Author Topic: Week 1 Mustachian Needing Advice on Student Debt, Budget & General Finance  (Read 2107 times)

fantasticFI

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Hi all,

I learned of MMM 6 days ago and this is my first post in the forums so please be gentle =) Single and 29, I wish I had been more aware of personal finance independence sooner (had a different definition in my mind back then), but better late than never! Reading MMM's articles and browsing through the Badassity posts really motivated and inspired me. Thanks to all for that.

In this post, I'd appreciate your suggestions on best achieving two goals:
1. Pay off student debt as quickly as possible (I read about the Harvard MBA who paid off 90k in debt in 7 months which was inspiring, but I also want to continue building an emergency fund in case work stumbles)
2. Build a positive net worth; then look to buy a place sometime down the line if that makes financial sense

Here's my current financial situation:

* Debt: Student loan of $60k at 7% interest (it's a lot at a high interest rate. Not looking to explore why this happened since there's much family and personal history involved, but focusing on the present and future)
* Income: $75-80k/year pre-tax; ~$4100/month after tax and other deductions such as disability insurance
* Retirement account: $33k in Roth IRA, newly invested in index funds (after reading MMM articles)
* Savings accounts: $15k
* Investment accounts: $5k in stocks
* Other asset: 7-year old car; decided to not buy a newer one after finding MMM =)

Monthly expenses:
- Rent: $900 all inclusive (am lucky to find this deal in this major city. I have roommates)
- Gas: $150 (not within walkable distance to public transit)
- Grocery: $150
- Eating out/entertainment: $150 - this is a goal right now, since I'm on my week 1 of Mustachianismů
- Car insurance: $30
- Cell phone: $10 after some employer reimbursement

Other: Company doesn't have 401k offering; I max out on the annual Roth IRA allowed contribution.

Thanks in advance for your thoughts and encouragements on my path to financial independence!




nawhite

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Two bits of advice:

1. Your savings account looks like it has more money than you likely need in an Emergency Fund. If your monthly expenses really are around $1400 like your numbers say, then you have about an 11 month E-Fund which sounds really high when you have student loans at 7% and a fairly decent sized ROTH and $5k in other investments. I'd recommend you drop that $15k down to at most around $8k or so and put the remainder towards the student loans.

2. Get Mint.com or You Need A Budget (YNAB) going so you know what your actual expenses are. One thing I realized when starting out was I was saying "We spend $200 on gas/month" but forgetting that I was also spending $500/6 months on insurance and also was putting about $500-1000/year into maintenance and repairs. So in my head I was only spending $200/month but then I'd look at car expenses for the year and would see "oh shit, I spent ~$400/month on cars"

So get Mint or YNAB going and figure out what your expenses really are.

fantasticFI

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Thanks - I plan on doing 1. For 2, you're so right, I already forgot that I spent $30 a few days ago on car maintenance. Will use Mint more diligently and keep better track of all expense.