Take-Home Pay: ~US$26,697.544 per year
after taxesFebruary and July: ~US$1,841.27/month*
Other Months: ~US$2,301.59 per month (14500RMB at 6.3RMB/US$)
Take-home pay is earned income after Chinese income tax, US tax exempt under FEIE (Foreign Earned Income Exemption). US Citizen working in China for a Chinese company. Employer provides Chinese health insurance and a housing stipend included here in 'earned income' for ease of calculations.
*Months of February and July are not working months, so I earn partial salary during these month. This February I used this salary (minus fixed expenses of US bills and rent) as my travel budget. These holidays are the only chances I have to travel outside of the city I live in and travel is a huge reason I work where I do and at the job I do. Currently, I'd rather scrimp during the rest of the year and be able to take advantage of this time to travel more than I would be able to at another job or in another location. I plan on doing more or less the same in July, although with hopefully much lower expenses (I will be staying in China/Mongolia, travelling in less touristy areas, and staying in lower-end accomodations).
Total Current Expenses: $1220.77/month ($930.77 after I cancel insurance)
Total US Expenses: $505.77/month ($215.77/month after I cancel insurance)
Health Insurance: $190/monthly (to be cancelled this month)
Life Insurance: $100/monthly (to be cancelled this month)
Student Loan Minimum Payments: $98.77/month
Online Charges: $67/month
VPN: $8/month
Netflix: $8/month
Scribd: $8/month
Audible: $15/month
Kindle Subscriptions: $7/month
Online Chinese Courses: $21/month
Other: ~$50/month (Misc. shopping, gifts, mostly book purchases)* recently this has been much lower, but averaged over the past year I still budget about $50
Credit Card Annual Fee: $75 (only on my oldest card, not cancelling the card due to credit score considerations)
Total China Expenses: ~$715/month (~4500RMB)
Rent: ~$175/month (~1100RMB at 6.3RMB/US$)
Spending: ~$540/month (~3400RMB at 6.3RMB/US$)*
*This includes
all other expenses. I basically give myself a 100rmb/day budget plus 400rmb "wiggle room" for bigger expenses that may come up during the month. This is my maximum spending budget, but I usually spend a bit less. January I spent 2900RMB (~$460)
**Both of these are rounded up a bit. I hold the lease to our apartment and sublet rooms. This covers rent, but I pay utilities, housekeeping, drinking water, and management fees, so this "rent" is variable and a conservatively high estimate.
Assets: $14,622.66
US Checking & Savings: $8,148.53
China Checking Accounts: ~$4,924.13 (31,022RMB at 6.3RMB/US$)
Roth IRA: ~$1,550 since August 2014 ($1,200 lump sum +$50/month automatic contribution)
Liabilities: Student Loans: $8,476.30 Total
- $3,199.68 @ 5.8% (to pay off... this month!?!)
- $4,643.03 @ 4.25%
- $ 633.59 @ 3.15%
Credit Card Balance: $74 (paid in full monthly)
US Credit Score: Approximately 769 (Equifax, Transunion)
Savings:At this point I'm saving about $1080 a month. This should be increasing to $1370 a month once I jump through all the hoops of cancelling insurance policies in the US while residing abroad (thanks to some face punches as a wake up call in a previous post).
Anticipated Annual Savings:
$1,370x 8 = $10,960
$1,080x 2 = $2,160 (January and March before my insurance gets cancelled)
$0 x 2 (February and July - not working, travelling)
Total Anticipated Savings 2015: $13,120
Savings Rate: ~49% (Ok, but could be improved).
Another factor is that I am up for contract renewal, new salary starting in July/August. My manager has already mentioned a 1000rmb/month (~$158.73) raise after tax. If I get my negotiation chops brushed up (erm, I have no spine), I may be able to get higher. I don't plan on increasing my spending so this would just be more 'stache money.
Main Questions:1. Should I pay off the rest of my student loans in one lump or start investing? I have aggressively paid down my loans over the last year and a half, tackling the high interest loans (many were 7.8%!). I was planning on putting any savings leftover after my Roth Contributions towards the loans, but now that I'm not sure I can contribute to a Roth the tax deadlines don't seem as pressing. I still think I will pay off the 5.8% loan this month but I'm unsure if it's wise to drop all of my cash into the other two loans (4.25% and 3.15%), or if I should start investing to 'diversify' a bit. I've already paid off around $20-25K in loans. My main goal is FI rather than RE and I'm only 25, so I have some wiggle room.
It can be a bit difficult for me to transfer money to the US, so I do prefer keep the balance in my US savings account at about 6 months of my US expenses. I just sent some money home with my mom, which is why my US cash holdings are fairly high right now. Once I have all the paperwork done for cancelling my insurance plans, I should be able to decrease the amount I hold in my savings account significantly.
2. I was planning on maxing out my Roth IRA contributions for 2014 this month, but after doing some reading I'm not sure that I'm eligible to contribute to the Roth anymore. Basically I would have to not claim the Foreign Earned Income Exemption, thus disqualifying myself from claiming it for the next five years. I would probably have to pay full income tax again on my income here in China, since none of my employers here have been able to provide me with proof of income tax paid. (See fun tax stuff here:
https://americansabroad.org/issues/taxation/foreign-earned-income-and-roth-ira-contributions-revised/) I haven't run all the numbers but this doesn't really seem worth the tax break on the Roth. I have already contacted both the broker I opened the Roth with and my accountant in the US, but neither have much experience with this. I'm not eligible for a 401K, and as I'm currently not paying any US Income Tax a regular IRA wouldn't be helpful even if I were eligible. Do I have any other options?
3. If a regular taxable investment account is my only option, this is what I'm considering. I don't have a lump sum of $9K to drop, but over the next 3 quarters I should be able to come up with enough to fund the following:
2015 Q2: $3K into VTSMX Total (US) Stock Market Index
2015 Q3: $3K into VGTSX Total International Stock Market Index
2015 Q4: $3K into VBTLX Total Bond Market Index Fund
2016 Q1: $3K into VISVX Small-Cap Value Index Fund (US)
These lump sum deposits would just be to meet the minimum investment requirements and somewhat diversify. By the end of 2015 I would be approximately in 66% Stocks (1/2 US, 1/2 International), 33% Bonds. By Q1 2016 I would be up to 75% Stocks (2/3 US, 1/3 International) and 25% Bonds, which is about the allocation and diversification I'd like to maintain from that point with monthly buys of equal amounts into each.
If I choose to pay off the last of my loans first, I'll just bump these investments back a quarter or two. I'm not too worried about over-investment in stocks for a few months, partially because I'm young enough to recover if I magically lose it all (oh wow, then I'd be... in the same boat as the average 25 year old) and partially because I do have partial ownership of a family trust that owns some high value property in the US. I don't know how much the trust or my share is worth and I don't want to be dependent on it, so I don't count it in most of my calculations. However, it does allow me to take a bit more risk than I might otherwise.
I'm only just getting to the point of being able to research all this investment stuff without my head swimming or my heart racing. I witnessed my dad lose his company and his shirt (and a lot of other peoples' shirts) in his foray into daytrading in the late 90s, and it left me with the conviction that stocks were only for egomaniacs and gambling addicts. Jumping into index funds is a huge step for me, but it seems like the logical next one...
Any advice is welcomed. I'm bracing for the facepunching.
