Author Topic: Reader Case Study - First Step to Financial Freedom at 22??  (Read 5085 times)

Travis.S92

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Reader Case Study - First Step to Financial Freedom at 22??
« on: December 27, 2014, 08:48:14 PM »
First off, let me start by saying: I am SO glad I came across this website. You see, I believe in omens, and the world has been sending me many good omens about investments and being able to break free from this slavery world. I felt it to be a very clear sign when I came across Mr. Money Mustache's blog!

Now

Income: My one job as a Dining Facility Mentor, pulling 9.27$ an hour at roughly 40 hours a week.

Current expenses: Car Bill: 275$ a month, it is a split bill for a car with my parents, who have the loan for the car, I am pitching half payments with them for my using the car more than them.
Phone Bill: 80$ a month, looking to quit T-Mobile and try out Republic Wireless.
Gas for vehicle: Roughly 50$ bi-weekly (We live on a military base 30 miles from nearest town, on the opposite side of the mountain from it.)
Food: Roughly 200$ a month. I help put food in the house for 6 people.

Total Monthly Expenses: Approximately 655$
Total Monthly Salary: Approximately 1,400$
Expected Monthly Ending Balance: 745$

Questions:

1: How do I get my wife to commit to cutting unnecessary costs?? Current game plan: Trying to encourage her to study stock markets and investing, watching money grow rather than drain to empty. It is going on 3 years and she still does not understand the concept that "little things add up."
2: If I can hit my monthly ending balance target, how should I set it aside? I have opened, sadly I know, my first savings account. I currently can only invest 50$ (Poor choices made due to Christmas holiday and sister's upcoming wedding in January.)
3: Is there any hope for me?!

Thank you to everyone who takes the time to read my case study and assist in any ways possible!

Edit: Answers to the questions I seemed to miss, hope this gives a bit better of a picture for you all!

My wife is currently unemployed due to some personal issues we are currently working on.
No kids, but does helping care for 4 dogs and a guinea pig count? (We rotate buying the dog food every month, that would be roughly 40$ a month, guinea pig would be about 20$ a month. So t hat's 60$ off that 745$ which brings us to 685$.)
No rent/mortgage due to living with my parents.
My wife currently has no financial position other than learning how to manage my account.
When she is finally able to work we will most likely have a shared account.

I attended a not so great college to become certified as a medical assistant. I graduated there top of my class with honors and all, became certified and sadly many of the medical offices seem to see that training irrelevant. This certification expired now 2 years ago and helped with little to nothing.
I am currently working on getting into the oil fields nearby. One of the soldiers my dad works with has been going to them during his leave and had recommended it to me. If I can get in it will be MUCH better pay at $375 a day to start.

As far as where my current job is going: no where. I have pushed for higher positions strategically as possible with my company and they have given me only 1 promotion and 2 raises, which as you can see by my hourly rate is next to nothing. So I am hunting for better jobs at the moment as mentioned.

Commute: Commute would be roughly that in my original position, but by the grace of God they finally understood I'd be better suited to fill a position that is only 2 miles from my house. Other than once or twice a week trips to town for groceries/outings, we all walk most places here.

Savings: What is the difference between savings and high interest savings? What would be considered high interest? My current savings account (mind you just recently opened) is at 1.00% interest. They also host a "Dream Account" in which you save for something such as a house/car that I will be investing in soon which is set at 1.05% interest and offers a 5.00% bonus for every 6 months of consecutively adding to the account and not withdrawing from the account. I haven't started yet because I'd like to get opinions on if that is worth it. It is with Barclays Banking that this is through.

Credit: My credit score is low, could not get offers through most credit card companies, working with small finances through Fingerhut to build credit (recommended by my mother, if there are better ideas please let me know!)

Hope these answer the questions well and thank you so much for the help!
« Last Edit: December 28, 2014, 06:01:18 AM by Travis.S92 »

marty998

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #1 on: December 27, 2014, 09:10:16 PM »
Lots of questions for you:

Does your wife work? If not why not?
Do you have kids?
Where's your rent/mortgage line - do you live with your parents / in laws?
What's her financial position like?
If you keep separate finances do you expect one day for it to be combined? If not why not?

What are your prospects?
Do you have a degree/ are you higher educated?
Can you get a better job?

Sadly $9.27 an hour is not going to cut it, thats basic entry level type stuff, surely you can improve on that.


Future Lazy

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #2 on: December 27, 2014, 09:30:17 PM »
First off, good job starting early! You might feel it's difficult to get started with a small salary, but over time, you'll be way way ahead of 30 year olds that have accumulated debts and other bad decisions if you just avoid them. Because of this, YES THERE IS HOPE FOR YOU! :)

Income: Where is this job going? Will you be expecting to get promotions soon, and if so, how soon? Do you have plans for college (or have a degree already)? If so, what are they? If not, have you considered trades? I live in the Denver area, and there are easily 15 electrician's jobs posted per day.

Good job with the permanent full time employment - a lot of males in our age range are unemployed, arguably between 9% and 12%. However, $9.27 is chump change, now matter how low the COL might be in your area (if it is), and any responsible hardworking adult with no prior experience deserves $12+, IMHO. With room to grow, lots of room.

Commute: IRS says it's $0.51/mi to drive. I've crunched the numbers on my own car (23mpg, 10+ years old, 150k+ miles) and actually found that it's $0.56 for me - ouch.

Looks like your commute is (5 days * 4 weeks) 20 work days a month, with a 60mi round trip. That comes out to (60*20) 1200 miles a month. Your total car costs seem to be $375/mo, which comes out to about  $0.31 cents a mile, right now. However, if you were including all the other car things, such as insurance, repairs and maintenance, it's possible that the actual cost to your family unit is much closer to the IRS standard.

Try playing with this worksheet?
https://docs.google.com/spreadsheets/d/1WUA9QjNKOOiPxMD0SnTRCb6VPDoxDf4j-Wg1__Vvjyw/edit?usp=sharing

That being said, if your current job IS going somewhere - OR, if you're planning to go to college or go into the trades, moving to a more metropolitan area might be good. Living within walking/biking distance of where you work would eliminate your car costs, but replace them with rent.

Savings: $745 appears to be solidly around 50% savings rate, which is great. Maintaining this as your life gets more complicated might be difficult, but I definitely encourage you to try to keep it at or above the 50% you've got now.

Try to open a high interest savings account with an online bank - search the forums for suggestions - and begin saving an emergency fund.

Spouse: Does the DW work? If so, what is her income?  If not, why not? What is her share of the expenses? Do you guys have combined finances, or do you keep them separate from each other? Why isn't her income/expenses included above?

If you have separate finances, all you can do is educate her and try to bring her around to your more long term point of view. When it comes to "little things", I began working on my DH's discretionary spending by cleaning out his pockets and adding up all the sums of the receipts for junk food/beef jerky/sodas and asking him, "Hey, what would you do with $75?" When his answer was "I don't know.." I told him, "Well, that's what you spent on junk in the last week." Other than pointing out these types of things and what they actually add up to, I've just been leading by example - from my example, DH has taken up using Personal Capital for tracking spending and asking me how stocks/investing works.

If you don't keep finances separate, OR if she's not making an income and is spending yours on "little things", then just put your foot down. It's your money, and your future. If she wants snacks or handbags or haircuts, she needs to get that stuff on her own.
https://www.youtube.com/watch?v=sxSEW3sUitA

If you have android phones, try the app "Should I buy it?"
https://play.google.com/store/apps/details?id=com.kiodev.shouldibuyit.app&hl=en

Hope this helps! Good job being self aware at an early age, and good luck!

PS. You didn't mention CC debt above, which is great! However... If you don't know your credit score/don't have a credit card yet, I would look into getting one, only for playing the system. Having a high credit score is key to unlocking cheap cheap loans (only when you really need them!!) and being able to game the credit card system in general.
« Last Edit: December 27, 2014, 09:32:25 PM by KaylaEM »

Travis.S92

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #3 on: December 28, 2014, 06:04:37 AM »
Updated above to answer the questions asked, thank you all for the help!

kpd905

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #4 on: December 28, 2014, 06:12:30 AM »

Credit: My credit score is low, could not get offers through most credit card companies, working with small finances through Fingerhut to build credit (recommended by my mother, if there are better ideas please let me know!)


I'd recommend getting a secured credit card.  Never pay interest to increase your credit score.

Also, the interest on that savings account is good, but I wouldn't worry about that special dream account option.  It adds 5% to the interest you earn, not 5% of the amount you have invested.

So say you take your $685 per monthly surplus and put all of that into the savings account.  After 6 months, you'll have $4110 in there, which which earn $41.10 in interest per year.  The bonus 5% thing will earn you an extra $2.05 per year.

YoungInvestor

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #5 on: December 28, 2014, 08:07:46 AM »
Really, the only thing that can make an actual difference here is higher income.

9.27$ is ridiculous, go do something else.

There's a 745$ difference between your income and expenses, why can you only invest 50$ a month?

Murse

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #6 on: December 28, 2014, 09:11:12 AM »
Really, the only thing that can make an actual difference here is higher income.

9.27$ is ridiculous, go do something else.

There's a 745$ difference between your income and expenses, why can you only invest 50$ a month?

Agree ^ Definitely an income problem. Expenses are as low as they get but realize that they are this low because you are being subsidized. Your goal in my mind (assuming you and your parents want you out of the house when possible) should be to get an income and try to keep your savings rate at a minimum of 40%. The oil field sounds like a good lead, however my understanding is that field is feist of famine meaning if/when the oil dries up in your neck of the woods what are you going to do? I would guess that if you do good work they might be willing to relocate you to a different oil field but that may require relocating (possibly to another country) so ask yourself if you are willing to do this and make a career out of it? If not then it is fine for getting your income up for now but you need to figure out what job/career you want to be doing 5 years from now and work towards it.

As for the MA thing maybe it was your program (bad rep,) maybe your local hospitals, or maybe you didn't try hard enough to get a job in the field, but MA's are employable in my state/area. I will admit that I do see more CNA's then MA's though. Again figure out what it is YOU want to do 5 years from now, but keep in mind to maintain a 40% savings rate, preferably 50% or more. I'm sure you could do the math but the bigger the income, the easier this will be. If you decide you want to be something with a low income that is fine, just realize that it is going to be harder to hit the higher savings rates.

For your wife and investing, I am curious what you mean by you wanting her to learn about stocks and investing? It sounds to me like you may be talking about active investing which is generally a no-no around here.

 My girlfriend of 2 years is the same way on spending a little bit of money but on a lot of things. I have been trying to work with her as well. The thing I have come to realize is that she doesn't see the end goal, in her mind retiring happens at 65 when SS kicks in so you have income to survive on. All she hears me saying is that I want her to spend less but she doesn't realize why. I am fairly extreme, if it were up to me we would have a 70-80% savings rate but I told her if we can save 50% then I will be happy. I told her is we can save 50% then her staying home with kids will be an option later, if not, sorry, we can't afford it. My personal plan/goal is to START off saving 50% but then avoid lifestyle inflation and add future raises to the savings, increasing our savings rate.

Future Lazy

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #7 on: December 28, 2014, 12:45:17 PM »
Re credit:

It took me 6-7 credit card applications to get my first card. Mostly places returned that they wouldn't service me with a card because of my complete lack of history. WalMart actually told me it was because the "applicant is deceased" lol.

Capital One gave me my first card, their Journey student card - no need to prove I was a student, I'm not and never have been. When my DH was looking for a credit card, I told him to apply for that one and he was approved right away. The interest rate on anything you get is going to be usury, so you should never ever ever ever ever ever carry a balance/pay interest. Ever.

Look for offers similar to that, especially ones that say "student" or are otherwise geared to our age range.

Travis.S92

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #8 on: December 29, 2014, 05:53:07 AM »
I see all the responses and they have all got my brain's little cogwheels going! Tons of things to think about and readjust, and as mentioned with the income issue, I really figured that to be the biggest issue. I am off to work for now and will have a reply to all questions no later than 3pm mountain time today. Thank you all again so much for the help!

Murse

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #9 on: December 29, 2014, 10:11:12 AM »
Re credit:

It took me 6-7 credit card applications to get my first card. Mostly places returned that they wouldn't service me with a card because of my complete lack of history. WalMart actually told me it was because the "applicant is deceased" lol.

Capital One gave me my first card, their Journey student card - no need to prove I was a student, I'm not and never have been. When my DH was looking for a credit card, I told him to apply for that one and he was approved right away. The interest rate on anything you get is going to be usury, so you should never ever ever ever ever ever carry a balance/pay interest. Ever.

Look for offers similar to that, especially ones that say "student" or are otherwise geared to our age range.
Kayla, did you have an income? I have applied to 3, my problem is that I don't have an income or credit history.

Catbert

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #10 on: December 29, 2014, 10:19:36 AM »
OP - One additional thing you need to figure out is whose car is it when it's paid off and you (eventually) move out.  Whose name is on the registration/loan?   Is it your parent's car and you're paying $275 a month as your contribution to the household for car and living expenses?  Or will it be your car when it's paid off?  I realize it doesn't seem to matter now, but it will when you move out if you and your parents have different expectations.

Future Lazy

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #11 on: December 29, 2014, 10:28:39 AM »
Re credit:

It took me 6-7 credit card applications to get my first card. Mostly places returned that they wouldn't service me with a card because of my complete lack of history. WalMart actually told me it was because the "applicant is deceased" lol.

Capital One gave me my first card, their Journey student card - no need to prove I was a student, I'm not and never have been. When my DH was looking for a credit card, I told him to apply for that one and he was approved right away. The interest rate on anything you get is going to be usury, so you should never ever ever ever ever ever carry a balance/pay interest. Ever.

Look for offers similar to that, especially ones that say "student" or are otherwise geared to our age range.
Kayla, did you have an income? I have applied to 3, my problem is that I don't have an income or credit history.

I did have part time income from my job at Home Depot, as did my DH. That may make a difference.

OFC, there's always the dreaded option of picking up the phone and actually calling the CC company to ask questions. :0

Murse

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #12 on: December 29, 2014, 10:36:02 AM »
Re credit:

It took me 6-7 credit card applications to get my first card. Mostly places returned that they wouldn't service me with a card because of my complete lack of history. WalMart actually told me it was because the "applicant is deceased" lol.

Capital One gave me my first card, their Journey student card - no need to prove I was a student, I'm not and never have been. When my DH was looking for a credit card, I told him to apply for that one and he was approved right away. The interest rate on anything you get is going to be usury, so you should never ever ever ever ever ever carry a balance/pay interest. Ever.

Look for offers similar to that, especially ones that say "student" or are otherwise geared to our age range.
Kayla, did you have an income? I have applied to 3, my problem is that I don't have an income or credit history.

I did have part time income from my job at Home Depot, as did my DH. That may make a difference.

OFC, there's always the dreaded option of picking up the phone and actually calling the CC company to ask questions. :0

That would make it too easy ;)

Travis.S92

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Re: Reader Case Study - First Step to Financial Freedom at 22??
« Reply #13 on: December 29, 2014, 04:45:52 PM »
@Mary W - The vehicle is currently under my parents name but will be transferred to me when it is paid off. Though due to recent issues I am looking at dropping the agreement with the parents and investing in a bicycle until I can just buy my own vehicle. My parents are pretty wishy-washy lately due to financial issues of their own and I do not mean to seem as though I rely on them when really they are relying more on me, which is hurting both of us in the long run. It's a very difficult situation at the moment to put it simply!


@KaylaEM - I didn't know that you could put in for student offers without being a student! I will definitely look into this.

@YoungInvestor - This is due to tight budget from holidays and sister's wedding coming up.

@FutureNurse - Pretty much same mindset of my wife, thinking retirement is at 65 and when I brought up the idea of early retirement she automatically thought it sounded bad. Still trying to get her to understand what it means!

@blahblah - 1. This seems to be the case. She has never held a job in her life and doesn't seem to understand the value of a dollar! It is a work in progress.

2. This is insightful as I never really looked at those expenses as being investments. For some reason my mind always clicks to stocks, real estate, etc. haha.

3. I shall make the most out of my time in improving my situation, especially with the help of this awesome community!


Thank you all, and if I missed something or if there is anything else you'd like to recommend to me please let me know!