The Money Mustache Community
Learning, Sharing, and Teaching => Case Studies => Topic started by: Ocon on August 14, 2017, 12:11:34 AM
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Mustache_Wallace here and ready to enter into the fight for freedom. First obstacle in the way is a debt emergency. Here's the stats:
Age: 26
Single, 3 Roommates
Student loans:
Loan 1
--Outstanding balance: $7,744.64
---Interest: 6.550%
Loan 2
--Outstanding balance: $21,015.86
---Interest: 5.960%
Total Debt: $28,760.50
Minimum Payment: $400 split between the two loans
Revenue:
Job: ~$3,000/month
Expenses:
Rent/ Utilities: $600
Phone/ Car Insurance: $200
Groceries: $300
Gas: $150
Gym: $20
Xbox/ Netflix: $21
BoA Fee: $12
Misc: $75
Total: ~$1378
Apparent monthly payment able to put towards debt: $1622 (4x current payment)
Cash on hand: $8,033.41
Initial target: 20 months to freedom (based off of half of income put towards loan)
Strategy: Pay off the smaller loan as fast as possible, then attack the larger loan
Let the roast begin!
Mustache_Wallace
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Your car expenses are way too high. Phone should be $25 at most, which means you are spending $175 on car insurance. Either you are over-covered, or you own a car that's well beyond your means, or you are/were a terrible driver. Which is it?
$150 in gas PER MONTH? Either you own a ridiculous car, or you drive way too far to work, or you just like going around town for no reason. Which is it?
$12 per month in banking fees? It's dead simple to avoid fees. Direct deposit, minimum requirements, or switch banks altogether. That's $144 per year that you don't have. Why are you wasting it?
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Considering your other thread about your nightlife/going out habits, where is that in this budget? Misc?
$300 for groceries for a single person? You should be able to cut that down to $200 easily, in addition to everything Paul der Krake pointed out.
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Also consider any possibility of freelance/part-time work to supplement your income.
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Considering your other thread about your nightlife/going out habits, where is that in this budget? Misc?
$300 for groceries for a single person? You should be able to cut that down to $200 easily, in addition to everything Paul der Krake pointed out.
It's not in the budget anymore.
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Your car expenses are way too high. Phone should be $25 at most, which means you are spending $175 on car insurance. Either you are over-covered, or you own a car that's well beyond your means, or you are/were a terrible driver. Which is it?
$150 in gas PER MONTH? Either you own a ridiculous car, or you drive way too far to work, or you just like going around town for no reason. Which is it?
$12 per month in banking fees? It's dead simple to avoid fees. Direct deposit, minimum requirements, or switch banks altogether. That's $144 per year that you don't have. Why are you wasting it?
To be honest, I'd have to get back to you on that one. Phone and car insurance are carry over bills from when I lived at home, I just give my padre $200 a month. The car he drives could be a potential factor. I've only had one ticket in like ten years of driving.
I live 15 miles from work. I can't exactly change this as I just got signed a one year lease unless I find a closer job which I know some of you recommend and will look into.
It is Bank of America. I don't know why I'm charged $12 a month because I direct deposit enough and actually have a savings.
$300 in groceries was taken from the last month when I spent this much on groceries. I just gave that as a number. I bet I can get it to $150 easy.
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Also consider any possibility of freelance/part-time work to supplement your income.
Freelance what, like writing?
Part-time weekend work is definitely an option. Also, what I left out above is the potential overtime I could make from my company. Starting September and going to January, I could be making an extra $1k/ month. If not, I'll probably work at some nearby Liquor Store.
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Considering your other thread about your nightlife/going out habits, where is that in this budget? Misc?
$300 for groceries for a single person? You should be able to cut that down to $200 easily, in addition to everything Paul der Krake pointed out.
It's not in the budget anymore.
To clarify, a combination of factors led me to reevaluate my lot in life on Saturday. I went out on Friday but could tell, deep down, I didn't want to be out. I didn't want to do it anymore as it did not align with my goals (health, financial independence, freedom from debt). This was heavily influenced by that thread, other case studies I've read and rereading some MMM articles. That and realizing I'm 26 years old, and have nothing to party about with $30k debt.
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To clarify, a combination of factors led me to reevaluate my lot in life on Saturday. I went out on Friday but could tell, deep down, I didn't want to be out. I didn't want to do it anymore as it did not align with my goals (health, financial independence, freedom from debt). This was heavily influenced by that thread, other case studies I've read and rereading some MMM articles. That and realizing I'm 26 years old, and have nothing to party about with $30k debt.
Sounds good, especially while getting rid of the debt!
By the end of it, you may find that the nightlife didn't give you that much after all, or that you have gotten some new hobbies that are way more interesting.
Best of luck!
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So this sounds like your theoretical budget, not your real? Have you been tracking your real numbers via something like Mint or YNAB? Rolling averages will be a massive help to you, because while 'cold turkey' can work for some people, and tapering down works better for others, knowing your biggest areas of challenges helps the most period.
You've got some good underpinnings here- your debt isn't at absolutely insane interest rates, you have roommates, you have the luxury of time.
Have you seen MDM's investing order? With debt interest rates at your levels, I would make sure you're taking full advantage of retirement plan employer matching. https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153 (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153)
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I really don't have anything to add as the other posters already hit everything I'd have said something about and it sounds like you've had a bright and shiny epiphany regarding personal enjoyment time/lifestyle stuff and how maybe time to rein it back a bit to get out of debt/realize goals. Good luck, OP!
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Thanks all. I'll report back next month. Do you think dropping most of my savings to pay off the small debt is a good idea? I'm strangely scared to do it.
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Thanks all. I'll report back next month. Do you think dropping most of my savings to pay off the small debt is a good idea? I'm strangely scared to do it.
No. No way I'd be comfortable with only a few hundred bucks in an EF. Focus on the lifestyle changes, on cutting everything back and throwing it all at the loan. If you are impatient, challenge yourself to work that OT to get it done faster. I guarantee you'll feel better when you make that last payment, because you will feel like you really earned it. And you will then have the confidence to tackle the next bit, which then further increases your confidence to tackle the next, until you are in a virtuous cycle instead of a vicious one.
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It is Bank of America. I don't know why I'm charged $12 a month because I direct deposit enough and actually have a savings.
I would spend the time to find out. No reason in the world to give BofA $144 per year.
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Thanks all. I'll report back next month. Do you think dropping most of my savings to pay off the small debt is a good idea? I'm strangely scared to do it.
No. No way I'd be comfortable with only a few hundred bucks in an EF. Focus on the lifestyle changes, on cutting everything back and throwing it all at the loan. If you are impatient, challenge yourself to work that OT to get it done faster. I guarantee you'll feel better when you make that last payment, because you will feel like you really earned it. And you will then have the confidence to tackle the next bit, which then further increases your confidence to tackle the next, until you are in a virtuous cycle instead of a vicious one.
+1. Go read the investing order. You NEED an emergency fund. If you had loan sharks threatening to take your kidneys, then yeah, sure, don't have an e fund while paying off debt. But in your situation, you need at least a $1000 safety net. That's kinda the bare minimum for "shit life can throw at you" fund.
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Personally, I would:
1. Find a good local credit union that won't charge you any fees.
2. Put 1000-1500 in a savings account and use the rest of your free cash to pay off most of the 6.55% loan.
3. Shop around for car insurance (I did this when I was approximately your age any my bill went down by 60%).
4. Look at your phone and plan to see if you can do better (I'm in a T-Mobile family plan for $22/mo, Mint SIM has cheap options).
You are in a good spot relative to lots on this forum. You have lots of cash flow to take care of those loans and move on with your life debt free.
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Thanks all. I'll report back next month. Do you think dropping most of my savings to pay off the small debt is a good idea? I'm strangely scared to do it
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No. No way I'd be comfortable with only a few hundred bucks in an EF. Focus on the lifestyle changes, on cutting everything back and throwing it all at the loan. If you are impatient, challenge yourself to work that OT to get it done faster. I guarantee you'll feel better when you make that last payment, because you will feel like you really earned it. And you will then have the confidence to tackle the next bit, which then further increases your confidence to tackle the next, until you are in a virtuous cycle instead of a vicious one.
+1. Go read the investing order. You NEED an emergency fund. If you had loan sharks threatening to take your kidneys, then yeah, sure, don't have an e fund while paying off debt. But in your situation, you need at least a $1000 safety net. That's kinda the bare minimum for "shit life can throw at you" fund.
I've been looking at the MDM investing order and don't really know half the shit on there. Probably a bad sign. Either way, I've achieved Step 1, pretty sure I've achieved Step 2 for my company, and now I'm on Step 3. I'll be messaging you when I get to Step 4, or if I need to do something about Step 2.
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I would spend the time to find out. No reason in the world to give BofA $144 per year.
I figured it out, I think. Sometime long ago they changed my savings to a checking because I was constantly transferring money from the savings over to it. So if I don't have $1500 in each, they'll bill me. The path forward is: a) Keeping $1500 in each (not really difficult) b) going to the bank, and my employer to have them direct deposit $250 from my check to one of the accounts, and the rest to the other c) get a saving account, close one of the checking, and maintain $1500 in that, while saving in the other.
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What doesn't make sense about the investing order? That's what we're here for =) Let us know your sources of confusion, and we can help from there!
In short, for your circumstances:
-Get your emergency fund to $1000 minimum
-If your work offers a 401k (a type of retirement account), put in money up to the match they offer (if they offer one). Ex, my company does a partial match on up to a 6% of my paycheck contribution, so I would contribute 6%.
-Pay off debts above 7.25% (5%+ treasure note yield of 2.25%).
-Max your HSA if you have access to one. Here's info on that: https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html (https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html)
-Max an IRA. Traditional or Roth depending on your income level.
-Max your 401(k)
-Pay off debts above 5.25% (3% + treasury note yield of 2.25%)
-Finally, invest in taxable accounts
I hope the rewrite helps =P A lot of it is learning different retirement vehicles (IRA, 401k, HSA).
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I think you would benefit from being way more granular about your expenses. A bunch of things are not in your budget and I bet they'd eat up more than the $75 a month you call "misc":
-- Holidays and gifts
-- Car maintenance/eventual tire replacement
-- Health & dental expenses (do you have copays? Out-of-pocket expenses for some things?)
-- Personal care (haircuts, etc.)
-- Clothing and care of clothing (laundry, dry cleaning)
-- Home furnishings (even just for occasional replacing broken stuff)
This stuff can add up. I'll make a pitch for YNAB (You Need a Budget) here, in particular the "classic" version of the software.
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What doesn't make sense about the investing order? That's what we're here for =) Let us know your sources of confusion, and we can help from there!
In short, for your circumstances:
-Get your emergency fund to $1000 minimum
-If your work offers a 401k (a type of retirement account), put in money up to the match they offer (if they offer one). Ex, my company does a partial match on up to a 6% of my paycheck contribution, so I would contribute 6%.
-Pay off debts above 7.25% (5%+ treasure note yield of 2.25%).
-Max your HSA if you have access to one. Here's info on that: https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html (https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html)
-Max an IRA. Traditional or Roth depending on your income level.
-Max your 401(k)
-Pay off debts above 5.25% (3% + treasury note yield of 2.25%)
-Finally, invest in taxable accounts
I hope the rewrite helps =P A lot of it is learning different retirement vehicles (IRA, 401k, HSA).
Lol, I'm not sure I have ever heard about IRA (traditional or roth) or HSA. But I'm going to read that link about HSA. As far as 401k, I have to work at my company for two years if I want to get their matching. I'm either at 5% and they match 4% or 6% and they match 5% (this being the max). But again, I only receive that money if I'm at the company for two years (daunting but I could commit). I don't think I did anything special or extra with my 401k so I'd have to look into this more. I've worked there for one year.
Also, I might be keeping 4k for now. That would leave $1500 in each 'checking' account and the extra 1k. I also have some expected expenses coming up.
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You need to do some tax reading. Knowing the tax code is one of the few activities you can do this week that's guaranteed to save you a couple thousand bucks without changing anything to your income.
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What doesn't make sense about the investing order? That's what we're here for =) Let us know your sources of confusion, and we can help from there!
In short, for your circumstances:
-Get your emergency fund to $1000 minimum
-If your work offers a 401k (a type of retirement account), put in money up to the match they offer (if they offer one). Ex, my company does a partial match on up to a 6% of my paycheck contribution, so I would contribute 6%.
-Pay off debts above 7.25% (5%+ treasure note yield of 2.25%).
-Max your HSA if you have access to one. Here's info on that: https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html (https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html)
-Max an IRA. Traditional or Roth depending on your income level.
-Max your 401(k)
-Pay off debts above 5.25% (3% + treasury note yield of 2.25%)
-Finally, invest in taxable accounts
I hope the rewrite helps =P A lot of it is learning different retirement vehicles (IRA, 401k, HSA).
Lol, I'm not sure I have ever heard about IRA (traditional or roth) or HSA. But I'm going to read that link about HSA. As far as 401k, I have to work at my company for two years if I want to get their matching. I'm either at 5% and they match 4% or 6% and they match 5% (this being the max). But again, I only receive that money if I'm at the company for two years (daunting but I could commit). I don't think I did anything special or extra with my 401k so I'd have to look into this more. I've worked there for one year.
Also, I might be keeping 4k for now. That would leave $1500 in each 'checking' account and the extra 1k. I also have some expected expenses coming up.
Ooooh, you get to learn about IRAs! They're awesome. You should be excited. It's a whole world of financial opportunity you didn't even know you had, and not reliant on an employer! =) I'm not being sarcastic, btw, this is legitimately awesome stuff.
An IRA, in short, is a "bucket" you put your money in. This bucket has special tax rules. There are two types- roth or traditional. They're a bit different from each other, but either option is what is called "tax advantaged". There's a yearly limit for contributions- $5500 per person per year (until you're a lot older, so doesn't apply to you). IRAs are so awesome because they help you pay less in taxes. A traditional IRA can help you pay less in taxes now, whereas a roth IRA can help you pay less in taxes later (at retirement age, essentially).
The "stock series" is really helpful for all this. Here's the whole thing: http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/) and here's the section about retirement accounts: http://jlcollinsnh.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/ (http://jlcollinsnh.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/)
I hope that helps! Keep asking questions and we'll keep helping you to find answers!
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I think you would benefit from being way more granular about your expenses. A bunch of things are not in your budget and I bet they'd eat up more than the $75 a month you call "misc":
-- Holidays and gifts
-- Car maintenance/eventual tire replacement
-- Health & dental expenses (do you have copays? Out-of-pocket expenses for some things?)
-- Personal care (haircuts, etc.)
-- Clothing and care of clothing (laundry, dry cleaning)
-- Home furnishings (even just for occasional replacing broken stuff)
This stuff can add up. I'll make a pitch for YNAB (You Need a Budget) here, in particular the "classic" version of the software.
I do suppose you are right. The plan was to get expenses to zero. That 'budget' I put up was sort of just a list of everything I'm paying for/ average of things I've paid for. The Misc was entirely unrelated to anything too, I just didn't want to put what it actually was on the list. That expense is gone, however, I'll still have misc expenses as you point out. So I might still have 75$ in misc, but not on top of the 75$ misc payment above, lol. If that makes sense. That being said, I started MMM like half way through this month so my final August report is going to be bad.
Also, I have no utilities bill and any detergent I'd buy for laundry is considered in groceries. Haircuts, yeah. I'd say I get one every two months, equating to $15 a month.
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What doesn't make sense about the investing order? That's what we're here for =) Let us know your sources of confusion, and we can help from there!
In short, for your circumstances:
-Get your emergency fund to $1000 minimum
-If your work offers a 401k (a type of retirement account), put in money up to the match they offer (if they offer one). Ex, my company does a partial match on up to a 6% of my paycheck contribution, so I would contribute 6%.
-Pay off debts above 7.25% (5%+ treasure note yield of 2.25%).
-Max your HSA if you have access to one. Here's info on that: https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html (https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html)
-Max an IRA. Traditional or Roth depending on your income level.
-Max your 401(k)
-Pay off debts above 5.25% (3% + treasury note yield of 2.25%)
-Finally, invest in taxable accounts
I hope the rewrite helps =P A lot of it is learning different retirement vehicles (IRA, 401k, HSA).
Lol, I'm not sure I have ever heard about IRA (traditional or roth) or HSA. But I'm going to read that link about HSA. As far as 401k, I have to work at my company for two years if I want to get their matching. I'm either at 5% and they match 4% or 6% and they match 5% (this being the max). But again, I only receive that money if I'm at the company for two years (daunting but I could commit). I don't think I did anything special or extra with my 401k so I'd have to look into this more. I've worked there for one year.
Also, I might be keeping 4k for now. That would leave $1500 in each 'checking' account and the extra 1k. I also have some expected expenses coming up.
Ooooh, you get to learn about IRAs! They're awesome. You should be excited. It's a whole world of financial opportunity you didn't even know you had, and not reliant on an employer! =) I'm not being sarcastic, btw, this is legitimately awesome stuff.
An IRA, in short, is a "bucket" you put your money in. This bucket has special tax rules. There are two types- roth or traditional. They're a bit different from each other, but either option is what is called "tax advantaged". There's a yearly limit for contributions- $5500 per person per year (until you're a lot older, so doesn't apply to you). IRAs are so awesome because they help you pay less in taxes. A traditional IRA can help you pay less in taxes now, whereas a roth IRA can help you pay less in taxes later (at retirement age, essentially).
The "stock series" is really helpful for all this. Here's the whole thing: http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/) and here's the section about retirement accounts: http://jlcollinsnh.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/ (http://jlcollinsnh.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/)
I hope that helps! Keep asking questions and we'll keep helping you to find answers!
Lol! The ignorance of my ways is starting to seep in. I'm going to start reading, but, just to be clear, I shouldn't start these until my debt is paid off, correct? Not 401k, that's #2, but everything #4 and up.
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What doesn't make sense about the investing order? That's what we're here for =) Let us know your sources of confusion, and we can help from there!
In short, for your circumstances:
-Get your emergency fund to $1000 minimum
-If your work offers a 401k (a type of retirement account), put in money up to the match they offer (if they offer one). Ex, my company does a partial match on up to a 6% of my paycheck contribution, so I would contribute 6%.
-Pay off debts above 7.25% (5%+ treasure note yield of 2.25%).
-Max your HSA if you have access to one. Here's info on that: https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html (https://www.cnbc.com/2016/06/15/health-savings-accounts-a-second-retirement-plan.html)
-Max an IRA. Traditional or Roth depending on your income level.
-Max your 401(k)
-Pay off debts above 5.25% (3% + treasury note yield of 2.25%)
-Finally, invest in taxable accounts
I hope the rewrite helps =P A lot of it is learning different retirement vehicles (IRA, 401k, HSA).
Lol, I'm not sure I have ever heard about IRA (traditional or roth) or HSA. But I'm going to read that link about HSA. As far as 401k, I have to work at my company for two years if I want to get their matching. I'm either at 5% and they match 4% or 6% and they match 5% (this being the max). But again, I only receive that money if I'm at the company for two years (daunting but I could commit). I don't think I did anything special or extra with my 401k so I'd have to look into this more. I've worked there for one year.
Also, I might be keeping 4k for now. That would leave $1500 in each 'checking' account and the extra 1k. I also have some expected expenses coming up.
Ooooh, you get to learn about IRAs! They're awesome. You should be excited. It's a whole world of financial opportunity you didn't even know you had, and not reliant on an employer! =) I'm not being sarcastic, btw, this is legitimately awesome stuff.
An IRA, in short, is a "bucket" you put your money in. This bucket has special tax rules. There are two types- roth or traditional. They're a bit different from each other, but either option is what is called "tax advantaged". There's a yearly limit for contributions- $5500 per person per year (until you're a lot older, so doesn't apply to you). IRAs are so awesome because they help you pay less in taxes. A traditional IRA can help you pay less in taxes now, whereas a roth IRA can help you pay less in taxes later (at retirement age, essentially).
The "stock series" is really helpful for all this. Here's the whole thing: http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/) and here's the section about retirement accounts: http://jlcollinsnh.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/ (http://jlcollinsnh.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/)
I hope that helps! Keep asking questions and we'll keep helping you to find answers!
Lol! The ignorance of my ways is starting to seep in. I'm going to start reading, but, just to be clear, I shouldn't start these until my debt is paid off, correct? Not 401k, that's #2, but everything #4 and up.
Sorry#2 and up, emergency fund is 0.
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So a couple things. With your 401(k), that 2 year period you're talking about it called "vesting". Only one more year until you're vested isn't bad at all! I have a 5 year vesting schedule, where each year I'm with my company I earn 20% more of their match. So you definitely want to be going up to the match right now, even if you're not vested YET. Unless you're certain you'll leave within the next year, then that's debatable. But yeah, I would recommend contributing 5% of your paycheck, if that's what they match up to, otherwise part of your rightful compensation is being left on the table!!
As for debt first or IRAs first. Check the investing order =) Your debts are less than 7.25%, but above 5.25%, right? So you actually DO want to max your IRA first! You can expect a better return, between market and tax advantages, on the IRA than the return you get paying down the debt. Remember, whether it's subtracting a negative (paying off a debt) or adding a positive (investing), it's all about increasing your networth.
So then your action plan should be:
-Save $1k
-Set paycheck contributions to 5% for your 401k
-Learn about roth vs traditional IRAs and decide which one id best for you to invest in (I would guess traditional, but I don't know your situation well enough). Open an account (lots of us around her like Vanguard). Start putting money into your IRA for the 2017 year.
-IF you can fully fund your IRA for 2017, then extra goes toward debt.
Hope that helps.
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So a couple things. With your 401(k), that 2 year period you're talking about it called "vesting". Only one more year until you're vested isn't bad at all! I have a 5 year vesting schedule, where each year I'm with my company I earn 20% more of their match. So you definitely want to be going up to the match right now, even if you're not vested YET. Unless you're certain you'll leave within the next year, then that's debatable. But yeah, I would recommend contributing 5% of your paycheck, if that's what they match up to, otherwise part of your rightful compensation is being left on the table!!
As for debt first or IRAs first. Check the investing order =) Your debts are less than 7.25%, but above 5.25%, right? So you actually DO want to max your IRA first! You can expect a better return, between market and tax advantages, on the IRA than the return you get paying down the debt. Remember, whether it's subtracting a negative (paying off a debt) or adding a positive (investing), it's all about increasing your networth.
So then your action plan should be:
-Save $1k
-Set paycheck contributions to 5% for your 401k
-Learn about roth vs traditional IRAs and decide which one id best for you to invest in (I would guess traditional, but I don't know your situation well enough). Open an account (lots of us around her like Vanguard). Start putting money into your IRA for the 2017 year.
-IF you can fully fund your IRA for 2017, then extra goes toward debt.
Hope that helps.
That does help. I am slightly skeptical about putting money into an IRA mainly because I don't understand it but also because I've always thought getting rid of debt ASAP is the key to wealth (Dave Ramsey and MMM article about debt).
So what I'm slowly gathering in my tax deficient brain is this: traditional IRA = max out now and get a tax break during tax season (deductible?), pay taxes when you withdraw at retirement or ROTH IRA = pay taxes now but have no taxes on withdrawal when you retire. Either way, I can't touch this money until 60? Does this help me retire earlier? And these funds only 'grow' so long as I contribute, but the contributions have tax benefits at some point (now or later) which is the idea behind putting money in them in the first place? You would think Roth is better. I've been reading all the links you sent me as well as some random articles explaining the stuff. I know its a dumb way to think but things like IRA and 401k always have me worried because you can die at any time. My goal is to pay off debt and then retire as soon as humanly possible however I'm probably missing some key points here.
If I'm making 52K pretaxes (pretty sure this is without overtime), which is the better option?
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You're definitely catching on! And if it makes you feel any better, you're having the same questions we ALL do initially! =) I didn't want to provide info about accessing the funds early, because it can be massively overwhelming until you understand the basic ideas of the accounts, period!
Okay, part 1: "no access until I'm 60?"
-There is a fancy thing called the "roth pipeline" that lets you access funds early for early retirement if you plan your affairs appropriately. I'll admit that we're getting into the areas I don't understand as well, so I can't explain them as well. (Well, I have understood them, gone, "yup that's what we'll do", then promptly forgotten because we're a long way from FIRE (financial independence, retire early). But I have links! This is where we get into what is called "drawdown strategy".
https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ (https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/)
Part 2: Roth or traditional IRA?
The mustachian tax guide: https://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/ (https://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/)
There's a section in there called "traditional and roth IRAs". So, this is where it might be useful to ask someone better versed, but it seems *to me* like you would benefit most from traditional. The thing is, it takes a lot of forecasts of things that are just so hard to tell when you're very young. What will your tax rate be when you retire? Higher or lower than now? Etc. When DH and I were earning ~$55k, we opted for traditional. As our earnings have grown, and we only qualify for some of the deduction for the traditional, we do part traditional and the rest roth. When you get a high enough income, you don't qualify for the roth anymore though.
Here's a good article about it all: http://www.madfientist.com/traditional-ira-vs-roth-ira/ (http://www.madfientist.com/traditional-ira-vs-roth-ira/) It explains it *way* better than I'm doing, haha.
Part 3: I could die at any time.
-Welcome to rolling into your mid 20s, when your brain starts straddling the line between nihilistic YOLO!!!! and being like 'wait I should have a plan... maybe'. It's an uncomfortable spot psychologically. I address this specifically because honestly, you can learn every bit and scrap of investing info there is, but if you follow the traditional young man psychology, you cannot fathom yourself as old. You expect to die young, simply because you cannot conceive of old age. And so why plan for it? But statistically, you will live until you're old. And you need to plan accordingly. Obviously don't make your life suck now for the hope of tomorrow (see: "deferred life plan"). But as it seems you've been realizing, the happiness that comes from throwing money at binge drinking is incredibly fleeting (I've been there, I'm not judging in the least, to be clear!). This actually has some physiological underpinnings, by the way. Alcohol is a depressant, and that's not an arbitrary term. Among other things, frequent use of alcohol (particularly with a binge intake model) tends to lessen life satisfaction overall. Which I am way too lazy to cite right now, but I'll dig it up tomorrow if anyone is curious about it and can't find the info on their own.
Anyway, I ran into this constantly with my ex. Anytime anything got too uncomfortable to think about, he would drop into "well, I'll probably die young anyway". When pressed, the most he would say was "I can just tell. I can just feel it". Unsurprising considering the fatalism, he joined the military (and a boots on the ground branch, no less). He just honestly couldn't think ahead to the future, it was too uncomfortable. So when I see someone retreat back into the "well we can die anytime", it seems that's because that's the self-protective option. Yeah we need to keep a tiny bit of that perspective, or we become boorish, but if we actually let that view permeate us? We become incredibly self-destructive. If everyone was waiting with bated breath to get smashed by a car tomorrow, no one would build or do great things, you know? Because those take time and faith (in the non-theistic sense of the word).
Sorry for getting all esoteric there. I'm a nurse, and I had to fight through a lot of that nihilism in nursing school, and come around to a comfortable and stable place with it. But I think most of us work through it and end up in a healthy place, where we try to build a future but still practice mindfulness about the joys in our lives now, and cultivating those.
Keep the questions coming =) I literally keep a file of useful links for case studies.
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$150 in gas PER MONTH? Either you own a ridiculous car, or you drive way too far to work, or you just like going around town for no reason. Which is it?
15 miles round trip = 30 mile daily commute.
30 x 250 work days (5 days a week x 50 weeks) = 7,500 commute miles / year
Even with some other driving, a road trip, etc. it shouldn't be much more than 10,000 miles/year and that's on the high side.
So 10,000 miles @ 25mpg (which was the average in 2016) = 400 gallons/year
400 gallons @ $2.25/gallon = $900
$900/12 = $75/month
Even with a 20 mpg vehicle it comes out to $93.75/month
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You're definitely catching on! And if it makes you feel any better, you're having the same questions we ALL do initially! =) I didn't want to provide info about accessing the funds early, because it can be massively overwhelming until you understand the basic ideas of the accounts, period!
Okay, part 1: "no access until I'm 60?"
-There is a fancy thing called the "roth pipeline" that lets you access funds early for early retirement if you plan your affairs appropriately. I'll admit that we're getting into the areas I don't understand as well, so I can't explain them as well. (Well, I have understood them, gone, "yup that's what we'll do", then promptly forgotten because we're a long way from FIRE (financial independence, retire early). But I have links! This is where we get into what is called "drawdown strategy".
https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ (https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/)
Part 2: Roth or traditional IRA?
The mustachian tax guide: https://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/ (https://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/)
There's a section in there called "traditional and roth IRAs". So, this is where it might be useful to ask someone better versed, but it seems *to me* like you would benefit most from traditional. The thing is, it takes a lot of forecasts of things that are just so hard to tell when you're very young. What will your tax rate be when you retire? Higher or lower than now? Etc. When DH and I were earning ~$55k, we opted for traditional. As our earnings have grown, and we only qualify for some of the deduction for the traditional, we do part traditional and the rest roth. When you get a high enough income, you don't qualify for the roth anymore though.
Here's a good article about it all: http://www.madfientist.com/traditional-ira-vs-roth-ira/ (http://www.madfientist.com/traditional-ira-vs-roth-ira/) It explains it *way* better than I'm doing, haha.
Part 3: I could die at any time.
-Welcome to rolling into your mid 20s, when your brain starts straddling the line between nihilistic YOLO!!!! and being like 'wait I should have a plan... maybe'. It's an uncomfortable spot psychologically. I address this specifically because honestly, you can learn every bit and scrap of investing info there is, but if you follow the traditional young man psychology, you cannot fathom yourself as old. You expect to die young, simply because you cannot conceive of old age. And so why plan for it? But statistically, you will live until you're old. And you need to plan accordingly. Obviously don't make your life suck now for the hope of tomorrow (see: "deferred life plan"). But as it seems you've been realizing, the happiness that comes from throwing money at binge drinking is incredibly fleeting (I've been there, I'm not judging in the least, to be clear!). This actually has some physiological underpinnings, by the way. Alcohol is a depressant, and that's not an arbitrary term. Among other things, frequent use of alcohol (particularly with a binge intake model) tends to lessen life satisfaction overall. Which I am way too lazy to cite right now, but I'll dig it up tomorrow if anyone is curious about it and can't find the info on their own.
Anyway, I ran into this constantly with my ex. Anytime anything got too uncomfortable to think about, he would drop into "well, I'll probably die young anyway". When pressed, the most he would say was "I can just tell. I can just feel it". Unsurprising considering the fatalism, he joined the military (and a boots on the ground branch, no less). He just honestly couldn't think ahead to the future, it was too uncomfortable. So when I see someone retreat back into the "well we can die anytime", it seems that's because that's the self-protective option. Yeah we need to keep a tiny bit of that perspective, or we become boorish, but if we actually let that view permeate us? We become incredibly self-destructive. If everyone was waiting with bated breath to get smashed by a car tomorrow, no one would build or do great things, you know? Because those take time and faith (in the non-theistic sense of the word).
Sorry for getting all esoteric there. I'm a nurse, and I had to fight through a lot of that nihilism in nursing school, and come around to a comfortable and stable place with it. But I think most of us work through it and end up in a healthy place, where we try to build a future but still practice mindfulness about the joys in our lives now, and cultivating those.
Keep the questions coming =) I literally keep a file of useful links for case studies.
Definitely cite that binge alcohol intake model leading to less life satisfaction study. I've felt extreme unsatisfied with life the past year - the year in which I've been binge drinking pretty much the most - and only been feeling alive when binge drinking. It's weird, you could be having so much 'fun' and at the same time feel like this is not the right life path.
Funny also, I've only ever 'wanted' to join a boots on the ground military branch. I think my 'we could die at anytime' was more of a, well, maybe plan a little bit and keep some money to for now but even saying that I have some sort of cognitive dissonance. Like eh, who are you kidding, you're gunna buy steak and cheese subs and booze anyways, might as well just open an IRA.
We become incredibly self-destructive. Get out of my head. If everyone was waiting with bated breath to get smashed by a car tomorrow, no one would build or do great things, you know? This one made me look down at the ground, like damn she's right. Hit hard like a body shot. Because those take time and faith. There is also a great impatience that my generation apparently has, and I feel it too. I want my debt gone now, I want to be retired now, when I was lifting I wanted to be jacked now. Often times with these longer goals, you work hard for awhile, get bored or discourage, look at the mountain still before you (because its been two months), think, why am I spending my one life doing this shit? And give up. Part 3 was way more up my alley. Psychology, philosophy, etc. Taxes are hard, man. I'm gunna have to read those links and get back you again, lol.
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As far as IRAs, how do you figure out if you qualify? And does this have anything to do with employment even though it is individual?
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$150 in gas PER MONTH? Either you own a ridiculous car, or you drive way too far to work, or you just like going around town for no reason. Which is it?
15 miles round trip = 30 mile daily commute.
30 x 250 work days (5 days a week x 50 weeks) = 7,500 commute miles / year
Even with some other driving, a road trip, etc. it shouldn't be much more than 10,000 miles/year and that's on the high side.
So 10,000 miles @ 25mpg (which was the average in 2016) = 400 gallons/year
400 gallons @ $2.25/gallon = $900
$900/12 = $75/month
Even with a 20 mpg vehicle it comes out to $93.75/month
Yeah, my vehicle situation is bad. I can't defend it. I might even be getting 18 mpg. Keep in mind that $150 was somewhat arbitrary, and also based off of driving to the gym roughly seven days a week, which may or may not be .... seven miles each way. That was until I badly injured my back, and now I haven't been in three weeks.
I suppose if it is arbitrary it could be more or less than the $150. When this month is over, I'm going to post everything I spend and where this month in order to be shamed by the mustachian community. Half the month I was antimustache, and now I'm learning and applying all this shit trying to grow a mustache (It's weird when I say that because I actually have a full beard).
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As far as IRAs, how do you figure out if you qualify? And does this have anything to do with employment even though it is individual?
http://money.cnn.com/retirement/guide/IRA_traditional.moneymag/index3.htm?iid=EL
http://money.cnn.com/retirement/guide/IRA_Roth.moneymag/index4.htm?iid=EL
Does not have to do with employment (unless you are self-employed, then there's a different route). You just need to have taxable income not over the limitation amounts.
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First, the binge drinking. This is a super complex topic, because causality goes *both ways*. Ie, we have decent evidence that both that depression leads to binge drinking (self medication) and binge drinking leads to depression. It's obviously incredibly hard to tease out these factors though, because the only way you can truly prove causality is a double blind trial, which... yeah, you can't do that with binge drinking and depression, that would never be approved by an internal review board, lol. Anyway, here are some links on it. First are more accessible articles about it, second set are studies and lit review.
http://www.huffingtonpost.com/hannah-sentenac/drinking-depression-and-t_b_5787796.html (http://www.huffingtonpost.com/hannah-sentenac/drinking-depression-and-t_b_5787796.html)
http://www.webmd.com/depression/guide/alcohol-and-depresssion#1 (http://www.webmd.com/depression/guide/alcohol-and-depresssion#1)
http://www.sciencedirect.com/science/article/pii/S0376871616000478 (http://www.sciencedirect.com/science/article/pii/S0376871616000478)
Arghhhh I'm having a hell of a time finding articles that aren't paywalled right now. Driving me nuts, I miss my full ebsco access. >.< I'll have to come back to this another time, slow loading plus pay walls are annoying me right now.
Second:
As far as IRAs, how do you figure out if you qualify? And does this have anything to do with employment even though it is individual?
Only very vaguely associated. They are not through work in any way, you set it all up and contribute on your own. However, you have to have earned income to contribute to them, and the contribution limits are based on what you've earned. https://www.irs.gov/retirement-plans/traditional-and-roth-iras (https://www.irs.gov/retirement-plans/traditional-and-roth-iras) and https://www.irs.gov/retirement-plans/ira-deduction-limits (https://www.irs.gov/retirement-plans/ira-deduction-limits)
Since I know you have access to a 401(k), here's this: https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work (https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work) Below $62k mAGI you can take the full deduction as a single filer. $62-72k is a partial, and above $72k is no deduction.
For roth IRA, here's the table: https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2017 (https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2017) you can contribute if you're below $118k mAGI as a single filer. Hope that helps!
Final thought:
I really find that nihilism and self destruction grow out of uncertainty. So let's step waaaaaay back and ask the biggest question of all: WHY? Why are you here? Why do you get out of bed? What do you feel your purpose in life is?
This isn't religious stuff (although I suppose it could be). I'm an atheist and I have my own answers to those, they aren't incompatible. But you sure as heck need answers to those types of question, about your life's purpose, or you will always be adrift without a sail.
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So one more question regarding an IRA... With overtime, I'm not sure if I might exceed 61k gross pay for 2017. I haven't worked a full calendar year yet, so it is hard to gauge. Would going over that totally fuck with/ make not worth it, to do a traditional IRA?
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So one more question regarding an IRA... With overtime, I'm not sure if I might exceed 61k gross pay for 2017. I haven't worked a full calendar year yet, so it is hard to gauge. Would going over that totally fuck with/ make not worth it, to do a traditional IRA?
Also, on the investment order, an HSA is before and IRA?
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So one more question regarding an IRA... With overtime, I'm not sure if I might exceed 61k gross pay for 2017. I haven't worked a full calendar year yet, so it is hard to gauge. Would going over that totally fuck with/ make not worth it, to do a traditional IRA?
That does make it hard. I'm in a similar boat. Both DH and I have variable incomes, so year to year we can have $30k+ swings in mAGI. What we did the first year is not *optimal*, but it is *easy*. We just waited until spring, got all our tax paperwork in order, (this happened early Feb), and THEN we did our IRAs. You have until April of the following year to do IRA contributions for the previous year (ie, until taxes are due in 2018 for your 2017 contributions). This is sub-optimal though, because you lose a ton of time in the market. For this year, I think we put the funds in for 2017 in like May when we got the money together? And I think our plan is just to recharacterize if we need to. I forget. Maybe we're doing the same thing this year haha and I've forgotten.
So one more question regarding an IRA... With overtime, I'm not sure if I might exceed 61k gross pay for 2017. I haven't worked a full calendar year yet, so it is hard to gauge. Would going over that totally fuck with/ make not worth it, to do a traditional IRA?
Also, on the investment order, an HSA is before and IRA?
Yeah, an HSA is considered "triple tax advantaged". Here's an article on why people love it: http://www.madfientist.com/ultimate-retirement-account/ (http://www.madfientist.com/ultimate-retirement-account/)
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Lol, crap. So I'm not even to consider an IRA until I max an HSA? This is like 10 grand gone too. It's so hard for me to accept this this is better than getting rid of debt. I guess that's my impatience again. What is the optimal HSA provider?
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Lol, crap. So I'm not even to consider an IRA until I max an HSA? This is like 10 grand gone too. It's so hard for me to accept this this is better than getting rid of debt. I guess that's my impatience again. What is the optimal HSA provider?
The HSA question is out of my depth (we don't have 'em), so that may be one for the wider forum to ask.
Why do you feel like this is going backward, vs paying off debt? Do you have an insight into your thoughts on this?
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Lol, crap. So I'm not even to consider an IRA until I max an HSA? This is like 10 grand gone too. It's so hard for me to accept this this is better than getting rid of debt. I guess that's my impatience again. What is the optimal HSA provider?
You contribute to an HSA without paying taxes on those contributions, the earnings grow tax free, and you don't have to pay tax when you use those funds to pay for medical costs. No taxes paid ever (except perhaps, sales tax upon the purchase).
Here is a list - http://www.investors.com/news/special-reports/best-hsa-providers-by-fees-features-and-investment-options/
Generally, employers offer health plans which have an HSA as an option of a high-deductible insurance plan. The contributions can be taken out pre-tax from your paycheck.
An IRA gets taxed once, either on contributions (Roth) or distributions (Traditional).
Hope that helps.
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Lol, crap. So I'm not even to consider an IRA until I max an HSA? This is like 10 grand gone too. It's so hard for me to accept this this is better than getting rid of debt. I guess that's my impatience again. What is the optimal HSA provider?
You contribute to an HSA without paying taxes on those contributions, the earnings grow tax free, and you don't have to pay tax when you use those funds to pay for medical costs. No taxes paid ever (except perhaps, sales tax upon the purchase).
Here is a list - http://www.investors.com/news/special-reports/best-hsa-providers-by-fees-features-and-investment-options/
Generally, employers offer health plans which have an HSA as an option of a high-deductible insurance plan. The contributions can be taken out pre-tax from your paycheck.
An IRA gets taxed once, either on contributions (Roth) or distributions (Traditional).
Hope that helps.
Alright thanks. I'm not quite sure I can utilize an HSA through my employer or plan. I don't think I have an hdhp.
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Lol, crap. So I'm not even to consider an IRA until I max an HSA? This is like 10 grand gone too. It's so hard for me to accept this this is better than getting rid of debt. I guess that's my impatience again. What is the optimal HSA provider?
The HSA question is out of my depth (we don't have 'em), so that may be one for the wider forum to ask.
Why do you feel like this is going backward, vs paying off debt? Do you have an insight into your thoughts on this?
Because everything I've ever known about financial independence has been to get rid of debt first. Debt, to me, equals slavery as it is a payment that must be met every single month. The faster you pay it off the faster you have one less payment. Even without these retirement accounts, you can still accumulate wealth. That being said, I can see why it is a good idea to max out yearly contributions because they are once a year/ once in a lifetime 'investments?'.
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Lol, crap. So I'm not even to consider an IRA until I max an HSA? This is like 10 grand gone too. It's so hard for me to accept this this is better than getting rid of debt. I guess that's my impatience again. What is the optimal HSA provider?
The HSA question is out of my depth (we don't have 'em), so that may be one for the wider forum to ask.
Why do you feel like this is going backward, vs paying off debt? Do you have an insight into your thoughts on this?
Because everything I've ever known about financial independence has been to get rid of debt first. Debt, to me, equals slavery as it is a payment that must be met every single month. The faster you pay it off the faster you have one less payment. Even without these retirement accounts, you can still accumulate wealth. That being said, I can see why it is a good idea to max out yearly contributions because they are once a year/ once in a lifetime 'investments?'.
Well, you're literally keeping more of your money. It's money you are saving and not paying taxes on. As opposed to "losing" like 25% or more to taxes. That's a big deal! Your using federal law to make your money worth more than what it was worth before.
So yeah, debt is an obligation. But so are housing costs and food. Where will the money for those come from? Even with zero debt, you're still a wage slave unless you gain financial independence. What's it matter if you have too much negative or not enough positive? The result is the same. It's all about rate of return/interest rate , not which side of the balance sheet it's listed on.
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Lol, crap. So I'm not even to consider an IRA until I max an HSA? This is like 10 grand gone too. It's so hard for me to accept this this is better than getting rid of debt. I guess that's my impatience again. What is the optimal HSA provider?
The HSA question is out of my depth (we don't have 'em), so that may be one for the wider forum to ask.
Why do you feel like this is going backward, vs paying off debt? Do you have an insight into your thoughts on this?
Because everything I've ever known about financial independence has been to get rid of debt first. Debt, to me, equals slavery as it is a payment that must be met every single month. The faster you pay it off the faster you have one less payment. Even without these retirement accounts, you can still accumulate wealth. That being said, I can see why it is a good idea to max out yearly contributions because they are once a year/ once in a lifetime 'investments?'.
Well, you're literally keeping more of your money. It's money you are saving and not paying taxes on. As opposed to "losing" like 25% or more to taxes. That's a big deal! Your using federal law to make your money worth more than what it was worth before.
So yeah, debt is an obligation. But so are housing costs and food. Where will the money for those come from? Even with zero debt, you're still a wage slave unless you gain financial independence. What's it matter if you have too much negative or not enough positive? The result is the same. It's all about rate of return/interest rate , not which side of the balance sheet it's listed on.
You certainly make it hard to argue with that logic. I suppose if we treat our personable finance as a business, some businesses take on debt to ensure larger growth rate. That's assuming I know anything about business. Also I need to detach from my money.
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So here are my current thoughts:
--Maxing out 401k 6% with 5% match, 4825.79$ already in, 100% vested after two years
--It's not looking like I qualify for an HSA
--By my calculations my pretax income will sit at or exceed 61k which makes the IRA more complicated at this time
Thoughts? Action plan?
On a side note, I got paid today and haven't bought anything all week.. so that was different
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So here are my current thoughts:
--Maxing out 401k 6% with 5% match, 4825.79$ already in, 100% vested after two years
--It's not looking like I qualify for an HSA
--By my calculations my pretax income will sit at or exceed 61k which makes the IRA more complicated at this time
Thoughts? Action plan?
On a side note, I got paid today and haven't bought anything all week.. so that was different
Do more reading and see if you think, given your expectations of your life, if tIRA or rothIRA is a better choice for you. Roth is certainly easier when you're in the phaseout, although not always the best option. At the very least, start setting aside the money for this. Build up your $5500 and figure out your plan =) Have you heard of an "investing policy statement"? Time to write one! This will help you answer some of your own questions. https://www.bogleheads.org/wiki/Investment_policy_statement (https://www.bogleheads.org/wiki/Investment_policy_statement)
An important thing too to start figuring out is, once you have money in your IRA bucket, what will you invest it in? (Hint: around these parts, we heartily advocate total market index funds like VTSAX).
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Hi!
My head is spinning with all the talk about HSA, IRA, ... and I'm more than old enough to be your parent and have an MBA in finance!
I think you need to start at the beginning:
Track your expenses
Sign up with Mint or do a trial subscription at You Need a Budget. For the next few months, track all your spending — then analyze. Don't try to cut anything until you have a good idea where you stand.
"But my debt emergency!!!" I hate debt too ... yours isn't a dire emergency; you are comfortably paying it down faster than expected. You can take a few months to examine your financial life before making any drastic changes.
Meanwhile, pick a couple of beginner-level finance books/websites/videos and start learning. Ramit Sethi isn't bad, if you ignore his attitude about spending (anti-mustache). His information about automatic bill payment, beginner level investing, types of retirement accounts ... excellent.
Oh, one action item — ditch your current bank account and find a bank/credit union that won't look to rob you blind at any excuse.
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Roth might be a good idea for you because you can withdraw your contributions (not any earnings on them, though) without penalty if you need to. Sorry if I'm repeating anyone; I'm too fried right now to read back through the thread. Why does $61K income make things complicated? Pretty sure you can just open an IRA with Vanguard and plop your money in, as long as you don't exceed the $5,500 annual limit for people your age.
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Roth might be a good idea for you because you can withdraw your contributions (not any earnings on them, though) without penalty if you need to. Sorry if I'm repeating anyone; I'm too fried right now to read back through the thread. Why does $61K income make things complicated? Pretty sure you can just open an IRA with Vanguard and plop your money in, as long as you don't exceed the $5,500 annual limit for people your age.
Only complicated in that he's in the phaseout for the traditional IRA potentially. So he can't just plop $5500 into a tIRA right now and get the full deduction- this means tax wise, ideally, he would do some in tIRA and some in a roth IRA. But that involves knowing your tax particulars. So the means waiting, or recharacterizing. Just a little more complicated than a clear cut, one way or the other type income number.
I'm curious if Wallace can contribute enough to his 401k this year though to get the full traditional deduction =) That would probably be best case scenario!
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Hey congrats on deciding to dive in!
I'm 26 too so I'm right there with you on navigating the waters of the different accounts. The best thing I did was get JLCollins book, it's not overly wordy and he wrote it for his 19yo daughter so aimed for a novice who just wants to know what they need.
I had about 50k in student loan debt and recently destroyed it. It was super gratifying. I'd stick to what the others are saying as far as the order of operations but thought I'd offer some BoA advice. I have their cash rewards CC, I paid for EVERYTHING on this. They give you actual cash back, not just money you can put back into your statement balance, and if you redeem into a BoA account it's an extra 10%. Pay it off every month and get a figurative discount on everything you buy.
BoA has a networth tracker and other tools you can use to track how much your spending if you are using their cards to pay for everything (see above). I liked this but I was using other cards to hack away at my debt so now I use personal capitol to track my net worth. It's really exciting to see it changing and it actually looks at the transaction of the other cards to see what your spending vs BoA seeing $150 to a citi card and lumping it into a financed group.
If you're in good standing with your CC they often offer you options for balance transfers or some do just for signing up, chace is great for this. What I did was take these and put my student loans on credit. The card would have zero money on it and I wouldn't touch it for anything. I'd get an offer for zero percent for 12 months, send 30% of my available credit limit to it to not mess up my credit score and just be sure to pay it off by the end of the year. You pay a small fee for the transfer but it was always less than what I'd be spending on the monthly interest for the loan. This way allowed me to build up a safety net/emergency but also save on the interest of my loans which were really stressing me out. You're ahead of me because I wasn't really investing yet when I did all this.
If you decide to do this MMM And Mad fientist bth have CC pages that show the ones with the best offers. MMM just doesn't offer chace anymore, the banned him for his badassity.
Good luck and keep us all posted on how you're doing!
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Roth might be a good idea for you because you can withdraw your contributions (not any earnings on them, though) without penalty if you need to. Sorry if I'm repeating anyone; I'm too fried right now to read back through the thread. Why does $61K income make things complicated? Pretty sure you can just open an IRA with Vanguard and plop your money in, as long as you don't exceed the $5,500 annual limit for people your age.
Only complicated in that he's in the phaseout for the traditional IRA potentially. So he can't just plop $5500 into a tIRA right now and get the full deduction- this means tax wise, ideally, he would do some in tIRA and some in a roth IRA. But that involves knowing your tax particulars. So the means waiting, or recharacterizing. Just a little more complicated than a clear cut, one way or the other type income number.
I'm curious if Wallace can contribute enough to his 401k this year though to get the full traditional deduction =) That would probably be best case scenario!
If I contribute to my 401k does that effectively 'lower' my income and therefore make 'more' eligible for the traditional IRA? I'm sitting at 61k if I take my gross income and multiply by the remaining months, not my take home income.
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Yes.
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Roth might be a good idea for you because you can withdraw your contributions (not any earnings on them, though) without penalty if you need to. Sorry if I'm repeating anyone; I'm too fried right now to read back through the thread. Why does $61K income make things complicated? Pretty sure you can just open an IRA with Vanguard and plop your money in, as long as you don't exceed the $5,500 annual limit for people your age.
Only complicated in that he's in the phaseout for the traditional IRA potentially. So he can't just plop $5500 into a tIRA right now and get the full deduction- this means tax wise, ideally, he would do some in tIRA and some in a roth IRA. But that involves knowing your tax particulars. So the means waiting, or recharacterizing. Just a little more complicated than a clear cut, one way or the other type income number.
I'm curious if Wallace can contribute enough to his 401k this year though to get the full traditional deduction =) That would probably be best case scenario!
If I contribute to my 401k does that effectively 'lower' my income and therefore make 'more' eligible for the traditional IRA? I'm sitting at 61k if I take my gross income and multiply by the remaining months, not my take home income.
Precisely. Your 401k "hides" your money from the IRS, functionally. It just magically and wonderfully doesn't count then. So if you can get your mAGI down to below $61k, you can take the whole traditional deduction.
There are lots of tax projection calculators around that you can use, if you have access to your pay stubs =)
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Roth might be a good idea for you because you can withdraw your contributions (not any earnings on them, though) without penalty if you need to. Sorry if I'm repeating anyone; I'm too fried right now to read back through the thread. Why does $61K income make things complicated? Pretty sure you can just open an IRA with Vanguard and plop your money in, as long as you don't exceed the $5,500 annual limit for people your age.
Only complicated in that he's in the phaseout for the traditional IRA potentially. So he can't just plop $5500 into a tIRA right now and get the full deduction- this means tax wise, ideally, he would do some in tIRA and some in a roth IRA. But that involves knowing your tax particulars. So the means waiting, or recharacterizing. Just a little more complicated than a clear cut, one way or the other type income number.
I'm curious if Wallace can contribute enough to his 401k this year though to get the full traditional deduction =) That would probably be best case scenario!
If I contribute to my 401k does that effectively 'lower' my income and therefore make 'more' eligible for the traditional IRA? I'm sitting at 61k if I take my gross income and multiply by the remaining months, not my take home income.
Precisely. Your 401k "hides" your money from the IRS, functionally. It just magically and wonderfully doesn't count then. So if you can get your mAGI down to below $61k, you can take the whole traditional deduction.
There are lots of tax projection calculators around that you can use, if you have access to your pay stubs =)
In that case, I'm probably all set. If I subtract the amount I've put into my 401k (assuming that's all from this year) from my gross income, I'd be below 61k. Like you said, I'll probably have to check my last pay stub.
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Glad to hear it!
And how is your 'prospective budget' shaping up vs real spending? Still feeling satisfied stepping away from the 'unbearable lightness of being' mode of life (aka, party hard on the weekends?)
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Glad to hear it!
And how is your 'prospective budget' shaping up vs real spending? Still feeling satisfied stepping away from the 'unbearable lightness of being' mode of life (aka, party hard on the weekends?)
Nevermind I was wrong. About 1700 YTD. I'll answer that when I get home later. This month report is gunna be rugged. For the most part, I'm still trying to figure things out.
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Glad to hear it!
And how is your 'prospective budget' shaping up vs real spending? Still feeling satisfied stepping away from the 'unbearable lightness of being' mode of life (aka, party hard on the weekends?)
I guess I started this journey on August 8th, so I guess I should be having a better month. That means I've been actively trying or aware of MMM for two weeks. Chalk it up to an adjustment curve.
Here is the prospective 'budget:'
Student loans:
Loan 1
--Outstanding balance: $7,744.64
---Interest: 6.550%
Loan 2
--Outstanding balance: $21,015.86
---Interest: 5.960%
Total Debt: $28,760.50
Minimum Payment: $400 split between the two loans
Revenue:
Job: ~$3,000/month
Expenses:
Rent/ Utilities: $600
Phone/ Car Insurance: $200
Groceries: $300
Gas: $150
Gym: $20
Xbox/ Netflix: $21
BoA Fee: $12
Misc: $75
Total: ~$1378
Apparent monthly payment able to put towards debt: $1622 (4x current payment)
Cash on hand: $8,033.41
So this wasn't actually a budget, it was just a list of expenses I'm 'okay' with paying (or was okay with paying). Hidden beneath this was more money I don't like spending, like 'bars and alcohol,' which has been pretty much out of control for months. 'Out of control' meaning I really didn't care I was spending it but now I don't want to spend it at all.
So, the BoA fee should be gone. I cancelled xbox live. And netflix is staying because my roommates use it, and one of my roommates pretty much pays for trash bags, dish soap, etc., and doesn't ask us for anything. The Misc. fee up there won't be returning either.
I can definitely see how groceries can be reduced. I had lentils and rice from a bygone era in my cabinet and have been eating them for lunch everyday. I went to the grocery store yesterday when I was still hungry and ended up buying snacks I didn't need. That was the first time I've been to the grocery store in August, spending $10.99. Realistically I could've got away with like $5. Still a far cry from $300 - but that was when I was 'bodybuilding' on mostly precooked chicken, lol. I honestly could see myself needing maybe four cartons of eggs a month, two bags of lentils, and a bag of rice as staples. Don't know the cost for sure, but this is under $25. I should probably get some vegetables in there too, but I'd need to cook them. I used to buy mass packs of steamfresh which could have been $2-3 a day on veggies. $60-70 a month on whey protein. If I changed that now, it could $50 for the month of September and that is high balling it. We will see. I don't want to get too excited, because I know who I am and how I am capable of getting off track, slipping back into not give a fuckery. I also know how you guys would chew me out. Something needs to be done, however, as I find myself still hungry after dinner.
All this being said, I have had some slip ups. I went out last weekend and had that sort of epiphany where I really didn't want to be out. And then I went out Saturday. It was pretty much last minute, and I fought tooth and nail the entire way, spending $22. Also, since starting, I think I have technically eaten out twice, both on Thrones Sunday. I'm starting to resent people who essentially ask me to do things that either: a) get me to get hammered, etc. or b) get me to spend money on shit I shouldn't spend it on (getting hammered, eating out, vacations).
I made the decision that I would keep all obligations I made previous to MMM so as to not lose my mind. Thus, I went to my brother's birthday party and took a $38 hit and in November I'm involved in a wedding where I'll be glad to take some more hits. Also, McGregor v Mayweather is a must buy but I'll have people to split the cost.
I want to start September clean so I'm trying to pay off any random bills: a $400 medical expense that I don't know how to pay and $90 I owe my friend from a while back.
Long post here. For anyone still interested, it's been an okay two weeks. If this community didn't exist, I don't think I could do this on my own. Also, it made me realize maybe I shouldn't 'stress' so much about my debt. I've also been questioning everything I own too meaning basically my vehicle, my phone and maybe even my body (nothing special, but it can take a lot of resources to bodybuild). I thought having a paid off vehicle was the way to go but it's not if you have shitty mileage. I'm considering getting the Moto X too and lowering my phone plan to $10 a month but not before I get some real numbers from my dad.
I can see myself getting along just fine. On the weekdays, I can just give in to the rat race, trying to enjoy the mediocre job I have and for what it is: a place of refuge from people trying to get you to spend your money. Wanna hang out Friday? Nah, man, I got work.
I haven't been exercising because I really fucked up my back pretty much a month ago. I need to start again because I think I get very depressed or anxiety ridden if I don't exercise. My other post How To Be Bored (https://forum.mrmoneymustache.com/ask-a-mustachian/how-to-be-bored/msg1655103/#msg1655103) should be renamed to How Does One Wage The Passive War To Financial Independence? You work hard all month, and then increase your net worth or decrease your debt at the end of the month. Then the cycle repeats. You see the needle move, and that is it, you gotta pass the time until the next deposit. And then eventually you realize you aren't fighting a war anymore, you've just altered your lifestyle to something realistically no different than before except for what you eat and how you spend your weekends.
Two weeks, not so bad. Lots of room for improvement.
Note: I have one pair of pants. I bought them like a year or two ago and they are falling apart, lol. Any advice on buying jeans? I'm thinking one pair for work, and one pair for everything else.
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So I might actually be the right person to be replying, haha. Husband and I are both fitness nuts. Large home gym, rogue equipment. He does more Oly than bodybuilding, and fights (currently loving BJJ, has done other stuff in the past). I've been out of sorts for a few months (long story) but used to do a lot more Oly and Crossfit/Metcon style stuff. Also, we're definitely watching the McGregor fight. (BJJ guy is ordering it though, and asking for donations or potluck style. I'll make a big pot of chili as my contribution, since none of those guys can cook haha. Maybe you could find a similar option to defray the cost? I know it's going to be the most expensive pay per view fee they've ever done on a fight, supposedly).
Anyway, a couple thoughts.
1) I think the other thread is covering it well, but don't cut yourself off from people just for frugality's sake. Find new friends, or redirect activities, or skip drinking while out (bodybuilding is a GREAT excuse for this, alcohol totally destroys your gains). But don't isolate yourself. That's like someone crash dieting, it'll never stick. Humans are social animals, and if you isolate yourself, you'll be totally miserable.
2) I count my health among my assets. Carefully weigh decisions for how it affects your health. You don't need precooked chicken and steam-in-pouch veggies and tubs of whey powder to be healthy, or even to lift. You need a healthy diet though, and to eat enough. Don't skip your veggies for money.
PS- any veggie can be a "steam in bag" if you put it with water in a covered container in the microwave: http://www.thekitchn.com/how-to-steam-broccoli-in-the-m-47176 (http://www.thekitchn.com/how-to-steam-broccoli-in-the-m-47176) After that just add some butter and some seasoning salt. Tada, it's already in the storage container even.
Eggs generally work out cheaper per gram protein than whey powder does, and they have other really good stuff as well (vitamin A and choline and all sort of wonderful things... don't throw out the yolks!). I buy 5doz eggs at a time from Costco, and have to do that every 7-10 days. I eat 2 eggs for breakfast, husband eats 4, and then we'll use eggs for other things as well, like tuna cakes (1 can tuna + 1 egg, add some salt and garlic powder, pat down flat in pan, fry in butter 4 min each side. Eat with hot sauce or soy sauce or feta cheese or pesto).
The website BudgetBytes is a great resource.
Point is, food can be delicious and fast and cheap and only require one dish to prep. You just need to get creative and plan ahead for your meals if you aren't going to be home. I work 12 hour shifts with NO lunch break (nurse) and I manage to eat whole real foods all the time. You can do it too!
3) Don't beat yourself up about your expenses not dropping to zero instantly. It can take some time to adjust and re-learn how you Do Life. And if you get too self-deprecating about your efforts, you will abandon them. I imagine you go through this cycle, since you mentioned wanting results immediately then giving up when that doesn't happen. So your curve would go like Discovery->Zealotry->Frustration->Self-deprecation->Self-punishment->Tiny slip ups->Completely give up. You need instead to cultivate an approach more like getting a college degree. You learn, you succeed, you fail in turns, and yet you always come back to something that progresses your ultimate goals.
A lot of times on the forums people have this view of TRY HARDER, RIGHT NOW, NEVER STOP, NEVER GIVE UP. But we know that doesn't actually line up with the psychology of change! As they say though, there's no zealot like a convert. These are usually people new to MMM, and they usually burn out after a while too. This is why it's so important to set goals, and have the long game in mind. Don't deprive yourself of friends and vegetables. Instead, build a life where friends and vegetables are both affordable and sustainable and build the life you want to lead.
Re the goals, I like this post and often come back to it: http://www.frugalwoods.com/2015/05/08/is-frugality-sustainable-without-a-goal/ (http://www.frugalwoods.com/2015/05/08/is-frugality-sustainable-without-a-goal/)
4) Pants. Are you close to a thrift store? They tend to have larger selection than most anywhere, actually. What do you do? We buy husband's jeans at places like Cabellas, but then he works in industrial sites, so the fashion requirement is zero but the durability requirement is high. Either way, I recommend planning ahead and buying a gift card off cardpool to get additional % off.
Hope some of that helps!
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@Mustache_Wallace, it sounds like you're having some of the useful discomfort that leads to figuring things out. You're a young guy, you're figuring out how you want to live your life -- what's important to you. The MMM community has lots to offer in that regard, IMO. But change takes some time, especially when you're not exactly sure what you want things to change to. So, I'm sending you encouragement and good wishes. I think you're really smart to be questioning a life of debt and consumerism. I was a whole lot older than you are before I began to get my act together.
You pointed out that the "budget" you presented was actually just a list of expenses you were okay with (leaving out some other places where your money is actually going). Earlier, I recommended YNAB (stands for "You Need a Budget") but I'm not sure I made clear what it is. It's a budgeting software that many around here have found lifechanging. I strongly suggest you at least look into it. I, personally, use the desktop version rather than the subscription version. It has revolutionized my ability to make good plans for my money. Even if you don't take this advice, I wish you well and look forward to following your journey.
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Discovery->Zealotry->Frustration->Self-deprecation->Self-punishment->Tiny slip ups->Completely give up
This is probably how most things in my life go. Sticking with things has always been hard. As for the college degree, I pretty much skated by without any real ambition. If I needed to get an A to keep the GPA afloat I would, and then go back to skating. Not the best way to approach things.
As for jeans, I don't need anything fancy but I probably wouldn't wear anything I didn't like, lol. I have to change into scrubs at work, I just want something without holes in them prior to changing.
You pointed out that the "budget" you presented was actually just a list of expenses you were okay with (leaving out some other places where your money is actually going). Earlier, I recommended YNAB (stands for "You Need a Budget") but I'm not sure I made clear what it is. It's a budgeting software that many around here have found lifechanging. I strongly suggest you at least look into it. I, personally, use the desktop version rather than the subscription version. It has revolutionized my ability to make good plans for my money. Even if you don't take this advice, I wish you well and look forward to following your journey.
I've been using Mint. Is YNAB that much different or better? My budget is spend the least amount possible that doesn't make me give up spending the least amount possible.
In other news, I paid off that medical bill today. I asked the lady why hasn't anything bad happened since I haven't paid it in months and she said it was about to go to debt collectors, lol. Crisis narrowly avoided.
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I haven't used Mint but my understanding is that it's more for tracking spending rather than *planning* spending, which is what budgeting actually is.
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I haven't used Mint but my understanding is that it's more for tracking spending rather than *planning* spending, which is what budgeting actually is.
It has a budget section. And if you go over on any budget it will send you a notification.
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Does anyone know if the Moto X is actually good? Will switching from an iPhone to the Moto X and from Verizon down to RW be miserable? I know I could adapt, and would like to spend less time on my phone anyways but I am curious. It looks like I could be paying 80-100 for my phone right now which I never knew was the case. I thought the 200$ I gave my paps was mostly car insurance but it looks like it is half phone.
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Does anyone know if the Moto X is actually good? Will switching from an iPhone to the Moto X and from Verizon down to RW be miserable? I know I could adapt, and would like to spend less time on my phone anyways but I am curious. It looks like I could be paying 80-100 for my phone right now which I never knew was the case. I thought the 200$ I gave my paps was mostly car insurance but it looks like it is half phone.
It's gonna suck at first going from Verizon to RW and an iPhone to a Moto X. I have a Moto E 2nd gen with RW and am on a grandfathered refund plan that no longer exists that costs about $12 and used to have a Droid Maxx on Verizon for $60 a month. You'll notice the coverage is worse and the phone is worse. But then you think about the money you pay for it and you just kind of deal with it. I mean really, my wife and I could easily spend about 100 bucks for 2 lines/month or $1200 a year. Instead we spend $12 a month each or about $25 a month (taxes affect price slightly) or just $300 per year.
You have to decide what is worth it to you, but unless you do business where you need to be reached at all times with the best coverage available, I know what would be worth it to me. Also, my grandfathered RW plan will forever make it really hard for me to give it up.
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I've definitely heard GoogleFi is much loved over republic wireless. Might be worth investigating.
Also, sounds like you need to shop around for car insurance. $200 for both those things is insane. We pay less than $60/month for TWO cars, one of which is a 2017.
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I've definitely heard GoogleFi is much loved over republic wireless. Might be worth investigating.
Love Project FI, especially so because of the FI pun on our FIRE journey.
That said, it's only compatible with 3 phones - the Pixel/Pixel XL, Nexus 6P, and Nexus 5X. Google's site said they are out of stock on both Nexus models, though you can transfer over an existing phone if you own it. I've heard other people have tried to rig their phone (which is not one of the 3 above) to be able to match up with Fi's service.
Pricing is very straight-forward. $20 for unlimited talk & text. $10/GB of data used - no overages or slowing of service. Simple. I'm consistently under $40/month and usually closer to $32-$35. It's very easy to limit data - just don't watch videos or download anything if you're not connected to Wi-Fi.
You also get use of three cellular networks - T-Mobile, Sprint, and US Cellular. So even if Sprint's coverage is horrible where you are, you have a chance to get good service from one of the other two. The phone will automatically switch to the strongest network.
Another bonus is the ease of international use - can be used in 135 countries. Data roaming is charged at the same $10/GB rate. Texts are the same as well ("free") and calls are $0.20/minute. So if you're an international traveler at all it comes in very handy.
Looks like the Pixels start at $649. Google will let you pay it off over 2 years with 0% interest, so $27.04/month. It essentially becomes a two-year "contract" I believe, though I'm not 100% sure. Still, if you can manage around 1GB/month of data, that's ~$60/month for a Pixel + Project Fi service for the next two years. If you have an existing Pixel or Nexus that you own, it's just over $30/month for the service.
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Mint may have a budgeting section that sends out notifications but it doesn't sound like it's doing you much good. I'm suggesting that there is at least one other system that many people here have found extremely useful, that may be worth taking a little time to consider. Good luck to you.
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I have had a Moto X for 2.5 years and I am 100% satisfied. I did finally make some changes a couple months ago that enabled me to fall back in love with the phone. The husband and I are trying to avoid upgrade fever and so far it's working. I use the Nova Launcher instead of the android/motoX launcher. That lets me customize the home screen way more than I used to be able to and get rid of the permanently afixed google search at the top of each screen. I also downloaded a different texting app (Textra) because I do not love the way android messaging works. But it's a good phone with a long battery life and good sound quality. The camera isn't great, but that's not a big deal really.
I second or third the recommendation for budgeting and tracking. I use EveryDollar now because I prefer to do a zero-based budget. Before we used that, we budgeted and tracked expenses using google sheets. This is what we started with a couple years ago: https://docs.google.com/spreadsheets/d/1ryk0pNlChaq93yBDsMZq_D0bmrnXV7FU9nrt7Z01HEk/edit?usp=sharing
But still, every month I sit down with pen and paper and we list out all of our planned expenses for the month. That forces us to consider events like your fight night or big needs like new pants/shoes, and then we set an amount to spend for those items. Our big area for money leakage (spending without realizing it) was on lunch out at work. So we limited ourselves with cash-only on non-budgeted spending (miscellaneous stuff). All of a sudden we stopped spending so much on that! I'd recommend you give yourself a set amount for entertainment and eating out and get that amount out in cash each month. Once it's gone, it's gone.
At the end of the day, these kinds of lifestyle choices do cause you to have to say sometimes, "no, sorry I can't do that, it's not in the budget." And that is hard at first. But you can figure out better alternatives. Invite people over for board games or to watch sports. Meet up with people at the park for ultimate frisbee. Make friends through free hobbies like cycling or volunteering.
Oh! on the pants. You might be able to check out Plato's Closet if you've got one locally. A lot of men don't realize that they have a decent men's section with very affordable, gently-used clothes. But if you can't find something there, go get yourself a pair of pants from Ross's or JCPenny or Kohl's. Pants are a need, it's okay to buy a new pair of pants.
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Hey, your case study isn't all that bad, you know.
Those debt rates to me are a bit "urgent", however (the interest rates). All over 5% and such...
I would:
1) Spend 2 months maximum to pay off the $7k debt in full, leaving a little over $1000 in the savings account for lifestyle cash flow surprises. (they always come).
2) Move the debt repayment from the smaller debt onto the second one to snowball it, maybe increase it by a couple of hundred more.
3) Get all my employer matching funds starting in month 2...
4) Pay off debt #2 with any left over.
5) keep maximizing my savings and expenses, keep the pencil sharpened, in other words..
BUT ALSO -- look for ways to increase income! You are 26, with a degree or two (I presume)... earning more money should be in your near future if you focus on it. Start this now.
Good luck.
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How's it going, M_W?
I'm new to MMM and worry I won't be able to keep up my MMMing.
What's on your mind/mustache after a month or two?
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I just read through your case study.
First awareness is the first step to change. You have done that and that is awesome. I have 2 siblings 29 and 32 both living paycheck to paycheck and make enough money not too and have grown up with a parent that is very money conscious. At 26 you are probably ahead of the majority of your peers or Americans in general. I can tell you are very intelligent and I am sure you will be able to figure all of this stuff out. It takes time and can definitely be confusing. I am engineer and I find finance stuff confusing.
I think you are coming from this with the spend as little as possible without looking at the whole picture. You make a decent income and your debt is not a huge debt emergency. There is no need to go straight bare bones. I think first you need to get a handle on how much and what you are spending your money on. Then from there you are in a better place to set a budget.
I use mint as well. It is really helpful in identifying how you spend your money. You can look at the trends and see how much you are spending in various categories. Also it lets you set a monthly budget so it can be used as well. I have not used YNAB. The mint will help you with the first step in identifying where is your money going.
I think it may be a good idea to think about what you really enjoy. Are you an outdoors person or movie buff or sport fan. You can use meetup.com to find people that have similar interest as you to and that hopefully do not take you down a destructive path.
Also, with the phone there are various prepaid carriers that let you bring your iphone with you.
Do you own a bike? You said you were only 7 miles from the gym. A great workout would be riding to the gym or even work if possible
Back pain and injuries are no joke. Definitely do some research on exercises that will help strengthen your core so you can avoid future back problems.
It has been awhile since you updated, I look forward to hearing about your progress.
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I just found this thread and wanted to see if you had considered refinancing your loans to get a lower interest rate? I used Earnest to refi my law school loans down to 3.5% (others use Sofi or other lenders).
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Hello All,
I was a little hesitant to come back to this thread because of how far I have fallen since the last time I posted. The guilt of falling off the wagon (really never getting on the wagon) has weighed heavily on me. No amount of disappointment from anyone here could affect me, however, as I am my own harshest critic. And so I return.
Other than changing my 401k to receive the maximum company match, nothing has changed since the last time financial freedom wise - except for one thing, my attitude. I realized that it wasn't the partying, the eating out, impulse buys, or any of that that was the problem; it wasn't even boredom like I had said before - it was addiction. I have an addiction to indifference. You work hard for a long time, make great ground, things get a little rocky and you revert right back to not giving a fuck. It's not an excuse, it is a victim mentality in way. I will no longer be the victim of my own deluded philosophies.
Frankly, I'm fed up. I'm fed up with myself. I'm fed up with the life I have been living. I'm fed up with being a sheep when I want to be a mustache.
I am ready to give this a good, honest effort. I have made some bad decisions since then, but I am already making the required changes from the knowledge I gained the last time I was on the forums, and rereading MMM's posts. I don't expect anyone to give a shit. You all helped so much last time, giving me your time and knowledge to help me with a path forward in my life. And I am forever grateful and apologetic. The time has come to put all that knowledge into practicality.
The last time I thought I was ready to change, now I know I am ready to change.
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Note: Before I was somewhat vague on my postings here. I was somewhat ashamed to give the full knowledge of my current situation because I knew the reaction would be harsh. This time, I want to be 100% fully committed to the cause.
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Current situation:
Savings
$7,582.86
401k (assuming I work two years at my company):
$10,059.48
Student Debt
$26,385.93
Net Worth
-7,873.59
Vehicle
2008 Toyota Tacoma, no payments (I know, I know). My Dad gave this to me as a gift for getting my Master's and I thought it was a great gift because it had no car payments. Ironically, I just reread Curing Your Clown Like Car Habit on MMM and he specifically mentions this vehicle as one no human should ever drive. Before I don't think I mentioned this because I knew it would get shit on. Now, I'm ready to sell it.
Based off my last ten or so paychecks:
Monthly take home:
$3281.04
I usually operate on the minimum income I will receive which is ~$2800/ month. With OT I can make a maximum of ~$4000 but that is if there is available extra hours.
Required Expenses as of July (Rent to go from $600-800 and potentially 950):
Rent: $800 (electricity and WiFi will be soon to come, I'm hoping combined this is $900) Assume $950.
Phone Bill/ Car Insurance: $215 (includes $30 for phone repayment - $630 left on payment)
Gym: $20
Groceries: $300
Netflix: $11
Spotify: $10
Medication: $10
Gas: $300
Minimum loan payment: $360
Shit that's worse than I thought.
Expenses:
$2176
Average month income: $1105.04
Minimum month income: $624.00
Now I say required expenses because last month I spent so much I actually dipped into my savings. I could elaborate on that one for you guys, but I don't see the point. I know it was all mainly stupid spending.
Actions taken so far:
I assumed my phone line from my Dad. We were paying out the ass for the phones and I couldn't justify the spending any longer. I lowered it to the $55 plan (lowest), but I'll still get fucked for May for $100 because of verizon being dumb. As for the phone (and I could use some guidance here), I have $205 in cashback already from my BoA account. I plan to open a CapitalOne Quicksilver Account (and potentially one more account) to get anywhere from $150-300 in rewards within one month that will allow me to almost fully pay off the phone for free essentially. I'm not so familiar with credit cards, etc. but I think this is a decent way to quickly get the phone bill to $55 without dipping into savings. Also, once I pay off the phone, I can ditch the line entirely if I want something cheaper.
Potential Savings $45
Rent
The increase in rent might actually prove very useful because of its location. Also, it is apparently a two month at will tenancy or something, so if we give them 60 days notice, we can move whenever we want.
Car Insurance
I was dragging my feet with the title to the truck but this month he should be able to sign it over to me giving me full control of it. I'm sure there will be some fees or something associated with this but I'll take it over, and shop for lower insurance. In short time, I plan to sell the truck to get something much more fuel efficient.
Hopefully a lot, but I've never outright dealt with insurance and car ownership so it's tough for me to estimate.
Groceries
I actually spent $298 last month on groceries which is terrible. But this was basically impulse buying diet sodas, water bottles, bagels, fiber one bars, whatever the fuck I wanted. The goal is to get this to $150 per month, including whey protein, to maintain my current bodybuilding lifestyle. I've already worked out a scheme, I think, that will keep me at or around $5 per day. If I can squeeze this even further to $100 per month and still hit my macronutrient needs this would be awesome. I'm also looking into a costco membership but that is approximately 20 miles away.
Potential savings: $150-200$
Netflix/Spotify
Cancelled. I don't even watch Netflix and only use Spotify at the gym, which I didn't before, and got along just fine.
Potential savings: $21
Medication
Nothing I can do there.
Gas
Obviously the problem here is the truck. But I recently moved to 0.4 miles from my gym, and 5 miles closer to my work (10 miles). I have a bike at my Dad's house (make sure it's still there), that I plan to ride around to the gym and for anything else that isn't the main work commute. I estimate this will save me $150 or more on gas based on mileage, mpg, etc. But we'll see. Furthermore, this new location is next to a bus stop that could take me directly to work for $1.50/ day. I could take the bus in and bike home for around $30 or so per month. It's an option to explore. I could even consider biking to work, but my endurance likely isn't good enough and I'll need somewhere to shower.
Potential savings: $150 or more
Loans
Group A
$6,474.56 @ 6.55%
Group B
$19,673.88 @ 5.96%
My goal is to pay off the $6,474.56 before July 13. That includes both a vacation (already paid for unfortunately) and a Bachelor Party (we decided against going abroad to save money). I want to focus on this debt and then look into things like HSA, IRA or just laser focus the other one too for approximately another year. I find for me the the retirement accounts can prove to be a little distracting in tearing down the debt but we'll see. Maybe I'm just being an idiot.
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I strongly believe I have the potential to cut my costs by $500 - $600/ month, or more.
With the loans paid off and the changes made, I'm hoping that even with a take home of 41k, I can save 50% (after 401k deductions). Once I hit July, and make the 100% vested status, I can proceed to push for raises, promotions, and even different a different job that could pay me more. Until July I won't consider anything, and continue to work as much OT as possible (70 hours last week).
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Of course with all his (and I know there is a lot to be desired), I must put in the work to achieve the desired result. I ask for a second chance from you guys as I demand a second chance from myself. Let me know what you think about my plan, and any tips on how to keep progressing.
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Hello,
Change is hard, falling off the wagon happens to the best of us. Congrats for owning up to your past. It seems you have gained some awareness as to what was preventing change. What have you done to work on your mind set and attitude? It is great that you have a set of steps to move forward financially, but it does not seem you have considered how you will challenge your indifference. I definitely suggest taking some time to evaluate and come up with some strategies to avoid the indifference in the future. One thing is setting some SMART goals. These can be financial or non financial related. They give you something to channel your energy. It sometimes helps to have visuals for your goals. Say one is to pay down your student loan. Maybe making a thermometer and you color it in as you pay more and more off to the total goal.
Next you mention no way of tracking your expenses. You say that you made a bunch of foolish purchases, but do you know what they are and how much they cost you? Your budget does not show any funds for the misc. costs like personal care, entertainment, etc.
The gym is fairly low cost, but instead you could put the money towards your own set of weights and make your own home gym.
Five miles on a bike is nothing unless you are climbing up a big steep hill. I am sure you would have no problem with the ride in a very short amount of time.
The vehicle. Have you informed your dad of your intention to sell it? Instead of transferring the ownership why not have your dad sell it or you sell for him and ask to keep the money instead. Then you are not paying any registration fees, insurance, or taxes on the sale. It seems like it might be very possible for you to not own a vehicle at all. Are you considering that? If you do end up with a vehicle you should definitely be able to find cheaper car insurance. For reference I have a 2013 Prius with full coverage and pay $420 every 6 months.
Have you looked at consolidating the student loans? Depending on your degree you may qualify for a loan through SoFi or some of the other crowd source lenders for a lower rate.
The Phone: Get it paid off and find a prepaid plan. Total Wireless uses the verizon network and is $25 a month plus $10 per 5gb of data. Most likely you would be able to bring your phone with you. If not sell it for a cheaper one.
Using the bank hacking is a good idea just make sure you read all the fine print. Many require direct deposit or minimum balances. Same with credit cards.
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Frankly, I'm fed up. I'm fed up with myself. I'm fed up with the life I have been living. I'm fed up with being a sheep when I want to be a mustache.
I would listen to The Life Coach School podcast if you're into podcasts. I think some of her tips could help you here.
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Hey good move on owning your situation.
I can recommend puppy wireless highly. They use Verizon towers so service is just as good. Your phone will transfer to them no problem, just order a SIM card. I pay 28.60 month for 2gb and unlimited talk and text.
Nice truck you have so that’s great. Those are so popular and you should have no problem fetching a pretty penny. They run forever. But dang it those Toyota trucks suck on gas.
Personally I recommend replacing it with a 4cylinder hatch back. I’ve got a Scion xB that I love but yeah it’s not the prettiest thing. But because of that it’s a great value. Toyota engine and the used ones are reasonably priced. A similar Camry or accord is easily a couple grand more because they’re so common. The scion brand is gone now but only recently. I’d recommend the iM model also. It’s now called a corolla hatchback and costs more simply because it’s a Toyota badge.
I’ve owned a Honda Fit which is my favorite car I’ve owned. So fun to drive but I prefer the size of my xB. Lots around here own Prius’s.
I ditto the title transfer recommendation. You could probably skip a step selling it straight to a new buyer. This will save money and probably time. Usually new titles have to be mailed to you.
Good luck.
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Dude, you're already making strides. You clearly want change. You have more numbers, you've got plans, some of which you've already enacted.
A thing I notice: What do you want your life to change *to*? When you think of your best life -- the life you want to tell people about when you're 70 -- what is it that you see? Family + children? Athletic activity? Crazy travel stories? Philanthropy? Knowing what your goals are is a massive boost to the psyche. You're not saving because you're supposed to, you're saving because you want to celebrate your 65th birthday in Bali, or because you want to send future kids to college. Those goals can (and should!) change over time, and they might not be clear right now. But they'll keep you ticking. When your spending gets to where it reflects your values and your goals, you'll be feeling real good.
Specifics:
The credit cards: If there's signup bonuses, they're often tied to total spend within the first several months. Make sure that it's reasonable for you to spend that much. I spend relatively little on cards, so I don't go for the card hacking much. There's others on this forum who have talked about it extensively, though.
Food: $100/mo on groceries is a pretty ambitious Mustachian goal, especially for a bodybuilder. Right now, I'd focus on getting to $250 next month. Some specific suggestions:
1. Buy whole chickens and roast them. Cheap lean protein that will impress housemates, gymmates, your parents, and partners, and it'll last you a week. My method: make a brine (6 cups water to 1/2 c salt, heated to a boil); let the brine cool; put the raw chicken in the brine and let it sit for 4-12 hours. Pat dry. Stick chicken in a 450 degree oven (makes a nice crisp skin) for 10 minutes, then turn the oven to 350 (cooks the inside) and roast for another 50 minutes or so until the juices run clear when you poke a thick piece of meat.
2. Batch prep veggies. Buy whole veggies -- heads of broccoli, big bags of carrots, potatoes, etc. On the weekend, chop those fuckers up and pack 'em into the fridge. It'll take 30 minutes to an hour to do a week's worth of veggies. During the week, you can steam, roast, or saute whatever you want just be tossing stuff in a bowl/pan/skillet, maybe with some olive oil. Things like snap peas are also great for quick meals, because they don't need much chopping.
3. Carry a water bottle with you. Like, literally just a plastic water bottle that you have in your recycling bin works. Fill it up and live that high hydration life.
4. Spices. Use 'em, love 'em. They are chill on literally every diet ever AND they make your food taste superlative.
5. Get your zeal up for delicious, cheap, healthy food. It's not "ugh more steamed broccoli." It's "I am fucking LUCKY because I have DELICIOUS BROCCOLI WITH LEMON AND PEPPER." I know this sounds dumb, but it's a real thing -- you eat your mindset. I've experienced this and it's a super heady thing.
There's a sub-200 grocery thread here that has some good stuff, too, if you want a deep dive.
The bike: You clearly spend time working out your muscles. Your heart is a muscle, too. Give it a workout. Biking to the gym and other incidentals (groceries, etc) is a great start. See how your back deals with it, and then try working up to the commute. Is the ride to your work hilly?
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Can you see yourself working for two more years at your company? It seems this is a stipulation for your 401k correct?
When July 26th comes, I'v reached two years and I'm 100% vested.
Your net worth calculations seem weird to me. The way the math is working is the following:
Student Loans -$26,385.93 + Savings ($7,582.86) + 401k ($10,059.48) = Net-worth $-8,743.59. Not sure where you got your number of $-7,873.59.
I think I wrote my savings wrong.
Should be (-$26,385.93) + Savings ($8,450.42) + 401k ($10,059.48) = Net-worth $-8,743.59. That previous number may have already applied some bills set to go out or checks already written.
Let's take your income which is $2,800. Don't count on overtime in your calculations and any overtime you do make throw it at your loans. Also why do you have both your avg take home pay of $3281.04 vs your minimum take home of $2,800? Is this due to overtime?
Yes, minimum is $2800. Anything else is OT. That $3281.04 is an average of my last ten paychecks.
"Average month income: $1105.04
Minimum month income: $624.00"
I think by this you mean "average leftover income each month after expenses". If so I'd change this to clarify.
It's not an average of what is left over, it is what would be in my bank account after minimum expense for an average paycheck ($3281) and a minimum paycheck ($2800).
For groceries, you need to budget for this. Not sure if you and your gf buy groceries together but getting to $150-200 is totally doable. Also I'd recommend meal prepping especially if your working out and living a "bodybuilder lifestyle". Great way to save money by prepping meals on a weekend day once a week vs struggling for time on the weekday each day.
Work in progress. No I don't have a GF. I meal prep everything as it stands. I've got an excel sheet that has three meals written out for roughly $5/ day.
Have you cut back on your binge drinking? I read that was a point made last year. If so great, if not that should cut some expenses too.
Yes, I have cut back on binge drinking, and anything that might go along with it. In fact, I'm not even partying a quarter as bad as I was when I tried doing this last August. I was going fucking wild then.
Finally I'd recommend you use a budgeting app. Personally I use YNAB. Although your not terrible in spending (I've read much worse), it can help you keep accountable
You're like the eighth person to tell me to get this app. I use mint to track everything. Do I really need YNAB? DIRNYNAB? It's ten bucks a month for something that seems pretty easy to do.
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Hello,
Change is hard, falling off the wagon happens to the best of us. Congrats for owning up to your past. It seems you have gained some awareness as to what was preventing change. What have you done to work on your mind set and attitude? It is great that you have a set of steps to move forward financially, but it does not seem you have considered how you will challenge your indifference. I definitely suggest taking some time to evaluate and come up with some strategies to avoid the indifference in the future. One thing is setting some SMART goals. These can be financial or non financial related. They give you something to channel your energy. It sometimes helps to have visuals for your goals. Say one is to pay down your student loan. Maybe making a thermometer and you color it in as you pay more and more off to the total goal.
Next you mention no way of tracking your expenses. You say that you made a bunch of foolish purchases, but do you know what they are and how much they cost you? Your budget does not show any funds for the misc. costs like personal care, entertainment, etc.
The gym is fairly low cost, but instead you could put the money towards your own set of weights and make your own home gym.
Five miles on a bike is nothing unless you are climbing up a big steep hill. I am sure you would have no problem with the ride in a very short amount of time.
The vehicle. Have you informed your dad of your intention to sell it? Instead of transferring the ownership why not have your dad sell it or you sell for him and ask to keep the money instead. Then you are not paying any registration fees, insurance, or taxes on the sale. It seems like it might be very possible for you to not own a vehicle at all. Are you considering that? If you do end up with a vehicle you should definitely be able to find cheaper car insurance. For reference I have a 2013 Prius with full coverage and pay $420 every 6 months.
Have you looked at consolidating the student loans? Depending on your degree you may qualify for a loan through SoFi or some of the other crowd source lenders for a lower rate.
The Phone: Get it paid off and find a prepaid plan. Total Wireless uses the verizon network and is $25 a month plus $10 per 5gb of data. Most likely you would be able to bring your phone with you. If not sell it for a cheaper one.
Using the bank hacking is a good idea just make sure you read all the fine print. Many require direct deposit or minimum balances. Same with credit cards.
Paperwork in the truck is all but done. He is literally going to sign it over to me. I hadn't considered him selling it for me though. The plan would be to lower insurance at all costs and sell the truck at some point. The real plan is see how biking to work works out and then figure out the vehicle situation. If biking works out, than the truck will pretty much not be used.
Bike ride to work might be a little tricky. It is ten miles, and very hilly. I plan on taking the bus in and biking out. Only weird thing is, I'd be biking home at 11:30pm at night, and often times my shifts go overnight 12am, 4am - I've even worked until 9am. But these days are foreseeable I can plan accordingly.
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Not sure what this means but I just found a Scion xA 2007 for 7grand, 14k miles. I can’t really afford it at the moment but if I sell the truck....
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Not sure what this means but I just found a Scion xA 2007 for 7grand, 14k miles. I can’t really afford it at the moment but if I sell the truck....
Seems high even for those crazy low miles. I’m betting it will sit so keep your eye on it. If you sell the truck go check it out. Have a mechanic look at it and I’d offer 4500 and go from there. Depends on your area too so do some research.
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It is 08MAY18. According to Mint, I have only spent 70$. Technically I am waiting for my final rent payment to pass through and that will be $670 spent for the month. Also according to Mint, by this time in April, I guess I had already spent $1220, including rent. That is almost double. I see it as $620 whatever the fuck I wanted to spend v $70 within a calculated budget. So it goes.
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It's ok for your spending to vary from month to month.
For me, 10 miles over hilly terrain doesn't sound like much fun on a bike, but the bus sounds doable. $1.50/day on the bus is WAY cheaper than what you'd spend on even an efficient car, once you include depreciation and maintenance.
I'd recommend you resolve the car situation ASAP, both the ownership and the insurance. If the title has gone through, sell that thing and get yourself a more efficient vehicle, and reevaluate your insurance. You're old enough that liability-only insurance should be lots cheaper.
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Now that tax law has changed and you'll have a 12K deduction, look at your IRA options again. Until 2025 you know you'll have a lower tax burden. So you might want to pay your taxes now during the low tax season (Roth) and then switch to tIRA when the taxes go back up and/or your salary kicks you into a higher tax bracket.