Author Topic: Case Study - Am I Doing the Right Things?  (Read 6738 times)

$$$Manager

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Case Study - Am I Doing the Right Things?
« on: September 17, 2014, 08:13:19 PM »
Hi Mustachians!  I'm very new to the website and would like feedback on my present situation.  Do you have any suggestions about what I could be doing differently? 

Income:  37K annually from a 40hr/week Fulltime hourly job.  I get $1,094 every 2 weeks.
Current Expenses (paid out every 4 weeks):
$290 cash to blow
$589 towards VISA card debt of about $1,600
$240 towards 401K (employer matches 4% of my annual pay)
$50 to church
$400 set aside for ongoing medical expenses (I have 2 chronic conditions)
$50 the phones (punch me now for my 2 phones)
$93 auto insurance and insulin pump insurance
$40 electric bill
$59 internet service
$165 co-op apartment maintenance fee (includes gas heat, water, sewer, garbage pickup, prop taxes, yard work)
$92 groceries
$120 gasoline
TOTAL:  $2,188 (4 weeks pay)

Assets:  My 680 sq. ft. apartment and 2006 Tacoma truck are paid for.  Apt. may be worth about $50K and truck maybe $10K.
I also have about $700 left in "medical/emergency savings" after recently taking out about $1,200 to pay down credit card.
Liabilities:  My only debt is my one VISA credit card, which I was using to pay for medical expenses (I stopped doing that last week).

I can get really discouraged about my never ending medical expenses, but they are what they are.  Thanks in advance for your thoughts, suggestions or feedback.
« Last Edit: September 17, 2014, 08:34:18 PM by $$$Manager »

neophyte

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Re: Case Study - Am I Doing the Right Things?
« Reply #1 on: September 17, 2014, 09:45:07 PM »
I'd cut the 'cash to blow' category as much as you can possibly stomach until the debt is gone. I'd also contribute enough to the 401k to get the full employer match, but not beyond that. You don't mention the VISA interest rate, but it's bound to be higher than the returns you would get in the stock market in your 401k. Gas would also be cheaper if you could swap your truck for a smaller car.

Great job on the grocery bill!
« Last Edit: September 17, 2014, 09:47:22 PM by neophyte »

Starter

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Re: Case Study - Am I Doing the Right Things?
« Reply #2 on: September 17, 2014, 09:48:19 PM »
My suggestions:
Sell the Tacoma and get a nice cheap sedan.   (Mr.MM posted about great options back in 2012)

http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-smart-people/

Apply the difference (from the sale of truck and savings on gas/insurance) directly to the outstanding Visa.
Burn the Visa.
Use "cash to blow" and "toward VISA" and savings on gas/insurance to create your stash. (aprox. $900/4wks)
Adding this to the $240/4wks already paid into your 401K, you're over the 50% of income to savings.
Retire early.





$$$Manager

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Re: Case Study - Am I Doing the Right Things?
« Reply #3 on: September 17, 2014, 10:01:10 PM »
Thanks to all for the advice.  My tacoma is a simple 4 cylinder gas sipper, so hate to sell it.  But, I could drive it less.  It's only 4 1/2 miles to work and I could bike or take the bus instead of drive.  I think I will cut the VISA up in little pieces and put the $$$ towards savings once it's paid off.

waltworks

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Re: Case Study - Am I Doing the Right Things?
« Reply #4 on: September 17, 2014, 11:08:30 PM »
What are your financial goals, if any? As of now, you're really not saving anything significant, though you'll be saving a little bit once the CC bill is finished.

I'd look at:
-Ditch a phone.
-Ditch the truck at the very least for a cheaper/more efficient car, or better yet for a bike/walk/no car.
-Stop "blowing" $290 a month and take up a free hobby/sport that you love to do (bike for the double win?)

-W

Exhale

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Re: Case Study - Am I Doing the Right Things?
« Reply #5 on: September 17, 2014, 11:15:49 PM »
Chronic conditions can be so draining to one's pocket and soul. Good job for what you're doing.

You've already received good concrete advice already. My additional comments are:
- Yes to biking (if your chronic condition allows)
- I echo waltworks' question about your goals - financial as well as (I would add) personal. Having a strong vision of where you want to be in 1, 3, 5, 25 years can be a powerful incentive and aid as you go forward.

Good luck!

horsepoor

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Re: Case Study - Am I Doing the Right Things?
« Reply #6 on: September 17, 2014, 11:50:11 PM »
What is the interest rate on the VISA balance?  It might be worth looking into a 0% balance transfer, especially if you can find one with no fees, but it looks like you could kill that balance in 2 months if you give up your "cash to blow" for the short-term.  Internet and phones seems a tad high; you could probably get down to one phone and figure out something cheaper for internet (maybe make your phone a hotspot, or share with a neighbor or find a different provider).  Otherwise, looks like you're doing a great job and have really low expenses!

former player

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Re: Case Study - Am I Doing the Right Things?
« Reply #7 on: September 18, 2014, 01:28:26 AM »
Agree with the comments above on expenses.  Congratulations on the paid-off condo and on getting the credit card debt down - are you aiming to have it paid off by the end of this year?

How much do you know about your 401(k)?  How much do you have in it?  What funds is it invested in?  What are the fees on those funds?  What are their returns?  Are there better options within the 401(k) which have lower fees and higher returns - eg any Vanguard funds?  Your 401(k) is your stash: you need to tend to it with loving care.


Overseas Stache

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Re: Case Study - Am I Doing the Right Things?
« Reply #8 on: September 18, 2014, 03:25:55 AM »
Is $92 on groceries a month really correct, or are you using your money to blow fund to go out to eat all the time? It also makes me wonder were you are driving to all the time? $120/month on gas is really high if you only work 4 miles from work and aren't driving to the grocery store all the time. Also TIL there is such a thing as insulin pump insurance.

little_owl

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Re: Case Study - Am I Doing the Right Things?
« Reply #9 on: September 18, 2014, 03:43:41 AM »
I, too, would like to know more about your goals, which would help me provide more tailored advice.

That said, I am going to assume, at some point, you would like to be more financially secure and eventually financially independent.

First, income: You are doing okay on your current income, but an increase would certainly be helpful.  Are there side hustles you can pick up, a raise you can ask for (because you have earned it or because you take on more responsibility), or other jobs that are also close to your home that you could apply to?  Increasing income even 5k would be hugely helpful.

Expenses:
$290 cash to blow - Nope, not allowed when you have debt and very little savings.  Give yourself $25 in cash and try not to spend any of it unless a legit emergency.  Put first towards cc, you will have it paid off in 2 more months.

$589 towards VISA card - This obviously sucks, but you must cut up the card immediately and remove it from your home so you do not use it any more.  Pay it off and then immediately take $600 and start saving it (then, investing it) monthly to support you financial security.

$50 the phones (punch me now for my 2 phones) - consider yourself punched, this is completely stupid.  Cancel one immediately and sell it on gazelle.com to get a few bucks.  Put extra money towards your emergency fund, and then your investments (401k or start and IRA)
$93 auto insurance and insulin pump insurance - This seems expensive, do yourself a favor by shopping around.  I pay just a little more and have more vehicles.
$92 groceries - this seems low to me, as others have noted.  Is it being subsidized by eating out somehow?
$120 gasoline - this seems insanely high.  Cut down on your driving yesterday.  Let yourself do one fill up each month and no more, this is seriously insane.

There are some categories that I don't see....do you not buy any clothing?  Any gifts?  No entertainment?  Property taxes?  Car registration? If so, good for you, but I find that many people have hidden expenses they don't account for in budgeting and get really surprised when those expenses arise / don't know how much they are spending there.

Get your emergency fund / medical fund up to about $3k and then from there, just keep contributing the $400 monthly for your medical.  Divert other resources into the market.

How much do you have invested in the market already via 401k?  Are you comfortable that you have that invested in the smartest, low fee fund?

Good luck and try not to get discouraged, you are doing what you can control in saving money to address your medical needs.  You should feel good about that.  Please keep us updated!

Astatine

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Re: Case Study - Am I Doing the Right Things?
« Reply #10 on: September 18, 2014, 05:32:38 AM »
Medical expenses are pretty fricken annoying, I hear you on that. Is a replacement pump covered by your health insurance when yours goes out of warranty? cos if not, an emergency fund for a new pump would be prudent, I think. (not sure how much they are in the US but tend to be about $10k here)

Also, and I'm kinda reluctant to raise this cos I'm in a lot of denial about this myself, I presume you've got the same risk of complications as I'm facing (another t1 here). One of my current drivers for FI (and possibly early retirement) is the fear of not knowing how long I've got before my body starts to noticeably fail. (I'm relatively newly diagnosed) I could have a few years, or decades before I get complications. If that's also a concern for your situation, that might be another motivator to get your finances sorted out and get staching.

Good luck!

fireferrets

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Re: Case Study - Am I Doing the Right Things?
« Reply #11 on: September 18, 2014, 06:02:16 AM »
If you've been burning your "cash to blow" on stuff that you no longer want, sell it on Ebay and Craigslist. After taking the leap and making an account, Ebay is really no trouble at all to use and I have already sold $200 worth of crap I was never going to use or look at again. I only invest a few minutes a day in putting up new posts and mailing out sold stuff.

plainjane

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Re: Case Study - Am I Doing the Right Things?
« Reply #12 on: September 18, 2014, 07:09:25 AM »
Income:  37K annually from a 40hr/week Fulltime hourly job.  I get $1,094 every 2 weeks.
TOTAL:  $2,188 (4 weeks pay)

Are any of these items really a monthly cost, and not 4 weeks?  If so, with your upcoming 3 paycheck month (many people are going to hit one of those in October), you should be able to put some extra cash towards that credit card debt.

You really need to track where that $290 is going and start making some choices as to your priorities.

Chranstronaut

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Re: Case Study - Am I Doing the Right Things?
« Reply #13 on: September 18, 2014, 08:38:41 AM »
What is your medical insurance situation?  I understand if you'd rather not post about it, but I'd recommend looking over your options again when you re-enroll this fall.  I know many people here love using insurance with a health savings account (HSA), even people without chronic conditions.  The reason is that this account lets you put in pre-tax money (like a Traditional IRA) to be used on health expenses, which earn interest over time (again, like a Traditional IRA).  If you don't use the money the year you put it in, you don't loose it!  You keep it even when you leave your job and you can withdraw from it like a retirement account after age 65.  You should at least run a comparison of your HSA options vs. what you have now, since you know you have to put quite a lot of money toward health expenses anyway.

Note that HSA and FSA (flex savings account) are NOT the same thing and an FSA does not have the investment benefits of an HSA.

Search around the forum for more info on HSAs and check out this article from the Mad FIentist on using HSAs for retirement.  I also recommend reading the comments, there are some good questions.
http://www.madfientist.com/hsa/


$$$Manager

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Re: Case Study - Am I Doing the Right Things?
« Reply #14 on: September 18, 2014, 11:14:26 PM »
Hi Mustachians.  Thanks for the questions, advice, etc.
 
- About my 401K - I know little about it and will have to see about the interest rates, etc.  because my company just transferred everyone's 401K funds to a different system to save money on fees.  So now I have to reselect how I want to invest the $.

- The second phone is being ended very soon.  I'm going to cancel my landline. 

- I was caught off guard about the questions about my goals, but shouldn't have been.  My goals are to retire early somehow IF it's possible for me.  I need to find out how much $$ I'll need to stay afloat.  I'm not new at being careful with money, but am new at seeing my way to saving larger chunks of money.  And, I'm very new at feeling hopeful about my money situation.  When my mother passes, I will inherit 5 properties and maybe 500K, but you can't count your chickens before they're hatched.  I want to be able to take care of myself as best I can under my current circumstances.

-The credit card is being cut to pieces!

- I will read the items suggested by some of you.

mozar

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Re: Case Study - Am I Doing the Right Things?
« Reply #15 on: September 19, 2014, 09:02:40 PM »
Unless your mother is on her deathbed I wouldn't count on it. People live to be 100+ these days and elderly care is expensive.

I don't know how close you are to your mother, but you may find that you will wish you could give the money back for more time with her.

This is on my mind because my grandmother died recently. We weren't close and my mother inherited 250k which is her only nest egg... but I have never felt this sad...food for thought.

Exflyboy

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Re: Case Study - Am I Doing the Right Things?
« Reply #16 on: September 20, 2014, 09:33:04 AM »
This is a bit of a hair on fire emergency.. although its not too bad.

Basically as others have said your spending too much when you have that CC balance.. Unless its a zero % interest rate that has to be dealt with immediately.

What is the interest your paying on the CC?.. Lets assume 15% for now.

1) Transfer the balance to a zero% opening CC card.
2) Consider getting a Heloc (assuming lower APR than the CC).. only use what you NEED, not what you want..
3) cut down your fun money as far as possible until the CC is paid off and then you have a stable emergency fund (3 to 6 months of all expenses in the bank in cash)

Then figure out what your long term goals are.. Whatever they are, getting out of debt and an emergency fund in place is top priority.

Frank

Mrs. Frugalwoods

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Re: Case Study - Am I Doing the Right Things?
« Reply #17 on: September 20, 2014, 11:24:50 AM »
What is the interest rate on the VISA balance?  It might be worth looking into a 0% balance transfer, especially if you can find one with no fees, but it looks like you could kill that balance in 2 months if you give up your "cash to blow" for the short-term.
+1. The "cash to blow" category strikes me as very high. What's that going towards? On the flip side, your groceries are super low--nicely done!