Author Topic: Another Case Study  (Read 3625 times)

Lexipainter

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Another Case Study
« on: April 01, 2013, 01:02:19 PM »
Hi there,
I just started reading this week, but have long been wanting to minimize my debt and spending. I consider myself somewhat thrifty, but I tend to waste my money on my younger siblings (they're like kids to me and our mom/parents are kind of out of the picture due to drug problems and other various bad parenting).

About me: 29, never married, no kids, renting, had shitty jobs for a long time. BA in History and then I went back to school and got my Masters in Teaching.

Take home pay: ~2700
Rent 500
Student loans 500/mo (38,468 total, 6.55%)
Car 500 (I've been doubling my payment, still owe 5000, 1.9%, 2010 Toyota yaris)
Insurance 70
Cellphone 50
Savings 500
Spending money 500 (groceries, gas, etc)

Those are all my bills. My boyfriend pays everything else. A few more details:
Savings account $1500
401k $2310
I spend about $150 on gas a month, but I live 7mi from work and can bike there in 40min. I've been avoiding it due to weather but this month I'm going to start at least a few days a week. I spend between 100-150 on groceries. The rest I blow on random shit or traveling to see my siblings (they live 3-4hrsaway). I don't buy a lot of clothes and I don't eat out or go to bars often.

Where should I start? I was thinking of paying my car off first. If I just keep at 500 I can pay it off by January, if I up it to 750 and use my savings, I can pay it off in sept. if I up it to 1000 and use my savings, then July. Or I could sell it and get a cheaper car?

Next, student loans. I'm set to pay them off in 10yrs. If I pay off my car ill be able to double my student loan payment. Also I work at a low income school and after 5yrs I may be able to get somewhere around 8-12k forgiven. I think I could buckle down and get it paid off in 4-5yrs.

Even after that, I still don't think I can save a full 75% of my paycheck. I think I'll have to figure out a second income... Cleaning houses, a summer job, etc. or if I switched careers and got a higher paying job (definitely doable in my location).

My last step is getting my bf on board. He makes a lot more than me and wastes much of it on beer, DVDs, records, etc.

And when my cell plan expires I want to get on Republic Wireless (in about a year)

I think I remembered everything. Advice? Comments?

EDIT: I forgot to mention that I don't want kids and my ideal house is a Tumbleweed tiny house (still trying to convince the bf on that one)
« Last Edit: April 01, 2013, 01:08:10 PM by Lexipainter »

AJ

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Re: Another Case Study
« Reply #1 on: April 01, 2013, 01:24:27 PM »
Standard advice:

1. Pay the cancellation fee and get a cheaper phone now. If you have a year left on contract it will almost certainly be worth it. Do you need unlimited calls/text/data? Check out your actual usage and see if something cheaper might be worth it. MMM and others pay $10 a month. I use Republic because I need unlimited for work, but in FI I will switch back to AirVoice or Ting. Republic is a terrible carrier - they are just the only ones that offer the fancy unlimited stuff for so cheap.

2. Sell the car. Buy a cheaper one if you MUST - but living so close to your work you may be able to get away without a car altogether. That would eliminate your insurance cost. It's just a matter of how much you want to get your savings rate up. Either way, use the proceeds to pay down your student loans.

3. Get a better paying job if you can and if it is in line with your goals. Don't stay at a low paying job just for the student loan forgiveness - the math doesn't work in your favor.

Even after that, I still don't think I can save a full 75% of my paycheck.

Is that your goal, a 75% savings rate? Please say yes, because when people have clearly defined goals it is much easier to give advice. If you are just generally looking to optimize, then the above three are really all I have for you. But if you really want to get to 75%, we can have some fun with less, um, standard advice :)

Lexipainter

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Re: Another Case Study
« Reply #2 on: April 01, 2013, 01:42:01 PM »
Yes, ideally I would like to save 75%!

Thank you for the advice!

Lexipainter

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Re: Another Case Study
« Reply #3 on: April 01, 2013, 02:12:01 PM »
Also, I am mainly staying with the low paying job due to summers off (and I like the job)... But if I'm going to be serious about this I should really be working in summer...

unpolloloco

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Re: Another Case Study
« Reply #4 on: April 01, 2013, 03:16:22 PM »
If you halve the car payment (pay minimum) and halve your savings contribution (is getting to the point of being a decent emergency fund), you can throw 1k/month at the high-interest student loan and be out from under it in just over 3 years (assuming you can't save anywhere else).  Your car loan (low interest) will be gone soon enough at minimum payments.

Done by Forty

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Re: Another Case Study
« Reply #5 on: April 01, 2013, 03:21:51 PM »
I love your goal of a 75% savings rate.  You've already mentioned boosting your income and my guess is that's going to be a necessary component of reaching your goal.

In addition to the things you've noted, if I wanted to get to that rate at that income, I would:

-Address rent over time.  Maybe a tiny house is one way to do that but there are some upfront costs to figure.  Still, a $20k home on a trailer may prove to be a smart move after a few years.  In the short term, maybe roommates (even sharing a room) can help drive that figure down.

-Just get rid of the car altogether and even move so you can take public transportation when biking's not an option.  A cheaper car would address the debt but not the ongoing costs of car ownership.

-Maybe just cancel the cell phone

-Get really granular on any discretionary spending


You could take your goal by increments, too:  get out of debt, then gain a 25% savings rate, then 50%, then %60, etc.

Good luck!
« Last Edit: April 01, 2013, 03:23:40 PM by Done by Forty »