Author Topic: New Young Mustachian - Need Advice  (Read 4577 times)

lvoevge

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New Young Mustachian - Need Advice
« on: July 08, 2014, 09:50:11 AM »
Hi all:

I'm a 24 year old PhD student. I'm studying natural resource economics and I'm looking at about $100k of debt when I finish. The good news is that I'm set to make roughly $100k to start as an economist. I'm trying to adopt more mustachian principles and make the best financial decisions for myself and my fiance.

Currently have no real investments (other than my education)
Roughly $800/month in living expenses
$70/week on groceries
Probably about $50 a week on random things/eating out
$4000 in savings

$2300/month income

I am wondering if anyone has any tips on how I can use this to create a surplus. I've been trying to just add money in savings each month but it never seems to happen.

Thanks.

Cheddar Stacker

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Re: New Young Mustachian - Need Advice
« Reply #1 on: July 08, 2014, 09:54:07 AM »
What is the income from? Do they have a 401K plan?

What are the details on the student loans? Can you make payments toward the highest interest rate loan while still studying?

lvoevge

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Re: New Young Mustachian - Need Advice
« Reply #2 on: July 08, 2014, 09:57:20 AM »
What is the income from? Do they have a 401K plan?

What are the details on the student loans? Can you make payments toward the highest interest rate loan while still studying?

The income is from a graduate assistantship flat rate @ 1700/month and 500/month from my fiances employment.
The student loans are unsubsidized all at the same (estimated) interest rate of 400/month. I have 2-3 years left. The loans are deferred and no payment is required--interest or principal--until I graduate.

I'm in for quite a good starting salary, but I'm not sure if that justifies inaction now.

iampatriciag

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Re: New Young Mustachian - Need Advice
« Reply #3 on: July 08, 2014, 10:09:15 AM »
If you're having trouble adding to the savings account, but you understand that this is crucial, consider transferring money with every single deposit to your account.  Perhaps it can be set up automatically, but I do this manually - whenever I get paid or deposit a random check (a rebate on an appliance purchase?  OK!), I make a flat-out 10% transfer from checking to savings that same day.  We've got a good emergency fund cushion, so whenever we reach some other arbitrary number above that, (an extra $2k, for example), that gets swept into our Vanguard account.  This is just 'baby steps' but it's added hugely to our net worth with no discernible 'pain' for all that gain.

Once those student loans come due, and you start earning 4x your current salary, keep saving!!  Anything extra should go to the loans.

Cheddar Stacker

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Re: New Young Mustachian - Need Advice
« Reply #4 on: July 08, 2014, 10:14:20 AM »
I'm in for quite a good starting salary, but I'm not sure if that justifies inaction now.

That was kind of my point. The loans are deferred, but can you make payments? If so, it would be in your best interest to begin the process now to get that outstanding balance to a more reasonable figure. If you find out some have a higher interest rate than others, do everything you can to target those loans first.

I prefer to invest than pay down debt, but that's a big number and I would be more comfortable cutting it in half before I started really seriously investing.

Keep those expenses low, even after the $100K jobs starts. Once you are eligible for a 401K, start stashing there even with outstanding student loans, particularly if there is a company match because it's free money. At $100K you are going to be paying a lot of taxes. Deferring as much as possible will become important very fast.

CowboyAndIndian

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Re: New Young Mustachian - Need Advice
« Reply #5 on: July 08, 2014, 10:17:27 AM »
Quote
The loans are deferred and no payment is required--interest or principal--until I graduate.


The loan and interest may be deferrred, but the interest is accumulating.

Pay down with the money saved each month, but keep your savings for emergencies.

okashira

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Re: New Young Mustachian - Need Advice
« Reply #6 on: July 08, 2014, 10:40:41 AM »
Quote
The loans are deferred and no payment is required--interest or principal--until I graduate.


The loan and interest may be deferrred, but the interest is accumulating.

Pay down with the money saved each month, but keep your savings for emergencies.

Not necessarily.
If they are federal subsidized Stafford loans, the interest is payed by the government, until 6 months after graduation. Take advantage of this and pay down the one's that are not subsidized and high interest.

The good news for OP is that she does not need to worry about researching investments for a while. You have some great investment available in your own accounts (high interest student loans)

CowboyAndIndian

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Re: New Young Mustachian - Need Advice
« Reply #7 on: July 08, 2014, 10:42:44 AM »
Quote
Not necessarily.
If they are federal subsidized Stafford loans, the interest is payed by the government, until 6 months after graduation. Take advantage of this and pay down the one's that are not subsidized and high interest.

He very clearly says it is an unsubsidized loan.

ampersand

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Re: New Young Mustachian - Need Advice
« Reply #8 on: July 09, 2014, 07:31:24 PM »
One way of guaranteeing some savings/debt reduction is to automatically have a withdrawal put on you paycheck or your bank account. This could fund a Roth IRA, or pay down your debt. If it's removed from your regular bank account it might be easier to not spend it :)


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BZB

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Re: New Young Mustachian - Need Advice
« Reply #9 on: July 09, 2014, 08:36:13 PM »
Are you in the US? If your university gives you benefits such as medical insurance, flexible spending plan, access to student recreation center, etc., make sure you are maximizing your use of those. For example, when I was in grad school we got mostly the same benefits as employees, minus the access to retirement accounts. I used the rec center, student health clinic, and used the flex spending plan to pay for medical expenses with pre-tax dollars. Also, take advantage of any career development seminars, advising, mock interview practice, resume critique, and mentoring from alumni your school may offer. Grad school will treat you like cheap labor, but there are actually a lot of nice resources for students if you look around. Also I definitely recommend starting a Roth IRA if you haven't already, using automatic withdrawal from your paycheck.

lifejoy

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Re: New Young Mustachian - Need Advice
« Reply #10 on: July 09, 2014, 10:13:33 PM »
I just wanna give you props for your already low expenses! Good job. Does living expenses include things like cell phone and Netflix? I'm thinking if you put out a more detailed breakdown, we could provide more specific advice.


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Chranstronaut

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Re: New Young Mustachian - Need Advice
« Reply #11 on: July 10, 2014, 12:11:16 PM »
Quote
The loans are deferred and no payment is required--interest or principal--until I graduate.


The loan and interest may be deferrred, but the interest is accumulating.

Pay down with the money saved each month, but keep your savings for emergencies.

This is really important advice, which I really wish I had followed when I was in school.  If you still have 2-3 years left in your program, you are going to have a hefty chunk of interest accumulated when you graduate.  If you're taking on near 100k in debt, a 5% student loan is adding multiple thousands of dollars per year just in interest.  At least the first handful of payments you make will be entirely interest.  Small payments while you are still in school will help reduce some interest accumulation and allow you to attack the 100k principle directly once you have a better salary.  It will also get you in the habit of paying out extra money to your loans before optional expenses, which may or may not be helpful for you mentally.

Chranstronaut

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Re: New Young Mustachian - Need Advice
« Reply #12 on: July 10, 2014, 12:22:00 PM »
Another question/comment from a fellow young Mustachian:

Are some of your loans from your undergraduate degree?  If they have been deferred for several years already, you might be surprised at how much interest you are accumulating.  It sounds like your interest rate is 4-5%?  I would at minimum get all current information on the loans, their actual interest rates and monthly minimums, and get online accounts set up with the loan provider(s) so you can make payments easily if you want to.  I know Sallie Mae and some other providers will offer a discount on the interest rate for setting up automatic payments.  It would be worth looking into something like that as early as possible if you're sitting on several year old loans.