The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Jessica on March 29, 2013, 09:34:20 AM
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Hi folks. I'm brand new to this whole idea of FI and holy cow, it is blowing my mind! I don't want to waste any more time. Here's my situation - your advice is much appreciated.
I'm 33, unmarried, no kids.
Income: $3800 a month (take home) from my day job. I can get moonlighting work easily but right now I'm studying for my professional exam (I'm thiiiiis close to being a fully licensed psychologist) so I'm not doing extra work - but it's on the table for about September.
Debt: 18,000 in car loan (I know, I know... groan! Huge mistake.)
Expenses per month:
Rent: 975
Electricity: 85
Cell phone: 75
Internet: 45
Car insurance: 110
Car loan: 400
Groceries, toiletries, cleaning supplies: 300
Restaurants/fast food: 100
Gas: 300
Clothes/books/general spending: 150
Professional fees (license, insurance, etc): 100
TOTAL MONTHLY SPENDING: 2640.
Assets:
7,000 in chequing account
59,000 in RRSP's (I believe this is the same as the US 401.k type of plan? Tax deferred savings.)
Some additional notes:
I live in the rural north of Canada, so housing is expensive. I'm in not the absolute cheapest place to live in my small town, but nearly. I do have a second bedroom and I've thought about renting it out - we're an oil region so there are lots of guys with money who need accommodation, but I'm pretty nervous about inviting a stranger into my home. Especially as a single woman. I might try going through the hospital where I work to find one of the contract nurses as a roomie - this is the only way I can see of cutting my housing costs.
My car is a huge SUV <shame>. I do need a reliable vehicle - I have to drive for work and I cover a huge territory. For example I have work in a community that's an hour and a half away from my office, and it's all rural roads out here. If you break down when it's -40 and you have to wait several hours for help, you could literally die if you can't stay warm. This isn't too common, of course - most of the year the weather is better than that - but I can't downgrade to a 15 year old clunker suitable only for a few unavoidable trips per month. I am thinking of lobbying my manager to change my job requirements so I can get rid of the need for regular work travel, which would let me walk to work every day (I live a 10 minute walk from my regular office) and get a much humbler car. My car eats a massive amount of my monthly income and I need to do something about this.
My gas bill is insane - this is largely due to dating someone who lives in the city, a 2 hour drive away. I make a few trips out there each month.
I'm Canadian so I don't pay anything for health care costs.
I'd like to buy a house. I'm allowed to borrow up to 25k from my RRSP's for this purpose, and that's sort of what I've had in mind for my cash on hand. I also like to have a cushion of cash around - as a single person there is no back up if I get laid off or what ever. But should I be putting some of that cash onto my loan? I'm not sure where to focus first: get rid of the car loan (or sell the car), build up for a down payment on a house, something else entirely...? I feel like I'm looking at a bloated budget and insufficient savings up there - it's got to change.
Help!
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I might as well be the first of many: that vehicle needs to go. Sell it and buy a used vehicle that gets great mileage. You've posited the issue as either your huge SUV or a "15 year old clunker suitable only for a few unavoidable trips per month." As a psychologist friend of mine says, "most problems can easily be solved if people will just quit thinking they have only two choices...." Find a car in the middle.
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Expenses per month:
Rent: 975
Electricity: 85
Cell phone: 75
Internet: 45
Car insurance: 110
Car loan: 400
Groceries, toiletries, cleaning supplies: 300
Restaurants/fast food: 100
Gas: 300
Clothes/books/general spending: 150
Professional fees (license, insurance, etc): 100
TOTAL MONTHLY SPENDING: 2640.
Rent: get a roommate or a cheaper place., that's a ton to be spending - my boyfriend and I live in downtown Vancouver and pay $732 total including utilities.
This:
lots of guys with money who need accommodation, but I'm pretty nervous about inviting a stranger into my home. Especially as a single woman.
is ridiculous. Stop letting irrational fears get in the way of FI. I wouldn't think twice about renting out a spare bedroom to a guy if I was in your situation.
Cell phone - we pay less than that for both of our phones. Cut it down.
Groceries/toiletries - we spend $230/month for this for two people, and don't eat out at all. You're spending way too much.
Clothes, books, spending - $150 is a lot when you're in debt.
I'm not going to start on the car.
I think the issue here is that you don't consider your debt an emergency - you have $18,000 in debt yet you have a restaurant budget, expensive cell phone, and overall spendy lifestyle. With your income, you could knock that bad boy out in no time if you took it seriously.
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It is a sad state of affairs when someone is willing to spend more on their CAR than the FOOD THEY EAT :)
What's more important? A car loan or food on the table?
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I wouldn't (from a western US perspective) call your housing costs excessive.
On the car, I think you are suffering from misconceptions and/or lack of knowledge. Your new(ish) SUV is NOT inherently more reliable than a 15 year old clunker. In fact, it may be less reliable, as for instance a new Ford/Chevy etc vs a 15 year old Honda or Toyota.
If getting stranded is a real possibility, carry an emergency kit. In your climate it should include a good down jacket, and a good winter-rated down or synthetic sleeping bag. Have those, a bit of food, and a book or two to read (include an LED headlamp) and you'll stay cozy & warm all night.
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I might as well be the first of many: that vehicle needs to go. Sell it and buy a used vehicle that gets great mileage. You've posited the issue as either your huge SUV or a "15 year old clunker suitable only for a few unavoidable trips per month." As a psychologist friend of mine says, "most problems can easily be solved if people will just quit thinking they have only two choices...." Find a car in the middle.
Yes, this!
The best thing you can do is just start to develop an attitude more conducive to savings. Get out of the "yeah, but..." or "I can't change because..." stuff - those phrases will kill you.
Are you really worried about freezing in your car? Can you mitigate that risk by keeping blankets in there? How about a heater for emergencies: http://theparsimoniousprincess.blogspot.com/2011/02/canned-heat-how-to-make-emergency.html Buy a burner phone, charge it, then power it off and keep it in your glove box for 911 emergency calls. The combination of all those will keep you safe and warm until help arrives - for wayyyy less money than a single month of car payment on that pos suv.
And, more to the point, like Dee said, you can get a reliable car with hella better gas mileage for way less than $18k.
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I can't tell if you already have, but if you read all the blog posts and do what they say, you'll get 90% of the way to where you should be.
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I think the issue here is that you don't consider your debt an emergency - you have $18,000 in debt yet you have a restaurant budget, expensive cell phone, and overall spendy lifestyle. With your income, you could knock that bad boy out in no time if you took it seriously.
This sums it up nicely - you need to change the way you think about what you're spending on vs your debt and saving rate. And please, don't be in any hurry to buy a house.... it's a lot more maintenance and $$$ than you think, not to mention the reduced flexibility to move for employment, etc.
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Thanks all. Very well taken points. Current chore list:
1. Ditch the beast car. Sell it and replace with something I can afford right now.
2. Research better cell plans. I'm stuck with my current plan for about 7 months but after that, this expense needs to drop too. I'll hunt around the archives but any advice on good Canadian cell plans would be appreciated.
3. Acquire roommate! I think I can find a midway between fearful and reckless - I'll start looking for a female roomie.
4. Quit eating out - and see where I can drop the grocery bill too.
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First off, congrats on saving 1100 a month. That's a good thing.
Just a thought on the car. Can your employer do anything to supplement this? I know you are in the health care industry and in Canada, both of which are very different from my experience. But it seems if you are required to drive large distances for work (other than standard commuting to the same office every day), you should see if you can negotiate mileage reimbursement (does that exist in Canada?) or if they will supply you with a vehicle. Asking politely and with a good tone will do no harm and the worst that can happen is they say no!
And as a woman living in an O&G area, there is no way I would feel comfortable living with a man I did not know. Most seem to be good guys, but still. Go with your gut here and see if you can find a female roommate. Checking through the hospital is a great idea.
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My employer already does provide a mileage reimbursement - I haven't included that in my expenses. So yes, that gas bill is really my own personal spending. I can definitely cut it down a goodly chunk.
And yeah... probably most men, as with most people, are perfectly safe and mostly only a threat in terms of how complimentary their living style is with my own, but I think I'll stick with women for now. Because we're rural we have a hard time attracting permanent employees (so by the way, if you find it hard to get a job and you have any kind of skill or trade, come up north and there will be employers falling all over themselves to hire you). We get a lot of temporary contract nurses and I think I could capitalize on this to find roommates who won't make me afraid of being assaulted in the night. :)
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Not wanting to derail the conversation, but the male-bashing going on in this thread is quite astounding - automatically treating all men like rapists is not okay. I've known a ton of decent guys who have had so much trouble finding places to live, shared or otherwise, due to this nonsense.
To the people saying this is just fine and dandy - if OP had posted saying she didn't want a black roommate because she was worried about getting robbed, for example, would you respond "it's understandable, I wouldn't want a black roommate either"? Or would you be saying, "Don't be a freaking racist"? What if she said she didn't want a Muslim roommate? Or a gay roommate?
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Jessica - are you claiming your Northern Living and travel allowances on your taxes? It does make a huge difference! You might be able to claim a couple of those trips to see your BF if nothing else. Would be worth it to talk to your HR to see what they can do for you too. I don't know if you are in BC or Alberta - but Northern Health in BC is really good about taking care of their employee's especially if they are concerned about retention.
Zikoris - you are derailing the conversation and being unfair. I personally, don't see any of the comments above as "Male Bashing" the OP simply stated her personal preference, which she is entitled too, as have several others.
She did not make any blanket statements about all males - and in fact knowing nothing of her situation - it isn't fair of us to judge - who knows, working as a psychologist, what she has been exposed to, or what personal experiences might make her feel the way she does. While her feelings might seem silly to you, they are very valid for her and should be respected as such, even if you might not agree.
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Regarding cars, Andrew Hallman ( a fellow Candaian) in his book Millionaire Teacher has a great chapter on how to never pay for a car ever again.
Rob
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No man bashing intended. I'll quote myself from a little higher up: "probably most men, as with most people, are perfectly safe." No offense intended - it is just a preference, living with a woman is what I feel most comfortable with.
Other points: I'm just south of the norther living allowance cutoff zone, so unfortunately I can't claim this. I'm in Alberta. And will definitely look into claiming travel allowance on taxes - thanks for the suggestion.
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Hi Jessica, would you qualify for zone B? you basically get 50%...that's the category we fall into, but many people who have lived here all their lives don't realize they can claim it.