Author Topic: reader case study: Mustachianism on low income - what can I do better?  (Read 5001 times)

geek101

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Hello, and thanks for reading! Your advice is greatly appreciated.

I am 24, with a 2 year AAS degree looking to finish up a BS in the next year (hopefully). I took the last year off to start working full time because I want to graduate college with 0 student loans; long story but the program changed and I wasn't going to have enough money to pay for my remaining classes with cash up front last year, so decided to take a year off of school. I'm pretty burnt out on school but I am 15 credits or less away from completing the degree, so I will force myself to finish.

I saved and my parents saved for college; I did 2 years at community college with a tuition discount due to family working there; lived with my parents, worked part time during the school year, full time in the summer, and most of my money went into savings. I then transferred to a state school for the cheaper tuition. I did have the opportunity to take several trips to Europe which I do not regret in the least, but definitely cost a pretty penny.

My main problem right now is that I have a modest income, and I might be sacrificing my long term future in order to get the necessary cash for my short term goals. Read on for a detailed explanation.

Here's my line item details.

Income:
Usual take home 2k per month from the following sources:

Full time job = $1680/mo take home

Side hustles:
Donating plasma = 200/mo avg. Twice a week, one hour per session, base rate is $50/week, with bonuses most months.
Music lessons = 40/mo, looking to expand this, as I only have one student right now on a regular lesson plan.
Other = Averaging 80/mo from other sources such as selling stuff, random gigs, etc.

Current expenses:

Transportation: 135/mo

Auto Insurance = 30/mo
Gas = 90/mo
service/misc = 15/mo

I drive an '04Ccivic which is as much car as I need. It's paid for in cash, and 'mine,' but my dad's name is still on the title so I can keep it on his insurance, meaning I pay 30/mo. If I were on my own insurance it would be 45-50 for the minimum liability coverage, 60+ for equivalent coverage. Gas isn't a terrible expense for me because I only avg 6k miles a year (admittedly more than many mustachians around here). I do not own a bicycle although I only live a couple miles from work. I do live in MN so biking would only be an option for half the year. Overall I am fine with my car expenses, but maybe I need to cut back here.

Utilities and Housing: 564/mo

Rent = 475/mo
Electric + heat = 40/mo combined (electric higher in summer, heat in winter)
Internet = 40/mo
Renter's insurance = 9/mo

I live in a 500 square feet 1 bedroom unit in a quiet 4 plex. Anything not above is covered by the landlord (or rather built into rent). No central A/C, 1 window unit in my bedroom which is where I spend the majority of my time when at the apartment. I try to not use it much but MN summers get hot and humid, so I do end up running it when needed. It has been about a dollar a day in the summer for electricity.  I do have a desktop computer which is my primary entertainment and uses some juice. I do try to conserve electricity and I feel my electric bill is an acceptable lifestyle choice, though the frugal side of me would like to ditch the computer (more time to learn instruments!) and use the A/C more sparingly.

I would have liked to share internet with one of the others in the 4plex but they are all fine paying the 40 themselves, so no opportunity to split it. I'm not thrilled about paying 40/mo but it's my primary entertainment at the apartment. I have amazon prime and use my parents Netflix account, no TV. I am a geek so internet is a "need" (yes, an air quotes need, not an actual need)

I had room mates for the last 4 years and only recently moved to a 1 bedroom. Rent used to be 300/mo with room mates and utils were the same when split, I do miss that 175/mo extra savings per month BUT rent is still cheap for me and the value I get from being on my own (and living in a quite building) is probably nearing that extra money. My apartment is by no means extravagant, and one of the more reasonable 1 bedrooms in town.

Food: 160-180/mo

Fast food = 40/mo
groceries = 60/mo
restaurants = 50/mo
alcohol = 10/mo

I have been more frugal in the past with food, lately I have been eating out a lot with friends. I do my best to bring food to work for lunch, but I am not a good cook so mostly cheap convenience stuff. I want to cook more but rarely make time to plan and execute this, yet my spending seems frugal when I ask my friends (most of them frugal as well) what they spend on food per month. I used to be around 150 per month but last few months have been at 180. I shop at Aldi when I do get groceries and cook. Do I need to challenge this area more?

Charitable contributions = 360/mo

This is basically non-negotiable for me. I have one commitment that will end next month, and another at the end of the year, but I plan on using most of that money towards other charities I want to support. This is something I value immensely and I also volunteer heavily, which is actually my main entertainment in life, and completely free.

Misc:
smart phone = 50/mo.
entertainment = 10/mo. for a new album or one movie ticket per month
Shopping = 50/mo. includes household items, toiletries, clothing, etc. Mostly needs, if I want something I will save up for it in a sinking fund.
Misc expenses = 25/mo for things that come up (not emergencies but random stuff that comes up)
 
Home furnishings = 20/mo. my apartment is pretty well furnished now but there are a few things I notice every month that need (mostly want) so I have a small amount budgeted for this.

I had very little of anything when I moved a few months ago to my own place, and was diligent to find used items and hand me downs from my parents and their friends. All in all I went from just about nothing to 'fully furnished' (needs, few wants) for about $500.

Total spending = $1424/mo

I would consider myself to be frugal but I want your opinions :)

What's missing:

I am on my dad's employer health care plan until I turn 26, which has no additional cost for him, thanks Obama!

NO DEBT! I am so happy to not owe anybody a cent.

In addition to that total I contribute 6% of my full time salary to my company 401k, which matches 2%, for 8% total. Then, $25 a month goes automatically into my Roth IRA. This works about to be about $200/mo going into tax advantaged retirement accounts.

Anything else left over goes into my short term savings goals.

Assets:

Retirement accounts = $2,622.15

401k = $967.50 in an S&P500 index fund
Roth IRA = $1,654.65 in an extremely low cost S&P500 index fund

Savings account = $5,608.87

College =      $1,500.00 (plus an additional 1k not included in the total earmarked by my parents)
Emergency= $2,000.00
House =       $1,908.87
Car =           $100.00
Wedding =   $100.00

Liabilities:

NO DEBT!


Highlights:

Projecting ~$26,000 net income this year, including a $1500 windfall that started my Roth IRA. Projecting about a 30% savings rate., or ~8k saved.

Specific Question(s):

1. Am I frugal enough or do I need to cut back my expenses? My opinion is that at 17k/ year, I'm doing pretty well living on my own, especially considering a significant percentage of that is charitable giving, but you be the judge!

2.  Short term goals sacrificing my future? ER does interest me, I would LOVE to be able to retire in my 40's and volunteer all of my time, but I just don't see that happening for me. ER is not one of my goals currently; if the means were there in the future, perhaps, but not currently, mainly because of my modest income. Maxing out 401k on 28k a year gross? Ain't happening. Maxing out my Roth IRA would technically be possible but I would have almost nothing going into short term savings. I do however want to retire at 60.

I am very happy with my life currently and my FI number is probably between 450-500k.

I do not want to experience lifestyle inflation; I recently got my first raise at work and the first thing I did was up my 401k contribution so I won't 'see' any of it. I was previously only contributing the minimum amount to receive the match.

What are my short term goals? One of my life goals is to never be in any debt sans a mortgage. I refuse to take out a loan for anything besides a home (and even that I'm not thrilled about.)  My conservative goal is that I want to have the house paid off by age 45. That means at the latest getting a 15 year mortgage in 6 years at age 30, and making no additional payments. This is my 'goal' but I want to buy a house much sooner that 6 years.

South Central MN where I live is fairly low cost of living, especially for housing. 100k would probably buy me all the house I and my future family would ever need. Because I don't want to pay PMI, that means a 20k down payment. Even with 6 years to save, that's 3.3k a year, which is obtainable with my current income, but still a substantial chunk of what I'm able to save.

I do expect to be able to increase my income in the next few years, especially after finishing college. I love the company I'm at but getting up to my 'market value' will be hard with them; they don't pay very well honestly. I'm at 13.50 an hour right now, which I was told "is all we can afford for this position right now."

I also expect to get married in a couple of years, before buying a house, and that extra income plus sharing expenses would leave the household with a lot more money that can be saved. One of my main goals when married will be to save 50% of our income at the minimum.

So my "right now" planning/saving is telling me I need to delay large retirement savings and build up my cash savings for the down payment; but I do expect to be able to increase my savings rate substantially though it may be 3-4 years before that would happen; I might be locked into my current income for the short term, even my side hustles have limited expansion potential.

I'm just having a real hard time relying on what might happen in the future to meet my down payment goal, my mindset is that if I can meet the goal based on the now, I should do what I need to do now to accomplish that, but am I sacrificing my future and saving too much in a general savings account?

FYI, according to my calculations, I would only require an additional ~55/mo contribution to retirement savings to be able to retire with my ~500k nest egg at age 60.

Advice? Thanks for reading!
« Last Edit: September 03, 2014, 12:22:45 PM by geek101 »

4alpacas

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #1 on: September 03, 2014, 12:28:48 PM »
Quote
1. Am I frugal enough or do I need to cut back my expenses? My opinion is that at 17k/ year, I'm doing pretty well living on my own, especially considering a significant percentage of that is charitable giving, but you be the judge!
There are definitely areas that you can cut back on. Food, shopping, home furnishings would be areas that I would tackle first.

Quote
South Central MN where I live is fairly low cost of living, especially for housing. 100k would probably buy me all the house I and my future family would ever need. Because I don't want to pay PMI, that means a 20k down payment. Even with 6 years to save, that's 3.3k a year, which is obtainable with my current income, but still a substantial chunk of what I'm able to save.
If you want to buy a home, start saving your side hustle money in a separate account.  Only spend what you make at your full-time job.  Work on increasing your music lesson income to reach the $3300k/yr goal.

Quote
I also expect to get married in a couple of years, before buying a house, and that extra income plus sharing expenses would leave the household with a lot more money that can be saved. One of my main goals when married will be to save 50% of our income at the minimum.
Are you dating anyone right now?  I would caution against making marriage a goal and putting off the 50% savings rate until you're married.

Quote
FYI, according to my calculations, I would only require an additional ~55/mo contribution to retirement savings to be able to retire with my ~500k nest egg at age 60.
Stop eating fast food and shopping for home furnishing and you're there. 


I think it's great that you're thinking about retirement and long term plans at 24.  In your shoes, I would focus on your priorities.  Also, stop eating fast food.  Your 30 year old self will thank you for it. 

Lkxe

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #2 on: September 03, 2014, 03:30:05 PM »
to the food goal- If you find you don't want cook after working or whatnot, try bulk cooking or doubling. If you cook one week but make double- you don't have to cook next week or when you don't want to. If you cook one week but quadruple it you don't have to cook this month. My son is in college, cooks poorly but he can throw chicken,beans, corn and salsa in a crockpot , then eat over rice or as tacos, or wrapped in tortillas with enchilada sauce or toasted as quesdillas. Frozen meatballs are spaghetti, Italian grinders, stroganoff. Hot dogs make great fried rice with leftover rice from the chicken yesterday.  Eggs scrambled with veg, cooked over potaoes and leftovers - Frittata.  Find what you like. cook it and freeze it. Leftover steak and a bag of oriental veg is great and you got to have steak yesterday. Try http://www.poorgirleatswell.com/ or http://www.budgetbytes.com/ or http://www.leannebrown.com/cookbooks

edit to add cookbook
« Last Edit: September 03, 2014, 03:32:18 PM by Lkxe »

thedayisbrave

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #3 on: September 03, 2014, 04:03:36 PM »
I think you're doing well.  Yes, there are some little expenses here and there that you can cut, like home furnishings etc.  Definitely can cut the fast food - even if that means you have to up the other numbers, in the end you'll be healthier :) and your money should go farther.

All that's left to do is increase income.  Keep your side hustles going.  First time I've ever heard of donating plasma as a 'side hustle' but looks like it works for you! Like others have mentioned, work on growing your teaching business.  Even if you take on 1-2 more students per week, that's another $160-$320 you can save.  If you do get more students, what I would do if I were in your shoes is up the 401K + IRA contributions rather than letting those extra savings linger in a checking/savings account.  It'll come out of your paycheck but with the cash you make you should be able to cover it, effectively 'transferring' more into your tax advantaged accounts.

Stay the course! You'll be fine :)

4alpacas

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #4 on: September 03, 2014, 04:09:50 PM »
I agree with Lkxe.  Bulk cooking keeps our grocery budget and dining out budget low. 

I'm also a HUGE fan of Budget Bytes.

La Bibliotecaria Feroz

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #5 on: September 03, 2014, 07:47:18 PM »
Will you be able to seek a higher-paying job when you graduate? Is your current full-time job at least somewhat related to your field of study for networking value?

Thegoblinchief

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #6 on: September 04, 2014, 06:40:05 AM »
Surprised no ones mentioned the phone. $50 is high for a cell phone. Lots of ways you can cut that back, but they're all listed here:

http://forum.mrmoneymustache.com/share-your-badassity/communications-tech-son-of-the-superguide!/

Biking in MN is possible all year, though over 2 miles I'd probably just walk it in truly awful winter weather. I bike all year round in a similar climate just fine. Your food and household spending could be less. Make it a goal to keep that combined category between $175-200 or even less.

Otherwise you need to increase income and use 401(k) and a Roth (Roths are very powerful since your income is quite low) as much as you can.

I'd personally rethink charity. 20% of your income is a lot, especially at your income, but perhaps I'm selfish.

theadvicist

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #7 on: September 04, 2014, 07:46:50 AM »
I think you're doing great! I'd probably also look at your phone costs. For everything else, I think you're doing well, especially on grocery spending. Make sure you're getting variety in your diet though, don't want to be frugal at the expense of healthy!

wtjbatman

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #8 on: September 04, 2014, 08:32:08 AM »
I am on my dad's employer health care plan until I turn 26, which has no additional cost for him, thanks Obama!


Public Hermit

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #9 on: September 04, 2014, 09:11:45 AM »
Ditch the fast food, eating out, and home furnishings. You also may want to diversify your investments to include small cap, international equities, and bonds.

APowers

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #10 on: September 04, 2014, 10:31:32 AM »
I would look at your job. I'm not really one to speak, considering that I have gotten exactly zero interviews in about 3 years, with one exception.

That exception was at Domino's Pizza. You said you have $1680/mo take home income working full time; I take home at least that much working only four days (thurs-sun). Then again, our minimum wage in WA is ~$9.50/hr-- which is much more than MN's $6.50. Does your current job help get you experienced in the field you want to work? Or is it just a job to pay the bills?

Fuyu

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #11 on: September 04, 2014, 11:27:19 AM »
I think the difference in take home pay is also because WA doesn't have income tax, but MN does.

4alpacas

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Re: reader case study: Mustachianism on low income - what can I do better?
« Reply #12 on: September 04, 2014, 11:50:40 AM »
wtjbatman, your post made my morning.  <3