Author Topic: How to get started?  (Read 13423 times)

uppy

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How to get started?
« on: January 03, 2014, 06:30:55 PM »
Hi all,

I'm new around here and I have a general question, sorry if it's long-winded. First of all, I've read many of the posts on MMM and I am amazed at what many of you have done/are doing to gain financial independence (esp. MMM himself). I was thrilled to find this website since it aligns with many of the practices I already follow, and adds much more advice and information. For example, I already follow a meticulous budget and my live-in girlfriend and I spend very little each month. (Though we could do even better I think -- esp. since we live temporarily in NYC for her grad school.) We spend about $38,000/year combined, and are able to save at most a few hundred bucks a month. We do have a small amount saved, about $4k, and are planning to invest that in an index fund.

Our net worth is in the negative, though. 1 car loan, minor credit card debt from reckless youth (almost paid off). Both of us are college graduates and we both want kids. However, we both have significant student debt (20k + each) due to neither of our parents having any money. That's WITH working through college and pre-college. Now she will have grad school debt as well. Added to this, our incomes are ridiculously low. Having been lured into the liberal arts education, we came out of undergrad with no real employable skills and have had difficulty finding well-paying jobs. I make like $25k/year and she's surviving on loans. She's in school for social work -- a big money maker, I know, but it's what she loves.

I'm extremely frugal by nature which is probably why I never felt compelled to slit throats for a better degree/job experience -- I was always content with less. But now it's biting me in the ass. I write fiction and dream of quitting work so I can concentrate on that. I believe I could make money at it, too, if I had the time and energy to do it consistently. But that's beside the point -- my big question is: how can we possibly get to 25x our annual spending with so little income? Or, more accurately, if we can't get significantly more income, won't this take us until we're in our 60s anyway??

(forgot to mention: we are 30 and 26 yrs old)

thanks in advance for any tips/suggestions!!
« Last Edit: January 08, 2014, 07:13:55 AM by jrez »

Eric

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Re: How to get started?
« Reply #1 on: January 03, 2014, 06:51:31 PM »
The good news is that it's not your income but your savings rate that determines your time to FI:

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

However, as you know, it's easier to save more if you make more.  So I'm going to tell you what you already know.  You need to make more money.  Find a new job.  Or take on more responsibility at your current job.  Or take on a second job.  Or start selling drugs.  Okay, probably not that last one.

Rebecca Stapler

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Re: How to get started?
« Reply #2 on: January 03, 2014, 06:57:00 PM »
Or start writing fiction on the side. Take the plunge and do it! Just don't quit your day job until you've made a lot of $$ doing it.

Also, even though you're on a meticulous budget doesn't mean that you haven't budgeted for things that are superfluous expenses. Post your budget and we will cut it up for you ;)

onFIRE

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Re: How to get started?
« Reply #3 on: January 03, 2014, 07:40:36 PM »
You shouldn't be saving when you have debt.  Throw that 3k (save 1k for emergencies) at the credit card and car loan and then start chipping away at the student loans.  Check out Dave Ramsey for helping with the debt.  It really does work and you are so lucky you are young!!!!  I knew all this when I was your age but thought someday I'd make more money and only realizing now that if I had just started back then even with the crap money I've made my whole life I'd already be retired!

Frankies Girl

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Re: How to get started?
« Reply #4 on: January 03, 2014, 07:54:24 PM »
Without knowing what the interest rates are on your debts, I'd still say it is a better idea to pay off the really bad stuff (definitely the credit cards and car likely which are likely to be higher than the school loans, but they may also be high) before investing.

I would also say that your girlfriend getting a graduate degree and going into further debt might not be a smart decision if the job won't pay MUCH higher to offset the cost of the degree itself. Wasting time getting mostly useless degrees and racking up debt isn't going to help. If her getting a graduate degree means a great bump in pay and allows her to make a significantly higher salary, then never mind.


Davin

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Re: How to get started?
« Reply #5 on: January 03, 2014, 10:41:07 PM »
Some social work jobs qualify for Public Service Loan Forgiveness. Your girlfriend may want to look into whether or not her student loans can be reduced under this program.

uppy

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Re: How to get started?
« Reply #6 on: January 04, 2014, 05:51:03 AM »
Thanks everyone for the great advice. I guess it didn't occur to me NOT to save and instead pay off the debt first, because everything I read tells me to save, save, save and invest as soon as possible. Thank you Dmy, that illustrates it pretty well.

Perhaps some specifics would help. The CC debt is actually not too bad -- I paid off most of it by throwing my entire tax return into it a few years running, when our expenses were less. There's only about $1k left and I've set up automatic payments to have it paid off before my introductory 0% APR expires (I did transfer balances to a new card to get that intro APR, and got the 3% fee, but figured it was worth it.) Can't do more than that and still buy food etc.

The car is at a 5.5% APR and we owe about $4,000 (which is about what the car is worth). Initially I had considered paying this off with the $4k savings, but it scares me to empty our emergency fund completely. Would it make sense to pay it down by $3k and still pay interest for a while longer? (We also thought about selling the car since we don't really "need" it right now. But getting together money for another car when we are done here would be pretty difficult. We will def. need at least one when we move.)

The student loans are about 5.25%, about 20k -- and we each have about that much. This is the big one, the thing that I feel will be eating up anything we can save for a long time.

We looked at the graduate degree like this. My gf loves this work and was doing it anyway. It provides feelings of satisfaction for her. But it pays like crap, and the only way to better the pay is to have better credentials. Hence we are living in outrageously expensive NYC (in a cheap area relatively speaking) to get this degree. It's too late to back out now, I think. It's important to her. The Public Service Loan Forgiveness sounds really awesome, though, thank you Davin I will look into that!!

Trust me, I would LOVE a higher-paying job. I'm searching constantly. You got one I can have? ;)

SO I guess biggest question is: should I reduce my savings to 1k to pay off 3/4 of my auto loan? It took us like 3 years to save that $4k...

And my secondary question -- after looking at my budget and realizing that there probably are some extraneous items, like Netflix and a small "hobby" budget in there (beer brewing, etc.) :) -- what do you guys do about quality of life while saving for FI?

thanks again for helping me groom my 'stash.

OperaAdam

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Re: How to get started?
« Reply #7 on: January 04, 2014, 06:25:41 AM »
Hey jrez,

I've spent a pretty good amount of time in New York myself as a struggling artist type, so I get where you're coming from. I have a few things that I'd do if I were you. It's good that you're going to kill the cc debt before the 0% runs out. That's definitely priority #1. As for the car, I would sell it. I've done the car thing in NY and I honestly prefer not having one. It's more trouble than it's worth in a big city like that. If you really need one, you can rent one for a day, or use one of the many car sharing services that are popular there.

I'm going to assume that you don't make any money from the sale of the car, but that you don't lose any either. At this point, you'll have a lot of extra money every month that was going to the car and the cc payments. Since you know you'll need a car when you leave, decide how much you're going to need and put that money toward saving for the car. For example, if combined your car payments and cc debt add up to $300 a month, you could save up the cash for an equivalent car in just over a year. You might check out something like https://www.smartypig.com/, or your bank might offer a similar program.

Finally, you seem to imply that you're leaving NYC when you can. That is a good idea. I currently own a townhouse. It's three times the space of anything I ever had in NYC, and 1/3 of the price. That alone is enough to bump up your savings rate a lot. I read this the other day, and I think it applies: http://gothamist.com/2010/05/03/patti_smith_suggests_finding_anothe.php

Good luck.

uppy

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Re: How to get started?
« Reply #8 on: January 04, 2014, 09:40:25 AM »
Thanks OperaAdam. Smartypig looks interesting, I will have to look into that.

I can't help but be a little discouraged as I start to do the math here, and realize that for someone like me, the MMM method doesn't really bring a very early retirement into the realm of possibility without a big spike in income. Even after paying off other debt, I'm looking at retirement at 50 or older. I guess you could call that "early." With my gf plus my own student loan debt, which will total out at somewhere around $80,000, that will take us 6.6 years to pay off even if we chug out 1k per month on it. Then, assuming we can save 35% of our income after that, we're still talking about another 10 years before FI (if I'm reading the "shockingly simple math" post right).

The idea that we could even put 1k towards that bill for 6.6 years, all while refraining from improving our quality of life by (for example) buying a house, having kids, travel, or increasing our expenses in any other way until I'm 50...it is hard to imagine. I suppose that's the price for retiring 10+ years sooner than average....and in that case I have to ask: is it worth it?

Or am I missing something?

NinetyFour

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Re: How to get started?
« Reply #9 on: January 04, 2014, 11:34:19 AM »
I strongly second the suggestion to sell the car.  ASAP.  Remember, it's not just the car payment.  It's the fuel, maintenance, registration fees, insurance, stress.  Get rid of it.  You will be so glad you did.  Who needs or even wants a car in NYC?

Yes, the journey to FI (I just mistyped it and it came out "IF"--hmmm...) can take time.  But the great news is that you have already bought into the philosophy at your relatively young age.  Some of your elders (like me) were clueless throughout our 20s, 30, and maybe 40s, until we found MMM and changed our wasteful ways. Late but not too late.

So don't be discouraged!

FastStache

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Re: How to get started?
« Reply #10 on: January 04, 2014, 12:12:20 PM »
Having been lured into the liberal arts education, we came out of undergrad with no real employable skills and have had difficulty finding well-paying jobs.

A couple of things about this....
I went to liberal arts school and came out with plenty of real employable skills and know of plenty of people that graduated with me with plenty of employable skills. Some of this is caused by a bit of "complainy pants attitude" to be honest. I don't mean to be rude, but this is important and if you really feel this way it will show when you go for interviews, etc. You need to really figure out if what you say is true, and if it is you need to acquire real employable skills asap. Check out MMM's post on careers with no graduate degree if you want, he has some good ideas.

lackofstache

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Re: How to get started?
« Reply #11 on: January 04, 2014, 04:12:12 PM »
Having been lured into the liberal arts education, we came out of undergrad with no real employable skills and have had difficulty finding well-paying jobs.

A couple of things about this....
I went to liberal arts school and came out with plenty of real employable skills and know of plenty of people that graduated with me with plenty of employable skills. Some of this is caused by a bit of "complainy pants attitude" to be honest. I don't mean to be rude, but this is important and if you really feel this way it will show when you go for interviews, etc. You need to really figure out if what you say is true, and if it is you need to acquire real employable skills asap. Check out MMM's post on careers with no graduate degree if you want, he has some good ideas.

I've got a BFA. I used it to make about $30K/yr at a job and delivered pizza on the side for a few years after college. Then I got my insurance licenses and made nearly $60K last year plus benefits. I still make an extra $10-15K/yr designing/printing things with my wife, but the bulk of our life is paid by selling for someone else.

I'd say if you want to increase your income, pretend your degree doesn't matter. If you're tied to your degree forever, the "mistake" of your major will always be there. Get out of your comfort zone and let go of expectations (your own & others') and a lot of opportunities arise.

uppy

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Re: How to get started?
« Reply #12 on: January 04, 2014, 06:04:39 PM »
Ha ha, I knew I was going to get some flak for that liberal arts ed. comment. Actually I didn't used to think that way. It's a degree, which is something on a resume. Maybe I'm just looking for something to blame.

Lackofstache:
Can you elaborate on what it is that you do? By getting insurance licenses do you mean to sell insurance? I'm curious how you become qualified for something like that. Was the process/schooling expensive?

Where I lived before and will likely return to, I had my own small contracting business, mostly word-of-mouth, tree work, painting, etc. However I think I burned out after 5 years and was just exhausted all the time. Didn't get big jobs because I was so small scale. I didn't want to go all the way and invest in tons of equipment, get employees, etc., because I knew I didn't really like the work. I do enjoy working with my hands but I guess I'm more of a pansy intellectual type at heart...  ;)

I am all for branching out, I am just having trouble finding something a) satisfying and b) 'stash-growing.

Perhaps I should start another thread elsewhere about job-searching techniques...when I was job searching last year I sent out nearly 50 resumes/cover letters and got nothing (granted, it was an economically depressed area). But I was WAY out on a limb, trying to pretend I had skills I didn't.

Zamboni

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Re: How to get started?
« Reply #13 on: January 05, 2014, 10:43:47 AM »
Quote
And NinetyFour: thanks for your input on the car. My reasoning for wanting to keep the car is that I hardly ever need to drive it, and when I do, it saves a lot of money/time/aggravation (namely, trying to get out of the city to visit relatives upstate using public transportation is often like pulling nose hairs + dipping them in hot sauce + rubbing them in your eyes for 6 hours straight). And we definitely will need one when we leave NYC in 2 years -- not enough time on our income to save for another car without financing it. I DO hope to pay it off sooner rather than later, though.

OperaAdam is right.  Your thoughts on the car are not sound financial reasoning.  If you hardly ever need a car (and I used to live in the city, so I know that's true), then just rent one when you need it until you move.  Enterprise really will pick you up exactly where and when you want them to, so it's not particularly inconvenient if you just plan teeny bit.  There's also programs like "WeCar" (not sure if those have taken off in NYC) that allow you to buy points and then just reserve a car online and borrow it from one of their hub stations.  Certainly these options are not as much of a headache as keeping a car maintained, insured, registered, inspected, and parked in NYC.  Besides the fact that it's much cheaper to rent a car a few times a year, you get to drive a practically new car each time if you rent, which is kind of fun.

Even though I am reasonably well off, my car (a used Prius) was less than $4000.  I bought it from someone like you, who had likely bought it new and then didn't drive it very much.  You are thinking new car, perhaps, when you think about how much you need to save for a car?  That is crazy talk.  Put the remaining car payments into savings instead of the existing loan and you'll be fine when the time comes that you move.  Get rid of the car payment, find other options for transportation while you are living in the city, and save your money now.

Here's a video just to give you an idea (the math is a little optimistic and I wouldn't invest it in just a single mutual fund, but the general concept is correct.)  From 2 minutes on is probably what you need to think about:
http://www.youtube.com/watch?v=BKyV8CTHeJ0
« Last Edit: January 05, 2014, 10:56:05 AM by Zamboni »

NinetyFour

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Re: How to get started?
« Reply #14 on: January 05, 2014, 10:52:48 AM »
And NinetyFour: thanks for your input on the car. My reasoning for wanting to keep the car is that I hardly ever need to drive it

???

Sorry to be like a broken record, but it just makes no sense to keep the car and the car payment.

randymarsh

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Re: How to get started?
« Reply #15 on: January 05, 2014, 11:34:26 AM »
I do continue the fiction writing on the side, Rebecca, and I am building a large collection of rejection letters :) My motivation there is that many great authors acquire 100s of rejections before they are ever accepted for publication. So I'm picking away at my first 100. So far I have about 15-20.

Have you looked into self-publishing on Amazon? I'm sure it's not as easy as uploading your book and watching the $$$ come in, but you may have some luck there. I've read stories of a few people who are able to make at least a few hundred bucks there.

Cassie

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Re: How to get started?
« Reply #16 on: January 05, 2014, 01:03:22 PM »
I have a Master's in social work and she will make much better $ then she would have with only a BA in the field. Also for many jobs an advanced degree is mandatory to even get the job & especially for promotion so you will not be sorry that you invested in this degree.  It also is a broad degree that prepares you for many different jobs within the field. Depending on where you live also when she gets a job many states have requirements that for most human service jobs your degree must be in SW and you must be licensed. So individuals with general counseling degrees, marriage & family degrees, etc (even master's) find themselves unable to practice in some states but not all states.  Good luck!

uppy

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Re: How to get started?
« Reply #17 on: January 06, 2014, 09:06:18 AM »
Everyone -- thanks so much for the helpful input.

I'm feeling a bit more optimistic now, partly because of the fact that I realized our education debts might not be quite as much as I originally thought. If we could chunk out 1k/month on them (assuming our other debts are paid off) we could pay them off in about 5 years. This, of course, assumes that we can find reasonable-income jobs (which is not what we have now).

However, I still have to disagree with most of you concerning selling the car! I promise you I completely understand your reasoning so far. In theory I agree with you. But I still find it extremely unlikely that I would be able to a) convince someone to take over payments on the car, and b) save up enough $ in the next 20 or so months to buy a new (used) car without financing it. (The only way that could change is if we were to move somewhere foreign, as Dmy suggests, and didn't need a car.)

Here are some specifics. We pay about $200/month for the car, and that's at 5.5% APR. Not bad for a car loan. Actually, that $200 includes insurance. Registration is $50, plus MAYBE $20/month in gas. We are very careful about parking it and have never gotten a ticket. Total = $2,690/year including interest on the loan. So about $225/mo. If we saved that every month for 20 months we'd have $4,483, call it $5,000 at the moment we move (which doesn't take into account the time/effort needed to sell the car/find a new one) -- enough for a junker worth at least $2,000 less than our current vehicle. Then, it would probably cost several grand to fix a leaking head gasket or other major problem within a year or two. Then, because it's so cheap, it has wicked high mileage and after not too long we're out of a car again, only used it a few years, and the car is exponentially more of a money-sucker because it was a p.o.s. and didn't last.

Our car is in great shape and has had no mechanical issues. We owe <$4k on it.

(Granted, I COULD get extremely lucky like Zamboni and find someone willing to sell a nice Prius for $4K. But how likely is that?)

All that to say, I do like hearing everyone's arguments so feel free to keep telling me I'm an idiot. Maybe one of you will get through.

I do intend to pay off the loan ASAP: Like, as soon as our 4k in savings (which is in CDs) matures. Then I'll be kicking the shit out of my school loans until those are dead, too.

Thanks for helping justify the MA degree, Cassie.

I have thought about publishing on Amazon but when you do that, you often give up the ability to have it traditionally published and make more $ on it than you ever did on Amazon. A novel is like 4 years of work so it's a trade-off and a gamble with little to gain, statistically speaking. For now I'll just cash in on the joy of writing :)

I think the above is a factor that MMM is constantly harping on but it seems like is sometimes missing from the forums  -- the joy factor. You can't quantify, for example, how "worth it" it is to do something that either a) saves you from hating the world/your city/your life just a little bit or b) actually brings you genuine happiness, even at a monetary cost. (not talking about my car necessarily).

MsSindy

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Re: How to get started?
« Reply #18 on: January 06, 2014, 10:06:21 AM »
You're probably going to hate what I have to say, since I'm going to be a bit of a joy-sucker.  The fact is, you went after a degree in a subject that you were interested in and enjoyed, without a clear plan on how to capitalize on it.  In other words, you went after what was 'joyful'.  All that is fine, but now you can't complain that you can't find high-paying employment.  As I see it, you either 1) need to find a way to capitalize on the strengths you have, 2) do something that is perhaps not that 'joyful' but pays well or 3) stay 'joyful', but most likely low paying.

None of those 3 things are better or worse, but will be the decision you'll need to make.  And remember, just because you pick one of those paths now, doesn't mean that you can't change later, or even that opportunities won't come later.  Further, your employment can also just be a "means to an end", and let your 'joy' be your side projects / hobbies / family.  You may or may not find 'joyful' work....they call it work for a reason.  Also, some comments about each:

1) Capitalize on strengths: Are you a good communicator? writer? Opportunities exist to be a Requirements/Business Analyst, or a technical writer.  Think about what you are good at and try to exploit it.  Read Strenghts Finder by Tom Rath to help in this area.
2) No Joy, but good Pay - just "suck it up" for  a while.  Get a part time job to pay off your debts.  My DH and I did this and it both sucked and created joy, because we knew we were moving ourselves forward in the right direction.  Sacrifice a little today for a better future. This can also be said for taking a job that you may not be thrilled about, but it pays relatively well - the goal is to get into a line of work that has some sort of potential for you to move up if you're a solid worker
3) Stay where you are and be content with your situation.  If you like what you do, then perhaps early FI is not really for you.  If you don't have a burning desire, do (almost) whatever-it-takes attitude to be FI, then maybe it's not for you.  That's okay, too.  Just admit it and be content with the life you've chosen.

The fact that you're even thinking about these things and exploring options BEFORE you start a family will put you far ahead of most.  Regardless of what path you take, don't let life "happen to you".  Be aware of the trade-offs and make decisions based on what is right for you (and your future family), and then be content with those decisions.

Good Luck!

thepokercab

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Re: How to get started?
« Reply #19 on: January 06, 2014, 11:05:23 AM »
Quote
The only way that could change is if we were to move somewhere foreign, as Dmy suggests, and didn't need a car.

I might have missed this, but living in NYC why do you need a car?  There might be a really compelling reason why you need it, but you also say that you hardly ever use it, so i'm just wondering.  One of the things that just never occurred to me before I ran across MMM was how much of a money pit cars are.  Granted, some people live in rural areas, etc.. and need one, but if you live in a reasonably large city I really don't understand why its necessary.  My wife and I have two kids, in Phoenix AZ (not exactly a public transportation paradise) and we don't own a car.  I use public transit, a bike + enterprise when we need to leave town.  Its super easy, and saves us a ton.  We lived in Washington D.C. for a few years, and while we did have a car (foolishly), hardly ever used it- that was even easier because of their public transportation system.

Personally, i would sell your car ASAP, and pocket all of the savings for as long as humanly possible.  I would definitely do this if I had debt to pay off.   

Quote
I think the above is a factor that MMM is constantly harping on but it seems like is sometimes missing from the forums  -- the joy factor. You can't quantify, for example, how "worth it" it is to do something that either a) saves you from hating the world/your city/your life just a little bit or b) actually brings you genuine happiness, even at a monetary cost.

I'll admit that i used to think this way. For years, i took "joy" out of things like my car, cable TV, eating out at restaurants, etc.. Corporations, society and even your peers do a real good job convincing us that we need to spend money on these things in order to be truly happy.  We're indoctrinated from day 1.  But the "Matrix" analogy really does ring true here- At some point once you remove these things from the picture and unplug you realize that they don't bring about as much joy as you thought.  Now I get joy from going to the public library, reading books, playing with my kids, going to the park, etc.. And I also get joy from thinking about reaching financial independence, when I don't need to worry about being beholden to my job or money.     

uppy

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Re: How to get started?
« Reply #20 on: January 06, 2014, 04:52:03 PM »
MsSindy: All that you say is true, I did study something I enjoyed rather than something I planned on "capitalizing" -- which I think is why anyone studies liberal arts (short of not having any better ideas). We B.L.A.-ers had the naive idea that we could still make a healthy living doing something we were actually interested in. In most cases it doesn't work out that way. The jobs you mentioned (business analyst, technical writer) would definitely fall into category 2 for me: no joy, but good pay. Which I guess is why I don't have/may never be qualified for one of those jobs. I consistently rate happiness over money...but therein lies the contradiction because without money (or at least, an amount greater or equal to zero) you're never free.

Unfortunately I'm already in category 2 in terms of working to pay off debts -- it's just that the pay is not enough. I am definitely not "content" with my future as it presents itself and I am constantly thinking about how to change things (hence my participation here). I think what many of you are hinting at (or outright saying) is that there ARE options for better employment, even for someone with no credentials or experience, which do not require a huge investment of $ in continuing education, etc. That + what MsSindy says = those options are significantly lower in the joy factor.

Have you ever seen someone who has had their soul sucked out by spending 15-20+ years in category 2? I have, and that's part of what I'm afraid of. I.e., not being able to "come back" from the working-for-the-future mentality when the future arrives. My grandparents became FI after working their asses off for many years, but then they didn't seem to know what to do with themselves. They STILL could not afford to be happy. No matter how free or affordable things got, things weren't satisfying anymore because they'd forgotten how to enjoy them. (That's in contrast MMM's experience, in which he was able to become FI in a very short time. He busted ass for 9 years and came out with his soul intact.)

That said, I'm resigned to searching for a balance of less joy/more pay. I'm just hesitant to lower my standards for happiness too much, for fear I might become permanently disabled.

thepokercab: I agree on almost all counts. Although like anybody I have little bits of my brain/desires that are brainwashed consumer bits, I generally get happiness out of the same things you do. I don't own a TV, for example, or a smart phone, and I eat out maybe once every quarter.

Do all of you who think financing a used car is totally ridiculous take into account the value, now that I've done the stupid thing and paid interest for it (but it's almost paid off), of HAVING a vehicle I never could have afforded outright? It was unlikely I would ever have had $15,000 to pay upfront for anything, much less a car. But now I have a car that has and will last many more years and costs comparatively little to maintain.

Zamboni

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Re: How to get started?
« Reply #21 on: January 06, 2014, 05:45:31 PM »
Quote
Here are some specifics. We pay about $200/month for the car, and that's at 5.5% APR. Not bad for a car loan. Actually, that $200 includes insurance. Registration is $50, plus MAYBE $20/month in gas. We are very careful about parking it and have never gotten a ticket. Total = $2,690/year including interest on the loan. So about $225/mo. If we saved that every month for 20 months we'd have $4,483, call it $5,000 at the moment we move (which doesn't take into account the time/effort needed to sell the car/find a new one) -- enough for a junker worth at least $2,000 less than our current vehicle. Then, it would probably cost several grand to fix a leaking head gasket or other major problem within a year or two. Then, because it's so cheap, it has wicked high mileage and after not too long we're out of a car again, only used it a few years, and the car is exponentially more of a money-sucker because it was a p.o.s. and didn't last.

We all have no idea what kind of car you have, what you paid for it, or how much is it worth.  Perhaps it is an awesome little fuel efficient dynamo that will never break down for years?  If it is not that, then definitely sell it now.  Even if it is, there are A LOT of these cars on the road.  I did not looks especially hard or get an especially awesome deal.  Read the book Millionaire Teacher if you really want to know how to score on used cars, but I'm not interested in investing much time in the hunt.  Hey, I also understand where you are coming from in terms of being attached to your car.  I name my cars and drive them until they will drive no more.  I bought my first car with a loan similar to yours for $11000.  Although it felt great to have such a shiny car and I was happy with it, I could have probably gotten a car for $2500 that I would have driven for just as long (10 years) and put the difference in my Roth IRA for a couple of years.  That would be worth A LOT of money now.

If you bluebook value it, does it come out worth more than $4K?  It sounds like it does.  If so, then sell it, pay off your loan, and either invest the rest of use it to pay off other debt.  Then keep paying YOURSELF the car payment, and in 20 months you'll have 5K+interest+whatever you make on the sale.  But maybe you won't even need a car in 20 months, in which case you just keep adding to the fund.  Are you positive you will even need it where you are moving in 20months?  Do you even know where you are moving?  You just don't need it right now, and that $2,690/year is a lot of money. 

Americans are kind of weird about their cars.  My European and Asian friends all had no trouble selling cars when they didn't need them, or even just when they needed money.

randymarsh

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Re: How to get started?
« Reply #22 on: January 06, 2014, 05:47:26 PM »
Do all of you who think financing a used car is totally ridiculous take into account the value, now that I've done the stupid thing and paid interest for it (but it's almost paid off), of HAVING a vehicle I never could have afforded outright? It was unlikely I would ever have had $15,000 to pay upfront for anything, much less a car. But now I have a car that has and will last many more years and costs comparatively little to maintain.

There's a flaw in this logic. A 15K car is quite nice; you could have financed a much cheaper car. Minimum auto loans are usually around 8K. Plus you mentioned you rarely use it. It makes no sense to own a depreciating asset you rarely use. It's never been easier to go car-less now with services like Zipcar and Uber.

I'm not sure why it was unlikely you would ever have 15K? That's how much your car loan was right? And now you've paid it down to 4K? So the money came from somewhere. I haven't read every single post here so maybe I'm missing some piece of information.

the fixer

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Re: How to get started?
« Reply #23 on: January 06, 2014, 06:16:22 PM »
I think the above is a factor that MMM is constantly harping on but it seems like is sometimes missing from the forums  -- the joy factor. You can't quantify, for example, how "worth it" it is to do something that either a) saves you from hating the world/your city/your life just a little bit or b) actually brings you genuine happiness, even at a monetary cost. (not talking about my car necessarily).
He discussed this early on, but it seems lots of people have trouble getting it, not just you (even me sometimes). http://www.mrmoneymustache.com/2011/10/22/what-is-hedonic-adaptation-and-how-can-it-turn-you-into-a-sukka/

What it boils down to is yes, you can't quantify levels of joy we get out of things in objective terms. That's because we adapt to take joy out of whatever we happen to have that's most precious. For instance, I take great joy from climbing rock and mountains but take the use of my legs for granted, even though my joyful activity depends on them and even though other humans might take great joy in the use of theirs. MMM's philosophy is to use mind hacks to switch our joyful pleasures away from expensive things and towards cheap/free things. Your level of happiness stays constant, but that's before considering that you'll be generally happier just from the change improving your financial security.

uppy

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Re: How to get started?
« Reply #24 on: January 07, 2014, 07:56:19 AM »
thefinancialstudent: I think it's the same reason most people take out car loans. I needed transportation NOW. Scrounging together a few grand for a down payment was possible, while making 15k materialize out of teenie-weenie savings was not. I'm not saying it was anywhere near an ideal case!

Same goes for 20 months from now. We are most likely moving to rural western MA, where public transportation is virtually nonexistent, and bikes are impractical for longer (esp. winter) commutes. If I can't save up the $ for a new (used) car, I will either a) cut myself off from the more decent-paying jobs, for lack of transportation, or b) spend much, much more on housing to be walking/biking distance to the more decent-paying jobs.

Zamboni: finding a used car for $2500 that will last you as long as a car you bought for $15K (assuming you don't get ripped off) without spending the difference in maintenance does not compute with my experience buying junk cars for that much. Granted it is probably cheaper to maintain a junker for maybe 3-4 years tops. After that it's the law of diminishing returns. And, granted as well, you could repeat the cycle with another junker every couple years. But that comes with the added anxiety of "when will *this* p.o.s. deposit me on the side of the highway on my way to work?"

That said, I'm not *absolutely* positive I will need a car, I could get lucky. Or we could make an effort to move somewhere where we don't have any friends/connections. Maybe I'll start another thread about 'stache-friendly places to live when you are a social worker and a wannabe fiction writer. :)


aj_yooper

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Re: How to get started?
« Reply #25 on: January 07, 2014, 08:15:41 AM »
I have a Master's in social work and she will make much better $ then she would have with only a BA in the field. Also for many jobs an advanced degree is mandatory to even get the job & especially for promotion so you will not be sorry that you invested in this degree.  It also is a broad degree that prepares you for many different jobs within the field. Depending on where you live also when she gets a job many states have requirements that for most human service jobs your degree must be in SW and you must be licensed. So individuals with general counseling degrees, marriage & family degrees, etc (even master's) find themselves unable to practice in some states but not all states.  Good luck!

This^.  It is a very good flexible degree.  Get licensed.

Sell the car already.  Put half of your savings on your SL, then build up your EF again. 

Rebecca Stapler

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Re: How to get started?
« Reply #26 on: January 07, 2014, 09:50:26 AM »

That said, I'm resigned to searching for a balance of less joy/more pay. I'm just hesitant to lower my standards for happiness too much, for fear I might become permanently disabled.


As someone who has significantly cut her "entertainment" and "dining out" and "gift-giving" budget categories, I have to disagree that saving more $$ = less joy. I've had a lot of fun finding fun free things to do and give to loved ones. I know you're talking about earning a higher income, and I'm talking about saving money, but I really don't think that increasing your savings rate / debt payoff rate necessarily means less joy. I recommend you try it before you bash it. I was skeptical too, but I'm honestly happier now that I put people first and evaluate what I wanted to get out of a purchase BEFORE I spend the money, which helps me find a way to achieve that goal without spending the money.

Zamboni: finding a used car for $2500 that will last you as long as a car you bought for $15K (assuming you don't get ripped off) without spending the difference in maintenance does not compute with my experience buying junk cars for that much. Granted it is probably cheaper to maintain a junker for maybe 3-4 years tops. After that it's the law of diminishing returns. And, granted as well, you could repeat the cycle with another junker every couple years. But that comes with the added anxiety of "when will *this* p.o.s. deposit me on the side of the highway on my way to work?"

I am also going to disagree with you here, because I have had my 1999 Toyota Corolla since 2004, when I bought it for $4500, and it is still going strong -- even in the New England winters. We don't worry about it crapping out by the side of the road. Other than having regular maintenance on it, it's cost us $1700 in repairs over the past decade of owning it. I think the problem with your analysis here is that you assume a low price = a junk car. That's just not true. Maybe it's true for a crappy car that started off crappy, but there are some really reliable older model cars out there.

I agree w/ others that selling your car now is a great way to chip away at your total debt load. You don't need to find someone to "take over the payments." I would send your $4k savings in to the loan company, get the title to the car free and clear, then sell the car in a private party deal and replenish your $4k emergency stash. It will save you $220 this year alone in financing costs, nevermind the insurance, maintenance, and parking costs.

beanlady

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Re: How to get started?
« Reply #27 on: January 07, 2014, 10:48:35 AM »
I'm confused about why on earth your partner is getting her MSW in NYC of all places; you could've lived a lot cheaper in Albany! But assuming that transferring doesn't make sense given the sunken costs at this point, yup, raising your income somehow is the way to go. A lot of folks on this forum are older than you and might not realize just how hard it is for new grads to find decent work right now, no matter how creative and hard working they are, but make sure you keep your mind open to different things. Including possibly staying with family upstate during the work week if there are more job options there.

There is often a real choice to be made between current joy and making money that will allow for more freedom. It looks to me like most people who are successful at this have access to high paying jobs that they don't hate. I personally am choosing a part time job I don't much like but which pays as much as a full time job that I loved might... for me, having that free time to follow my dreams is more valuable than a fulfilling career (or, right now, doubling down on maximizing my income to further speed retirement... I'll get there earlier than most people but not for at least ten years). Chances are that you won't be able to retire anytime soon if you're not willing to work at a job you don't like. But if that's the choice you make, you can still remember to use money well and end up a lot better off than other folks in your income bracket.

mollyjade

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Re: How to get started?
« Reply #28 on: January 07, 2014, 02:05:34 PM »
You could look for side jobs rather than a better paying job since you're planning to move in a year and a half. Tutoring comes to mind if you're good with words and languages, and it pays pretty well by the hour. You can also use this time to look into what skills you need to develop in order to get a better job in your new location and acquire them.

uppy

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Re: How to get started?
« Reply #29 on: January 07, 2014, 03:58:00 PM »
Do you all (experienced mustachians) post your budgets anywhere on the forums? I would love to see the percentages of your incomes you spend on categories like transportation, food, large pesky bills like education loans or mortgages, entertainment, etc. (or if you no longer have large bills like that, your previous percentages).

Ok, ok, I get the point about the car. I will think more on that.

beanlady: I too had my misgivings about NYC, but she wanted the "experience" of doing social work in a large city. We are young(er) and don't know where we will eventually settle down. It would not have been my first choice, that's for sure. Then again, struggling here has led me to think about other options for the future, including this website.

I am in exactly the same place (job I don't much like but which pays like any full-time job I've been hired for. Still not great...) But I would even be willing to "double down" and work longer hours if I could find a tolerable and/or better-paid job. Not sure I would ruin my health digging in a mine, as someone suggested. Early retirement isn't worth much if you achieve early death in the process.

aj_yooper: what are SL and EF? Student Loans and ...?

aj_yooper

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Re: How to get started?
« Reply #30 on: January 07, 2014, 04:02:45 PM »
aj_yooper: what are SL and EF? Student Loans and ...?

My bad.  SL = student loans and EF = emergency fund. 


NinetyFour

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Re: How to get started?
« Reply #31 on: January 07, 2014, 04:24:34 PM »

frugalNYC

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Re: How to get started?
« Reply #32 on: January 07, 2014, 07:29:30 PM »
We spend about $38,000/year combined, and are able to save at most a few hundred bucks a month.

Okay, you're probably going to think I'm crazy but you can totally cut this spending in NYC. You didn't post a breakdown of expenses but the biggest expense in our fabulous city is housing, right? Do you have roommates? Before getting married, I was able to pay $550/month in rent because I lived in a (beautiful, spacious) apartment in Harlem with four other (amazing) people, two of whom were married (to each other, just to be clear).

Shop at Trader Joe's and limit dining out to only the inexpensive awesome restaurants as opposed to the expensive ones. Learn how to make your own food.

Don't pay for cell phone data. Everywhere has WiFi.

And seriously, sell the car. You say that you use it to visit relatives upstate? Think about going a year or two without doing this. Entice the relatives to visit you. I too have family upstate and the only reason I visited them in my first four years in the city was because I got the bus fare as birthday presents and they picked me up from the station. Look into post-school locations where you won't need a car. If you go into relocating with the understanding that you won't have a car, you're more likely to notice cool opportunities where you won't need one.


Now, the job sitch.

Could you tell us what your job is? Really I'm just curious. I worked for a year and a half at a low paying (22k/yr) job that I thought was my *dream job* but actually now that I'm in a role that appears more soul-sucky and corporate I've never been more satisfied with work. I'm also a writer (though I write nonfiction) with a liberal arts undergrad degree in the lucrative fields of philosophy and theater. My theory is that job happiness is 60% about the people who work with you and only 40% about the work itself.

(And just to emphasize that you can get your expenses down, I was able to live in NYC on 22k/yr while saving more than you and your girlfriend. For the two years before that, my budget was closer to $16k. And I still freakin' loved my life.)

Also, SIDE GIGS. Side gigs are the best in NYC. You're a writer. Look at the writing gigs on craigslist and ghostwrite someone's memoir on the weekends or become a TaskRabbit. Seriously. I have a friend (https://www.taskrabbit.com/profile/dmitry-s-13) who makes crazy money installing people's flatscreen TVs and putting together IKEA furniture. If you insist on keeping the car then think about putting it to work for you and renting it out to people on RelayRides (relayrides.com). Or hang out in the CostCo parking lot on the weekends and make some money driving people home with their boxes of groceries.

You can totally do this.
When I first started reading MMM I thought there was no way I'd ever begin to pay off my crazy student loans, much less retire early. But just a year into this, I'm on track to pay off my remaining $60k debt in less than two years. And I have a master plan that includes retiring by 40.

Also, it sounds like you have a really cool girlfriend. Having a rad partner is GOLDEN when you're into this Mustachian stuff.

You. Can. Do. This.

Guizmo

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Re: How to get started?
« Reply #33 on: January 07, 2014, 08:40:18 PM »
I lived in Brooklyn for like 10k a year not too long ago. My employer paid for my monthly train pass though. So you could say it was closer to 11k. I couldn't have even imagined living on $38k.

Yes, look for cheaper housing. It does exist in NYC.

Zamboni

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Re: How to get started?
« Reply #34 on: January 07, 2014, 10:06:19 PM »
Quote
My theory is that job happiness is 60% about the people who work with you and only 40% about the work itself.

I'd say it's 90% people and 10% actual work, unless you work in a very isolating job (like writing from home) or the salt mines.

uppy

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Re: How to get started?
« Reply #35 on: January 08, 2014, 06:52:27 AM »
Thanks for the good tips, frugalNYC.

Here's a basic look at our combined monthly budget:

Transportation (metrocards): $150
Entertainment: $75 (we rarely spend this much)
Work/School supplies: $50 (again, rarely spend this except when she needs books...in which case we go over budget)
Food: $350
Laundry: $16
Cellphones: $45 (<--neither of us have smart phones. I pay $15/mo pay-as-you-go.)
Other: $150 (this category is always different stuff, from cleaning supplies to gifts, etc.)
Utilities: $70
Rent: $1250 (everyone says this is ridiculously cheap. But we don't have roommates.)
Credit Card payment: $80 (0%APR)
Internet: $66
Car+Insurance: $200
Tax fund: $240 (this is not a bill. I am an independent contractor so I treat this savings like a bill for taxes.)

Total: ~$3,160

Yearly: $37,920

We do spend a little less than this since we are able to save usually $100-$200 per month under our budget. Occasionally it's more, occasionally it's zero, often due to unforeseen things like "mom's got empty nest syndrome and we have to visit." Expenses will be reduced a bit when we pay off the car, hopefully this month or next, and the credit card gets paid off in a few months at 0%. We are currently paying nothing towards loans but will start putting almost all savings towards them after we pay off the car.

In the summer months we biked to work, but since then it has been dark when we come home and we have both been almost killed several times despite multi. flashing lights on us and obeying traffic laws. Gf actually got hit (nothing major). So we stopped.

I don't know how to find cheaper housing without getting roommates, which I've found as a writer is generally a bad idea. We have thought about trying to live in Queens, where supposedly it's a little cheaper. But we are currently in what's thought of as a "cheap" area in Brooklyn -- definitely not fashionable or nice.

My problem is even finding these soul-sucky corporate well paying jobs. I'd rather not say what I do but it is physically exhausting and pays about $25k/year. The other part of our "income" is actually money my gf was able to borrow from relatives for school that we portion out to ourselves monthly, which equals about $13,500/year, so total of about $38,500.
« Last Edit: January 08, 2014, 07:05:23 AM by jrez »

lhamo

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Re: How to get started?
« Reply #36 on: January 08, 2014, 04:45:49 PM »
慢慢来!(hope the characters show up right...)

If you're going to be in NYC long enough, definitely look into moving to Queens.  I know prices have gone up since we lived there in 2000-2003, but we had a great pre-war apartment in Jackson Heights for much less than comparable housing would have been in Brooklyn.  In some parts of Jackson Heights, Elmhurst, Woodside and Flushing you might actually think you are in China -- you can totally immerse yourself in Chinese by buying groceries in the Asian markets, etc.  You might be able to find good side gigs tutoring english or other subjects if you target the Chinese-speaking market, too. 

In terms of job opportunities, you might want to look into foreign student services offices at universities and colleges.  Lots of schools are targeting the Chinese market and having Mandarin ability is a plus. 

I would try hard not to lose the Chinese you worked so hard to acquire.  There are good online programs you can use, and in NYC it is easy to find tutors or language exchange partners.