Author Topic: Middle of the Road Income - Is it Enough?  (Read 7223 times)

blackwire

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Middle of the Road Income - Is it Enough?
« on: January 06, 2015, 09:12:50 PM »
I'm new to the forum, but not really new to the lifestyle though I must admit I was honestly slipping a bit since buying a new house. Nesting and all that makes it tough to save. Remodeling and furnishing your first home is a money pit, luckily the more expensive parts are done and the only thing left are furnishings. I didn't go into debt over it, but sometimes I wonder if the money would have been better spent in an investment account.

So, I'm in a 53K a year position at the age of 26 coming up on 27. I'm single and own a house that I currently have about 99K left on the mortgage. I have a new laptop that I'm making interest free payments on until paid off at around 300/month (one of the luxuries I treated myself with because I was tired of crappy laptops and I needed something nice to work on when I did development work -software as well as photography-). My car is leased, the payment of which was paid for in full up front, and I have about 8 months left before I have to return it or buy it. Other than these things I have no debt / worries financially. I started young with a credit card to start building credit which has gotten me a fairly decent credit score.

I've got 11K in investments and 10K in the bank (5K of which is an emergency fund because despite what Mr. Money says I'm inclined to be prepared for the worst). I'm trying to sell my photography to make some side money, but that's off to a slow start (as with everything that's worth while in this world - it takes time).

Here's the trouble. At 53K a year I have around 35K net after taxes, 401k, and medical. I'm attempting to pay down my house note faster so I'm making 1000$ monthly payments. After utilities and spending the absolute minimum per month on the necessities I can manage to scrounge up around 1200$ - 1300$ a month to put into investments (on a good month when I'm not buying furniture to put in my house and other household necessities - unless you don't mind living in an empty/vacant house). At that rate in 10 or even 15 years I'm afraid I won't have the money to get by even with my house paid off. I'm trying to get on the right path, but I'm in need of a little guidance. Can anyone give suggestions?

Thanks in advance! Looking forward to being a part of the community and getting things on track!

MikeBear

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Re: Middle of the Road Income - Is it Enough?
« Reply #1 on: January 06, 2015, 09:23:27 PM »
First thought: Get some housemates to pay you rent for extra cash.

steveo

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Re: Middle of the Road Income - Is it Enough?
« Reply #2 on: January 06, 2015, 10:02:21 PM »
Its going to be tougher on that income and with your spending habits - i.e. car lease and laptop on credit.

In stating that I think you are on a good income for your age and I would just keep saving and minimizing spending where it makes sense.

blackwire

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Re: Middle of the Road Income - Is it Enough?
« Reply #3 on: January 06, 2015, 10:06:00 PM »
First thought: Get some housemates to pay you rent for extra cash.

I thought about this at one point though my friends are married or have good living situations as it stands today. Any suggestions on where to find a reliable housemates that will respect the place and not steal everything I own? Really appreciate the suggestion; let's keep going with this. I'd like to pursue this, but need to know how (where to look). Thanks!

blackwire

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Re: Middle of the Road Income - Is it Enough?
« Reply #4 on: January 06, 2015, 10:08:35 PM »
Its going to be tougher on that income and with your spending habits - i.e. car lease and laptop on credit.

In stating that I think you are on a good income for your age and I would just keep saving and minimizing spending where it makes sense.

I'm getting away from the car lease and going to buy a reasonable car at the end of my lease (6-8k) and once the laptop is paid off I don't expect anymore large purchases for a while. Good thoughts, appreciate the feedback. :)

MikeBear

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Re: Middle of the Road Income - Is it Enough?
« Reply #5 on: January 06, 2015, 11:01:27 PM »
First thought: Get some housemates to pay you rent for extra cash.

I thought about this at one point though my friends are married or have good living situations as it stands today. Any suggestions on where to find a reliable housemates that will respect the place and not steal everything I own? Really appreciate the suggestion; let's keep going with this. I'd like to pursue this, but need to know how (where to look). Thanks!

If there's a college in your town, you could post a notice there for housemates. They pay high dollar for housing, but you'd have to interview them for compatibility and such. Just start brainstorming about it. Once you become aware of something, it's easier to figure out a strategy from there. Research your local Craigslist ads for others that are renting, etc.

Doubleh

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Re: Middle of the Road Income - Is it Enough?
« Reply #6 on: January 07, 2015, 03:16:26 AM »
Don'tbe dispirited. As previously said you're earning pretty good for your age, but also bear in mind that unless you are on a career path that tops out where you are now, you're likely to see decent wage growth as you develop your career over the next 10 years.

When you're young and building a career the real trick is in keeping those living expenses in check and avoiding lifestyle inflation. If you can manage to bank your pay rises over the next decade you should be in good shape.

I'd definitely second the suggestion of finding roommates, you could also try craigslist or asking around your extended network of friends. Pay a lot of attention to compatibility, bad room mates can be a real pain in the rear but good room mates can be a huge boon - more fun times, conversation at home and split the cooking, all the while paying your mortgage for you!

kpd905

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Re: Middle of the Road Income - Is it Enough?
« Reply #7 on: January 07, 2015, 05:41:35 AM »
I'll second the idea to find a roommate for a while.  How many extra bedrooms do you have in the house?

And what is the rate on the mortgage?  If it is really low, you may want to max out your 401k/IRA before using all your extra money for mortgage payments.

If you put $5250 in your 401k, it should get you out of the 25% bracket.  I would do at least that much, and then maybe start throwing money at the mortgage.  You get to invest $1000 for only a $750 change in your take home pay (less if you have state income tax).
« Last Edit: January 07, 2015, 05:45:00 AM by kpd905 »

ShoulderThingThatGoesUp

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Re: Middle of the Road Income - Is it Enough?
« Reply #8 on: January 07, 2015, 05:49:12 AM »
You're one person, you don't need furniture in every room yet.

boarder42

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Re: Middle of the Road Income - Is it Enough?
« Reply #9 on: January 07, 2015, 06:03:59 AM »
^^^^ THIS .  just wait for insane deals to pop up on craigslist if you feel you need something. 

wtjbatman

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Re: Middle of the Road Income - Is it Enough?
« Reply #10 on: January 07, 2015, 07:04:13 AM »
It's all about expenses, not income. You are doing a decent job now, but you can do even better. Cut those expenses, stop leasing cars and laptops, and before you know it you will have your 401k and an IRA maxed and you will be well on your way to FIRE.

And depending on what the interest rate on your mortgage is, you may want to stop paying extra on it for now. Better to get your tax advantaged accounts filled up first so your invested money has longer to grow.

BuildingFrugalHabits

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Re: Middle of the Road Income - Is it Enough?
« Reply #11 on: January 07, 2015, 07:21:59 AM »
It's definitely doable.  I was making around 50k out of school for a good amount of time while still putting some money towards retirement.  At the time I got married, my wife wasn't working and we lived on just my mediocre salary and made it work.  Here's the thing though, you will most likely get raises and your spouse if and when you get married my work as well.  In my case, both of those scenarios came to fruition and boom, instant boost to the savings rate!  Consider your current situation to be practice and good habit building for the future when you may at some point become flush with cash.  I'd also recommend avoiding leasing cars and borrowing money for anything other than a mortgage.  If you can't pay cash for it, you can't afford it! Good luck!

BuildingFrugalHabits

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Re: Middle of the Road Income - Is it Enough?
« Reply #12 on: January 07, 2015, 07:33:13 AM »
Oh yeah, and you should definitely consider getting a roomate if you don't have one already!

arebelspy

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Re: Middle of the Road Income - Is it Enough?
« Reply #13 on: January 07, 2015, 08:57:40 AM »
Absolutely possible.  I made ~33k coming out of college (and my wife made ~17k).  You still make more than I do, individually, at my 9-5, even today (though not by a ton, and obviously less than both of us combined).  I'll FIRE around age 30.

Side gigs, LBYM, second income if you get a partner, investing, etc. all will help speed it up.

It's really just about applied diligence over time though.  LBYM and invest everything you can, and you'll be FI before you know it!
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thedayisbrave

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Re: Middle of the Road Income - Is it Enough?
« Reply #14 on: January 07, 2015, 09:07:46 AM »
Absolutely possible.  I made ~33k coming out of college (and my wife made ~17k).  You still make more than I do, individually, at my 9-5, even today (though not by a ton, and obviously less than both of us combined).  I'll FIRE around age 30.

Side gigs, LBYM, second income if you get a partner, investing, etc. all will help speed it up.

It's really just about applied diligence over time though.  LBYM and invest everything you can, and you'll be FI before you know it!
+1.  You can totally do it on that income but it will necessitate cutting expenses and boosting income (side gigs, promotions) if you can.  It's good that you've acknowledged the laptop on credit & car lease as the last straw.  Get as many roommates as you can.  Meet them for coffee or lunch first before discussing leasing... get a feel for who they are.  I've found that most people are nice and genuine - go with your gut, ask for a security deposit, lay down some rules and you'll be golden.  Anything that seems remiss, drop them and keep looking - you will be allowing these people in your house after all!

Max your 401K.  Can you contribute to a Roth IRA? Do both if possible.  If not, contribute to the 401K to the match if your employer offers it then put $$ in the IRA.  I was able max both on a ~$45K income (gross not net) so I'm confident you can ;) (yes that was with roommates, so my monthly spending was somewhat artificially depressed due to low housing costs).

You're in a great starting position without handicaps such as overwhelming debt, etc.  Now it's time to start the race :) But remember, it's a marathon... not a sprint.  We'll be in the bleachers cheering you on!!!


JLee

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Re: Middle of the Road Income - Is it Enough?
« Reply #15 on: January 07, 2015, 09:57:06 AM »
First thought: Get some housemates to pay you rent for extra cash.

I thought about this at one point though my friends are married or have good living situations as it stands today. Any suggestions on where to find a reliable housemates that will respect the place and not steal everything I own? Really appreciate the suggestion; let's keep going with this. I'd like to pursue this, but need to know how (where to look). Thanks!

I found the first tenant I rented to via Craigslist. Wasn't fantastic, but wasn't absolutely horrible either.

I found the next two (renting one room) on Craigslist. They're amazing.  My other room is rented to a friend I've known for 5+ years.

I went from renting a room to owning a 1825sq ft house. I bought a dining room table and chairs for $150 or less (Craigslist), and a couch / love seat combo for $150. Another chair and coffee table for $50. When I had my first roommate, I added a hutch thingy for food storage (no pantry)..I think that was $30 or so.

The previous owners of my house told me how they found such a great deal on their dining room table set at ~$2500.  O.O

I still have a fairly large room that has no furniture in it. Unnecessary, IMO - I wouldn't really use it anyway, plus it makes a great dance floor (I've hosted blues dances at my house and having the space is great).

neo von retorch

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Re: Middle of the Road Income - Is it Enough?
« Reply #16 on: January 07, 2015, 10:13:25 AM »
When I lived in my house, I first found roommates through friends and acquaintances. Friend of a friend. Friend of a co-worker. More recently, I've started to use MySmartMove.com and have them fill out a $35 credit/background check. Of course, I still meet them and just talk casually about themselves to get a feel for what they are like. My most recent renter - I actually met him after approving him, only because I had a close friend I trust (and recently vacated roommate/tenant) meet him first.

Seņora Savings

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Re: Middle of the Road Income - Is it Enough?
« Reply #17 on: January 07, 2015, 11:20:45 AM »
I'm having a bit of trouble seeing the problem.

It looks like $2900 a month:

$1000 House
$1200 Savings
$300 Laptop
$400 Other

Not counting the saving in you 401k.  That gives you at least a 40% savings rate.  But with your extra principal payments and 401k it has to be 50%.  This is while living in more house than you need and buying luxury goods.  You're appear to be in good shape.

I second what everyone says about roommates.  They are a much better way of filling up a house than Ikea.  Next time that you are tempted to buy furniture make sure that it's something you actually want (it won't be something that you need, I know that because you haven't had it in the past and you've been fine).  If you're getting a sofa, you'll know that you actually want it if your primary reason for getting it has something to do with sitting down.

blackwire

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Re: Middle of the Road Income - Is it Enough?
« Reply #18 on: January 07, 2015, 09:40:15 PM »
Seņora : I do want the sofa for sitting! And for the fact that it feels weird having a living room without a sofa. I agree with you though, it's more of a want than a need which is why I'm hesitant.

Neogodless : Thanks for the suggestions. Friend of a friend is a great idea!

JLee : Neat, a dance floor. That's an interesting use for extra space that would otherwise be empty! Cool story.

Thedayisbrave : Great suggestions and thank you for the support. I'll have to do some research on Roth IRAs to see what that's all about. Currently just doing 401K to the max of what the employer will match and the rest is going into investments.

Arebelspy : Good to know it's doable! I am pursuing other means of income and progressing in my career still so hopefully things will continue to get better. :)

BuildingFrugalHabits : I've always had that mind set of "don't buy things you couldn't otherwise pay for". I have the money to pay off the loan for the laptop, but I don't because it's interest free. I paid the lease in full up front so it's been a free car for 2+yrs now with no money spent on oil changes, maintenance, etc. I like the mentality of considering this as practice! Good tidbit and I'll keep that one in the back of my mind until I get where I'm going and I'll pass it along after that.

Wtjbatman : So, I figured paying off the house as quickly as possible would be a good idea because it's a huge money pit. Faster payments means less interest and more money in the long run, right? It's at 4% interest right now. Hoping to drop this later if it gets any lower.

Kpd905 : Thanks, I'll keep this in mind. How much of a difference does it make to be in a different tax bracket given the amount over the tax bracket is only just slight?

Doubleh : Thank you for reminding me I'm still pretty young in my career path. I guess I forget this sometimes or think that I'll be stuck places for a while, but I do have plans to keep moving up in my career. I agree on the living expenses; people, myself included, tend to buy more when more is available to spend. I'll have to keep a close eye on my spending habits and make sure I don't fall into this trap.

MikeBear : Good idea. I didn't think about college goers. Perhaps I could find a fairly stable bookworm nose to the grinding stone kind of roommate that I could have interesting conversations with and that would for the most part keep things tame. I like this idea!

Spartana : Thank you for the words of encouragement and for the story. I love to hear others having success in their life especially when I am or could be following a very similar path. Greatly appreciate you taking the time to give feedback and share your story :)

Everyone : I appreciate all the great feedback! Everyone has been really helpful and I can't really say thank you enough. Learning from others suggestions and wisdom gained through experience is priceless for me. I'll start asking friends and looking around for housemates and maybe go light on the furniture and build a few of the other pieces I need to keep from paying retail (cost of wood is pretty cheap comparatively). Definitely plan to keep on the 401K, dump the leased car for a "good enough" car, and keep moving up in my career. I have a new sense of hope for my future thanks to everyone here. Really great community!

Keeping a positive outlook is always good and it's easier to do so when someone else says, "Yeah, I've done that... you can too". For all those that are middle of the road like me I hope you'll take away from this what I did and continue pushing forward. I feel good things in life are never easy, but in this case the reward feels worth the effort.
« Last Edit: January 07, 2015, 09:43:21 PM by blackwire »

JLee

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Re: Middle of the Road Income - Is it Enough?
« Reply #19 on: January 07, 2015, 10:06:56 PM »
I would grab a decent used sofa off of Craigslist. Or a LoveSac. They're ~$800 new for the 6ft "SuperSac" but they seem to be $200-ish used.  They're awesome for sitting, lying, jumping on, and you can fit 2-3 people on one easily. It was well loved at my house. :)