Author Topic: Case Study - Mandatory Minimalism  (Read 6800 times)

Selena777

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Case Study - Mandatory Minimalism
« on: April 18, 2013, 11:05:02 AM »
I definitely have an interest in ERE and financial planning, but my problem is that most of these analyses are geared towards married middle income professional homeowners with a lot of disposable income, and while my student loans are professional level, my income and position are menial, and while I split my expenses with my SO, we do not consider our income as joint - financially we're roommates. I believe at my current income position is somewhat intractable (I am marginally employable and hang onto my current position like a buoy in a violent sea because it is one of the best permutations of the job genre with full time hours and health care coverage, both of which are rare), and I figure that I can be cleverer than I am marketable to employers and "hack" my way through adult life by living underneath my modest means. But what would that look like? Because of my SO and admittedly personal preferences, I cannot undergo an unconventional living arrangement for an extended period of time (ex: living in a vehicle).

Breakdown:
Rent 325
Utilities 60
Internet service - 25
Health insurance 100
Auto insurance (*car is owned outright) 75
Gas 200
Phone 85 (it was a gift from my so, so I am hesitant to jettison it. I'm on his family plan. Before the current phone I had a payment of 40.0 and a phone that could only make calls and text)

I have credit card debt incurred from dental expenses and a paid private student loan on a card with an introductory APR of 0% of which totals 3700. Getting rid of this before the rate expires is my foremost concern. I have 20000 of student loans that are on an IBR plan where they took my income from 2012 and gave me back a minimum payment of 0. I understand that this gives me an opportunity to offload the potentially high interest consumer debt more quickly, but I would like a plan to get rid of the loans as well. They are low interest, but as a person prone to extended periods of unemployment, I can't afford to keep them without running the risk of default - my unemployment deferral is already exhausted. I would like to start to contribute to my employers 401k plan a at least the matched level of 10%. I make 23000 annually pretax. So, what do I do? The world of work is not kind to me, and I would like to retire early most of all.

* I have to keep the car. My commute is 45 minutes with it and it would take an hour and a half, three buses followed by 30 minutes of walking on public transit. Punctuality is paramount in my current position, and I have experienced having to sneak into work late at a previous job because a bus or train arrived late or not at all. I cannot do that in my current position - the penalties for doing so would be severe.

dizzean

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Re: Case Study - Mandatory Minimalism
« Reply #1 on: April 18, 2013, 11:29:46 AM »

* I have to keep the car. My commute is 45 minutes with it and it would take an hour and a half, three buses followed by 30 minutes of walking on public transit. Punctuality is paramount in my current position, and I have experienced having to sneak into work late at a previous job because a bus or train arrived late or not at all. I cannot do that in my current position - the penalties for doing so would be severe.

This is your highest expense right here and will be the biggest hindrance to you getting to ERE.

I don't know where you live so the logistics may truly not work out BUT if you can go car-less and ride your bike to work/shopping you will save nearly $300 a month.

innkeeper77

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Re: Case Study - Mandatory Minimalism
« Reply #2 on: April 18, 2013, 11:49:55 AM »
The car is indeed a large expense, is there any way you can reduce the cost? You can look into hypermiling, driving to errands less, and possibly even switching to a more fuel efficient vehicle.

the fixer

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Re: Case Study - Mandatory Minimalism
« Reply #3 on: April 18, 2013, 12:10:05 PM »
You might want to look into Your Money or Your Life (YMOYL). In that book they show how to compute your actual, after-costs hourly wage. If you're making $23k/year with that long/expensive of a commute, your effective hourly wage is far lower than you think. I'm not being prescriptive here, because it's your life, but running the numbers on whether or not your job is a good deal right now may help you think more broadly about what your options are.

Using what info you've provided, here's what I calculate:
Your advertised hourly wage is $23k/40/50 = $11.50 (I assume you get two weeks' paid vacation/sick leave, and I'm ignoring holidays)
A more accurate estimate takes out your overhead expenses of commuting, and adds your commute time as time lost due to the job:
($23k - 200 * 2.5 * 12) / (40 + .75 * 10) / 50 = $7.15
[by the way I assume you meant your commute was 45 minutes each way; if that's for both ways you have no excuse not to bike it! I also assumed your total cost of driving is 2.5 times your gas cost, which is a ballpark estimate that sounds right to me]

If you also account for lunch hours, any unpaid overtime, incidental expenses like work clothes, and any food you buy while at work (eating out for lunch, vending machine, etc.) it will go down further. This is still pre-tax, your effective after-tax income is even lower. Offsetting all that partially is that they're paying a portion of your health insurance, I don't know what their subsidy is or how much it would cost you to get private insurance, so I omitted that.

As a comparison, the federal minimum wage is $7.25/hour. So if you could find a minimum wage job located across the street from where you live (no commute time or expenses), you'd be taking home more money than you are now.

pop pop!

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Re: Case Study - Mandatory Minimalism
« Reply #4 on: April 18, 2013, 12:13:53 PM »
You could also look into whether the phone could be used on a less expensive carrier.  Like moving from Sprint to Virgin Mobile, something like that. 

It doesn't sound like a bike commute will work for you in your current situation.  I base this on a 45 minute drive time. If, however, this is actually 15 miles sitting in traffic, then maybe you could bike it.  Other options include car or van pooling if available.  Sounds like you're pretty tied to your job, but it wouldn't hurt to be continually on the lookout for something closer that meets your needs.  I'm also guessing that your SO doesn't work near your place of work.  But if so, you both might move closer to work.

the fixer

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Re: Case Study - Mandatory Minimalism
« Reply #5 on: April 18, 2013, 12:24:27 PM »

matt_g

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Re: Case Study - Mandatory Minimalism
« Reply #6 on: April 18, 2013, 01:05:14 PM »
Congratulations  on your insanely low spending.

1. I agree with the fixer, read the book "Your Money or Your Life (YMOYL)"
2. Forget the 401k, you have a debt emergency.  Pay off your debts first, then contribute.
3. Figure out what your income is after tax.
4. Figure out what all your expenses are, including food, etc...
5. Keep your cellphone, but change your plan to a pre-paid one.  something like airvoice for $10/month.   Did someone give you a gift of a cellphone with a 2 year contract?  The gift of slavery?  Pay the $200 cancellation fee or whatever, you'll have that back in no-time.
6.  Move closer to your job, or get a job closer to your house.   That car is costing more than your think..  45 mins... how many miles is that a day?  60...80?  That's basically costing you $20-$40 / day to drive your car back and forth to work.  Plus your time.
7.  Find a job that pays more money, or get a side gig.

Selena777

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Re: Case Study - Mandatory Minimalism
« Reply #7 on: April 18, 2013, 02:18:52 PM »
Matt_g, do I pay off my student loans and the card first, or just the card before funding the 401k? I'm 27, this is my first real job and I feel that I have to make up for lost time in regards to saving for retirement. i have calculated post tax income and have about 6 months worth of transactions in a ledger to accurately source my current spending figures. I am not good at getting jobs at all. It took me three years to get this one, so I'm wary about leaving it. Minimum wage employment introduces the prospect of having to pay out of pocket for all medical care/procure expensive individual coverage and facing not only lower pay, but fewer, more inconsistent hours and a higher likelihood of termination. Also I've tried and repeatedly failed to acquire those jobs in the past. I definitely take the commute into account when determining how much it's worth, but I also know that I am overcompensated for the position that I currently hold.
« Last Edit: April 18, 2013, 03:50:45 PM by Selena777 »

the fixer

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Re: Case Study - Mandatory Minimalism
« Reply #8 on: April 18, 2013, 02:54:44 PM »
My comparison to minimum wage was only meant to be illustrative. It seems like what you need is to learn how to increase your income if you've had so much trouble with finding jobs. That's not something I'm very good at advising with, and it could be due to lots of things: mismatched skills, applying for the wrong jobs, not knowing how to sell yourself to an employer, etc.

matt_g

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Re: Case Study - Mandatory Minimalism
« Reply #9 on: April 18, 2013, 04:54:39 PM »
selena,

1. What is your after tax income & expenses?
2. How many miles is your commute?
3.  Is it possible to move closer to your job?
4. What type of work do you do?
5. What is your degree in?


Selena777

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Re: Case Study - Mandatory Minimalism
« Reply #10 on: April 18, 2013, 10:49:26 PM »
1. My post tax income is 1634.77 per month. Taxes don't really have a significant impact on expenses for me.
2. It's about 30 miles away.
3. My S.O. lives close to his job now, and mine is a town away in a town that we have no intention of moving to.
4. I'm a phone drone.
5. My degree is in psychology and anthropology.

Spork

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Re: Case Study - Mandatory Minimalism
« Reply #11 on: April 19, 2013, 09:26:12 AM »
I definitely have an interest in ERE and financial planning, but my problem is that most of these analyses are geared towards married middle income professional homeowners with a lot of disposable income, and while my student loans are professional level, my income and position are menial, and while I split my expenses with my SO, we do not consider our income as joint - financially we're roommates.

I don't mean to threadjack.... and I don't mean to ask personal stuff... but... is this something that can be fixed?  IMO [which could be vastly different than yours or someone else's] if you're significant enough to call each other significant and you live together, there needs to be some amount of joint finances.  Otherwise, if there is income disparity you end up with a 'have' and a 'have not' that are supposedly a team working together.  This is bad.  Been there, and realized my mistakes (as the 'have' of the pair) well after they were irreparable.

It doesn't even have to be a 'what's yours is mine and what's mine is yours' joint finance.... it can be "I make 20% of the income so I pay 20% of the bills, but we at least agree on what we spend it on and work on it together."

twinge

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Re: Case Study - Mandatory Minimalism
« Reply #12 on: April 19, 2013, 12:14:30 PM »
Quote
2. It's about 30 miles away.
3. My S.O. lives close to his job now, and mine is a town away in a town that we have no intention of moving to.

Essentially if you're paying half of the housing costs you're subsidizing your S.O. by paying out for the long commute while he/she has little costs in this realm.  I agree with Spork that you might want a conversation about thinking about finances more broadly, but you might start that with a conversation about how much the commute is costing you.  If these conversations seem hard to broach than that may be a signal to you about the prospects of the relationship...

matt_g

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Re: Case Study - Mandatory Minimalism
« Reply #13 on: April 19, 2013, 02:35:14 PM »
According to my calculations your expenses are $10,440 per year, lets assume you don't eat for free, so that another $200/mo or $2,400.    You make $19,608 per year, after expenses you have $6,768.  You still haven't taken any money out for cars, clothes, entertainment, saving up for a house, or the 401k.  assuming you save every penny of that money, you could retire in 25 years.  But you have $23,700 in debt, so you can just add 4 years to that or 29 years.  If you want to play the game of numbers & leverage, you could hold onto some 0% loans and put money in your 401k but in my mind you are just creating a cash flow issue.

If you want to retire sometime in the next 15 years, something has to change.

This is what I would do:
1. Read the book "Your Money or Your Life (YMOYL)"
2. Right now, your cellphone is costing 5% of your income! You can keep it, but change your plan to a pre-paid one.  something like airvoice for $10/month.  (savings, $900/yr)
3. Make some money on the side replacing cracked cellphone screens, or fixing phones for people assuming you can find 2 phones a week to fix at $50 profit each, thats another $5k/year.  Or another job or another side gig, that's really your only way out of this.  Think... craigslist..
4.  Think about other ways to increase your income.  Find a job making $50k in your field and these problems all go away, that's where I'd focus the most energy.

Making those changes could get you down to 18 years... or less if you wanted to keep doing your side gig in retirement.  But I think you have more expenses not listed here, clothes is a starter.  Start with step 1, when you've finished that books, things will be clearer.

P.S. You are putting 15,600 miles on your car per year just to go back and forth to work!
« Last Edit: April 19, 2013, 02:40:20 PM by matt_g »

AJ

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Re: Case Study - Mandatory Minimalism
« Reply #14 on: April 19, 2013, 04:03:23 PM »
I believe at my current income position is somewhat intractable (I am marginally employable and hang onto my current position like a buoy in a violent sea because it is one of the best permutations of the job genre with full time hours and health care coverage, both of which are rare)

...but as a person prone to extended periods of unemployment...

The world of work is not kind to me...

I cannot do that in my current position - the penalties for doing so would be severe

Sounds to me like you need a new job. Or even better, self-employment. If you're smart enough to get degrees in psychology and anthropology you're smart enough to figure out a way to increase your income. The best way for you to leverage your time and energy right now is figuring out a way to either get a better paying job, or figuring out a side business you can do on your own. Do you have the skill to start making $50k tomorrow? Probably not, but you obviously have the skills needed to formulate a plan to gain marketable skills.

I know you're just grateful to have a job right now, but $11 an hour and a 45 minute commute to a job you don't even seem to like is not a good long term plan.

Sunflower

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Re: Case Study - Mandatory Minimalism
« Reply #15 on: April 19, 2013, 04:37:55 PM »
Hey Selena,

As someone who is around the same age and is also job searching at the moment, I know how much having a 'real' job means and I wouldn't walk in and quit tomorrow to get something in retail (which as you already mentioned isn't a guarantee either).

I've really enjoyed reading another blog called 'askamanager.org' and you might find it interesting it as well. She frequently says that getting a job is significantly easier if 1. you already have a job and 2. you've been in that job for at least a year. So while your long term goal might be to increase your pay, I think it's fine to be thinking about the best way to live with your current situation and try to increase your skills on the side so that you can start applying to new, better jobs in the future.

I'm also looking at a potentially long commute between my place of work and my SO but nothing is forever and making the best career choices for myself today is going to open up more opportunities later than looking only in the 5 mile radius around his place of employment.

ETA: Is there anyone that you could carpool with from where you live now to your work? If you work similar shifts maybe you could offer rides to offset gas.
« Last Edit: April 19, 2013, 04:41:36 PM by Chemistay »

Selena777

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Re: Case Study - Mandatory Minimalism
« Reply #16 on: April 19, 2013, 06:53:05 PM »
Okay, I averaged out some expenses.
Clothes: 16.80
Food: 239.39 - I already make virtually all the meals that are on my dime at home. I bring lunch to work, I have a giant feed bag of beans that I purchased and dragged up to my apartment. That being said, it's my biggest temptation to spend. I dream of having enough money to purchase premade deli items.
Entertainment: 8.56 The S.O. handles that primarily, and I get 60% of my entertainment through the internet.

Also, my vehicle is a clunker (200,000+ miles) and routinely needs to go to the shop for something or other. Costs are subsidized/reduced by S.O., but it often costs around 250.00.

Spork - I believe it would do more harm than good. He does not believe in austerity. Also, I think joining finances is a bit much for a girlfriend/boyfriend relationship.

I don't actually fix phones, I just answer them.

cats

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Re: Case Study - Mandatory Minimalism
« Reply #17 on: April 19, 2013, 09:56:13 PM »
Quote
2. It's about 30 miles away.
3. My S.O. lives close to his job now, and mine is a town away in a town that we have no intention of moving to.

Essentially if you're paying half of the housing costs you're subsidizing your S.O. by paying out for the long commute while he/she has little costs in this realm.  I agree with Spork that you might want a conversation about thinking about finances more broadly, but you might start that with a conversation about how much the commute is costing you.  If these conversations seem hard to broach than that may be a signal to you about the prospects of the relationship...

Yes.  You don't have to "merge" finances, but you should sit down and talk about whether or not your current arrangement is equitable.  Are you living where you are now *because* it is close to his job?  If that's the case, yes, it is (I think) fair to propose that he chip in to cover some of your commute costs.  If, on the other hand, you are living there because you both would hate living in the town where your job is, maybe it's not so fair.  Basically, would you have this commute if you were living on your own?

In general though, it really sounds like you need to earn more $$.  You might be able to trim a couple hundred dollars from your monthly budget, but you'll get that same effect from just a $5k/yr increase in salary.  If you can get yourself up to earning in the mid-30s, you'll be practically swimming in money!  I would suggest thinking about what skills you can easily/cheaply add to your skillset that will have the most impact on your job options.  i.e., do you see a lot of job openings where you are *almost* qualified but lacking 1 or 2 skills?  Can you pick those up somehow?  Or maybe you have some rudimentary skills in something that could be turned into a profitable side hustle, and you can figure out how to polish those up quickly.  Even something as menial as picking up a few regular babysitting gigs on the weekends could make a big difference in your situation.