Author Topic: Super new and now super anxious about finances  (Read 6487 times)

namby

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Super new and now super anxious about finances
« on: May 02, 2013, 05:32:21 AM »
Hi everybody.

I already see that this post will be one of many offering introductions and asking for help.

I'm super new to MMM blog, but have totally agreed with what I have read so far regarding paring down one's lifestyle. But as I read the blog and the forums, I just keep getting more and more anxious about my finances.

First, I think part of my anxiety and confusion is that I feel like I'm in a different position from many people here. I'm 25 and I feel like I'm in a career (social work) that doesn't have as much earning potential as MMM's did or other people posting in this forum. I also feel very naive when it comes to this financial stuff, having only been a salaried employee for only the past 7 months. Before that, I worked minimum wage or slightly above minimum wage hourly jobs or contract work before and during grad school.

(Please don't take this explanation as me whining or disparaging anyone, I'm sure everyone here works their ass off for what they earn. My career choice is my own and is one of passion, but I'd still like to try to be financially stable, while accomplishing future goals).

I graduated from grad school last year and I'm currently a social worker at a job that pays $32,000 a year ($1650/month take home).

I have $42,000 in federal student loan debt at 6.8% interest. I'm currently paying the minimum standard payment of $503 per month. However, my dad, being the greatest, has offered to pay this until December of this year.

So with that said here's a list of other expenses that I pay out of my own pocket:

Rent: $550
Utilities: average about $75/month
Groceries/household goods: $200
Gas: $160, but I do get monthly reimbursements for most of this as I use my car for my job.
Phone: $85
Hulu plus/Netflix: $16
Cat: $25 (litter and food)
Savings: $300

Which leaves me with about $200-$250 each month, which I had been spending on frivolous antimustachian things like eating out with my bf, going out for drinks with friends, or buying stuff.

I currently have about $2100 in savings.

The blog and forum has my head spinning and I'm not sure what my first move should be.

My plan was to continue to save until I've established an 8 month emergency fund and to switch to income based repayment plan for my student loans in December. But now, I'm not sure.

My gut instincts are either to aggressively save until I have my emergency fund or to throw as much money at my student loan as possible.

Any advice on what I should start with? All perspectives welcome! Thank you for taking the time to read! 




davisgang90

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Re: Super new and now super anxious about finances
« Reply #1 on: May 02, 2013, 05:54:17 AM »
Welcome aboard!

I think since you have a little bit in savings, you should invest the rest in a safe investment with the guaranteed return of 6.8%, that being your student loans.  I would look to pay that off as quick as you can.

I'm kind of surprised your social worker position doesn't help with that debt.  Might be worth looking into.  You are working in a very emotionally draining/fulfilling field, I would think there might be some debt forgiveness to be had or perhaps some way to achieve a lower interest rate. 

namby

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Re: Super new and now super anxious about finances
« Reply #2 on: May 02, 2013, 06:08:51 AM »
Thanks for the feedback, Davisgang90!

So from my research currently, since I work at a non-profit, if I were to change to income based repayment I would qualify for monthly payment of around $200. This would lengthen the time I would have to pay my loans off (i.e. more than 10 years), which means I would then qualify for federal loan forgiveness after making 120 payments (http://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdf).

However, there's no guarantee that this program will exist in 10 years. This is my dilemma regarding switching to the income based payment plant. If I switch I'll end up paying a ton more in interest if the program doesn't exist. If it does exist, I'll actually have about half of the amount I owe forgiven. :/


jrs

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Re: Super new and now super anxious about finances
« Reply #3 on: May 02, 2013, 08:25:56 AM »
...I'm 25 ... I'm currently a social worker at a job that pays $32,000 a year ($1650/month take home).

welcome to the 70th percentile of income distribution by age.  You're kicking ass!

MtnGal

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Re: Super new and now super anxious about finances
« Reply #4 on: May 02, 2013, 08:30:58 AM »
Hello and welcome!

Sounds like you have a job you enjoy which is wonderful. Social work isn't going to get you retired in just a few years (like MMM), but it doesn't sound like that is your goal.

So from what I gather, you spend about ~$1120 on essentials. I tend to be very conservative and like to have cash on hand for a emergency fund. Especially since you do not have other investments to rely on (like MMM HELOC) should something happen. I like 6 months which puts it at $6720, or you would still need 4620. Since your Dad is currently paying your student loans for a while, which is amazingly nice, what about trying to up your savings rate to at least $503 per month? That will not get you to 6 months of savings before you take over those payments at the end of the year, however, it will get you used to having that much come out of your budget. Plus you'll save an extra $3521 by the end of the year!

Also, does your work offer any type of retirement plan? I do not know much about what non-profits would offer, but if you can do something pre-tax, start now. Even at 1%. You will barely notice that missing amount and you can test out bumping it up.

namby

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Re: Super new and now super anxious about finances
« Reply #5 on: May 02, 2013, 12:02:51 PM »
Jrs, that graph actually makes me feel a lot better! I do often feel like I'm at the low end of the scale, when I compare my salary to some of my friends, but it looks like they're just at the extreme high end! Thanks!

MtnGal, I think your advice is spot on in terms of bumping up my savings. It definitely helps to reframe it as getting used to the monthly payments I'll eventually have to make.

I do believe we're offered a 403b, which I've been meaning to look in to. I'll definitely be asking for information on as soon as possible!

icefr

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Re: Super new and now super anxious about finances
« Reply #6 on: May 02, 2013, 12:33:19 PM »
Looks like you're not doing too badly with keeping expenses in check, except for your cell phone. Who is it with and how much data/minutes/texts do you use? I'd recommend checking out this guide: http://www.mrmoneymustache.com/forum/share-your-badassity/communications-tech-isps-voip-cell/

If you're with Sprint and have an Android phone, Ting has been great to me so far.

Taylor

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Re: Super new and now super anxious about finances
« Reply #7 on: May 02, 2013, 12:50:09 PM »
Hi Namby,
 I'm a fellow social worker and feel your pain about (relatively) low salaries given how hard and important the job is (and how well educated you have to be to do it).

I also relate to your anxiety, but don't worry, you can totally do this!

A few humble pieces of advice:
-do IBR immediately and get on the Non-profit loan forgiveness program (loan forgiveness after 10 years of service). I really doubt that will be going away any time soon
-If you are in clinical social work and are licensed, start a private practice where you are make $100+ per hour in your free time. I have a part-time private practice and this really helps supplement my income.
-If you don't want to do that, get some Social Work PRN shifts at a hospital. Easy work and great pay!

Your expenses seem pretty low, so great job with that. I'm sure you'll find ways to cut down even more as you have this new mindset.

Feel free to PM me if you want :)

etselec

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Re: Super new and now super anxious about finances
« Reply #8 on: May 02, 2013, 12:55:11 PM »
You are not alone! I make pretty much exactly what you do, though my take-home pay is about $300/month higher even with 403(b) and transit deductions. Are you in a very high-tax state or city?

I agree with the suggestion to increase your savings to $500/month. Tracking expenses is key - I use YNAB but some people really like Mint or their own Excel spreadsheet or notebook.

FI@2022Jem

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Re: Super new and now super anxious about finances
« Reply #9 on: May 02, 2013, 01:06:26 PM »
Hi Namby (and Taylor),

I also work in social work and am just a bit older than you.  Just want to add some support that it is possible to plan a semi-early retirement.  As Taylor said you will have more options if/when you become licensed.  I am slowly getting there but still realistically several years away but that is the goal.  I would definitely look into other loan forgiveness options in your state.  I know in CA there are several options for LCSW's and a few for ASW's who work in areas of higher needs.  The trade off is you get up to 10-20k for loan forgiveness and you have to continue to work in the area for a few years.  I imagine there are similar programs in your state- where do you live?
For examples look around these sites:
http://www.oshpd.ca.gov/hpef/LMHSPLRP.html
http://nhsc.hrsa.gov/

I do contribute to a 403b as well as a Roth IRA.  I don't have an all or nothing strategy and figure I should get into the habit now of making retirement contributions even while paying back my student debt.  Anyway, feel free to PM me as well.  You're already ahead of the crowd by starting to examine your finances.  Welcome to MMM!

-Jennie

ScottEric

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Re: Super new and now super anxious about finances
« Reply #10 on: May 02, 2013, 01:14:58 PM »

welcome to the 70th percentile of income distribution by age.  You're kicking ass!

This chart totally makes my day!

namby

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Re: Super new and now super anxious about finances
« Reply #11 on: May 02, 2013, 01:50:00 PM »
Icefr, I have AT&T for my smart phone with lowest plan for minutes (450 minutes for $40), $20 for unlimited texting, and $25 for 2GB. I'm currently trying to lower my monthly bill by cutting back on data, but I'm also locked in to a 2-year contract until February. After that I'll be shopping for a much lower option, probably using that thread!

Taylor! It's always great to hear from people in the same career boat! I'll definitely apply for the loan forgiveness program ASAP. I'm literally waiting for my license (to be an LSW) to come in the mail, but I wasn't clinical track in grad school (macro for me). I'm not sure if I want to pursue my clinical license yet, but I know having the LSW does make it an option for the future! I'll definitely look into getting some Social Work PRN shifts to supplement! Thanks for that idea!


Etselec, I live in Philadelphia. I'm not sure how PA's taxes are relative to other East Coast states (except I know it's definitely lower than NY's), but Philly's wage tax is killer! Plus my job had a malfunction with payroll, so for 5 months, they weren't even taking it out of my paycheck! They fronted the money for me at tax time, but now I have to pay them back over the next six months, so essentially I'm paying double wage tax until November. I currently use Mint, but checking out YNAB's website, I might try their free trial and see if it's more effective. Thanks!

Jennie, I was unaware that states had their own loan forgiveness policies, so I'll be doing some research in regards to Pennsylvania's over the next few days. I'm also doing some research into IRAs and may include that in my plans down the road. It's good to hear you're planning for early retirement too!

Thank you all for the feedback!

icefr

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Re: Super new and now super anxious about finances
« Reply #12 on: May 02, 2013, 02:16:42 PM »
Icefr, I have AT&T for my smart phone with lowest plan for minutes (450 minutes for $40), $20 for unlimited texting, and $25 for 2GB. I'm currently trying to lower my monthly bill by cutting back on data, but I'm also locked in to a 2-year contract until February. After that I'll be shopping for a much lower option, probably using that thread!

Don't let your contract stop you from getting out of it - do the math at least. I got out of my Sprint contract ~5 months early and it was totally worth it. I saved ~$60/month by switching to Ting from Sprint and the ETF was "only" $100, so that break-even point was pretty quick. There are several AT&T MVNOs worth investigating.

Dee18

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Re: Super new and now super anxious about finances
« Reply #13 on: May 02, 2013, 02:32:50 PM »
Tmobile has some good deals now that work with AT&T phones,

etselec

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Re: Super new and now super anxious about finances
« Reply #14 on: May 02, 2013, 06:21:20 PM »
No way, I'm in Philly too! Agreed, the wage tax is rough (though it could be worse, as I'm learning - freelancers pay the city upwards of 10%, plus a $300 license fee no matter how little you make). The double wage tax is hard, but on the bright side, you'll have $100/month more to work with when you've finished paying them back.

Still, though - you must have some deductions coming out of your paycheck, maybe health insurance or something? $1650 from 32k sounds like way too much tax to me.

mlipps

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Re: Super new and now super anxious about finances
« Reply #15 on: May 02, 2013, 08:57:43 PM »
On the more extreme side, have you ever considered moving? A friend of mine from college is doing a PhD in social work in Oz and reports that demand is very high there, even without the official LCW standing. Work considering at least.

namby

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Re: Super new and now super anxious about finances
« Reply #16 on: May 03, 2013, 03:35:33 AM »
Icfr, you make a great point. It looks like the ETF for AT&T would be $155 at this point. I'll investigate some of those MVNOs and see what the savings would be!

Dee18, TMobile is one the options I'll be looking in to, since they've recently switched to their new billing model!

Etselec, that's awesome! Yes, I do have healthcare being withheld, which amounts to $90 a month. Looking at a recent paystub, it looks like I pay about 26% in taxes or $648 each month.

Mlipps, imediately it doesn't feel like an option, but I would like to move in the future. So, I'll definitely make sure to move somewhere that there's a high demand for social workers!

Thanks again, all!

Taylor

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Re: Super new and now super anxious about finances
« Reply #17 on: May 03, 2013, 10:59:36 AM »
I went to Grad School in Philly, and immediately left :)

Here in CO, and I think this is true in other states as well as it's a national program, but you can work in a Health Professional Shortage Area (HPSA) for two years and receive 20-30K towards your loans. Most of these positions are for doctors, nurses, and dentists, but there are a few mental health positions. In my area, I've been trying to get one of these jobs for two years iwth no luck (literally one opening in 2 years in the entire Denver/Boulder area and I'm willing to commute a long way for this). Something to look into, though.