Author Topic: Case Study--The Mustachian's Guide to being young, broke, and (hopefully) badass  (Read 4560 times)

camarijm

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Hey everyone! Brief background, I'm a 25 yo single lady in the 4th year of my STEM PhD in a city that's very fun for someone my age. I used to read MMM regularly and attempted to focus on financial independence, but fell off the wagon a few years ago. After reviewing all my 2014 spending, I realized something needed to change. Below is my current 2015 budget.

1. Monthly Income- $2450 (gross)

2. Monthly Expenses- $1990 total
Rent- 880 (includes all utilities)
Groceries- 150
Restaurants- 100
Fast food- 50
Alcohol- 80
Coffee- 20
Gas- 40
Auto insurance- 30
Auto registration- 10
Renters insurance- 11
Charity- 30
Entertainment- 50 (includes books, music, races, anything else fun)
Air travel- 40 (exclusively for Christmas flight home)
Vacation- 30 (mostly weekend trips)
Shopping- 70 (I need to track this better since it's mostly Target and Amazon purchases)
Clothing- 40
Gifts- 30 (Christmas and wedding gifts)
Movies- 10 (includes Netflix)
Medical- 30
Hair- 15
Pharmacy- 10
CC Yearly fee- 8
Tuition Fees- 25
Taxes- 216 (required to pay estimated taxes)

3. Savings
Emergency Fund-1000
Roth IRA- 10,300
New retirement fund- 250/month starting this month as I'm no longer eligible for a Roth
Any remaining income will be added to the emergency fun or savings account for my future move when I graduate.

4. Debt- none and credit cards are paid in full monthly

What do you guys think? I know my food budget is probably throwing some of you into fits of rage. My biggest issue is that I go out a decent amount with my friends, so that adds up. I've been trying to cut back on going out to 1-2 nights per week, but even that is hard (I can only sit on my couch, drink wine, and read/watch Netflix alone so much). Any suggestions are welcome and very much appreciated. Seeing all the posts from people younger than me with 100k in savings is making me feel like I've done nothing to secure my future and I'm determined to make that change.

MDM

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...in the 4th year of my STEM PhD...making me feel like I've done nothing to secure my future and I'm determined to make that change.
Ummm, assuming you put that degree to good use in a well compensated job, your future is in very good shape. 

By "no longer eligible for a Roth" do you mean your income is a stipend and not "earned income"?

Always good not to waste money, but at this point I think your focus should be on finishing the PhD.  If you can keep expenses to ~$24K/yr after you graduate then things will be just fine.

Good luck!

College Stash

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Very nice. Assuming you're at Vandy like a lot of my friends.

College Stash

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Oh and you could churn credit cards to pay for your air travel home potentially.

camarijm

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...in the 4th year of my STEM PhD...making me feel like I've done nothing to secure my future and I'm determined to make that change.
Ummm, assuming you put that degree to good use in a well compensated job, your future is in very good shape. 

By "no longer eligible for a Roth" do you mean your income is a stipend and not "earned income"?

Always good not to waste money, but at this point I think your focus should be on finishing the PhD.  If you can keep expenses to ~$24K/yr after you graduate then things will be just fine.

Good luck!

Thanks for the feedback! Yes, I will eventually have a job that I'm well compensated for, but that's still pretty far out.

I'm on a fellowship now that doesn't count as earned income. It sucks.

I agree the key will be to keep my expenses that low going into a postdoc. I'll most likely have to move to a higher cost of living area when I graduate, which could potentially increase some of my monthly expenses.

camarijm

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Very nice. Assuming you're at Vandy like a lot of my friends.

You would be correct.

Oh and you could churn credit cards to pay for your air travel home potentially.

I have an airlines credit card and I use the points mostly to visit friend in near-ish cities. I just don't want to have that many different credit cards even if I don't used them, but thank you very much for the suggestion.

APowers

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I noticed you have a line for CC annual fee. You can get a no-fee credit card and save yourself $70/yr.

mm1970

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Well, you know what I'm going to hit:

Groceries- 150
Restaurants- 100
Fast food- 50
Alcohol- 80
Coffee- 20

Nobody is asking you to be a monk, just to be realistic about your ability to go out.  You go out so much that 1-2 nights a week would be too hard?  Um, that's a lot.

Why is coffee so expensive?  Is this coffee out or coffee at home?  (I guess if you drink a LOT of coffee, this could all be at home).
Alcohol seems a bit high.  If you limit your drinking to "out" only, and limit it to 1-2 drinks per week, you can cut that down.  Or conversely, drink at home and don't drink "out".
Restaurants AND fast food?

Can you implement a supper club instead of going out so much?  That's what one of our friends did in grad school (my husband was in grad school and so was his friend who started it).

Can you go out with your friends and not eat or drink?  Eat first, and then just get a snack?  Find other ways to socialize that doesn't involve eating out?  Sports, etc.

What is your charity for? 

ormaybemidgets

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You're not my new roommate, are you? I just moved in with a Vandy PhD. In other news, THANK YOU for telling me that a fellowship is not earned income. I'm on one too, and now I need to see if I screwed myself over with Roth contributions last year.

skunkfunk

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Echo the other guy here, that is pretty obscene discretionary spending given your income level. You have little going into savings and no buffer for emergencies month to month. You know what to do.

Seņora Savings

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What do you guys think? I know my food budget is probably throwing some of you into fits of rage. My biggest issue is that I go out a decent amount with my friends, so that adds up. I've been trying to cut back on going out to 1-2 nights per week, but even that is hard (I can only sit on my couch, drink wine, and read/watch Netflix alone so much). Any suggestions are welcome and very much appreciated. Seeing all the posts from people younger than me with 100k in savings is making me feel like I've done nothing to secure my future and I'm determined to make that change.

I think you're in a pretty bad shape financially.  Your job is guaranteed to end and your emergency fund will support you for less than one month.  Have you thought about what an emergency looks like?  For you it is like finding out your adviser has been falsifying data for years and you are not going to get your PhD.  Or graduating in a bad hiring year when and not being able to find a post doc.  If you're lucky you can get adjunct work, but if that happens you'll be adding medical insurance to your budget.

I suspect that you haven't met a lot of people in those situations; I'm a secondary teacher, I've met plenty of them.  The two examples I gave you are from people who were each once in their 4th year of a STEM PhD.

There's plenty of fat to cut in your budget, I assume you know what it is.  My advice is to put all of your discretionary spending (I see $495) into one bucket and decide the max you'll willing to let it be, maybe $5 per day.  It might be easier to cut out the fast food if you know that you can go out with friends three times a week because you packed a sandwich.  If you do blow the whole budget, try inviting your friends over for a game night, you might even find that entertainment can be free.

camarijm

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Well, you know what I'm going to hit:

Groceries- 150
Restaurants- 100
Fast food- 50
Alcohol- 80
Coffee- 20

Nobody is asking you to be a monk, just to be realistic about your ability to go out.  You go out so much that 1-2 nights a week would be too hard?  Um, that's a lot.

Why is coffee so expensive?  Is this coffee out or coffee at home?  (I guess if you drink a LOT of coffee, this could all be at home).
Alcohol seems a bit high.  If you limit your drinking to "out" only, and limit it to 1-2 drinks per week, you can cut that down.  Or conversely, drink at home and don't drink "out".
Restaurants AND fast food?

Can you implement a supper club instead of going out so much?  That's what one of our friends did in grad school (my husband was in grad school and so was his friend who started it).

Can you go out with your friends and not eat or drink?  Eat first, and then just get a snack?  Find other ways to socialize that doesn't involve eating out?  Sports, etc.

What is your charity for?
I do go out a lot (when I say go out, I mean any activity when I'm not at home). For example, this past week was: Dec 31- NYE party at bar, Jan 1-happy hour at brewery, Jan 2- make dinner and have game night at friend's place, Jan 3- bar to watch football game with friends, Jan 4- make brunch at home with some friends, Jan 5- girls night in to watch the Bachelor. Granted, I was on vacation most of that time, so I normally don't have plans 100% of the time.

My friends and I have dinner and game night once a month, a book club night in once a month, and I have a least one girls movie night in once a month, so I have activities that allow me to stay in. In addition to that, I go to happy hour with other students or my coworkers twice a month, play trivia at a bar 1-2 times a month, go to a brewery once a month, and go to brunch maybe once a month. I'm going to really try to cut back on the eating out and maybe it would be a good idea to give myself a 2 drink max when out.

I drink a ton of coffee/tea, on average 6 cups a day. Most of it is free at work, but I usually go to Starbucks about twice a week.

Charity for a nonprofit I work with and is a very important cause to me.

What do you guys think? I know my food budget is probably throwing some of you into fits of rage. My biggest issue is that I go out a decent amount with my friends, so that adds up. I've been trying to cut back on going out to 1-2 nights per week, but even that is hard (I can only sit on my couch, drink wine, and read/watch Netflix alone so much). Any suggestions are welcome and very much appreciated. Seeing all the posts from people younger than me with 100k in savings is making me feel like I've done nothing to secure my future and I'm determined to make that change.

I think you're in a pretty bad shape financially.  Your job is guaranteed to end and your emergency fund will support you for less than one month.  Have you thought about what an emergency looks like?  For you it is like finding out your adviser has been falsifying data for years and you are not going to get your PhD.  Or graduating in a bad hiring year when and not being able to find a post doc.  If you're lucky you can get adjunct work, but if that happens you'll be adding medical insurance to your budget.

I suspect that you haven't met a lot of people in those situations; I'm a secondary teacher, I've met plenty of them.  The two examples I gave you are from people who were each once in their 4th year of a STEM PhD.

There's plenty of fat to cut in your budget, I assume you know what it is.  My advice is to put all of your discretionary spending (I see $495) into one bucket and decide the max you'll willing to let it be, maybe $5 per day.  It might be easier to cut out the fast food if you know that you can go out with friends three times a week because you packed a sandwich.  If you do blow the whole budget, try inviting your friends over for a game night, you might even find that entertainment can be free.
I'm guaranteed my job until I finish my PhD due to departmental policies, so even if something horrible happened to my advisor, I would still be fine. By the time I graduate, based on my current budget, I would have ~$4000 in a non-retirement fund that I could utilize for any unforeseen circumstances.

I think it's a good idea to cut out the fast food. Most of that is eating in hospital cafeteria during an unanticipated late night at work. Maybe it would be beneficial to have an extra meal stored in my work fridge for those situations. I need to work on the restaurant spending. I'm going to try to suggest more nights in. We always have a blast when we make dinner and have game nights, so I can push to do it more.

Fuzz

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Consider cheaper versions of alcohol and coffee. What about Rainier beer and store-brand coffee?

If you're in year 4 of a STEM PhD, you're setting yourself up to be in great shape in a few years. I would make sure you invest time in figuring out the career side of things. My guess is that your best resources are people that are 2-3 years out of your program. I'd try to email 7-10 of them and figure out what you can do now to set yourself up for a great job. More likely than not, they'll have better info than the "career" person in your department. Also, I'd make sure you have a fund for your job search. Depending on what field your in and where you want to go, you should be prepared to drop $500 to fly to a city to meet someone for coffee. Where is that in your budget?

To get all Ramit Sethi here for a minute, at this point in your life, one unit of your effort/money put into your job search is a lot more valuable than one unit of effort/money saved put into the stock market. Once you're in the workforce, that may change.

I have a friend who finished a theoretical physics PhD a few years ago. Rather than pursuing fellowships and teach opportunities, he went to private industry. Turns out he loves his job and makes a ton of money. This was a pretty unconventional path for his PhD program, but it's worked out really well for him.