Starting out – low income, low expenses: what now?

[Platypus]

I’ve read through MMM’s blog, and really taken all of it to heart over the last few months, but I’m unsure where to focus now. Here’s a lot of information, rambling, and long…

I’m 26 years old. No current debt, but rebuilding my credit from the ashes of my early 20's. I had old bills go to collections, but I've paid them all off over the last two years. I moved my money a few months ago to a great local CU with a much better checking/savings interest than the big bank I had been banking with.

I only gross $30k a year at a technical manual labor job with no promotion potential. I receive dental/medical insurance coverage through my employer. I live with my partner of two years, and we've arranged that I pay all the groceries for the month plus $200 in rent. (He makes significantly more income.) For the two of us I average $300 total a month in groceries. We prefer to keep accounts separate for the foreseeable future, and I agree to pay a proportional amount of unusual expenses, such as travel or large household purchases.

I picked up a library card a few months ago, and then sold off about half my books. I’ve checked out dozens of cookbooks with a focus on greens and beans. I scan through each cookbook and choose a few recipes I find interesting, then take a digital picture of the recipe and file it away on my computer. I plan to use the library benefit of 75 free b&w print pages per week to create my own notebook of recipes. We’re going to switch to mostly bean/lentil/rice/egg protein for 2013, to see how low we can reduce our grocery bill.

I’ve been paying insurance on my old car for the last year, but I find that I only drive at most 2 days/week and usually for trips I could otherwise be taking on public transit. My low credit score has heavily affected my auto insurance premium, and I currently pay $1600/year. I already pay $44/month for an unlimited bus pass through work, which I use it to bus to work 5 days a week.

I'm planning to cancel my auto insurance in February, sell my old car, and use Zipcar for any driving that I can't use my partners' car for. I would have switched to Zipcar earlier, but we currently live too far away from any Zipcar locations. In January we move closer to my work, and into a more urban area, which puts me very close to a few Zipcar pick-up lots.

After I drop my auto insurance in February, my monthly expenses will look like this:
$1975 (monthly income)
-$200 (rent)
-$300 (groceries)
-$30 (cell phone plan)
-$44 (work transit pass)
-$55 (estimating 2 3hr Zipcar trips/month)
-$35 (dog food)
- about $60 in incidentals (lunch w/ friend, seeing a concert, ferry ticket)
= ~$1250 to savings each month

I don’t have much in savings right now, only about $3500, as I’ve only recently really tightened down on stupid purchases (eating out for lunch, buying coffee at work, drinking soda). But, my savings is growing and I don’t know what to do with it at this small of a scale. Is there anything I could be doing with this tiny stash?

I’m considering going back to school to finish a bachelor’s degree, as I only have an associate’s so far. At the earliest this could happen Fall 2013, but I’m not sure if I could float it that soon with savings + part-time work + financial aid. I feel like if I went towards the career that I think would make me happy, I’d be looking at becoming a Licensed Therapist.  The best available option in my area for graduate school has an estimated cost (w/o considering financial aid) of $46k total for their program. I don’t know what I would be looking at income-wise after that, and I'm wary of such a large student loan (never having had one before). Any advice?

I’m also looking to develop a side-job to increase my income. Currently considering pet sitting/walking and creating art to sell at local art fairs, or to sell through Etsy. Does anyone have experience with this?

Am I on the right track? Any suggestions for other ways to move forward?

[Working Mama]

Platypus,

Congrats!  You are thinking things through, pretty well!


Since I am all too new at this I shall defer to the experienced folks here in.  My humble and meager contribution is to ask whether you can go to school and work at the same time?  Long ago, in a different time, I was able to wait tables working the 5pm – 5 am shift in a dinner two nights and the 5- 3am on school nights and earn bachelors without any debt.  Perhaps that is still possible?  (I have no college friends; I was too busy working to make any.)

Another thought is that States often have a department of labor report out on the labor market.  You can see projections for the next 10 years, for your state.  Consider reading one of those reports (not the newspaper articles about them since hacks (aka journalists) often miss a lot in the details) Are the jobs going to be around when you finish?  What is the projected demand and salary for the degree you will finish with?
Love, Mama

[Crabricorn]

Do you mean a licensed mental health counselor (or some type of other therapist)? I'll assume that's what you mean and address that and if you meant something else, feel free to disregard!

I'm a PhD in psychology and a licensed professional counselor. I've done it all at various times - been a professor, worked in a mental health clinic, private practice, worked in a hospital, was a school psychologist at one time, and more! Be very careful about this career field. Spend as little money as possible getting the needed training. I see tons of people going into schools that are for profit (Walden, Capella, etc.). You can easily end up in $100,000 plus debt for a job making 25-35k if you are lucky enough to get a job. In general I'd say avoid the PsyD degree if you want a doctorate. They tend to be expensive! You'll need at least a master's to get licensed and I'd say go to the cheapest state school you can. Also, find out what the career is really like before you get into it. A lot of people have this notion that they give advice to people and that's not what you do. Also, insurance dictates treatment to a large extent and that can be frustrating. Try volunteering somewhere to get some experience if at all possible, and network like crazy.

I was lucky b/c I interned/volunteered in college and got hired less than 2 weeks after graduating (BA) with a full-time job. I was able to go to grad school for my master's with no debt because I worked through it full-time (with a better job that I got because of the first one). I also got my supervised hours for licensure at work for free - many of my classmates paid $50-100 per week for this and you've got to get it for 1-2 years or longer in some cases! Then I did the doctorate with minimal debt - I have some but nothing like most of my classmates. I have a 1/3 of what they have and I ended up with 2 doctorates! After completing this, I took a full-time professorship which I did for about 10 years while pursuing other stuff on the side.

I ended up leaving academia to consult in a specialized area. That's something I'd recommend to you - forget being a generalist; you'll make no money! My other doctorate is in criminology - the psychology/criminology angle can be very lucrative. As of today, I have a book contract in a totally different area of psychology(peak performance/sport psychology) and I'm working to build up a consulting business in that area.

I guess what I'm saying is be flexible, be open to opportunities and think like an entrepreneur. They will not teach you anything about business in grad school and if you do private practice, you'll be an entrepreneur! Learn as much as you can about business. Also, a lot of therapists say they are not in it for the money. This is crap! My dentist may not have been in it for the money, but he doesn't hesitate to charge me a boatload, nor does my accountant! Therapists (in general) are the most money averse group of people I know. You need to make a certain amount of money to pay for your expertise period!

That's my two cents and I hope it is at least somewhat helpful :-) Good luck & I hope you end up with a great career!

[Karl]

Platypus,

Congrats on doing so well financially and on trying to think through your future goals.

I, as a Psychology professor, double what Crabricorn has said.  If you go go graduate school, go to a school (usually a state school) that will *pay* for you to attend; if you can't gain entry to such a program, then find a job and rethink your graduate school plans. Coming out of graduate school with no debt gives you a multitude of options. Graduating with debt gives you "chains of gold."  During my early years of teaching I, foolishly in retrospect, wrote recommendation letters for some of my students who wished to attend for-profit educational institutions.  They now have 30-year mortgages on their future earnings. I say "NO!!!!," currently, to my students when they make such requests. For those who have worked with me for several years, and understand my sense of humor, I also start to waive my hand back and forth through the air and invite them to walk into it.  :)

Please be aware that, according to data presented at the MPA conference in Chicago, the APA has found that the median professional lifespan of a therapist (someone doing therapy full time) is five years.  People who stay in the field longer have taken steps to avoid burning out, especially by taking on non-therapy professional roles.  Think carefully about what you will do, in addition to therapy, as professional roles that will help you avoid burnout.

That said, if you wish to pursue this career path, I strongly recommend working toward government employment (e.g., Indian Health Service, Veterans Affairs, Military--civilian or in uniform). This avoids some of the headaches of billing and outside insurance control that show up in private practice.  Also, should you end up with some debt, several of these programs provide limited loan forgiveness/repayment.
 
I wish you good luck in your future educational and work endeavors,

Karl

[JanMN]

Just want to say you are doing GREAT on your savings rate- almost 65%!  Keep up the good work.

[caligulala]

I was a professional petsitter for 7 years. I owned a very successful service and had many dog walkers over the years. The job has reduced grown men to tears. It's much more stressful than one would imagine because if you want to make money, you need to be very efficient and there are many variables you have no control over. You may have a major clean up to take care of, houses can be broken into, animals can get sick, not to mention getting stuck in traffic and running behind schedule for the rest of the day. Animals also don't take days off, so if you are going to build a clientele, you need to be willing to work 7 days a week, including holidays. It is not the joyful daily romp in the park most people envision. Many days I worked solidly from 5am-11pm between visits, scheduling, client interviews, office work and the worst, bugging my clients to pay.

On the plus side, you get a ton of free, enforced exercise (nothing will help you lose or keep weight off like walking, even at a low speed), you get to hang out with some fun animals, and you don't have a boss. If I were to start the business over again, I'd be careful to limit clients to a small geographic area and be choosier during client interviews. In the beginning you'll want to say yes to everyone, but if you can sniff out crazy at your first meeting and decline the job, you'll save yourself so much trouble.

I also have a number of friends who are "successful" in the etsy/renegade craft fair world. It's more of a hobby that happens to pay for itself than a money making enterprise. I'd guess that they average $2-3 an hour for their efforts? So if you love to make something, go for it, but if you are looking for actual income, you're probably better off elsewhere.

[Bakari]

Your situation sounds not all that far from mine.
I make somewhere roughly in the range of 20k-40k a year at a semi-technical labor job.  I pay about $250 in rent, and save around $1000 a month.  I have an associates degree, but nothing higher.  There isn't much room for income increase or expense decrease without major life adjustments.  And I didn't make the best choices when I was younger, and only finished paying off debt feb 2010.

Then I come here, and look at these folks who make 50-100k, are buying houses, have new cars to sell, cable to cut, and it seems impossible to catch up.

But that 1250 you are saving each month turns into 15k for a year.  In 3 years its 45k.  In my case, I'm at $37k, (plus my trailer is paid for and is worth roughly 10k) in a little under 3 years from when my net worth was 0.  At my (or your) low level of living expenses, that'd be enough to live on for 4 years with no income. 
As long as the trend holds, I should be able to buy a multi-unit rental property within a few years (if I can't secure a loan with my income, maybe a few more years until I can buy a fixer in cash), and then, with the rent income, given my expense level, I should be able to retire right then (other than managing the rentals) if I want to.

The percent you save out of your total income is what matters, not the absolute numbers.  The single most important thing for you to do now is to just keep at it, don't get discouraged by how slowly the 'stach seems to grow.  A year from now its gonna seem big.  A couple years from then its gonna be hard to believe how fast it seems to be growing.  And that's even before it reaches the threshold where it begins to grow on its own from interest.

As to where to keep it, keep learning about investing as you go, try stuff out, make mistakes.  The amount is small enough that you could lose everything in the market and it won't set you back that much.  Better to learn now while the stakes are low.  I'm just now almost made up my losses from my very first investment experiment.  Totally worth it.

I only wish I had started all this at 26, instead of 30...

[Platypus]

My humble and meager contribution is to ask whether you can go to school and work at the same time?

This is definitely do-able. I've been taking an evening class at a local community college every quarter for the last year while working full-time, and I suspect that I could easily continue to work part-time while going to school. I've never handled a full load of "real" college classes before, though. I'd more inclined to take a quarter or two without work to get a feel for it, then get myself a part-time job.

Your situation sounds not all that far from mine...

You're right! We've definitely got a similar financial history. :) And, yes, percentages definitely count for a lot! Your response, and the responses from Karl & Crabricorn, definitely have me reconsidering my outlook...

As much as I like the idea of being a Licensed Therapist, the median income (Bureau of Labor Statistics) is listed at $46k and, yeah, people in that field sure burn out quickly. Another career choice I often think about is becoming a biostatistician, learning statistics and analytics geared towards biology and medicine. I live in a city that's flush with hospitals, particularly research hospitals and research centers. If I was accepted to grad school for this Master's degree track my tuition would be covered through the program and TA/RA work. Median income for a biostatistician would be closer to $75k. It's also a degree that gives me some flexibility I think, since once I know high-level statistics/analytics I can probably transition to other number-crunching jobs fairly easily.

The more I look at my financial situation, the more I feel like it may be in my best interest to build a bit more income before I return to college to finish my Bachelor's degree. By Fall 2014 at my current savings rate I could have 30k in the bank as I start classes. My yearly tuition would be $13k, and I should need about two and a half years of school to finish my Bachelor's. With part-time work I could almost certainly finish college without needing a loan.

And that's expecting no financial aid. I've filed my FAFSA the last two years, just in case, and using the calculator offered on my future colleges' website they show me as eligible for significant grants.

I've been taking one evening class at a local community college every quarter for the last year to boost my transcripts, which I've been able to do for free because of a state-employee benefit in Washington. I plan to continue taking as many classes as I can that'll be applicable to my Bachelor's degree.

I'm feeling really hopeful now. It's not even bumming me that I can expect at least another 21 months at my current soul-sucking job! Thanks for the feedback, guys. I really really have appreciated the information and perspective I've gained. (I guess this sorta turned into a journal, maybe I should move myself over to that forum.)