Case Study: Yuppie Denver Living

[OttoVonBisquick]

Life situation:
21 year old kid here, 1 semester from graduating with a degree in Computer Science, living/working in Denver for a summer internship. Own a 2002 Hyundai Accent GL that I use sparingly(ish), which I bought used with entirely my own money from a family member. Take a train to/from work, and have been working hard at slicing down my expenses. Honestly, I've been spending too much on dumb things like food/clothing items considering my financial situation.

What I do:
Generally quite healthy: I work out daily (either weights or running and/or walking if not tennis), and eat quite well and am working on losing weight.
Play tennis, video games, nothing of substance otherwise in my free time. I have become interested in discus and woodworking, but have no place to practice the latter!

NOTE:  All figures are expressed monthly

Gross Salary/Wages:
 ~$4,440 (Only until internship is up, then will be part time for ~$1700)

Other Income:
None. Perhaps I'll take up teaching tennis part-time.

Tax Withholding:
About $896 (20% estimate)

Monthly Take-Home Pay:
$3,584

Current Expenses:
Rent: $674
Groceries:  +/- $240 (Since reading MMM, I've been really cutting down expenses on dumb food items!)
Auto Insurance, rent insurance:  $90 (Denver....), $13
Cell Phone: (will update if I find bill)
Restaurant / Fast Food: +/- $38.00 (it depends on if I'm away from home or not)
Transportation: +/- $40 (gas)
Miscellaneous: +/- $180

Assets:
Checking: $650 (payday is coming soon)
Savings: $650
Temporary personal loan: $2000 (easily recallable, was to a family member in a pinch, money is available)
Wealthfront investment account: $9750

For those not in the know, Wealthfront is essentially an automated asset distributor based on a rather simple-minded risk-tolerance quiz they give you. And then they invest you in a spread of index funds. In my account, I have holdings in VTI, VEA, VWO, VIG, XLO, and MUB. Total market, foreign stock, emerging market, dividend stocks, natural resources, and municipal bonds. I'm hoping to continually contribute to the account once I have a full-time job.

I pay 0 fees (free for the first $10,000 deposited)

Liabilities:
Federal Unsubsidized Student Loan: $8,950 @ ~ 5.1%
Federal Subsidized Student Loan    : $22,634 @ ~ 3.5%
NASA FCU                                       : $70,781 @ 6%
Total: $102,365

Before everyone sounds the alarm bells, I became aware of the rashness of my choice of school in terms of finance well after the fact. I could easily have gone to a close one, but it is what it is. Parents offered to pay down about $70,000 of it post graduation, but I don't feel right taking it for granted, so I have made it a personal note to pay them back for it as soon as I have the means. I will have to begin official loan repayment starting about a year from now.

Specific Questions:
I am looking for general financial (or personal!) life advice here. Should I save up my money for loan payments? Should I put my rather limited funding in 401k matching? IRAs? More into the stock market?

Where can a guy find space to practice woodworking? Anybody know good woodworking shops that rent out space or tools?

That all being said, I am working out the details of spending some time abroad in Germany come January of 2016, so I will likely have to save up for that.

Obviously I know killing high-interest loans is a big priority. I hope that income post-graduation will yield enough income to cover those expenses as well as allow for investments. In addition to cutting costs, I'm hoping to come up with alternate income streams.

[Monkey Uncle]

Biggest question: what are you planning to do for income when your internship is over?  Right now your income greatly exceeds your expenses, but it looks like you will have much less of a buffer when your internship ends.  And that might evaporate once you have to start paying on your student loans.

I don't think we'll be able to help much until you can tell us the interest rate on the 70k loan.  That will be the determining factor in whether you pay that off or just make the regular payments.  Personally, I would work to pay off anything over 5%, but reasonable people can have differing opinions on that subject.

And think long and hard about whether you can afford a trip to Europe when you're 100k in debt and your income is about to drop to 20k per year.

[OttoVonBisquick]

I would assume it will be 5 or 6% from what I remember. I probably should have included this, but I wouldn't consider heading to Germany if my parents couldn't take a large whack out of my loan, probably the entire 70k one (since it is likely the highest interest and biggest).

As for income post-internship? I will continue working for them, part-time for $1770 a month through December, which will probably not be enough to save up enough to cover payments while abroad in Europe (After monthly expenses)... This is why I wouldn't mind figuring out better supplemental incomes and save up.

Additionally, I've applied for the Southwest 50k points card, and never heard a peep or got any mail from them, which lead me to believe that my credit score must be bad enough due to the loans, even though I successfully got a credit card about a year ago (that I only occasionally put big purchases on that I can afford and pay off within the month).

I want to apply for a card that will service international miles to cut the cost of airfare as well, but it's not looking too bright.

[thedayisbrave]

What is your income possibility looking like after December when you graduate?

[little_brown_dog]

Can you collect on that personal loan and use it to hack off 2K of the federal unsubsidized student loan right away? Then maybe funnel some of your excess pay towards paying that one down as fast as possible while you have the extra income (even though the balance is smaller, the interest is higher and it is also accruing interest in your grace period). Paying this one down will also give you a big psychological win and can help keep you motivated. As someone who also had about 100K in student loans (6.8% interest rate) I am more inclined to suggest paying down debt before investing, but that is my personal bias due to my own circumstances.

As for Europe, definitely try to maximize your savings. Either way the trip is going to be expensive, but there is a big difference between expensive and downright ludicrous. When we traveled in Germany, we rode the trains with just our backpacks and bought food at the markets like honey, bread, and cheese that could be easily carried from place to place. It was so much cheaper than buying breakfast or snacks every day...

[OttoVonBisquick]

$70k NASA loan interest rate is exactly 6%, I've updated the main entry.

What is your income possibility looking like after December when you graduate?

Well, assuming I go to Germany (I really, really, really want to, but we all want things), it will be zero since I will likely be in Germany. There's a minute chance I could work remotely to try and maintain my $1770 income for part-time work online, but otherwise nilch.

Can you collect on that personal loan and use it to hack off 2K of the federal unsubsidized student loan right away? Then maybe funnel some of your excess pay towards paying that one down as fast as possible while you have the extra income (even though the balance is smaller, the interest is higher and it is also accruing interest in your grace period). Paying this one down will also give you a big psychological win and can help keep you motivated. As someone who also had about 100K in student loans (6.8% interest rate) I am more inclined to suggest paying down debt before investing, but that is my personal bias due to my own circumstances.

Yeah, I was thinking about collecting on that loan anyways, since I'm dry in the checking account. Since the loan rate is .06 on the bigger loan, I assume you'd recommend paying some of that down with the money I'm earning this summer?

[little_brown_dog]

Typically I'd recommend going for that 6% interest loan first, but given that your parents have already agreed to cover this, you could consider just going full force against the smaller 5.1% unsub loan and eliminating that completely before you head to Germany. Then you could focus on making sure that you have enough to cover the other federal loan while you are abroad (you can take over the larger loan from the parents once that smaller fed is gone as well).

 I'd be interested to see what other posters recommend in this scenario given it balances the typical wisdom (pay highest interest debt down first) with the unique aspect of having other parties willing to cover the debt for the time being.

How long would you be abroad in Germany? One month abroad might be very different for financial planning purposes than 3+ months...

[OttoVonBisquick]

How long would you be abroad in Germany? One month abroad might be very different for financial planning purposes than 3+ months...

Likely at least 5 months (Jan - May) since I'm applying to study at a university there. I'm investigating part-time tennis coaching to subsidize, as well as possibly baking bagels and other goodies at a farmer's market or 3 in the near future. Who knows.

[OttoVonBisquick]

UPDATE:

After taking the car in for what I thought would be somewhat cheap repairs, I decided to pull the trigger on $1200 worth of leaky brake lines and worn drums/pads on my car, plus two torn CV boots on the front.

I'm investing in a new battery, spark plugs, valve cover gasket, and air filter which I will fix using a family member's tools and ramps sometime soon.

Will all that in mind, and the personal loan being recalled, expect my checking account to head to about $1100. Yay, car costs :/

[Bracken_Joy]

How long would you be abroad in Germany? One month abroad might be very different for financial planning purposes than 3+ months...

Likely at least 5 months (Jan - May) since I'm applying to study at a university there. I'm investigating part-time tennis coaching to subsidize, as well as possibly baking bagels and other goodies at a farmer's market or 3 in the near future. Who knows.

So what is the game plan here? Other than a personal experience, what are you gaining from Germany vs not Germany? Does it in any way lead to greater future earnings or otherwise further goals? Study abroad is amazing, certainly, but you are MASSIVELY in student debt. What does your lifetime earning potential look like? You're only telling us a few months out- what about next year, 5 years from now? What are your expected/projected earnings?

[OttoVonBisquick]

So what is the game plan here? Other than a personal experience, what are you gaining from Germany vs not Germany? Does it in any way lead to greater future earnings or otherwise further goals? Study abroad is amazing, certainly, but you are MASSIVELY in student debt. What does your lifetime earning potential look like? You're only telling us a few months out- what about next year, 5 years from now? What are your expected/projected earnings?

Lifetime earning potential looks good from any basic metric. My degree is in Computer Science and, if I accept a full-time job offer from where I'm interning now (which has been extended), I will make ~60k starting the Fall of 2016. I am also looking into learning about the inner workings of 'roboadvising' in finance as well as information security. Whether this leads to much higher-paying offers remains to be seen as determined by my ability to apply what I learn and where I will live.

EDIT: Also minored in Business and am actively looking for places to join startups on the side from my main job, if that helps.

Does that help?

[little_brown_dog]

hmmm i think you are going to get alot of mustachians advising against going to Germany if it isn't clear whether or not the semester will really improve your prospects in your career field. most semesters abroad end up being a great time living in another culture, but i have yet to find a friend who claims that their time spent crawling pubs in London or visiting Italian vineyards really gave them a leg up in their job ;)

a long term trip abroad with massive debt is kind of like buying a pony when you need to make your rent. this isn't to say that you shouldn't go abroad but i think you really need to evaluate whether getting out of debt and becoming financially stable is your current priority, or if experiencing a semester abroad is the number one priority.  Living abroad will be expensive even if you try to be frugal and odds are you won't be able to pay much if anything towards your loans while also living off savings. if you really want both, perhaps you should forgo the full semester and settle for an awesome 3 week long trip before you start your full time job in the fall.

[OttoVonBisquick]

hmmm i think you are going to get alot of mustachians advising against going to Germany if it isn't clear whether or not the semester will really improve your prospects in your career field. most semesters abroad end up being a great time living in another culture, but i have yet to find a friend who claims that their time spent crawling pubs in London or visiting Italian vineyards really gave them a leg up in their job ;)

a long term trip abroad with massive debt is kind of like buying a pony when you need to make your rent. this isn't to say that you shouldn't go abroad but i think you really need to evaluate whether getting out of debt and becoming financially stable is your current priority, or if experiencing a semester abroad is the number one priority.  Living abroad will be expensive even if you try to be frugal and odds are you won't be able to pay much if anything towards your loans while also living off savings. if you really want both, perhaps you should forgo the full semester and settle for an awesome 3 week long trip before you start your full time job in the fall.

You're definitely right, and I'm aware of the financial ridiculousness of my request given my situation. The reason I figured I would go January 2016 was because I'll have graduated in the winter, with ~8 months before I'd start a full-time job, which begins hiring typically in August. The reason for wanting to go is to learn about the culture and language, both of which I'm fascinated by, and immerse myself instead of just "taking a vacation".

Additionally, my school has mentioned that you may do study abroad for 1 semester after graduation. Problem being, they charge an incredible rate for 1 semester of study abroad, not including plane or rent. Even worse, Germany typically is very strict about letting non-study-abroad-program-associated students get student visas, in addition to the fact that I have basic German language understanding, and most require a pretty tough exam for language understanding, limiting my options to essentially Freie Universitat Berlin and Universitat Regensburg.

The place where I work is *very* lax about hours worked, when I'd start full-time, etc. but I don't know how well I could swing "I want to take several months off work to go study in Germany" if I just started within a year ago assuming I were to do this 2017 or later. It just seems like when I'm young and just out of school is the best opportunity, time-wise.

[Monkey Uncle]

Since your mind is made up about the Germany thing, it sounds like your number 1 priority right now is saving for that 5-month adventure.  When you get back, focus on (1) getting a well-paying job, (2) keeping your expenses low (which you mostly are already doing), (3) pay off the two higher-interest student loans (and/or take the parental help, depending on how you feel about that), and (4) invest anything that is left over.

[OttoVonBisquick]

Since your mind is made up about the Germany thing, it sounds like your number 1 priority right now is saving for that 5-month adventure.  When you get back, focus on (1) getting a well-paying job, (2) keeping your expenses low (which you mostly are already doing), (3) pay off the two higher-interest student loans (and/or take the parental help, depending on how you feel about that), and (4) invest anything that is left over.

Yep, I suppose it's just not that complicated, just to save up. I also want to use a credit card (or card churning) to get those airline miles to try and save a little on flight costs, but here's a worry:

I recently applied to a southwest card for the 50k miles (about 1 month ago) and haven't heard a peep since. No mail, no email, nada. I'm worried that a) My credit score is so bad (see 100k student debt) that they laughed at it or b) the mail got lost, in which case, if I were to apply again, they'd see it as a maneuver to desperately get more credit and it would hurt my score. Can anyone else weight in on this?

[Bracken_Joy]

Since your mind is made up about the Germany thing, it sounds like your number 1 priority right now is saving for that 5-month adventure.  When you get back, focus on (1) getting a well-paying job, (2) keeping your expenses low (which you mostly are already doing), (3) pay off the two higher-interest student loans (and/or take the parental help, depending on how you feel about that), and (4) invest anything that is left over.

Yep, I suppose it's just not that complicated, just to save up. I also want to use a credit card (or card churning) to get those airline miles to try and save a little on flight costs, but here's a worry:

I recently applied to a southwest card for the 50k miles (about 1 month ago) and haven't heard a peep since. No mail, no email, nada. I'm worried that a) My credit score is so bad (see 100k student debt) that they laughed at it or b) the mail got lost, in which case, if I were to apply again, they'd see it as a maneuver to desperately get more credit and it would hurt my score. Can anyone else weight in on this?

Call them and ask. =)

ETA: do you check your credit score? You should probably do that.

Loans don't necessarily hurt your credit unless you aren't paying them, or you had a TON of hard inquiries (ie, you took out a bunch of individual private loans instead of a couple big ones). In fact, a lot of young people have their credit score improve with loans because they have a payment history then.

[DecD]

If you're doing a great job at your internship, and wanted to transition to full-time post graduation, and they know you're graduating in December...I'd be very surprised if they wouldn't take you on earlier than next fall.  Hiring doesn't necessarily follow the academic calendar. 

If your university charges boatloads of money for a semester abroad, look around at other options.  I did my junior year abroad (England) and couldn't do it through an official study abroad program (none were applicable to my physics degree), so I applied directly to the uni in England and withdrew from my own university for a year, reapplying when I got back.  It was far more valuable to me since I was able to take courses that applied directly to my degree and still graduated in 4 years.

Then after I finished my masters, I found another masters program through a different US university that has a satellite campus in France- I spent a year in France, fully funded, getting 90% of another masters degree.  I broke even that year- spent everything they paid me, but nothing more.

So- are there other universities you can go to through?  One friend of mine spent a year at a satellite campus in Augsburg- it was back in 1993 and I'm having trouble recalling which school it was- U of Maryland maybe? 

A different friend spent a year in Bremen via a Fulbright scholarship, and one of my employees did 3 years in Munich via a Fulbright and then a masters direct with the university.

In other words- there are other ways to do this that won't add to your enormous debt.  How are your grades?  If you've got a stellar academic record and are interested in doing a masters program, you might be able to find funding to do so.  It would be worth the time to research other options.

[OttoVonBisquick]

Call them and ask. =)

ETA: do you check your credit score? You should probably do that.

Loans don't necessarily hurt your credit unless you aren't paying them, or you had a TON of hard inquiries (ie, you took out a bunch of individual private loans instead of a couple big ones). In fact, a lot of young people have their credit score improve with loans because they have a payment history then.

I have no idea what my CS is. Is there a way to do it other than to use your one "free" check through whatever agency does that?

I only have 3 loans, so that shouldn't be a problem

If you're doing a great job at your internship, and wanted to transition to full-time post graduation, and they know you're graduating in December...I'd be very surprised if they wouldn't take you on earlier than next fall.  Hiring doesn't necessarily follow the academic calendar. 

A different friend spent a year in Bremen via a Fulbright scholarship, and one of my employees did 3 years in Munich via a Fulbright and then a masters direct with the university.

In other words- there are other ways to do this that won't add to your enormous debt.  How are your grades?  If you've got a stellar academic record and are interested in doing a masters program, you might be able to find funding to do so.  It would be worth the time to research other options.

Yeah, I mean, they have extended an offer to work full time "after graduation", so I assume they're figuring to hire me in the spring, I suppose.

My grades have dipped back to just about 3.0, but a Master's in Germany, preferably in a different field than what I am finishing now (so not Computer Science), would certainly be of interest to me. Is there really that much funding out there for international students or were you and your friends kind of the exception (higher GPA, some great application)?

[Bracken_Joy]

Call them and ask. =)

ETA: do you check your credit score? You should probably do that.

Loans don't necessarily hurt your credit unless you aren't paying them, or you had a TON of hard inquiries (ie, you took out a bunch of individual private loans instead of a couple big ones). In fact, a lot of young people have their credit score improve with loans because they have a payment history then.

I have no idea what my CS is. Is there a way to do it other than to use your one "free" check through whatever agency does that?

I only have 3 loans, so that shouldn't be a problem

The "free checks" are offered once per year per major agency- Experian, TransUnion, and Equifax. These aren't your SCORE for free, they are your REPORT for free. Important difference. Your report allows you to check for fraud, for example. If someone has opened a card or a loan in your name, it will appear on these reports. Some people check all 3 at the same time once per year to see if they're consistent. Others (me included) spread them across the year- I check one every 4 months. You can pay to have them pull your actual FICO credit score, but it is not part of the free report. Services like CreditKarma can offer an estimate of your score. These tend to be fairly accurate if you have a 'clean' report, but if you have any complicated history (past defaults, missed payments, closed accounts, etc) then these estimates can be massively off from reality. Some credit cards offer your FICO score (true score) on each statement. Personally, what I did, and what I tentatively recommend, is to check your report(s) and pull one true score to start, and then use an estimating service from there. Up to you though. Hope the info helps.

[mm1970]

My husband enjoys wood working and took classes with our local "Adult Education" continuing education classes (I took quilting and cooking).

The wood working classes were cheap back then ($8  for 10 weeks), they've gone up now, but they gave access to the tools.  The first class you had to make a foot stool, but after that you could make what you wanted. So he did our coffee table and some book shelves and then our kitchen cabinets.

A quick search shows me this:

https://www.freeuregistration.com/ShowSchedule.awp?&Mode=GROUP&Group=HOMDES&Title=Design+and+Decorating&SubGroup=HOM

Colorado Free University in Denver has some classes.

Also, Home Depot has free classes.

Check the local community colleges, high schools, etc.

[DecD]

Yeah, I mean, they have extended an offer to work full time "after graduation", so I assume they're figuring to hire me in the spring, I suppose.

My grades have dipped back to just about 3.0, but a Master's in Germany, preferably in a different field than what I am finishing now (so not Computer Science), would certainly be of interest to me. Is there really that much funding out there for international students or were you and your friends kind of the exception (higher GPA, some great application)?

I don't know much about the Fulbright program- you'd have to research it.  I guess my point isn't "do what my friends did" it's "there are options out there, start looking and researching before taking the expensive route of least resistance."

I'm an engineer- getting funding for an engineering masters is quite common.  I wouldn't do one without funding, personally.  Now I did it in 2001, and perhaps then there were more fellowships available than there are now, I'm not sure.  But you won't know until you look.  Also- I think funding for non-STEM masters is a lot more rare.  But since you're a CS guy, you might be in luck if your "not CS" field is still engineering. 

Here's another question- why don't you want to stick with CS?  If you're thinking of moving away from CS, how does that affect a potential job offer?

What about other options?  What if you get a job with this company for a few years- 2 or 3 maybe- build up your resume, and then look for international job opportunities?  That would really give you the ability to spend some time in a place- and also pay off your loans first, and learn German before you go.  Take classes at your community college, or use a computer-based course, and find some local German speakers through a club or something for practice.  Then get a job in Germany.   Or, go back to get a masters THEN, when you're debt-free and know German, and have a better idea what you might want to spend your time studying.

[OttoVonBisquick]

Here's another question- why don't you want to stick with CS?  If you're thinking of moving away from CS, how does that affect a potential job offer?

In terms of study? Because right now the demand and availability of employment in the massive field of CS (there is no real "CS" field; there are so many entirely different applications that it's a term in relation to the degree name only, not some collective job type) is so much that, according to numerous advisors of mine, I'd be better off finding employment than seeking a masters in terms of learning at a far quicker and more applicable rate. I also do not (at least now) have an intention of going into research in CS, so a Masters as that stepping stone isn't quite my tea.

What about other options?  What if you get a job with this company for a few years- 2 or 3 maybe- build up your resume, and then look for international job opportunities?  That would really give you the ability to spend some time in a place- and also pay off your loans first, and learn German before you go.  Take classes at your community college, or use a computer-based course, and find some local German speakers through a club or something for practice.  Then get a job in Germany.   Or, go back to get a masters THEN, when you're debt-free and know German, and have a better idea what you might want to spend your time studying.

Damn, that does make a lot of sense. I suppose that I have zero real, substantial opposition to waiting other than the job security threat of leaving for a few months if I wanted to just study for a half year, but if I could get a Masters there, it would be in any field at all besides CS, really. I also am getting a Minor in both Business, specifically Finance, and Philosophy. I have a pretty sizeable interest in accounting, corporate finance and personal finance (Duh, I'm on MMM), so there's a chance of that being a path I chose to take.

Also, the chance to learn a lot more fluent German and give myself more financial, personal, and career space certainly appeals. I guess I figured that the social impact that the age difference of going later in life compared to the age of those that study impacted my pressure to go. I'll have to think real hard about this.

[MrsPotts]

I don't know anything, but speaking as a middle aged woman whose spawn is working on her research doctorate in CS, I say go to Germany.  Go now while you are young and unencumbered.   It is much harder to leave a settled life once you are older.  My daughter's friends all received multiple 70k+ offers upon earning their BAs two years ago...you should have no trouble paying those loans off within a year or 2 when you return.   Just don't borrow any more dollars, ever, and your future will be shiny.

[DecD]

I don't know anything, but speaking as a middle aged woman whose spawn is working on her research doctorate in CS, I say go to Germany.  Go now while you are young and unencumbered.   It is much harder to leave a settled life once you are older.  My daughter's friends all received multiple 70k+ offers upon earning their BAs two years ago...you should have no trouble paying those loans off within a year or 2 when you return.   Just don't borrow any more dollars, ever, and your future will be shiny.

I agree with this.  I have zero regrets about delaying my first real job for a year while I studied abroad in France for a very unnecessary but dream-fulfilling, awesome, fantastic, amazing year.  And I agree that it's easier to go earlier, before obligations pile up.  And delaying a dream- it runs the risk of delaying it too long.  However, I maintain that there are other ways to do it than the expensive easy option, and that these possibilities should be explored.  (Also, when I went, I was debt free.  It's a different monster when you're 100K in the hole.)

[DecD]

I wanted to post this earlier but couldn't find the link- I had to dig through my browsing history here at home to find it.  It's relevant:

http://www.thoughtcrime.org/blog/career-advice/

[Bracken_Joy]

I wanted to post this earlier but couldn't find the link- I had to dig through my browsing history here at home to find it.  It's relevant:

http://www.thoughtcrime.org/blog/career-advice/

That was not at all what I was expecting. I feel like few things on the internet you read and feel, "that has changed my perspective on [subject]". But that blog post did.

[OttoVonBisquick]

I wanted to post this earlier but couldn't find the link- I had to dig through my browsing history here at home to find it.  It's relevant:

http://www.thoughtcrime.org/blog/career-advice/

Excellent find. Thanks for the post, I think I've kinda made up my mind to try and get to Germany as soon as is possible.

Have you looked into getting a student visa through a private language school? I spent some time in France and took language lessons at a very affordable private school that specifically tailored their course offerings to meet the minimum requirements for a student visa. They had a lot of "independent study" time that allowed them cut costs but still have their students qualify for a visa.

I took classes that focused on passing the French language exams, ended up doing well, and getting accepted at a French university for a fraction of the cost of studying abroad. It seems that this might be possible in Germany too: http://thebillfold.com/2014/06/i-went-to-germany-to-be-an-au-pair-and-get-a-masters-degree-for-1000-euros/

Great idea, I'm talkign to the German-American consulate and am a little overwhelmed by the quantity of German universities and lack of streamlined information about "How do I get there?", but nothing good ever came super easy, I suppose.