Author Topic: Case Study for 30-something lady  (Read 18132 times)

SpendyMcSpend

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Case Study for 30-something lady
« on: July 12, 2014, 03:31:45 PM »
Case Study:
I've posted a few things here before but have a new rent $ among other things. 

Income:  Currently Gross 59,000 should be 65,000 starting September 1st. 
401k contribution:  10%
Taxes:  6ish% state tax,  20-23%ish federal tax
Take home works out to $1435 a paycheck x 26 paychecks at the 59,000 income. 

Student loans:  $23,000ish at 3.5% (variable) $14,000 at 2.75% (fixed) and $13,000 at 6.5% fixed
Credit Card:  $5,000 at 13.5%   $3,000 at 24.99%  $500 at 24.99%

Monthly Expenses:
Rent: $850 (share a 2 bedroom with another person)
CC minimums:  $250
Student Loan Minimums:  $235, $82 and $167 respectively
Electric/Gas: $35
Subway pass:  $120
Other transportation (visiting bf/famly by train/car etc):  $80
Professional fees/exams:  $100 (temporary for 5-6 months)
Drinks/dinner:  $50
Coffee (addict):  $20
Haircuts/lady maintenance:  $75
Food: $200-350 depending on dates/dinners/groceries
Clothes:  $75 (professional clothing and shoes)
Gifts (baby showers, weddings, Christmas etc):  $25
Travel to weddings:  $50
Car insurance/registration/inspection/repairs:  $75

That leaves $231 and it always manages to get eaten up with some other daily or yearly expense that I didn't think about.  I'm working on getting a new job that pays around $80-85k+

I want to retire by 43-45 and do something else fun for money and currently 32 years old.  I do want to get married (that's complicated also) but most guys my age don't seem to want a girlfriend or wife so I need to plan without a husband in mind. 

Current 401k is $101,500
Just started a Roth IRA and plopped $100 into it.

GGNoob

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Re: Case Study for 30-something lady
« Reply #1 on: July 12, 2014, 03:48:54 PM »
The obvious thing here is that the credit cards and the 6.5% student loan should be paid off. Paying those off will save you money on interest and free up $417 a month. That money could then be put into a Traditional IRA because you can use the Roth Conversion Ladder to access the money when you retire early (the 401k could also be rolled into the Traditional IRA when you leave your job).

Edit to add....

Since that $23,000 student loan is variable, it may need to be paid off if the rate goes up too high.
« Last Edit: July 12, 2014, 03:52:15 PM by logant1337 »

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #2 on: July 12, 2014, 03:52:18 PM »
Right now actually I have two 401ks that make up the total amount.  One (approximately $92k) is from a previous employer and is invested with Fidelity.  It's gotten absolutely great returns and it's a good firm so I haven't wanted to roll it over yet.  Is this not the move?

GGNoob

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Re: Case Study for 30-something lady
« Reply #3 on: July 12, 2014, 04:06:35 PM »
Right now actually I have two 401ks that make up the total amount.  One (approximately $92k) is from a previous employer and is invested with Fidelity.  It's gotten absolutely great returns and it's a good firm so I haven't wanted to roll it over yet.  Is this not the move?

You are most likely paying more in fees at Fidelity than you could somewhere else like Vanguard. Usually you want to get your money out of a 401k and get it in an IRA so you control the investments. You want a passive index fund with low fees like Vanguard. Lower fees means you could have hundreds of thousands more dollars in retirement. See my example below...

Lets assume your investment at Fidelity is invested in the Fidelity Freedom 2045 Fund. The expense ratio on that fund is 0.78%. If you had your $92,000 invested for 28 years (until age 60) and averaged 7% returns, here's your results:

Total value lost to fees: $120,432.64
Total account value after fees: $491,260.49

Now lets assume you moved that money to a Traditional IRA at Vanguard and invested in their Target Retirement 2045 Fund. The expense ratio on that fund is 0.18% and lets assume the same $92,000 invested for 28 years with a 7% return:

Total value lost to fees: $30,091.74
Total account value after fees: $581,601.39

Here's the fee calculator I was using: http://www.buyupside.com/calculators/feesdec07.htm

lizzigee

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Re: Case Study for 30-something lady
« Reply #4 on: July 12, 2014, 04:11:52 PM »
What the fuck! You've got two debts at 24.99% interest, you're spending on coffees and dining out and don't appear to have a budget.  Where's the sense of urgency?  Sorry to be harsh, but you seem to be living in a  fluffy alternate reality where your situation will all magically sort itself out.

It's a step in the right direction that you are trying for a better paying job and that you know what your debts are, but you also need to know what your true expenses are, and to cut down on optional extras until you are in a better financial position.

Live on noodles (or at least cook cheap healthy food from scratch), sell unused belongings, stop buying clothing and shoes, throw everything you have at your $500 debt, then the $3000. Track everything you spend for a few months, draw up a proper budget, and above all set goals, with timeframes and steps to get there. Wishful thinking alone will not get you the life you want, but you can definitely do it if you are willing to make changes. Best wishes

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #5 on: July 12, 2014, 04:15:57 PM »
I'm invested in (through Fidelity 401k):

Vanguard Inst Index
Longleaf Small Cap
Tweedy Browne GlbVal
PIM Total Rt Inst
FID Contrafund K

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #6 on: July 12, 2014, 04:19:05 PM »
I can't look shabby at work, I already do

GGNoob

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Re: Case Study for 30-something lady
« Reply #7 on: July 12, 2014, 04:23:27 PM »
I'm invested in (through Fidelity 401k):

Vanguard Inst Index
Longleaf Small Cap
Tweedy Browne GlbVal
PIM Total Rt Inst
FID Contrafund K

The expense ratios on all of those except for the Vanguard are really high. No time to type a longer response, but you could really benefit in the long term by investing in cheaper funds at Fidelity (Vanguard Admiral Shares funds if available) or by rolling it into a Traditional IRA at Vanguard. The usual funds would be Vanguard Total US Stock Market Index Fund Admiral Shares, Vanguard Total International Stock Market Index Fund Admiral Shares and Vanguard Total US Bond Market Index Fund Admiral Shares. Then you'd pick and maintain your own allocation between those 3 (in my HSA, I do 45%, 45%, and 10% respectively).

rpr

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Re: Case Study for 30-something lady
« Reply #8 on: July 12, 2014, 04:24:23 PM »
If the 401k contribution does not come with a match then stop it. Redirect this to debt. At 24.99%, the debt is an emergency. Also, stop the Roth contribution as well. Also, after tax the raise will amount to about $300. Throw that at the debt as well.

Also, agree with everything lizzigee said.

Nudelkopf

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Re: Case Study for 30-something lady
« Reply #9 on: July 12, 2014, 04:32:29 PM »

Student loans:  $23,000ish at 3.5% (variable) $14,000 at 2.75% (fixed) and $13,000 at 6.5% fixed
Credit Card:  $5,000 at 13.5%   $3,000 at 24.99%  $500 at 24.99%

Monthly Expenses:
Rent: $850 (share a 2 bedroom with another person)
Other transportation (visiting bf/famly by train/car etc):  $80
Drinks/dinner:  $50
Coffee (addict):  $20
Haircuts/lady maintenance:  $75
Food: $200-350 depending on dates/dinners/groceries
Clothes:  $75 (professional clothing and shoes)
Gifts (baby showers, weddings, Christmas etc):  $25
Travel to weddings:  $50
Holy fuck.

1. Find a cheaper place to rent, probably one with more than a single housemate.
2. Male your family visit you. You're spending a fuck tonne of money visiting them and thats just by bus and train.
3. Stop going out for absurd dinners, and why the crap are you spending $75/month on "lady maintanence"? The last I checked, men don't have this category, so why should you? AND that doesn't even include clothes!!!!
4. If you're traveling that much to a wedding, then you probs don't need to give a gift.
5. Your grocery spending is high. The lower end of your estimate should be more reasonable.

I can't believe you owe $3500 on credit cards with such a ridiculous interest rate!!
« Last Edit: July 14, 2014, 06:59:45 AM by FrugalToque »

GGNoob

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Re: Case Study for 30-something lady
« Reply #10 on: July 12, 2014, 05:07:45 PM »
Nevermind what I mentioned about contributing to a Traditional IRA. You are near the income limits and may not be able to deduct all of your contributions. But you should still roll over your old 401k into a Traditional IRA to Vanguard so you can save money on fees.

But I agree with everyone else here. No retirement contributions (except to get 401k match) until you get rid of your credit card debt.


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rpr

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Re: Case Study for 30-something lady
« Reply #11 on: July 12, 2014, 05:55:48 PM »
I disagree with the rollover to IRA. Just keep it at Fidelity but put everything into a Vanguard investment. This will allow you to make back door Roth IRA contributions more easily in the future when you are out of high interest debt.

Chrissy

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Re: Case Study for 30-something lady
« Reply #12 on: July 12, 2014, 06:06:49 PM »
Did you leave out some expenses?  Phone?  Internet?  Cable?  Health insurance?  Renter's insurance?  Parking?

I'm in Chicago, so your rent doesn't look that high to me!

Why is your subway pass so high?  My monthly, unlimited subway pass is $100, and I participate in the transit program through work, so I get it pre-tax for an additional $27 savings.  If you're not doing a monthly pass, you should.  Also, see if your company offers a pre-tax plan.

Do you really need the car?  You can always rent one or join a car-share service like Zipcar.

Can you consolidate your student loans at a lower rate?

As many posters have already said, pay off the credit cards before you save for retirement.  Their interest rates are eating the face off whatever return you're getting in the stock market.  In the meantime, call all the cc companies, and see if they will lower the interest rates.

Your plan to get a higher-paying job is excellent.  Pursue it aggressively.

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #13 on: July 12, 2014, 06:29:06 PM »
Rent is lowest of the low.  A sampling if what people I know are paying:  $2300, $1900, $1900, $1600, $1350.  I live in a borough of nyc.  Not trendy.  Not exceptionally safe. 

Same reason for subway pass. 

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #14 on: July 12, 2014, 06:31:23 PM »
Work pays for phone.  Internet included in the electric section

Mrs. Frugalwoods

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Re: Case Study for 30-something lady
« Reply #15 on: July 12, 2014, 06:32:05 PM »
For clothes and lady maintenance, could you reduce your spending? Possibly to zero some months? I do all of my lady maintenance at home for free--manicures, pedicures, eyebrows, haircuts, the works. And for clothes, I recommend thrifting for basic staples and then re-wearing them. I also have a professional job and need to look nice everyday and I've had great luck with thrift stores in wealthy areas--I find high-end stuff and pay an absolute fraction of the cost (I usually cap purchases at $20).

Groceries, dinners out, and coffee seem like other areas where you could cut. I, too, am a great lover of coffee, but I don't buy it out ever--we buy nice beans and grind and brew at home. I take a thermos-o-coffee to work with me. And, tough as it is, I'd recommend eliminating the dinners out--it's just a luxury item that you could be saving instead.

P.S. I feel your pain on rent (and yes, yours is cheap) as I used to live in a borough of NYC that was not trendy or safe (Crown Heights, Brooklyn) :)

Thanks for sharing and best of luck!

hexdexorex

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Re: Case Study for 30-something lady
« Reply #16 on: July 12, 2014, 07:23:21 PM »
Your doing ok based on your Salary. I would say NY is hard to live on with that kinda salary. There are areas to cut but those seem really small. I would def get a new job but keep cost the same and you should be able to pocket alot more cash.

How much do you want when you retire? 12-13 years from now might be out of reach unless something large changes in the next few years ...your income...or your savings (not a ton of wiggle room). I mean it also depends on where you retire....might not need that much if you do it overseas.

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #17 on: July 12, 2014, 07:37:46 PM »
How much do you spend on lady maintenance and coffee per month at home? 

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #18 on: July 12, 2014, 08:24:53 PM »
And clothing ?

GGNoob

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Re: Case Study for 30-something lady
« Reply #19 on: July 13, 2014, 12:51:10 AM »
I disagree with the rollover to IRA. Just keep it at Fidelity but put everything into a Vanguard investment. This will allow you to make back door Roth IRA contributions more easily in the future when you are out of high interest debt.

If the 401k can be invested in cheap Vanguard funds, then yes, leave it there. If not, I would assume rolling it over would be the better option to save on fees.

AssetGrinder

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Re: Case Study for 30-something lady
« Reply #20 on: July 13, 2014, 01:21:17 AM »
In your situation I would not invest a dollar more until you eliminate your debt. You have no emergency fund and you owe close to 60k in non mortgage consumer and student loan debt. I am not gonna harp on you with your spending as its not that bad, yes it could be better.

No point investing while you are paying close to 6% avg in debt. Sure markets have been good last 5 years but what happens when things crash 40% in a year? The 6% avg debt is a guaranteed return if you pay it off so no point in playing the market for volatile return.


ljp555

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Re: Case Study for 30-something lady
« Reply #21 on: July 13, 2014, 03:00:15 AM »
Sure you can rationalize spending on coffee, clothing, lady maintenance, but the reality is that you're borrowing money at 24.99% to get those things.

If you're not ready to give up that spending permanently, you need to at least cut it temporarily until the credit card debt is gone or you will never get ahead. Cut the visiting bf/family, eating out, coffee, clothing. Get the grocery bill to the minimum. Put every penny of the raise towards your debt. If it helps you psychologically, tell yourself that the hard cuts are only temporary! When the credit cards are paid off, you can always go back to spending on those things, but you will have freed up the cash you're now spending on debt payments for savings. Although I think once you've flexed your frugality muscle a little, you won't want to go back :)

ltt

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Re: Case Study for 30-something lady
« Reply #22 on: July 13, 2014, 06:06:42 AM »
I agree with others who mentioned to cut the credit card debt.

As far as the wardrobe, I would start taking a good hard look at the clothes you are purchasing.  it really doesn't take a lot to wear to work if you buy some nice pieces that you can mix and match and accessorize.  Don't buy the latest trends.  And buy on sale.  The best bargain I got in my life in terms of clothing was a black skirt that was lined for $5.  I wore it for years. 

Also, may I ask what you are doing to your hair??  $75 is a lot for hair on a monthly basis.  Are you having it colored? 

I would also skip the travel to weddings--send a card and wish them well.


SDREMNGR

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Re: Case Study for 30-something lady
« Reply #23 on: July 13, 2014, 06:36:21 AM »
Ignore the Vanguard worship here. I wish I'd had stayed at Fidelity. You can find equivalent Fidelity branded funds and etfs that are similar or sometimes cheaper than Vanguard counterpart.  They have the 0.05% fee etfs as well.  Look for them.

You can look nice and still not spend an arm and leg.  Resourcefulness and creativity will get you farther in this endeavor than complaining and thinking it can't be done before even trying.  Before you automatically say used clothes can't look new or nice, look around first at high end consignment shops, craigslist, websites for used clothing.  Many people sell things off after wearing it once or twice.

Spending seems to be a problem.  Credit debt is 1st sign that you don't know how to live within your means.  By definition, you are spending too much, if you are in debt to buy stuff you can't afford. 

Send a nice card and gift and skip the wedding. Let them know you would have loved to be there but could not make it happen due to timing and budget constraints.

Good luck.
« Last Edit: July 13, 2014, 06:40:35 AM by SDREMNGR »

rmendpara

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Re: Case Study for 30-something lady
« Reply #24 on: July 13, 2014, 10:54:21 AM »
Case Study:
I've posted a few things here before but have a new rent $ among other things. 

Income:  Currently Gross 59,000 should be 65,000 starting September 1st. 
401k contribution:  10%
Taxes:  6ish% state tax,  20-23%ish federal tax
Take home works out to $1435 a paycheck x 26 paychecks at the 59,000 income. 

Student loans:  $23,000ish at 3.5% (variable) $14,000 at 2.75% (fixed) and $13,000 at 6.5% fixed
Credit Card:  $5,000 at 13.5%   $3,000 at 24.99%  $500 at 24.99%

Monthly Expenses:
Rent: $850 (share a 2 bedroom with another person)
CC minimums:  $250
Student Loan Minimums:  $235, $82 and $167 respectively
Electric/Gas: $35
Subway pass:  $120
Other transportation (visiting bf/famly by train/car etc):  $80
Professional fees/exams:  $100 (temporary for 5-6 months)
Drinks/dinner:  $50
Coffee (addict):  $20
Haircuts/lady maintenance:  $75
Food: $200-350 depending on dates/dinners/groceries
Clothes:  $75 (professional clothing and shoes)
Gifts (baby showers, weddings, Christmas etc):  $25
Travel to weddings:  $50
Car insurance/registration/inspection/repairs:  $75

That leaves $231 and it always manages to get eaten up with some other daily or yearly expense that I didn't think about.  I'm working on getting a new job that pays around $80-85k+

I want to retire by 43-45 and do something else fun for money and currently 32 years old.  I do want to get married (that's complicated also) but most guys my age don't seem to want a girlfriend or wife so I need to plan without a husband in mind. 

Current 401k is $101,500
Just started a Roth IRA and plopped $100 into it.

Ignore your 401k and Roth investments right now, you have bigger problems. In the long-term, it is unlikely you will pay higher taxes than you do today (espcially since you live in NYC) so a Roth really is even less favorable. I don't imagine you are contributing the max to your 401k? Work toward hitting the $17.5k limit once your consumer debts are gone. Forget about a Roth. You pay close to 30% in taxes now for the privilege of contributing. Why not save 30% in taxes and put money into the 401k once only your student loans remain?

For your current 401k, cut your contribution to the minimum (to get your employer's match). Earning 7% in investments is irrelevant when you're paying 15%+ on some debts.

Your budget could be shaved a little here and there, but it's minimal (maybe $100-200 or a little more if you get extreme). Let's call it $250, that's only $3k/yr, so far less than what you need to get moving.

It's an income problem, plain and simple. NY is a tough place to live, especially if you go there with student loans and no financial safety net. Your basic expenses are high just because the city is expensive.

Looks like your raise should net you ~$350/month after taxes (30% ish), which will help to speed up some repayments.

Seems that you should be able to pay off the $500 cc by October, and then get working on the $3k cc.

Getting a little more frugal will also help, at least for the next year until you can work on getting your cc debt down and gone, but at the end of the day, you need more income in order to really start maximizing your 401k and Roth ($23k total) per year. That should be your 5 year goal, to be debt free (all debts) and then have the money left over to maximize your retirement vehicles.

Good luck! It will be a bit of a challenge, but set your goals and stick to them and you'll thank yourself every day in 10/20/30 years that you sacrificed a little bit and buckled down to get on the right track.

Financial independence is the dream, as then you are able to really live your life and work/play as you please.

Best wishes

wberkgal

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Re: Case Study for 30-something lady
« Reply #25 on: July 13, 2014, 04:13:25 PM »
For this lurker, your CS brought back memories. (I lived in NYC years ago with the same overall issues.) I don't see how you can retire at 45 and live in NYC unless you make quite a bit more money than you do now. But you probably know that, so either you're planning to make significantly more $ or move somewhere less expensive.

In the meantime, you want to get rid of the CC debt. To do that, in my opinion, you want to embrace a more mustachian life. That can be hard to do at your age in a large city, but you'll feel so much better if you can make the change in attitude. In many large cities people feel the need to appear more successful than they really are and your colleagues with the fancy clothes are probably drowning in CC debt. When you are tempted to spend money, ask yourself if you're spending it for yourself or for some other reason.  For example, when you buy expensive clothing for work, you're just paying your employer a kickback. Why would you do that?  When you are spending money on gifts for other people, are you doing this because you genuinely think they need the item or because you feel that it is expected from you? How about donating an hour of your time (or two or 3) working in their name for a charity? Be upfront with your family and friends, let them know you aren't spending money (that you don't really have now!) to travel or whatever. The wiser ones will respect you for your financial savvy.

Take it from someone who learned the hard way. I recently met an old friend and told him that my husband and I were retiring early (at 57 and 60, not early for you mustachians, but until quite recently I liked my job) and he said (he's 62) that was amazing, that no one else he knew could afford to stop working. These people were all the ones I envied, who seemed to have the best clothes and the best jobs and the most fun (going out) and the most "stuff." Turns out they don't like their jobs, but they are still in debt up to their eyeballs.  Thanks to my husband, a native mustachian, (I was almost 40 when we met, so there's still time for you!) we cut our expenses and grew our savings, despite job losses, the financial turmoil and buying a house, in other words, stuff that happens in life. And we had fun doing it. It's much easier doing this with a partner, granted, but eventually you'll find one. In the meantime, keep plugging along.

okashira

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Re: Case Study for 30-something lady
« Reply #26 on: July 13, 2014, 04:18:50 PM »
Wow, some serious facepunches in here. Looks like I am not needed.

mozar

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Re: Case Study for 30-something lady
« Reply #27 on: July 13, 2014, 08:29:21 PM »
I think that you should get that 80k job and start looking to live in a lower COL area.
« Last Edit: May 10, 2018, 11:47:56 AM by mozar »

Fatmouse

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Re: Case Study for 30-something lady
« Reply #28 on: July 13, 2014, 08:58:03 PM »
The lady maintenance and clothing budget do seem high to me.  I work in an office with very professional standards in a big city, and I do get the fact that this is a legitimate expense to a degree, but it can be reduced (and will probably actually simplify your get-ready routine a lot).

Two books helped me.  "Miss Minimalist" has a great chapter on wardrobe.  Tim Gunn's Guide to Quality, Taste and Style also is good, it includes a very specific checklist of what you need in your wardrobe and he advises not to have more.

It is counterintuitive to suggest books on MMM that essentially tell you how to shop.  But these books will also help you maximize what you already have, and help you avoid purchases that do not give you much utility.

You don't need "new" stuff just for the sake of changing things up.  If you believe this, you are just using clothes to boost confidence.  No one notices how often you wear the same thing.

Make-up:  I wear the exact same make up every day.  Replacing as needed works out to less than $5-$10 per month.  I do not keep any other make up around.
Nails: I do not paint them, but groom them carefully at home (easy way to look polished).
Hair:  Avoid coloring if at all possible, it is a money pit.  Longer styles are also cheaper to maintain.  I am not daring enough to cut my own hair, but I do trim bangs, which helps keep look fresh.

Good luck!

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #29 on: July 13, 2014, 09:33:00 PM »
I do laser hair removal (yes this is necessary) and minimal haircuts every eight weeks.  That's what it costs here.  I'm from near here so I'm not moving "back to my hometown". Jobs there pay $30k and houses cost $600k.  I don't think my clothing expense is high.  That's a pair of shoes or dress every two months plus dry cleaning and laundry.  I work fifteen hours a day so scratch meals and hand washing are really not options.  I think my expenses are pretty low.

rpr

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Re: Case Study for 30-something lady
« Reply #30 on: July 13, 2014, 10:07:45 PM »
Meadow,
I agree that your expenses are low. But given your debt situation something has to give. Either increase income or decrease expenses. Your first priority should be to get rid of the credit card debt. That interest rate is hurting you very badly. Slay that demon first. Take it as a challenge. Every tiny bit of payment helps. You can do it.

TJ79

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Re: Case Study for 30-something lady
« Reply #31 on: July 13, 2014, 10:16:37 PM »
whoever you're working for isn't paying you nearly enough to be putting in 15 hour days.

if you're serious about your goals, you need to completely shut down your personal life (weddings, dinners, dates, travel etc) until you have your cc debt under control. 






Fatmouse

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Re: Case Study for 30-something lady
« Reply #32 on: July 14, 2014, 06:42:48 AM »
Hang in there OP, it is not a life sentence!  Obviously some of the spending reductions noted on this thread seem a bit painful to you.  Consider using a tool like "Ready for Zero", and setting a target payoff date for the high interest credit cards.  Maybe that will be 2-3 years.  Whatever it is.  Having a target date makes foregoing certain expenses seem not so bad.

Your salary strikes me as very low for a high cost of living area and the hours you work.  Especially if you are already established in your field (3+ years experience).  Do you love your job?  Do you love where you live?  Someone on the thread mentioned you live in NYC.  Other cities like DC and Chicago might have similar job opportunities but are way more livable, in my experience.  Moving/ changing jobs could truly move the needle on your circumstances and perhaps radically alter the course of your life for the better.

Noodle

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Re: Case Study for 30-something lady
« Reply #33 on: July 14, 2014, 07:26:49 AM »
Although there are minor cuts that could be made here and there, I think the first step is to look at the bigger picture and crunch some numbers. What do you want most?

Right now you say you want to retire in your mid-40s. You also live in a very expensive city on what is a pretty average salary (although it would be worth more elsewhere). If you are serious about early retirement, you may need to think about a different job or field, or a side gig, or relocation, or getting very hardcore about expense reduction. If you are in one of those fields where the best jobs really are NYC, do you love that more than early retirement? There's nothing wrong with staying with work you like and find fulfilling until traditional retirement age, even though it's unusual in this particular forum.

I also notice that you have $100,000 in retirement savings, but also a lot in debt. Are you spending more in interest than you are making in investment returns? Would it be worth it to press pause on the retirement savings at least to pay off the CCs?

Once you have your big picture in mind, some of these smaller cuts can help you get where you're going.

JCfire

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Re: Case Study for 30-something lady
« Reply #34 on: July 14, 2014, 07:48:49 AM »
I can't believe how many replies in this thread have to do with relative paper cuts like investment expenses and coffee.  There are three things that are way more important than everything else put together when it comes to correcting this situation:

(1)  OP has $68,500 in debt, including some at 24.99% credit card rates
(2)  The minimum payments on this debt exceed $700/mo, so they're around 25% of OP's after-tax income.
(3)  There are likely missing expenses in the summary (for example, any phone? cable? garbage or water payment? any medical, dental, or vision expenses ever?  any vacations?  ever spend money on entertainment like going to the movies?  internet?  any dues for gym or other organizations?)

My recommendations are as follows:
(1)  Get a handle on the "misc" expenses that have caused you to accrue over $8000 in credit card debt despite telling us that your budgeted expenses are about $200/mo lower than your monthly income (and even more below your income before those CC minimums existed).  You can't know how big your problem is or the best way to solve it without having a more complete picture of your spending.
(2)  Stop contributing to your retirement accounts.  You can't afford it yet.  You can't afford it until your credit card balance is zero.
(3)  You mentioned a car but not a car loan.  That is great!  Is there any chance you can take out a car loan at a lower interest rate to pay off your high-interest-rate CC debt?  Or, if your car is only a few years old and/or from a fancy brand, maybe "trading down" to a cheaper but still reliable vehicle could help?  I did this myself just a month ago and ended up with a vehicle I actually prefer to my last one and a few thousand dollars in my pocket.  If you can get where you need by train and subway, is it absolutely essential that you own a car?
(4)  With an open mind, consider the other budget cuts suggested elsewhere in this thread, although I'll say you're doing great on rent and utilities for your area, and cutting a modest gift budget to zero is not the path to prosperity.

With that, it's time for a reality check.  Lets imagine that you can trim $300/mo from your budget, there are zero expenses you haven't mentioned, you get the raise you expect to $65,000, and you plow every excess dollar into killing your debt.  Even then, it would take you 4+ years to pay back your debt.  From there, it would be just 9 years until the very back edge of your current retirement goal (age 45).  You'll have something like $140,000 in retirement savings at that point if the market has been good during those years.  With annual expenses of about $40,000, you need $1mm+ in savings to retire.  You would need to increase your net worth by about $100,000 per year to reach your target.

The point is that for your goal to be realistic, there needs to be drastic change.  You'll need to make those budget cuts, and on top of that you'll either need to get that big raise to $80-85k (without a corresponding increase in your spending), or sell your car, or move to a lower cost of living area while at least maintaining income, or something else big.  If you don't want to revise your goal, you need to be honest with yourself about what it will take to get there, and find a way to make it happen even if it seems like a tough sacrifice up front.

Cheddar Stacker

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Re: Case Study for 30-something lady
« Reply #35 on: July 14, 2014, 08:07:04 AM »
Stand up, walk to HR, and ask if you are allowed to take out a 401k loan.

They are not for everyone, but you are here and you know better than 99% of consumers. You still should consider everything said by everyone else above so you don't end up in CC debt again.

Take a 401k loan for $8,500 and wipe out the CC's completely. Pay the loan back over 3 years. Interest rates on these tend to be around 4.25% which puts your monthly payment at $252. Notice this is exactly what you are paying right now? Except this will pay it off in 3 years, not 19 like the credit card statement says.

Leave the SL debt as is. I ran the numbers adding the $13K loan into this and it would double your payment (for that specific loan) and wipe out your monthly excess of $231. Once you are more comfortable get rid of the $13K loan quickly, then the variable. Let the 2.75% fixed drag on for the next 20 years if you want, it's not hurting you.

401k loan Pros:
Interest is around 4-5%, plus maybe $25-50/year fee.
Interest is paid to yourself within the 401k, not paid to a bank.
It acts as a bond in your 401k (fixed interest, guaranteed return on investment).
You don't have to get approval from a bank.

401k loan Cons:
If you get fired/quit you have to either pay it back in full or withdraw the outstanding balance (So don't do this if you really plan to get that other job soon).
You can only take out the lesser of $50k or 50% of your 401k balance.
It takes away from your other 401k investments pool, so there's an opportunity cost since that money isn't invested.
You pay it back with post-tax money ( you do this for all debt, but it feels different here as a paycheck W/H so worth mentioning).
You might not be able to contribute to the 401k while the loan is outstanding (I was able to when I took out a loan for an investment, all plans are different).

gradstudent

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Re: Case Study for 30-something lady
« Reply #36 on: July 14, 2014, 09:56:44 AM »
My wife and I live in Manhattan, have expenses similar to yours (just times 2) for rent and utilities, and are in our mid 30's. Our expenses are a little less, but in the same ballpark.  The main difference is we have no credit card debt or student loans, but we have about $250 a month in health/dental insurance and expenses. Food is similar at about $350 for both of us. I can tell you aren't getting coffee to go as I spend about $20 a month on good coffee that I make at home too-well done and very mustachian.

I have two main suggestions. We don't have a car. Since you live in NY, can you get rid of it? I know people are attached to them (my wife is one of those people), but my back of the envelope math for you would work out to $1800 a year or so from your listed expenses plus gas, tolls, and property taxes. Can you sell the car and put the money toward your debt? As a plus, you no longer have to worry about alternate side parking. If you have to drive it less than once a week, I would say you don't need it. By have to, I mean there is no other conceivable way to get where you want to in the NYC metropolitan area.

We also have almost exactly the same after tax income, but on a gross that is smaller by more than the difference in having two tax deductions. Do you usually get a big income tax refund? If so, I'd suggest adjusting your withholding to use more money to pay off the credit cards each month and if that's not something you are comfortable doing, use the refund to pay off the credit card balances.

Well done on the 401k balance and starting a Roth!

NYC is a great place to live and surprisingly cheap. It's amazing how much more money you have by not having a car (and you don't have to have a bicycle here either with all of the cheap mass transit!).


JCfire

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Re: Case Study for 30-something lady
« Reply #37 on: July 14, 2014, 12:11:39 PM »
Stand up, walk to HR, and ask if you are allowed to take out a 401k loan.

This is excellent advice and I wish I had thought to say it first.  Excellent suggestion.

Cheddar Stacker

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Re: Case Study for 30-something lady
« Reply #38 on: July 14, 2014, 12:37:58 PM »
Stand up, walk to HR, and ask if you are allowed to take out a 401k loan.

This is excellent advice and I wish I had thought to say it first.  Excellent suggestion.

Thanks JCfire. It's not for everyone, but most here should be aware of the power available to them so I like to mention it when others don't. Might not work for OP since she might leave soon, and since some (or most) of her 401K is at the old job, but rolling it into the new 401k (now or after the job switch) can fix that problem.

mozar

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Re: Case Study for 30-something lady
« Reply #39 on: July 14, 2014, 01:32:47 PM »
I hear ya OP, I really do. Where are you from? Ithaca? Stamford? Long Island
« Last Edit: May 10, 2018, 12:01:56 PM by mozar »

JCfire

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Re: Case Study for 30-something lady
« Reply #40 on: July 14, 2014, 01:47:47 PM »
Stand up, walk to HR, and ask if you are allowed to take out a 401k loan.

This is excellent advice and I wish I had thought to say it first.  Excellent suggestion.

Thanks JCfire. It's not for everyone, but most here should be aware of the power available to them so I like to mention it when others don't. Might not work for OP since she might leave soon, and since some (or most) of her 401K is at the old job, but rolling it into the new 401k (now or after the job switch) can fix that problem.

General standard is that 401k loan capacity is the smaller of 50% of the 401k balance or $50k, and she only has $8500 or so of credit card debt, so I don't think there's an obstacle.

The bigger obstacle is that if she takes out the loan now and pays off her credit cards, then she gets her dream job offer tomorrow, if she cannot pay off the 401k loan within 60 days of terminating her employment with the current employer I think the whole amount counts as a distribution, subject to taxes and early withdrawal penalties.  OP should keep that in mind before deciding to go this route, if she's actively searching for a new job.

smalllife

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Re: Case Study for 30-something lady
« Reply #41 on: July 14, 2014, 01:53:24 PM »
I disagree with the rollover to IRA. Just keep it at Fidelity but put everything into a Vanguard investment. This will allow you to make back door Roth IRA contributions more easily in the future when you are out of high interest debt.

If the 401k can be invested in cheap Vanguard funds, then yes, leave it there. If not, I would assume rolling it over would be the better option to save on fees.

Fidelity's Spartan Indexes have pretty good fees.  Not really worth the move to Vanguard, especially since you can put them in the Investor class for 0.02% more than the Vanguard fee without having to switch brokerages.

RetireAbroadAt35

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Re: Case Study for 30-something lady
« Reply #42 on: July 14, 2014, 03:16:47 PM »
Your actions are not in line with your priorities.  You need to make changes if your priority is FI.

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #43 on: July 14, 2014, 04:23:45 PM »
Car is from the 90s.  It's worth like $1000.  I use it to move things if need be or visit my family.  Round trip gas is $25.  Round trip train is $46. 

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #44 on: July 14, 2014, 04:24:59 PM »
No 401k loan until I get a new job.  Leaving by fall.  Can someone post a better realistic budget for me?

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #45 on: July 14, 2014, 04:30:27 PM »
I usually owe on taxes actually

madgeylou

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Re: Case Study for 30-something lady
« Reply #46 on: July 14, 2014, 04:39:35 PM »
No 401k loan until I get a new job.  Leaving by fall.  Can someone post a better realistic budget for me?

Your expenses are not bad for NYC -- I think you have the budget expense part worked out pretty darn well. As everyone has been saying, the problems stem from your high amount of debt and your low (especially for NYC) salary.

Not sure if you are getting the point -- trimming small expenditures is not going to solve your issues. You need to stand back and look at the bigger picture. How can you make more money? How can you get those high interest debts paid off?

It's not going to be possible to get out of this hole by just shuffling expenses around. You've got a different problem.

SpendyMcSpend

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Re: Case Study for 30-something lady
« Reply #47 on: July 14, 2014, 05:03:51 PM »
I have a job interview on Friday should pay 15-20% more minimum

rpr

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Re: Case Study for 30-something lady
« Reply #48 on: July 14, 2014, 05:06:31 PM »

I have a job interview on Friday should pay 15-20% more minimum
Awesome. Wishing you good luck.

Fatmouse

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Re: Case Study for 30-something lady
« Reply #49 on: July 14, 2014, 05:39:54 PM »
I have a job interview on Friday should pay 15-20% more minimum

This is great!  Hope it goes well.  :)