and available ways that are available to me... Really excited about the new job and your absolutely right, maybe shaving of 2 hrs of commute time  could give me adittional time for side jobs meaning adittional savings. Thanks iamlindoro. If anything else pops your mind let me know, ill be here constantly.

-Very much appreciated.

CaveDweller

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Congratulations @bcovasanzcarlo, you're getting a really early start which is awesome, and getting to live rent-free is another huge advantage. I think you're right that a motorcycle could be a good investment, since it could cut down on your travel budget as well as your super long commute. Those extra couple hours would be better spent on a side job, or else just having more time to spend with your wife and son.

Obviously TV is another opportunity to cut back and save more...

Seems like you're working hard to optimize things as much as you can for now. Once your wife finishes school, you guys will have the chance to save much more aggressively, and you may come across better job opportunities as well. Try and be patient, and keep up the great work in the meantime!!

Doulos

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To translate some of that from peso to dollar.
Total income 11,500 = $765.64
Rent:                   0
Groceries:           3000 = $199.73
Transportation:  1300 = $86.55
Eating out:         300 = $19.97
Electricity:          200 = $13.32
Gas:                   100 = $6.66
Tv:                     220 = $14.65
Phone:               300 = $19.97
Baby needs:       1300 = $86.55
School               1000 = $66.58
Clothes, etc:       0

Total expenses:    7720 = $513.98
Money left over:   2331 = $155.19

By USA standards you are doing incredibly well on expenses.
Does mexico have any pre-tax option for retirement?  Similar to a 401k or IRA?  I did a few searches but could not find anything.

The two things that look like you have some potential savings.
Groceries; I cannot be sure, but it seems possible.  Do you eat processed food?  Stuff that comes in packages?  In theory, you can usually save a lot of money by cutting things like frozen pizzas and soda from your diet.
- Based on estimates I could gather comparing Mexican to USA food costs, you should be able to cut your Grocery budget in half.
Baby needs; My wife has a friend that using cloth diapers and washes them.  This is of course much less convenient, but could cut a significant portion of your costs.
http://www.thesimpledollar.com/cloth-diapering-does-it-save-enough-money-to-be-worth-the-extra-effort/
Pre-FI.  Current Estimate 2022

Retired To Win

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Two things.

#1:You're right on the mark about building up an emergency fund.  Once you have paid off that 12K peso debt in 5 or 6 months, use the money you will no longer have to use to pay debt to build up that fund.  Try for a fund that can cover 6 months of your basic living expenses.

#2: AFTER you've got your Emergency Fund set up and are looking for good investments, do your homework well regarding Prestadero -- or any peer-to-peer lending.  It's not all automatic profits.  A certain percentage of the loans you invest in will default and you will lose your entire investment in them.  This will pull down your effective interest rate gain considerably.  AND you really -- really -- should NOT consider investing in such loans a few at a time.  The only way to make the odds work in your favor is to be able to invest in several hundred (1000 even better) loans at the same time.  (All this I tell you from experience.)

Good luck.

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MexMustachian

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Congratulations @bcovasanzcarlo, you're getting a really early start which is awesome, and getting to live rent-free is another huge advantage. I think you're right that a motorcycle could be a good investment, since it could cut down on your travel budget as well as your super long commute. Those extra couple hours would be better spent on a side job, or else just having more time to spend with your wife and son.

Obviously TV is another opportunity to cut back and save more...

Seems like you're working hard to optimize things as much as you can for now. Once your wife finishes school, you guys will have the chance to save much more aggressively, and you may come across better job opportunities as well. Try and be patient, and keep up the great work in the meantime!!

Thanks CaveDweller, also taking note of that. actualy this is the thing im paying for cable but have no internet. So since my wife often need internet, planning on canceling cable and getting internet, maybe just a couple of pesos cheaper but the benefit is greater since internet will help her with school me with everything else like maybe investing in stock later on and we can always watch stuff on the internet.... What do you guys think is better.. a freind of mine said he could pay for a motorcycle for me with his credit card that specific card gets 12 months @ 0% interest but it would be new... some were like 20,000 pesos. or just save up for a used one at around 10,000-12,000 but that would take minimum 6 months saving 2000 a month.. higher price and less commute now or lower price and bear commute 6 months?

MexMustachian

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By USA standards you are doing incredibly well on expenses.
Does mexico have any pre-tax option for retirement?  Similar to a 401k or IRA?  I did a few searches but could not find anything.



Thanks for the tips Doulos, unfortunately we dont have any pre-tax options here. Thats a big bummer and one of the things that could really help in the long run. Expenses might look good in that amount but remember mexican minimum wage is equivalent to U.S. minimum Hourly wage, of course im not doing either but for a normal Mexican these are a bit above average expenses since most would do with about 30% less and i totaly see what your talking about in the Grocery and diaper department. Will be looking in to the grocery list, but the diaper not so sure the Mrs. would love the idea. Shes still not all in for the saving half the pay, but shes getting there although our son´s expenses are still a very delicate subject for us. She still doesnt understand that its not taking anything away its just being a bit smarter and efficient for a better and self sustainable lifestyle int he future.

MexMustachian

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#2: AFTER you've got your Emergency Fund set up and are looking for good investments, do your homework well regarding Prestadero -- or any peer-to-peer lending.  It's not all automatic profits.  A certain percentage of the loans you invest in will default and you will lose your entire investment in them.  This will pull down your effective interest rate gain considerably.  AND you really -- really -- should NOT consider investing in such loans a few at a time.  The only way to make the odds work in your favor is to be able to invest in several hundred (1000 even better) loans at the same time.  (All this I tell you from experience.)


Thanks Retired to Win. Actualy one of the things that caught my eye about Prestadero is that it does give you the option to go all in to a single loan (would never ever do that) or to get slips at a time. Although the minimum amount per slip is 250 pesos so that by 100 or 1000 is still maybe a year minimum. Actualy the plan is to get nexts years savings fund hoping nothing tragic before that happens and destine that to prestadero and what ever i save from today to that time to go directly to emergency on a on hand small invesment account, its not much actualy like 2.8% annualy :P but im guessing anything is better that nothing, and plus it would be available 24/7 in case of emergency. Like im mentioned all this frugal lifestyle was already my default lifestyle by necesity, but i had never saved anything, what im seeing is that im paying debt and for any person in my situation (age, family, and past earnings) im doing it i guess in a fast passed manner (remainder of debt hopefuly gone by late july) so once thats gone ill start saving the most possible, gives me a bit of time to get the mrs. in the same tune :P 

MexMustachian

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Opinion on Peer-to-Peer lending but not through a platform or website, just doing it personaly like: Lend money to a neighbor or coworker or  or someone elses freind, ask for some type of waranty, something of higher value than what you you lend them. Keeping an agreement at a set % interest rate and for example, if at the end of the year agreement or couple of months agreement one does not get the money and interest back one keeps the item in warranty.

Doulos

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Opinion.
Dont lend to friends nor family.
And dont get in debt to them either.

Nothing destroys relationships faster than debt.  Debt is a form of slavery.

If you want to get into the loan business.  Do so in some manner that completely separates you from the client.
I would get out of that business completely.  Investing in Bonds would be the closest.

If your family and friends need money.  You do what your family is doing for you.  You give them a house to live in for free, or a 0% loan that you are willing to forgive if they never pay you back because you love them.
Pre-FI.  Current Estimate 2022

MexMustachian

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Opinion.
Dont lend to friends nor family.
And dont get in debt to them either.

Nothing destroys relationships faster than debt.  Debt is a form of slavery.

If you want to get into the loan business.  Do so in some manner that completely separates you from the client.
I would get out of that business completely.  Investing in Bonds would be the closest.

If your family and friends need money.  You do what your family is doing for you.  You give them a house to live in for free, or a 0% loan that you are willing to forgive if they never pay you back because you love them.


Of course I understand that completely actualy a personal rule is never profit purposely from family.... EVER... its better for family to profit from you.. and NEVER take advantage of no one aswell.. the thing is banks here lend money for maybe 50-70% interest anualy. Peer to Peerprivate lenders charge maybe 5%-10% MONTHLY.. I was thinking something like 3%-4% montly or even less.
« Last Edit: April 03, 2015, 02:58:03 PM by bcovasanzcarlo »

Doulos

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In the USA, 50-70% is so insanely high that is illegal.  This is call "Usury", this is governed by each state.  Thus the exact % varies greatly.

What you are looking to do seems to be what we call a "Pawn shop".
You take an item.
You evaluate the price of that item. (as if you are going to sell it for a profit).
You give the person that amount of money as a loan.
They pay you each month, until it is paid off.

If they pay you in full (interest, storage fee, any late payment fees) by the due date, you give them back the item.
Then if they do not pay you keep the item, and sell it.

If you enjoy the idea of haggling over prices, learning the historical value of items, being in sales, loaning people money, etc.
Then start your own pawn shop as a side business.
Pre-FI.  Current Estimate 2022

MexMustachian

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Thanks on the insight Doulus i hadn`t thought of it that way and now that i do, doesnt seem right. In my opinion Mexican bank loans, pawnshops are kind of a rip off and i would just be doing the exact same thing.. Ill keep reading up on other stuff. Looking in to Zurich Mexico and Vanguard Mexico but i just cant connect the damned dots..

Doulos

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Nothing wrong with running a pawn shop.  Some have great reputations and help the community.
There is are several popular shows in the USA about pawnshops.  Some are sleazy as you mention.
Some are legitimate.
http://www.history.com/shows/pawn-stars
Pre-FI.  Current Estimate 2022

MexMustachian

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Nothing wrong with running a pawn shop.  Some have great reputations and help the community.
There is are several popular shows in the USA about pawnshops.  Some are sleazy as you mention.
Some are legitimate.
http://www.history.com/shows/pawn-stars

Yeah I´ve seen the show. I was looking actualy at Zurich Mexico and they offer a steady 4.5% annual return on a fixed 15 year 1500 peso minimum per month saving rate.. do you know about anything like this in the states? Pros? cons?
If i were to take at it. I could start with 2500-3500 after paying debt and if an emergency or something stopped me from being able to save that amount i could always do the 1500 minimum.. What do you think?

iamlindoro

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What I see on Zurich Mexico looks like an annuity.  Generally speaking they are terrible investments.  If you have some literature about it, we could probably be more specific.  Bonus points if any of it is in English ;)

Really, you should take charge of your own investment.  You have access to US and world index funds that have historically earned 8-9% annually, no reason to get into a predatory annuity and accept a lower return on top of that.

You can look at this series:

http://jlcollinsnh.com/stock-series/

Some may not apply, but much will.  You can also look up annuities on the search here to see a lot of discussion about them, and why they're awful.

http://forum.mrmoneymustache.com/investor-alley/are-annuities-a-good-fit-in-retirement
« Last Edit: April 03, 2015, 09:11:16 PM by iamlindoro »
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bacchi

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Found this for you:

http://www.bogleheads.org/forum/viewtopic.php?t=81117

Blink! closed and now sends users to Accitrade, which is also owned by Banamex/Citigroup.

https://www.accitrade.com/accitrdapp/at_home.do

Sadly, it looks like the minimum is 100,000 MXN. Next year, though, you'll get the full 35880 + whatever you save and may be pretty close.


iamlindoro

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Bacchi gave you a good start.  Maybe also check out this list:

http://en.wikipedia.org/wiki/List_of_brokerage_firms_of_the_Bolsa_Mexicana_de_Valores

Some of those are established firms in either the US or worldwide, and some operate in the low cost space, too.  You may find a brokerage with a much lower investment minimum.
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MexMustachian

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Wow iamlindoro and Bacchi thanks for the info.. Im not the type of guy to ask to be baby fed info, but the thing is most of this stuff i dont even know what it is or how its called here, I kinda dont know what to look for, but you´ve provided much much info.. ill take the better part of the next 5-6 hrs doing more research. Ill let you guys know whats going on.. thanks really appreciate it.

bacchi

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Wow iamlindoro and Bacchi thanks for the info.. Im not the type of guy to ask to be baby fed info, but the thing is most of this stuff i dont even know what it is or how its called here, I kinda dont know what to look for, but you´ve provided much much info.. ill take the better part of the next 5-6 hrs doing more research. Ill let you guys know whats going on.. thanks really appreciate it.

You're probably want to search for "retail broker" or "discount broker" or similar. A lot of brokers are either for the rich or for companies and their pensions.