Author Topic: Case study, recommendations for brand new mustachian  (Read 921 times)

coldrums

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Case study, recommendations for brand new mustachian
« on: October 05, 2017, 09:59:42 PM »
Hi, I'm just a new Mustachian from Colombia, I discovered Mr. Money Mustache from Livingafi blog and, after reading some articles and forum posts, I realize this is a great community very aligned with my own thoughts on work life and the desire to retire early to enjoy a better way of life.

If you don't mind, I'd like to post some stats on my current financial status (which isn't the best), and I eagerly look forward to get some advice from experienced mustachians!

For the following values, consider that my cost of living is about 1/3 of the cost in a medium-large USA city, keeping approximately the same standard of living in regards to housing, food, public services access and entertainment. I think it's better to express my take-home income in US dollars equivalent, and all the other values as a percentage of that, so here I go:

Age: 36
Gender: male
Status: single with no kids
Work as: full time employee
Field: IT/Computing
Net worth: $0
Debt: $0 (I paid all my credit card debt just yesterday, using the savings from the few previous months, hence my net worth of $0)
Average annual take-home (net) income: US $30.000 (roughly equivalent to US $90.000 for someone living in the USA)
Average spending rate: 45% of net monthly income
Average saving rate: 55% of net monthly income
Rent cost: 12%
Food, groceries, eating out: 10% (fortunately food is very cheap and high quality in my country)
Transportation (public, I don't own a car): 2%
Misc expenses (personal items, infrequent purchases, etc.): 2%
Supporting a sister who is studying abroad: 7%
Going out/Drinks/Entertainment: 12%
Investments: none (saving all the money in a standard savings account)

Although I've worked for several years, just recently I understood the need to save and not spend unnecessarily, and I'm finding great pleasure as I see a bright future if I can save enough to retire early and enjoy aspects of life that are more important to me. For the time being, I just began to save part of my income, but I'm sure that percentage can be improved so I'm looking for suggestions from more experienced savers. Thanks!

okits

  • Magnum Stache
  • ******
  • Posts: 4466
  • Location: Canada
Re: Case study, recommendations for brand new mustachian
« Reply #1 on: October 06, 2017, 12:17:45 AM »
What options do you have to invest in financial assets, real estate, small businesses, etc.?  Being debt free and having a 55% savings rate is a great start!  (Setting aside an emergency fund of 3-6x monthly expenses is also advisable, but beyond that, savings accounts will generally not produce the kind of investment returns needed to reach FIRE in the timeline MMM's "Shockingly Simple Math" outlines).

(Good for you for supporting your sister's studies. Hopefully they lead her to a career path where she will be self-sufficient and able to help another family member study to improve their prospects, as well.)

elaine amj

  • Handlebar Stache
  • *****
  • Posts: 1874
  • Location: Ontario
Re: Case study, recommendations for brand new mustachian
« Reply #2 on: October 06, 2017, 01:56:58 AM »
Like @okits said - sounds like it is time to learn about investing!

Also, cultivate Mustachian habits and embrace minimalism to help prevent lifestyle inflation. Always thinking about the value of something to you is a really good habit to instill.


Also, the equivalent of US$900/mo in going out/drinks/entertainment sounds like a LOT of money for a single guy!!! It takes effort - but are u able to find less expensive ways to socialize?

For example, I like going to local festivals and going to shows and concerts. But it's rare for me to be able to justify admission fees. So I keep my eyes open, practice patience, and usually interesting things pop up that are free/low cost.

And yet, I still resist the impulse to spend because it's the normal thing to do. Last summer, I invited another couple to go out for a free fireworks show in a nearby town. We all agreed we didn't want to spend much - I suggested some low cost options for eating out but they eventually said they preferred to eat at home. Works for me - so I told them I would pack snacks.

We get there, set up our lawn chairs, I pull out our array of snacks and we all nibble and hang out. My kinda night out! After a while, we decide to walk around and see if there was anything interesting to look at. Plus we were tempted by the thought of ice cream lol! We didn't find anything other than a rather uninspiring set of food trucks with $$ popcorn, etc. My friends acted like the money they brought was burning a hole in their pocket and promptly bought the popcorn and a couple of crappy drinks. They ate maybe a quarter of it through the night? I think they had brought a certain amount of money and *had* to spend it? So odd considering they decided not to spend money on dinner at Subways!

Moral of the story? Be deliberate about your spending choices. Question all your sacred cows. Don't just spend on something because everyone else does. Little choices add up in the long run.


Sent from my iPhone using Tapatalk

Linda_Norway

  • Handlebar Stache
  • *****
  • Posts: 1600
Re: Case study, recommendations for brand new mustachian
« Reply #3 on: October 06, 2017, 02:57:00 AM »
A bit curious why you had this credit card debt in the first place. At least, don't build up any new debt of that kind.

Just some thought about things you could possibly save more on:

You could still save on your eating out, as this can usually be avoided by good planning. And as mentioned, your entertainment post is really high.

Do you have any fixed costs that you can try to get cheaper, like insurances, telephone, electricity, TV? You could consider to either cancel them or find a cheaper supplier.

Could you live somewhere cheaper or rent out a room in your house?

You say you don't have a car, which probably saves you a lot. I hope that means you are using a cheap form of transport (your legs, a bike or public transport) and not taxies.

coldrums

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Case study, recommendations for brand new mustachian
« Reply #4 on: October 06, 2017, 02:04:56 PM »
Thanks for your replies! As I'm new to the FIRE philosophy, there are many concepts I'm just getting a grip on.

@okits:
Although I'm very interested in investing, I began to save seriously only a couple of months ago, so I don't have yet a big enough stash to start investing. I was looking into Vanguard fund, but I think the minimum is US $10.000 (I hope to have this amount in about 7 months). Unfortunately it seems that I can't open a Vanguard account from my country, but I'd love to receive advice on how to open a Vanguard account from outside the USA. My sister will finish her master in about a year, so the support is temporary and I hope she becomes FI as well, as she is generally a frugal person.

@elaine:
You're completely right, I know I spend too much in drinks and going out, it's a bad habit that I've carried for several years and I'm finding difficult to downsize, but I'm working on it slowly to reach a point when I don't need drinking and partying to feel good or decompress from my job. You make a very good point about choosing the right company so you don't feel inclined to spend as much.

@Linda:
I was out of job for several months before landing my current job, so I was kind of living out of my credit cards (I know, very bad idea), but fortunately all of my debt is paid and I really don't use my credit cards so much now, as the interest rate in my country is criminal! (32% effective anual). I try to pay all in cash and really don't buy unnecessary items anymore (unlike in the past). The 12% in rent includes water, electricity and internet, as I live in a rented room in a big house, in an adequate middle-class neighborhood. I don't think I could downsize my rent without moving to a lesser (and more dangerous) place in the city. Last month I canceled my mobile plan (I use my employer's provided one), and the only service I pay for is Netflix. The public transport in my city is quite efficient so I take the bus to/from my job everyday. I take a cab every now and then but it's not a big expense.

I'd really appreciate your advice on how to save more and especially on how to invest in index funds from outside the USA. Thanks!

okits

  • Magnum Stache
  • ******
  • Posts: 4466
  • Location: Canada
Re: Case study, recommendations for brand new mustachian
« Reply #5 on: October 06, 2017, 02:24:58 PM »
In Canada we can't invest directly with Vanguard, either, but can open a brokerage account to buy their ETFs.  I'm able to do this very inexpensively, online, so perhaps you have similar options available in Colombia?

elaine amj

  • Handlebar Stache
  • *****
  • Posts: 1874
  • Location: Ontario
Re: Case study, recommendations for brand new mustachian
« Reply #6 on: October 06, 2017, 02:26:00 PM »
I don't know if u can invest in index funds from outside the US. I recently was discussing options with a Canadian who cannot find a US broker that will open an account for her.

I'd suggest looking for options within your country. May not be as low cost as in the US but hopefully you have one that has a reasonable MER. Vanguard is nice, but not the only game in town :)

I elected to keep the bulk of our investments within Canada even though our funds cost a little more. For the sake of simplicity, it was worth it to me.

Sent from my STH100-1 using Tapatalk


Linda_Norway

  • Handlebar Stache
  • *****
  • Posts: 1600
Re: Case study, recommendations for brand new mustachian
« Reply #7 on: October 07, 2017, 11:42:13 AM »
My country also has low cost index funds that invest globally, or per region. Your country might also offer something similar. Try to find some local investment blogs or website that have advise for your country.