Author Topic: Reader case study - Nurse and student need some help  (Read 2850 times)

Libber

  • 5 O'Clock Shadow
  • *
  • Posts: 6
  • Age: 32
  • Location: Aarhus, Denmark
Reader case study - Nurse and student need some help
« on: March 28, 2014, 06:53:44 AM »
Introduction:
Hi there. I'm 27, a trained nurse and I live with my 32 year old bf. He's an engineering-student after years of working in IT. We have no kids, but would like to have some within the next few years. I've been reading the MMM-blog for a few months now and I'm finally jumping into it and let you guys give me a good bashing. English isn't my first language, but I hope you will be able to understand my wall of text anyways.
It all started a few years ago when we decided we needed a car (at this point we were both working, living in a very cheap apartment and had no debt). My bf had a 40 min commute (by car) to his job, I had 15 mins (on my bicycle) to mine. We had NO money saved, so ofc we went out and bought a brand new car on credit (37K$). Not to soon after we moved to one of the most expensive areas of Denmark (I had gotten a new job and my SO wanted to study), but we didn't have the cash saved for the deposit, first few months rent etc. so we went down to the bank and borrowed some money to that (12k$).

We now realize that all the above mentioned actions were not well-thought through (at all..). We have made a few changes (which includes selling the car), but we really need the last kick.
We live in a expensive apartment, but the prices is pretty standard around here and I can walk 5 min to work, my SO have a 10 min walk to his school and there a many shopping (for groceries ofc) options within a 15 min walking distance.

Income:
  • Paycheck 1: 3100 $ (sometimes more, sometimes less)
  • Paycheck 2: 1475 $ (this includes a studentloan)
Combined income is around 4575 $/month

Debt:
  • Studentloan (this is my old loan and not the one my SO is building up atm): 15,500 $ (1% interest) - min. payment 150 $/month
  • Carloan: 4300 $ (7.5% interest) - min. payment 570 $/month
  • Other: 8500 $ (9% interest) - min. payment 275 $/month

Minimum payment on debt: 995 $/month

Fixed expenses:
  • Rent (1 bedroom/1 bathroom 700 sqft): 1450 $ (this includes heating and water)
  • Electricity: 86 $
  • Insurance: 65 $
  • Cable: 40 $ (I know I know - don't punch to hard pls)
  • Licens: 40 $ (this is a non-optional payment for everyone who have a radio/tv/internet)
  • Renters-union: 12 $
  • Internet: 55$
  • Phones: 40$ (includes data, free text and a limit on outgoing calls)
  • Netflix: 15 $ (I do not live in the U.S)
  • Spotify: 18 $
  • Groceries: 370 $
  • Union: 168$ (non-optional imo)
Fixed expenses: 2359 $/month

My SO fixed expenses every month (This includes groceries, rent, internet and his phone): 977 $ - which leaves him with 498 $ for spending/month
My fixed expenses every month (This includes groceries, rent and everything else mentioned): 2377 $ - which leaves me with 723 $ for spending/month

Asset(s):
  • Savings (Mine): 1475 $ (with a terrible 0.25% interest)
  • Forced public pension pays (Mine): 1100 $ - when you retire and reach the age of 65, you'll get a yearly supplement to the government-payed pension

The mysterious "spending":
This is my spending, since I don't know the exact numbers for my SO. This is based on the last few months where I used YNAB to track my spending.
  • Public transport (this is stupidly expensive in Denmark): 85$/month
  • Going out (Clubs, eating out etc.): 185 $/month
  • Clothes, shoes, makeup etc.: 18$/month
  • Gifts (birthdays etc.): 45 $/month
  • Misc. (this includes cigaretts, junk, stuff to the apartment etc.): 92 $/month
Total spending: 425 $

It's my impression that my SO spends around 2/3 of his "spending money" each month, mainly on transport, books and going out.

This leaves me with a surplus of around 300 $/month. At this point I've been saving those on my low interest savings account each month.
Thank you for your time and please give me/us ideas on how we can improve and get to FI before we reach 50 :)

phred

  • Pencil Stache
  • ****
  • Posts: 506
Re: Reader case study - Nurse and student need some help
« Reply #1 on: March 28, 2014, 12:31:55 PM »
bf needs to get a part-time job to pay for the meals you both eat at restaurants when you go clubbibg.

Do you both take a lunch from home during the week?

Can you give up the smoking?

MDM

  • Walrus Stache
  • *******
  • Posts: 9411
Re: Reader case study - Nurse and student need some help
« Reply #2 on: March 28, 2014, 01:17:50 PM »
Start by putting the extra $300/mo to pay off the 9% loan.  That should be "simple", particularly if you can do so by automatic payment.

Now for some "complex" items: if you do plan to have kids, are you first willing to
 -  get married, and
 -  share finances?

Answering those may take some serious discussions with your SO.  But, better to have those discussions and come to agreement before kids appear.  And we think having "our" finances is better for overall planning than having "my" and "your" finances.  Others may differ, but at least you get the same money-back guarantee on all advice here :).



genselecus

  • 5 O'Clock Shadow
  • *
  • Posts: 46
  • Age: 31
  • Location: Oakland, CA
Re: Reader case study - Nurse and student need some help
« Reply #3 on: March 28, 2014, 02:34:49 PM »
What kind of insurance do you have (you list it as a $65 monthly cost)?

You should get rid of the cable, and if you have to pay $40 just to have the option of paying $55 for internet, you may be able to find a workable option with someone else in your building so that you could share wifi (maybe the person above you or below?).

You should quit smoking.

I have never used Spotify, but $18 seems like a lot of money to spend on music per month, especially since there are numerous free options available. I use Songza, but I'm not sure if it is available in Denmark.

Try to go a month without going out to clubs or bars and such. Try it for a full month and then set yourself a limit of only going out once a month (and be sure to do some pregaming at home). If you aren't going out as much, you'll probably save some money on the public transport.

I'm not sure what the "other" loan is, but if you both are responsible for it, you may be able to have your SO get more money from his student loan to pay off the 9%. If he has access to cheaper credit, you should try to get it to save money on the expensive loans.

After this, you should continue to save money into your savings for another few months to give yourself some breathing room. Then start to attack your higher rate loans.

Good luck!

Fonzico

  • Stubble
  • **
  • Posts: 143
Re: Reader case study - Nurse and student need some help
« Reply #4 on: March 28, 2014, 03:13:13 PM »
Hey, and welcome! You're off to a good start just by being here, and I'm sure you can achieve your goals if you set your mind to it.

It's funny because your financial situations looks a LOT like mine in many ways - income is roughly the same, as are living expenses. The biggest difference is that we've paid down our old foolish car loan, and other debts, and are almost done with the student loans. So basically, I'm just you, half a step ahead!

Definitely get that 9% loan paid off as quickly as possible. Why save at .25% if you can be savings yourself 9%? And shop around for a better savings account (I'm guessing this is basically your emergency fund?). I'm in Canada, so I don't know what options you have there, but I can get at least a 1.25% rate with INGdirect, in a no-fees account.

You have a decent amount of wiggle room to optimize things too - if you cancel cable and spotify, and slash your "going out" and "misc" categories even by half, that's an extra $200/mo to put towards the loans, plus the 9% interest you'd be saving on that amount!

I admit that this isn't my strong suit, since our utilities are included in our rent, but can you reduce your electricity at all? MMM has some excellent articles about that one.


The big question is to what degree are you and your SO in agreement about financial goals? Presumably he will be making a pretty good salary once he's done school, but will also have his own student loans to pay. If you guys work together to maximize your debt repayment/savings now, FI before you're 50 is very achievable. However, if you let lifestyle inflation take over once you've got two salaries coming in, it's a whole different story.

Thegoblinchief

  • Guest
Re: Reader case study - Nurse and student need some help
« Reply #5 on: March 28, 2014, 04:05:19 PM »
Not sure about Denmark, but the grocery bill seems quite high for 1 (less so but still high if that includes both of you).

You need to cut eating out/clubbing altogether, or limit yourself to a small $ amount. Is a night at X worth taking out a 9% loan for? In fact, that's the criteria all unnecessary spending has to pass: would I take out a 9% loan to buy this?

Needless to say, throw everything you can at the 9% loan. The car loan will likely be dead already, but kill that off too if you manage to pay the other loan in less than 9 months.

Libber

  • 5 O'Clock Shadow
  • *
  • Posts: 6
  • Age: 32
  • Location: Aarhus, Denmark
Re: Reader case study - Nurse and student need some help
« Reply #6 on: March 29, 2014, 05:26:31 PM »
Wow - thanks for the response, it definitely give me something to think about.

I will try to quit smoking (My bf will really appreciate it). We've decided to get rid of the cable asap and I found another Spotify subscription cutting that expense into half.
Someone mentioned the "License" expense, let me try to explain that. Every household with tv, internet (from pc or smartphone) or radio is by law obliged to pay, so you can't wiggle your way around it (you can try, but then they'll include it in your tax). This is because you get access to the state-owned media called "Danmarks Radio" (Several tv-channels, radio-stations and a website). The public transport is unlikely to drop, since a round trip for visiting our parents is close to 75$ pr. person and we do occasionally visit friends in other parts of the country on birthdays etc.

When it comes to my bf and I it gets a bit tricky. We do share two joint accounts already. These cover most of the fixed expenses and groceries, but there's definitely an unspoken agreement of "what you do with the rest of your money is up to you". He has noticed that I've changed some habits already and I see a slight change in his spending as well. No matter what, I probably need to re-read MMM's article on the subject and figure out how to have "the talk"  (and get my shit sorted out a bit more as well) :)

P.s. I just made an extra 650 $ payment on our 9% loan (Yay me!)