Author Topic: Case Study: Older grad student in FLAMES.  (Read 4656 times)

QuacktasticStache

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Case Study: Older grad student in FLAMES.
« on: March 05, 2014, 06:15:48 PM »
Hi guys,

I'm new to the forums, so please be gentle. I realize that there is A LOT of room for facepunchery here.

I'm a grad student about to graduate in May, but I'm also a 30-year-old with very low retirement savings, despite always taking full advantage of the 401K match when it was offered to me. I feel like I should be contributing more (read: something) to my Roth IRA. But I'm also concerned that when I graduate, income based repayment on my student loans would drag them out 30 YEARS and triple their expense, and that is just unacceptable to me.

Other factors: I will have to move in August, which means saving first, last and security depost and moving expenses of about $3,600 (and that's renting the smallest Uhaul and moving my ever-smaller collection of stuff.) Also, you'll notice a discrepancy between my monthly income and expenses. I've been using some of the student loan for living expenses, though I'll admit that I hadn't been doing that on purpose.

I was nervous about my finances before doing the numbers. And now I see that MY HAIR IS ON FIRE, and I'm about to enter the job market again in a few short months.

Okay, the awful truth (using a monthly average based on the last 90 days):

Net salary (Part time work at institution I attend, includes $1K tuition break not counted here): $690.55
Gift while I'm in grad school: $500/mo
Misc income: $30/mo
Total average monthly income: $1,220.55

Rent: $780 (includes Direct TV and Internet. Can't cancel TV and save $$)
School Loan: $150 (Loan is unsubsidized, all interest will become principle upon graduation.)
Auto repair, gas and tolls: $270
Parking: $50
Insurance: $49
Groceries: $117
Dining out: $220 (**FACEPUNCH FACEPUNCH FACEPUNCH**)
Phone: Was $90/month, but bought Republic Wireless last month. Down to $25
Water & Electric: $78.98
Entertainment: $37 (usually going to the movies once or twice a month - *FACEPUNCH* - go read a book.)

Total monthly expenses: $1,739.11

Assets:
Retirement: $6,524
Savings: $1,662 (not enough for first, last and moving money)
12 year old car: $1,108

Debts:
School loan at 6.8%: $14,103
School loan at 5.41%: $16,701

Total debt: $30,804

Have a credit card, but don't carry a balance and have just put it in the strong box so that I stop swiping it at restaurants.

Between May and August, I'll be able to work more hours, and could possibly double the $690/month to something like $1,200/month. However, I don't know if I'll receive the gift of $500/month, as I will have graduated so in terms of the dollar amount it may be a wash. I will also have more time to freelance, which is feast and famine. Will make at least an additional $600 after graduation, but potential for more.

Besides eliminating dining out and movies, how can I turn this around? Where can I save the money to move in August? Am I absolutely insane to be thinking about my retirement account when everything else is in flames?

Thanks!

homehandymum

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Re: Case Study: Older grad student in FLAMES.
« Reply #1 on: March 05, 2014, 06:31:18 PM »
What are you driving for?  Distance between house and study/jobs?  That's not a facepunchy question - just wanting to know if this is an area you can cut.  If you bike/walk even some of the time it will cut down gas and parking fares.

Also, if you move in August, could your new place be somewhere that means you can ditch the car altogether?  That would free up $1000 from the sale PLUS $270 per month that could go into your debts.


G-dog

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Re: Case Study: Older grad student in FLAMES.
« Reply #2 on: March 05, 2014, 06:40:55 PM »
Post graduation - not sure what your area of study is, but in the sciences faculty can sometimes let you do a short 'post-doc' after graduation, before your new job ( using their grant $).  You are likely working on a thesis now, so I assume no options to pick up any other paying work now.

Otherwise:
Stop eating out ($200/mo X 5 mo = $1000)
Stop / cut back on the movies out ($37/ mo X 5 mo = $185)
Can you get a roommate? ($390/mo X 5 mo = $1950)
Is there any public transportation you can use?
Is there public transportation where you will move to? If 'yes', think about selling car ($1108)
Is there anything else you can sell instead of moving it?

In the big picture, you need these next 5 months to prepare for your move. If that means you don't contribute to retirement in order to avoid debt, then I think that is a good decision.  Start back up as soon as you can.

QuacktasticStache

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Re: Case Study: Older grad student in FLAMES.
« Reply #3 on: March 05, 2014, 06:45:06 PM »
What are you driving for?  Distance between house and study/jobs?  That's not a facepunchy question - just wanting to know if this is an area you can cut.  If you bike/walk even some of the time it will cut down gas and parking fares.

Also, if you move in August, could your new place be somewhere that means you can ditch the car altogether?  That would free up $1000 from the sale PLUS $270 per month that could go into your debts.

I drive b/c I actually moved out of the city proper to save rent money, but it seems to be a wash. (Mass transit + higher rent = driving and lower rent.) The distance is under ten miles, but it's too dangerous to bike (no bike lane on the bridge or highway/scared #$%less to pick up biking again the way my fellow commuters drive). Mass transit from here would be about $160/month, which would be possible come May, having already sunk $300 in the semester parking pass. (Fallacy of sunk costs, I know.)

I would ABSOLUTELY sell the car if I move to another major city in August! Man am I tired of repair bills.

QuacktasticStache

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Re: Case Study: Older grad student in FLAMES.
« Reply #4 on: March 05, 2014, 06:58:59 PM »
Post graduation - not sure what your area of study is, but in the sciences faculty can sometimes let you do a short 'post-doc' after graduation, before your new job ( using their grant $).  You are likely working on a thesis now, so I assume no options to pick up any other paying work now.

Otherwise:
Stop eating out ($200/mo X 5 mo = $1000)
Stop / cut back on the movies out ($37/ mo X 5 mo = $185)
Can you get a roommate? ($390/mo X 5 mo = $1950)
Is there any public transportation you can use?
Is there public transportation where you will move to? If 'yes', think about selling car ($1108)
Is there anything else you can sell instead of moving it?

In the big picture, you need these next 5 months to prepare for your move. If that means you don't contribute to retirement in order to avoid debt, then I think that is a good decision.  Start back up as soon as you can.

Hi G-dog,

Alas, I already have a roommate. Our lease won't let any single person stay for more than two weeks at a time, so we can't even rent out the living room. We're trying to cut down our water and electric bills too, but they seem to be pretty steady.  I'm in the humanities, so there's very few grant opportunities in general and none at my institution beyond letting me extend my current fellowship into the summer.

I have a ton of low value things to sell (books) and a few old electronics (anybody interested in a TI-83 graphing calculator?)

This --- "In the big picture, you need these next 5 months to prepare for your move. If that means you don't contribute to retirement in order to avoid debt, then I think that is a good decision.  Start back up as soon as you can." --- actually made me feel a little relieved! So thank you. I want to do it all (retirement, debt, savings) but maybe right now I just can't.

nereo

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Re: Case Study: Older grad student in FLAMES.
« Reply #5 on: March 05, 2014, 07:18:01 PM »

I'm a grad student about to graduate in May, but I'm also a 30-year-old with very low retirement savings, despite always taking full advantage of the 401K match when it was offered to me. I feel like I should be contributing more (read: something) to my Roth IRA. But I'm also concerned that when I graduate, income based repayment on my student loans would drag them out 30 YEARS and triple their expense, and that is just unacceptable to me.


Hello and welcome!
Your situation is serious, but I wouldn't panic.  It can be overcome.
For starters, you are about to enter the job market, which means (hopefully) that you will start earning considerably more than the $1700/month that you have been spending.  Better yet, if you have been living on $1700/month you won't feel horribly deprived to keep living at (or a bit below) that level while you get your financial house in order.

A few things;  for student loans income-based repayment means you can't be forced to pay back more than a certain percentage of your income (10% in the case of stafford loans).  BUT, you can always pay back more without penalty.  So don't worry if they give you a 30 year repayment schedule; just try to double (or triple) the monthly payments and then you won't still be paying them back in 2043.
$30,800 in loans is considerable, but not insurmountable.  I've met people with $200k in student loans. 

Other than that, cut your "going-out" budget, keep your other expenses low (they don't look too out of place for me) and keep it up

labrat

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Re: Case Study: Older grad student in FLAMES.
« Reply #6 on: March 05, 2014, 07:18:42 PM »
Dude -- really?  $220/month on eating out?!?!  Grad students are usually great a sniffing out extremely cheap or free food :)

And your current rent is with a roommate!?  Any way you can sublet/break the lease?  That amount is insane considering that you have a roomate.

When you move in August, will your rent increase/decrease?  If you haven't decided on a place yet, you need to find cheaper place.  Think studio apt or roommates since you don't have much stuff. If you're lucky like I was, your roomie will find a boy/girlfriend and shack up with them while still paying their rent!

Ditto on what G-dog mentioned.  After you are finished with school, continue to live as cheaply as possible (lookup nomoreharvarddebt for some great additional ideas), and you'll be able to chip away at the student loans.  Only contribute to a 401K if your new job offers a match, otherwise throw everything at the loans since your rates are a bit on the high side.  Once the loans are paid off and you are maxing out your 401K/IRA/HSA contributions, then you can start funding a Roth.   

Prairie Stash

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Re: Case Study: Older grad student in FLAMES.
« Reply #7 on: March 05, 2014, 07:23:08 PM »
If you we're closer I would buy the TI-83. Decent shape, $30 anytime. Sell some books, makes moving easier. If you need them buy older editions at a used bookstore, or borrow from the library. It's not a long term fix, just smart living minimizing the junk.

Guizmo

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Re: Case Study: Older grad student in FLAMES.
« Reply #8 on: March 05, 2014, 09:22:02 PM »
You can find cheaper rent. I rented a room in NYC for $500 a month not too long ago. Yeah, it might not be comfortable, but you don't make enough money to live anywhere else.

Cheddar Stacker

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Re: Case Study: Older grad student in FLAMES.
« Reply #9 on: March 05, 2014, 10:38:08 PM »
Other factors: I will have to move in August, which means saving first, last and security depost and moving expenses of about $3,600 (and that's renting the smallest Uhaul and moving my ever-smaller collection of stuff.)

Welcome to the forums, and while your situation requires some thought and planning, I've seen 10x worse in case studies here so I was expecting much worse when I read the subject line. You can get out of this in 2 years with a half-decent salary.

Are you renting the uhaul for a month? How does it cost $3,600 for moving expenses. Unless this includes the first, last, and security deposit I don't understand why it will cost so much money?

Also, why do you have to move? Is the housing reserved for only students? Are you losing your roommate?

I would re-consider whether any of these costs are really necessary before I decided to stop funding my retirement. Good luck.

dude

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Re: Case Study: Older grad student in FLAMES.
« Reply #10 on: March 06, 2014, 08:34:01 AM »
So, if I have the numbers right, after grad school you are going to earn @ $1800/month, or @ $22,000/year?

If so, I really gotta ask, why would you even bother getting the graduate degree?  What field is it in?  Is this really a good investment in your future? Perhaps it's a field that you love and so the earnings potential doesn't matter to you?

That being said, I would say your age is not a big deal if you play your cards right going forward.  I didn't enter the real working world until I was 32 (6 years military, 4 years college, 3 years law school), and I did so with zero savings, several grand in credit card debt, close to $80,000 in student loans, and no concept of the MMM philosophy.  And yet today I'm far above average in salary, savings and net worth for my age group, with a solid path to FIRE at age 54-55.

You are way ahead of where I was when I graduated in that you're younger, seem to have far less debt, and are clued in to the MMM way at this stage.  You have ample evidence here of people following the MMM path and getting ahead and so are in position to make good choices going forward.  Now it's just up to you to do so!

rubybeth

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Re: Case Study: Older grad student in FLAMES.
« Reply #11 on: March 06, 2014, 08:49:53 AM »
I was also an older grad student with a similar amount of debt upon graduating. It sucked, but that's what the graduate degree cost, and I felt I needed it in order to move up within my field. It ended up working out really well for me, so no facepunches for that.

I am a little confused about your earning potential once you graduate. Can you clarify what your actual starting salary in your field might be? Or a range?

Also, wouldn't you qualify for income-based repayment of your loans? You might consider doing that for a short time to get on your feet, get an emergency fund in place, etc. As you earn more, your payments go up, or you can switch to a payment plan with a shorter timeline. Typically, you have 6 months after you graduate before payments start. This can be a time to save up, maybe putting $1,000 in the IRA.

For now, cut down on the eating out (though some of this will just move to your grocery category) and entertainment and focus on saving what you'll need for moving expenses. $3,600 doesn't sound like an outrageous amount for deposit, first/last month's rent, and U-Haul. My sister moved from Pittsburgh to Minneapolis and it probably cost her more than that, even with my parents helping out with some of it.

Tips for entertainment: get a public library card. They have DVDs, books, books on CD, music, etc. so you can get lots of good entertainment value for free. Or just watch movies on television since it's already included in your rent cost.

Edited to add: also, for income-based repayment, you might consider the type of employment you select. I have no idea what your field is, but if you get full-time employment with a non-profit, school, college, etc., you may qualify for Public Service Loan Forgiveness after 10 years of income-based payments: http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service This might be a better or worse deal depending upon how much you could make in a public sector job, but for me and my industry (public libraries), I considered this as an option. I ended up getting married and making considerably more money in my first out-of-school job, though, so it ended up not being the best option. Instead, we paid off my debt and DH's in about 4 years (about $54,000).
« Last Edit: March 06, 2014, 08:53:42 AM by rubybeth »