Hello Mustachians,
Having just finished college, I wanted to find a job in order to get financial independence ASAP to focus on various projects, and recently came across this website while doing my research.
As I'm just starting on a career path quite similar to that of many people here, I'd like your input and advice.
Monthly Income: 3100$
Roughly 60k/year gross. This should be climbing quite fast in the next few years, to get to 100k fairly soon. My net income per month is about 3100$ after putting the maximum contribution in my employer's pension plan.
Current monthly expenses: 2130$
Rent : 900$/month. I don't have a roommate, and, to be honest, it's about the last thing I'd want.
Transportation : 30$/month. I live close enough to work to walk there in under 15 minutes. Sometimes I'll take public transportation to get elsewhere, though.
Food : 1000$ / month. This is a big one. My bosses go to restaurants (About $15-20/meal) every day or so for lunch, so I feel like I kind of have to follow. I basically eat every meal in a restaurant of some sort, getting some takeout on the way home.
Clothes : 100$/month. I recently had to buy quite a bit of clothing due to losing a lot of weight. As my wardrobe is now pretty decent, I expect this to get down to this level.
Going out : 100$/month. I'll usually go to a bar about twice monthly with friends, costing about 50$ each time.
Electricity (Inc. heating). 30$/month.
Insurance (Dental, medication, etc.). Free (through my job).
Assets: Just about nothing.
Liabilities: Nothing.
First off, I think I'm right in assuming that food is my biggest worry right now. I was wondering how anyone had dealt with not following people to lunch. Right now it feels a bit like an investment in my career. Please talk me out of it.
Of course, the evening takeout is profoundly antimustachean. Somehow, after trying to buy groceries and cook a few times, it doesn't seem to cost me significantly less than the 10$ or so takeout would cost me. Is it possible that cheap takeout may be as worthwhile as cooking for someone living alone?
On the investment front, am I correct in assuming that I should build some sort of an emergency fund? I was thinking on getting about a month's worth of living expenses in a savings account. Everything over this emergency fund's threshold will go in an indexed fund.
Thanks a lot!
As a fellow young professional (3 years out of undergrad), I can relate to your issues as I went through my own adjustment period in the first 1-2 years of work.
My issue was that I traveled so much, that I constantly had to readjust to being home each time I got off a project or had a gap in between out of town projects.
Anyway, Housing + Food = 90% of your total monthly expenses,
so any changes you make that don't include one or both of these categories will not work.
After the first few months, start bringing your own lunch, or picking up a sub or something for <$10 twice a week.
Networking is immensely important early in your career, but that doesn't mean you have to go broke doing it. If you really think that eating lunch out with colleagues 4-5x/week is important to advance your career, than cut back on food in other areas (weekends and breakfast/dinner) to help bring down costs.
Rent probably is a good deal, since you live in close walking distance to work, but if at all possible try and find an acceptable roommate once your lease is up (since you seem picky about living with someone, then just be sure you do the "roommate shopping" early so you don't get stuck with someone random from Craigslist).
The remainder of expense items aren't completely unreasonable.
An alternative to cutting back significantly on your expenses immediately is to give yourself a
hard limit on increasing expenses as you get raises; however, this only works if you commit to it, and it's easy to get caught in the trap of lifestyle inflation this way.
Even at your current level of expenses, you are saving ~$900/mo (29% of aftertax income)... which is GREAT! Set a higher target for yourself as your you get raises and you'll do just fine.
Priorities early in career:
1) Save up an emergency fund (3 months expenses) and savings account (planned expenses, i.e. travel, gifts, necessary shopping, etc)
2) Start investing in 401k/Roth/Trad. IRA
3) Once you max out both #1 and #2, then start putting some money into a taxable account
4) There are only 3 rules. In the words of the hip hop community, f*** b******, get money!