I’m struggling with making some big financial decisions in the shadow of my personal circumstances. I feel like my life is pretty freaking complicated at the moment, and I am overwhelmed trying to make sense of everything. Normally, I would consult with my parents about it (we’re a pretty close-knit family); however, part of the situation results from them, and I’d really like to get some outside opinions that I know will be practical, well-reasoned, and probably see some things I haven’t. **Things have already changed since I started pulling this together less than a month ago (!), and I’ve added the new info (look for the asterisks), but do keep that rapid pace in mind. :) **
This post contains a lot of explanation and additional information. I’m pretty nervous about opening up so much on the internet and have some privacy concerns, but I don’t think where I’m coming from will make sense without the detail I’ve provided here. For the short(er) version, just skip through and read the bolded and/or italicized information.
Income: My income has changed every year to date. I struggled to find a job out of college in 2008, so I ended up vastly underemployed and working PT retail customer service (herein after referred to as CSS), making less than $15K/yr. I started PT tutoring for math/science/test prep, and slowly realized that I really love it and don’t ever want to actually do what my college friends describe as their job. I now work FT as a private tutor (1099 status) and PT at CSS (the company I work for offers relatively amazing PT benefits). This will be my first full year working FT at anything. So far, I’ve averaged $2922/mo (gross) for Jan-Jun with tutoring and expect that amount to increase pretty significantly for Aug-Nov (though to be safe, I’m going to assume that any increase would average over the slow/$0 months to give $2922/mo for the whole year). My CSS gross income is on track to hit right around $10K this year, which averages to $833/mo.
Total Gross Income: $3755/mo average
Estimated Net Income (Gross - SE & Income Taxes): ~$2800/mo
Debts: $31.5K in student loans @5.125% (down from $43K+ in Dec 2012). I pay my monthly payment of $262 (auto-debit) plus $150 per week (paid weekly, because I want to avoid as much interest as possible on these suckers, and it is a HUGE motivator for me to see this balance drop so frequently).
Total Monthly Debt Payments: ~$912
Expenses
Cell Phone - $155/mo (family plan for self and parents, all on smartphones)
Health Insurance - $23.12/wk = ~$100/mo <--This is through CSS job, it’s pre-tax, and the company pays a chunk of the premium. It’s a Cadillac of health insurance, but I’ll have to COBRA after December if I want to keep it/attempt to re-qualify based on hours next year (min 1500 hrs required). The COBRA premium is ~$400/mo. Current plan is to COBRA and check out individual options during 2015 open enrollment.
Dental Insurance - $2.06/wk = ~$9/mo <-- Also CSS job, pre-tax
No car payment. I paid this off as a birthday present to myself earlier this year, also using the pay-an-extra-$150-per-week method. (What can I say? It works for me.)
Gas - $250/mo
Car Insurance & Taxes (12 mo avg) - $110/mo
Food contribution/Personal Care Items - $200/mo
Eating out - $200/mo
No rent/mortgage payment. See Complications/Things You Need to Know.
Doggie food - $50/mo
Total Monthly Expenses: $1074
Dedicated Savings:
401(k) Contributions - $83/mo <--This is through CSS job and is the full 10% I’m allowed to contribute. I get a 1.5% company match (in company stock) as long as I work >1000 hrs from Sept to Sept (met for this year as of 8/1).
Running gear/race fees - $50/mo
Doggie Vet/Boarding/Emergency Fund- $100/mo
Total Monthly Dedicated Savings: $233
Assets:
401(k) - $9600 <-- CSS company pays the fees on this account for as long as I am a current employee (work at least 1 shift every 30 days).
CSS ESOP - $5100 <--CSS company gives me stock valued at ~8.5% of my eligible wages for every year I work >1000 hrs. Company stock is privately-held, dividend-paying stock only available to current employees. Only cost to me is the time I spend working there, and the fact that this is a retirement account with rules and penalties similar to 401(k). I can also buy stock through a special IRA at a specific credit union, or directly from the company for myself. Purchases and sales have some significant limitations due to the desirable returns (average 10-year performance: +14%).
2008 Car - $4500, if that, and averages about 27-28 mpg (I calculate this every time I put gas in it.)
Savings Accounts - $11200
Total Assets: $30400
Net Income – (Debt Payments + Expenses + Dedicated Savings) = $581 Uncommitted Savings
Approx. Net Worth: -$1100
It certainly looks like I have a good bit left over right now, and while I do have a healthy savings account balance that is quickly rising (that could probably be used much more efficiently), there are some serious caveats.
Complications/Things You Need to Know:
1. I don’t pay any rent, mortgage, or utilities (besides the phone) because I still live with my parents, and they don’t ask me to. They help my brother (who is in the military and has a family) pay for several expenses and feel that it’s only fair to help me too. In return, I help around the house, and they like having me close (usually). Honestly, it works out pretty conveniently for all of us a lot of the time because…
2. My mom has a chronic illness, and I’ve been one of her primary caregivers since she was diagnosed (I was 15 then, 28 now). When she’s doing well, it looks like a pretty normal life. You’d never realize her illness is anything other than a minor annoyance. BUT when she’s not doing well, she’s very, very sick, and life is anything but normal, sometimes for a year or more. My parents are above average savers for this reason, but not Mustachian by any means (and have zero taxable investments). Their savings account gets wiped out when Mom is sick for more than a few months in a row. I always end up helping them pretty significantly – financially, physically, and emotionally—during those times. We thank God every day that our insurance company picks up the vast majority of the 6-figure-and-counting medical tab, but without such good fortune, you can bet your last dollar that I’d be providing serious support to them all the time instead of just when Mom is sick and out of work.
-->Please don’t misinterpret my purpose in sharing this…I do NOT begrudge them any of my help. I know all of the sacrifices they made for me and my brother growing up (and continue to make now when possible), and I’m more than willing and grateful to be able to return the favor. However, Mom’s sick episodes, with guaranteed yet unpredictable reoccurrences, do present some wrinkles in how I need to approach my own finances. My savings account would easily be double, maybe even triple, its current value were these circumstances different. I don’t really consider it a choice to help them—they’re my parents. I love them and owe them for basically everything, not the least of which is years’ worth of rent. :) I remind them of this fact whenever they start asking how much they owe me. Besides, I feel like it all washes out in the end with family, so why add something else to fret over?<--
3. I currently contract with a small but very busy single-owner business for my tutoring hours. The owner and I were introduced by a friend, and we get along pretty well. So far, our business relationship is going much more slowly than I envisioned but still in a positive direction. I made it very clear when I signed on that I ultimately wanted to be a partner. We laid out a potential plan for how I could progress with the business should things go well: starting as a contractor, becoming an employee, and eventually buying a partial ownership stake. We are currently in the “contractor” phase. **Just this past week, the owner let me know that she has decided to make me an employee and to be ready to fill out the paperwork sometime in the next couple of weeks.** I don’t know exactly when we’ll get to the “buy-in” discussion/phase, but I’m not willing to wait more than 2 years (hopefully I can be patient that long!). If nothing is happening at that point, I’ll start my own business using my contacts and referrals.
4. My brother and his family are moving from an Eastern state to a Western state. They’ll be near a major airport this time and easier to visit (flying vs driving for hours on end), but travel will also be much more expensive. My niece and nephew are >3 but still < 10 which is prime childhood IMO. We currently see them about 4 times a year, rarely more than a week at a time, and I really wish I could spend more regular time with them. I’ve already priced flights (~$380 RT) and gotten a rewards CC (including sign up bonus) with the airline I use for most of my extremely limited travel.
SOOOOoooo… after all that, my questions:
How should I prioritize my short-term goals of paying off my debt ($31.5K) and buying in to the tutoring business (need >$20K) with a longer-term goal of FIRE (that includes the potential for periods of significant support of my parents)?
Should I use cash or leverage to buy in to the business, assuming a buy-in happens?
My instinct says cash would be less complicated and provide immediate dividends without any payments, but I would appreciate some advice from any small business owners/purchasers out there. I can certainly see an advantage to using leverage and keeping more cash/liquid investments on hand. I could also probably afford a much bigger slice of the business through leverage. Is there also an argument to be made for keeping my contractor or employee status, instead of becoming a partner?
How should I invest my savings for optimal results? Should I invest it at all right now, when I feel like my hair is on fire and know I will need the money in a year or two? Maybe I should opt for some kind of split?
Can/should I slow down my savings (or my debt payments) to visit my brother and his family more often? Can I do this and still meet at least one of my short-term goals? Is it worth turning a short-term into a medium-term goal, or leaving my hair on fire for a bit longer?
Growing up, our entire extended family lived within 30 minutes of each other and was (still is) pretty close. We had Sunday dinner together almost every week, my brother and I spent every summer at our grandmothers’ houses playing with cousins, we celebrated birthdays once a month with one big dinner party for everyone, etc. I want my niece and nephew to have at least some small part of those experiences. I have no desire to give them cousins, so I’m all they’ve got. ;)
Should I be thinking more about moving out on my own? How would it affect my other goals?
If you forced me to choose between this and other goals right this second, other goals would win. I have no sense of urgency about moving out, and actually a sizable bit of anxiety about it, given how much my parents have needed my help in the last couple of years. My current timeframe for this is just “by the time I’m 30, if everyone is OK.” I really worry about what might happen if I am unable to help support my parents through a health crisis. I seriously doubt I would’ve been able to keep them afloat during the last one if I’d been living on the other side of the city, closer to work. Some of my friends keep telling me I need to move out, be more social, etc., but I don’t think they really understand the pressure I feel to make sure my parents get to retirement age with their health, 401(k)/pension, and home as intact as possible. I honestly think they’ll be ok and need less of my help after that, thanks to a major drop in work-related stress and expenses, but they have to get there first (currently 50 and 53).
** New change in the last 10 days: My parents want to look at moving close to my brother/semi-retiring now (Mom has mentioned a couple of times that she’s not sure how much longer she can physically handle her job, and wants to evaluate going on disability payments). I’ve told them we need to have a sit-down to go over all of their expenses and expected income, current retirement investments, etc., and they’ve actually been really open to it! I think this is a great opportunity for me to talk to them in detail about their finances (and health) and get some relief from my concerns, but I have no idea how to start/what numbers we should be running to help them make a decision like that! I’m already privy to pretty much all of their financial information (they very openly tell me things), but they’ve never wanted to have a real conversation about it before. Exciting but scary!**
I feel like everything is up in the air right now, and I don’t know what to do. I just want to have a real plan for my life, after years of muddying through from crisis to crisis. I’m tired of feeling so reactive and drained and on edge, instead of prepared and confident about my life’s direction. I'm working on it, but I need more help, especially with the detailed planning part.
I would appreciate any specific advice as well as general thoughts/observations.
Writing this and re-reading it has made me wonder if I should be seeking a therapist instead of internet advice. Haha. But true.