Author Topic: Late start to financial adulthood..  (Read 3119 times)

GreekStache

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Late start to financial adulthood..
« on: March 02, 2016, 07:53:08 AM »
Topic Title: Reader Case Study - Advice to growing up financially

Life Situation: 32, Single, 0 dependents, Michigan, USA.

Gross Salary/Wages: 60k - Paid 2x per month

Pre-tax deductions: 401k - 9% + 6% company match, insurance - 158$ month

Other Ordinary Income: N/A

Qualified Dividends & Long Term Capital Gains: N/A

Rental Income, Actual Expenses, and Depreciation: N/A

Adjusted Gross Income: This should equal the additions and subtractions above.

Taxes: Federal - 15.71%, state/local - 4.2%, and FICA - 8.3%

Current expenses :
Internet -39$
TV - 66.80 ( Can't cut the cord ill family member loves tv)
Phone - 66.80
Car Insurance - 149
Car - 606 - Leased
Student Loans - 200 (Finish school in 2 weeks this will jump to 493 in 6 months) - 49,386.29 (Total Balance)
CC Debt - 5799.57 - Minimum payment - 126$ - Variable APR - 15.43% - 21.43%
Gas - 200
Dating / Dining - 200
Dog - 90 - Looking into cheaper high quality food
Clothing - 69
Spotify - 10 - Cancelled
Plex - 5 - Cancelled
Haircut - 30 - Going to great clips

Total - 1857.60


I'm currently in the benefit of having groceries and rent / utilities covered as I take care of an ill family member.


Assets: 401k - Rollover IRA - 12,015.38 (VOO- 8603.29 VMGRX- 3090.77)  Work 401k - 6776.25 (VPMAX- 70.83% GTSVX- 19.31%  Midcap Index Fund K - 9.86%) - Savings - 1568.38


Liabilities:
Student Loans


1-05 Direct Loan - Unsubsidized
$863.04 6.800% No Due Date
 

1-07 Direct Loan - Subsidized
$2,646.98 6.800% 04/01/2016
 

1-12 Direct Loan - Unsubsidized
$2,110.25 6.800% 04/01/2016
 

1-08 Direct Loan - Subsidized
$3,447.83 6.000% 04/01/2016
 

1-09 Direct Loan - Subsidized
$3,507.18 5.600% 04/01/2016
 

1-13 Direct Loan - Subsidized
$1,000.00 4.660% No Due Date
 

1-14 Direct Loan - Unsubsidized
$2,505.76 4.660% No Due Date
 

1-15 Direct Loan - Subsidized
$4,259.00 4.660% No Due Date
 

1-16 Direct Loan - Unsubsidized
$4,854.20 4.660% No Due Date
 

1-17 Direct Loan - Unsubsidized
$3,483.38 4.290% No Due Date
 

1-18 Direct Loan - Unsubsidized
$2,740.60 4.290% No Due Date
 

1-01 Direct Loan - Unsubsidized
$2,650.67 3.860% No Due Date
 

1-02 Direct Loan - Subsidized
$4,535.67 3.860% No Due Date
 

1-03 Direct Loan - Unsubsidized
$2,120.32 3.860% No Due Date
 

1-06 Direct Loan - Unsubsidized
$2,475.64 3.860% No Due Date
 

1-04 Direct Loan - Subsidized
$3,524.44 3.400% No Due Date
 

1-10 Direct Loan - Unsubsidized
$1,533.76 2.320% 04/01/2016
 

1-11 Direct Loan - Unsubsidized
$1,127.57 2.320% 04/01/2016


Specific Question(s):

I've never been good with money and I had that moment a couple of months ago that I realized I needed to grow up. I have been very dumb and could have been taking advantage of the rent / free

groceries for a few years instead I have just done whatever I wanted.  I've never been very good with saving money and want to change that.  This benefit will be coming to an end soon so I'm

trying to make up for it while I can. I know I need to kill the CC debt first and foremost and I'm throwing all my spare money at it.  Where do I go from
« Last Edit: March 02, 2016, 09:16:06 AM by GreekStache »

Easye418

  • Bristles
  • ***
  • Posts: 469
Re: Late start to financial adulthood..
« Reply #1 on: March 02, 2016, 08:30:31 AM »
Not too late.  Welcome to the forum btw.  I am not an extremely frugal person however this will help you.  Also, take note of my sig, those are your only options.

Some low hanging fruit here.... Phone (try Google Fi), TV, Car, Car Insurance, Clothing and Haircut (insane to pay $30).

I presume the Car is brand new, potentially a truck, hence why you are paying full coverage Car Insurance?  This will be the first thing the board asks you to sell and get a used Prius. 

1.  Downgrade Car if you can come out decent.  Lowering Car Insurance.
2.  Switch to Google Fi for $30 a month.
3.  Cut the cord on TV.  Get Netflix if you need too.
4.  Haircuts should be no more than $10 bucks.  Start using Great Clips or some other discount haircutter.  My wife does this for me for free, but obviously, you are single.  Have a family member do it?
5.  Maybe drop 401k from 9% to 6% to just get the company match.  Your dollars are better off going to paying high interest debt.  You are 32, however, and saving should be a priority.
6.  Spotify and Plex - Gone, cancel.  Use free services instead. 
7.  Clothing - $69 a month.  Might need this to attract a partner, but its pretty high.  I spend maybe $300 a year on clothes and im a working professional.  Again, having a wife helps this one out for me.

Why is your dog $90 a month?  I have two GSDs and a Pom and we spend maybe $30-$45 a month on a 40lb bag of high quality food from Costco.

Now you are a single person, so entertaining yourself to keep yourself sane is probably very high on the list.  You also live in the upper Midwest with ridiculous climate for 60% of the year (I lived in Chicago for my first 24 years of life) so you are probably inside a lot.  So Spotify and a Netflix sub might be in order.

Also, I don't know what your investment choices are, but I would recommend you throw them into a Vanguard index fund or Target Retirement account.  Diversifies your portfolio and balances it correctly at low expense ratios.   
« Last Edit: March 02, 2016, 08:34:14 AM by Easye418 »

little_brown_dog

  • Pencil Stache
  • ****
  • Posts: 915
Re: Late start to financial adulthood..
« Reply #2 on: March 02, 2016, 08:45:26 AM »
+1 on the car - that really needs to go. ASAP. $600/mo cars are for spendy millionaires (not mustachian millionaires!), not a person with cc debt and a hefty amount of student loans! Trade that bad boy in for a reliable, used, cheap car and save yourself some major money each month.

Eating out/dating - can easily be cut in half. The coolest people to date will be thrilled to mix things up and go on hikes, play in the park with the dog, or just relax at home with beer/wine and netflix, just as often as going out for dinner and drinks.

My biggest priorities if I were you would be to: immediately lower those car costs, aggressively pay off the cc debt and then commit to never getting into cc debt again, and saving up a bit more of an emergency fund. You will be shocked how fast you can get rid of that debt if you just commit to slashing your unnecessary dining expenses and your car. Only after I had no cc debt, and 3 months of expenses in an efund would I move on to investing my extra cash or aggressively tackling the student loans.

« Last Edit: March 02, 2016, 08:47:33 AM by little_brown_dog »

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Late start to financial adulthood..
« Reply #3 on: March 02, 2016, 09:03:05 AM »
When does the lease end on your car? Can you end it early? How long is your commute that you spend $200 on gas - is the problem the distance (I know you aren't paying rent right now) or the MPG?

Your debt-to-income is not bad, but your interest rates are killer. See if you can consolidate at least some of these into lower rates. But know that it won't help you much if you continue making decisions like leasing a car for $600 a month. You should take a break from credit cards for a couple of years while you recalibrate your habits.

Apples

  • Pencil Stache
  • ****
  • Posts: 891
Re: Late start to financial adulthood..
« Reply #4 on: March 02, 2016, 09:08:26 AM »
Just popping in to say you probably do spend $90/month on your dog.  We have 1, and with food, bones to chew (he's the kind of dog that NEEDS things to chew on and goes through them quickly), and vet bills and preventative meds, our average spending is about $100/month.  So there may be ways to trim that back, but not much.

GreekStache

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Re: Late start to financial adulthood..
« Reply #5 on: March 02, 2016, 09:12:47 AM »
Issue with the car is it is a lease and it just started in December, so I'm not sure if that will be able to get lowered.  Huge bonehead move that won't be done again.  I can go cheaper on dog food now that you point that out and grin and bear the bad great clips haircuts.  I was accepted to ProjectFi, I just need to get one of their phones.  Dining / Dating expense is only so high because still in the early stages of going out and we're not fans of the cold so we usually go to a restaurant / bar etc.  I drive 30mins to work 18mpg.  I'd love to cut the cord, but watching television is the ill family members basically only activity.
« Last Edit: March 02, 2016, 09:14:52 AM by GreekStache »

little_brown_dog

  • Pencil Stache
  • ****
  • Posts: 915
Re: Late start to financial adulthood..
« Reply #6 on: March 02, 2016, 09:31:29 AM »
Issue with the car is it is a lease and it just started in December, so I'm not sure if that will be able to get lowered.  Huge bonehead move that won't be done again.  I can go cheaper on dog food now that you point that out and grin and bear the bad great clips haircuts.  I was accepted to ProjectFi, I just need to get one of their phones.  Dining / Dating expense is only so high because still in the early stages of going out and we're not fans of the cold so we usually go to a restaurant / bar etc.  I drive 30mins to work 18mpg.  I'd love to cut the cord, but watching television is the ill family members basically only activity.

For dog food we use diamond naturals. 35 for a 50lb bag at tractor supply. As for the lease how much will it cost you to break it? At 600/mo you are looking at spending over 7000 in the next year. It could be totally worth it to break the lease if it will cost you alot less than that. The dealer may be more willing to work wi you if you offer to buy a cheaper car through them as opposed to just trying to walk away.
« Last Edit: March 02, 2016, 09:34:46 AM by little_brown_dog »

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5489
  • Age: 32
  • Location: Earth
  • K Thnx Bye
Re: Late start to financial adulthood..
« Reply #7 on: March 02, 2016, 09:43:58 AM »
I would pay the penalty to break the lease, or find someone to take it over.

To put things into perspective your car is costing you $11,500 per year currently.

This amount is my total non rent expenses for 2015, including vacations, bars, and eating out a few times a month.

You should find a cheap $2-3k car that gets 30+mpg for the foreseeable future.

mountainstache7

  • 5 O'Clock Shadow
  • *
  • Posts: 37
Re: Late start to financial adulthood..
« Reply #8 on: March 02, 2016, 09:49:17 AM »
Good advice so far. If you're stuck with the car, then just focus on killing those debts. I liked using Dave Ramsey's debt snowball method(you can look it up online) or you can start with the debts that have the highest interest rates. Do whatever you can to reduce monthly expenses that are not debts, including lowering your 401k contribution to where you're getting the free company match. It's definitely not too late, I came back from 1.8 million in debt at the age of 33 and on pace to FI by 45. With some focus you can knock this out in pretty short order.

You could look at consolidating those student loans with SoFI. There is a link to them off the MMM site as another alternative to making some quick progress.  https://www.sofi.com/sofi-refi-300/

mountainstache7

  • 5 O'Clock Shadow
  • *
  • Posts: 37
Re: Late start to financial adulthood..
« Reply #9 on: March 02, 2016, 09:54:34 AM »
Definitely agree with 2Birds1Stone. Paying some money to break the lease(assuming it's not too painful) is well worth it. Your insurance will drop with a cheaper car too. Getting out of that fleece would be huge.

NestEggChick (formerly PFgal)

  • Stubble
  • **
  • Posts: 238
  • Location: Boston-ish, MA
    • Nest Egg Chick
Re: Late start to financial adulthood..
« Reply #10 on: March 07, 2016, 08:25:08 AM »
Congratulations on starting to get your financial life in order! It'll feel great! I won't bother to repeat the great advice that's already been offered. Like you said, you need to pay off that cc debt right away. I suggest cutting up your credit cards and not using them for a long time. Then, split your paycheck. Open a new bank account and have X% go into that account every pay period. Use that money to pay off the credit card debt first and when that's gone, put it toward the student loans. This is the "pay yourself first" method; you'll be sure you always have money to pay down your debts and there's no chance you'll accidentally spend it on discretionary things. You can sit down with pen and paper today and figure out this amount. Good luck!