Mustachians: I'm new to the forums but have been interested in MMM for awhile now. I know this is a very long post, but I really, really appreciate any advice you could give. My family isn't exactly down with the MMM way of thinking, so I don't know who else to ask:
After I realized my once dream career made me miserable, I was stuck in a job AND a master's program (going to school and working a job with insane hours - both full-time) that I knew I didn't want to do forever, let alone another second. I got let go from that job (huge blessing in disguise) and had to completely re-evaluate my life. Luckily most people at that time (23 - now age 24) didn't have it together either, so I'm bouncing back. Since then I managed to salvage the Master's by transferring the credits to a different program in the same school and working 2 (sometimes 3) part-time jobs and have recently graduated (with debt) and I'm in need of some life advice:
I have a job that allows me to work remotely full-time and I get paid $4570 a month -- (I'm technically a 1099 subcontractor so no tax-withholding).
I moved home for school (commuting ~1.5 hours each way), and I'm currently living at home (with my mom) now where I'm living "rent-free" (more on that later). It made more sense last year for me to file as her dependent (even though she was unemployed for almost all of 2014 and I was working 2-3 part time jobs for about $15/hr for 20 hrs/week) since I'm on her health insurance (brother still in school and on the insurance plan, costs the same for any number of dependents = no brainer) but I may file singly next year.
Since my mom and I both got laid off within 1 week of each other last year, it took a family financial situation to a new low. My mom (definitely anti-Mustachian) already semi-regularly had to borrow money from me (as a high-school student and a college student, and a grad student) for electric and cell-phone bills. This would really stress me out, not as in having to support the family, but as in, it really irritates me that the last time this bill has been paid I also paid it, and if you had told me you couldn't pay it, I could've paid it on time and avoided these $40 late fees. We live in a townhouse that is my grandfather's rental property and as far as I know, my mom hasn't paid rent in a several months (she’s working now but is likely going to be laid off again).
I'm open to paying my fair share of expenses, but my mom is anti-Mustachian (cable TV, pricey cell phone plan – though not on contract), so I’m unsure of what to do, especially since she isn’t really paying rent herself. I tried to talk to her about wanting to split the bills since we both live here, but she wants me to use the money to “save up” since that’s what she did at my age. So that’s question number one: what should I do with regard to living expenses?
Question number 2: I definitely subscribe to the MM “debt is a big fat emergency on fire” ideology, so I planned on using the remote nature of my work to power through my loan debt from school while living cheaply at home. However, some number-crunching revealed this may not be the case:
Here’s my figures (and I’m attaching a spreadsheet for those interested):
Total Debt: $48,765 (all student loans interest rates in the spreadsheet - no credit card debt)
Invested in Betterment (80% stocks/ 20% bonds): 6,030 (currently contributing $90/month)
IRA [from a 403b rolled over to Betterment (90% stocks/ 10% bonds)]: 1,970 (currently contributing $10/month)
Safety Net (Betterment (50% stocks/ 50% bonds): 2,973
Checking/Savings: 11,315 (way too high – I know)
With a monthly paycheck of 4570, I know I need to withhold money in preparation for taxes. When I was working for them part-time, I held $700 out of each paycheck (so far only one) in preparation for taxes in a Betterment goal (60% stocks/40% bonds) as a majorly conservative effort around 30%. What percent of my current paycheck should I save for taxes?
Other then withholding my own money for taxes – I plan on honing my Mustachian ways and using most of my paycheck to pay down debt/invest. In the spreadsheet, I used a rough number (3500) in which I would withhold slightly less than 25% of my income, and divide the rest between investing and saving. I know I need to have some sort of budget basic things, but, again, see my confusion on living expenses above.
When I look at dividing up this 3500/month into paying down debt, I realize that if I invest a greater portion of my 3500 (pay down debt with 1500 a month/ invest 2000 vs. pay down debt 2000 a month / invest 1500) I can actually have my investments paying that amount of student loan payments in terms of dividends in about a year (assuming a 5.2% return monthly – which is a big/big-ish assumption).
My current job is a 1 year contract so I’m only imagining myself in the current rent-free-able-to-work-remotely scenario for a year, after which I may want to find an apartment to live in, in which case I would have to pay rent OR have enough money to for a down payment to get a mortgage for a duplex, and rent out the other side to pay my rent
Regardless, the ability to have my investments pay my loan payment (in a year’s time!) and be debt-free in ~2 years is promising enough for me to reconsider emergency nature of my debt in favor of investing.
Thank you very much for you help, thoughts and advice to a young mustachian-in-training!
