Author Topic: Young Person Looking For Advice  (Read 1620 times)

Bones

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Young Person Looking For Advice
« on: February 26, 2017, 11:02:05 AM »
    Hello all, I am relatively young (26 years old). I am posting here to try and get some advice about my financial situation. I looked at the case studies section of the website but I am not financially literate enough to understand many of the categories that it told me to post about (like tax rates, etc.) so I figured I would post it here. If it better belongs in the case studies section then please feel free to move it moderators and I will adjust the format of my post accordingly. Let me also say that I have been reading the MMM forums and dipping into the blog and I am excited to be apart of this community!

    I am extremely fortunate to have a father who instilled the importance of investing in me at a really young age. Ever since I started baby-sitting when I was 13 years old he would take half of whatever I made, match it 100%, and then opened up a Roth IRA account and put it in there for me. For instance, if I made 30 dollars babysitting. I would get $15 to spend on movies or video games or whatever and he would take $15 of his own dollars and deposit $30 into my Roth. By the way, the matching stopped in high-school once I started getting paychecks and I haven't contributed to this fund in years, although I was able to appreciate it at the time I was a little annoyed not having as much money to spend as I could have in the immediate term. I know I am better off than most but I have "fallen off the wagon" recently and have had a prolonged financial lapse in judgement and now have some credit card debt that I have just recently pledged to eradicate (which comes along with binge-listening to financial podcasts (Listen Money Matters, Radical Personal Finance, some Tim Ferris show, etc. - and reading MMM and other financial resources).

    I have also been tracking 95% of my income and expenditures since I was about 20 years old in my own Excel spreadsheet (broken down into my own spending categories, credit card balances, income, etc.). Although it is great that I have been tracking things for so long I would not really take any of that information to heart or make changes based on spending trends, etc.

    Bottom line: I am responsible for my own decisions and it is my own dang fault for getting myself into credit card debt (currently have a net balance of ~$9,000 (amount in checking account - amount spread over all credit cards). That being said some factors for why I fell off the wagon include a terrible relationship where I was supporting both of us on a small income and putting many things on credit cards. I used to pay off my balance in full and never spend more than I had. After I started running a balance on credit cards it became less of a big deal to me to spend more than I have. There are some confounding factors such as depression/other health issues (lyme disease) and the relationship getting worse and worse and more traumatic and I started not caring about spending at all and buying items to try and make up for my poor emotional/mental state.

    We also ended up buying a house in December (well technically I bought a house - we left her off the title/deed/anything associated with the house because her credit is so awful and she has so much debt). I was definitely not ready to purchase a house at this point in my life and once again I am responsible for my decisions but I agreed to do this with her (we are now broken up) and it was definitely not the right call but I do really like the house and think home-ownership is a great thing and exciting - I just wish the decision would have been made with more time to think about it and put off another 1-5 years and not have the emotional baggage of the relationship associated with it. Luckily I am the sole owner of the house and it will stay that way. I only lived there for a week and a half until we broke up and now she is staying in the house while I live with my parents 30 minutes away (she has no financial means to move out and I am not the kind of person to give her an eviction notice - she can't stay with her parents because they are getting evicted from their house). She will be done with grad school in August (6 months) and she will move out then and I will move back in come hell or high water.

    I am definitely paying PMI on the house (only put down like 3.5% with the government assisted first-time home-buyers program). Luckily, since my house isn't worth that much (appraised at 100k I believe) I am paying "only" (I know it's money for nothing) $24.83 per month for PMI. I don't think it is worth it to me to try and pay down 20% to get it removed because I don't know if I want to be in this house for very long. Plus my mortgage company says I need a new appraisal to get it removed which I think run like $400 - which is over a year of my PMI payments - maybe not worth it for a shorter-term house? The house itself is fantastic but the neighborhood is not great (it was all we could afford). My exes car was shot with bullets 3 times in a drive-by shooting and she was supposed to be in it 5 minutes later - there was a bullet directly through the headrest. Plus I guess after we broke up a neighbor said they found a body in our alley. We live in a part of town that is notoriously not great (but not awful) but we are in a nicer pocket of that area. All of the neighbors were really surprised when this outbreak of violence happened over a week or two and said it was extremely unexpected for this block. Hopefully that dies down again soon but I have a tentative date of 2 years that I will re-evaluate whether or not I want to stay there or sell and move somewhere else within my area or perhaps to a new state.

    I went heavy into precious metals a couple of years ago and basically sank all of my income into primarily silver (I lost some of my data, so probably a dollar-cost-average of about $32 per ounce, plus or minus $5/oz). The good news is that if I didn't put the money into silver I probably would have blown it on speakers, music festivals, etc. So although I am not realizing a loss selling at approximately ~$18 per ounce, I learned a great lesson about emotional investing, lack of diversification, and spending more than I make and selling this off at a loss is my penance in way for my transgressions, haha. I have an emotional attachment to the silver but I have realized the my credit card debt is an emergency right now and so I have sold off about 30% of my precious metals so far and am continuing to list them on e-bay and will eventually sell off 95% of it (within the next month or two). I am keeping a couple of pieces that have sentimental value attached to them.

    Breakdown:
    • Income: Just north of $20,000 per year after taxes (take home pay) - just had to start paying health insurance a couple of days ago and that is $250 per month (that seems crazy to me!) so that take home pay will decrease significantly
    • Checking account: ~$500
    • Other investments: ~$3,000 in precious metals that I am in the process of selling off
    • Roth IRA: ~$16,500

    Debts:
    • Credit card balance: ~$9,700 (luckily, ~$5,500 of this is at a promotional APR of 7% which I have about 10 or 11 more months of - $2,900 is a new credit card that the first statement has not closed yet - won't pay interest for a another month or two - that credit card is composed of purchases that I would have made anyway but I got a new credit card because I qualified for the Chase Sapphire Reserve and I will get $1,000 in cash rewards after I spend $4,000 on it - minus a $450 annual fee and I come out on top plus I will get $300 in travel reimbursements and will likely cancel it after the first year and not pay that fee again - I will likely to back to using my American Express credit card after I hit that $4,000 to take advantage of the rest of the promotional APR - the last ~$1,200 is on a home depot credit card that I got when I got the house and the majority (~60%) of that balance is interest free so long as I pay the amount in full by 10 months from now or something like that)
    • Mortgage: ~$96,700 (purchased the home for $98,000 December, 2016 - it has a $4,000 MFHA loan on it and both that loan and the main mortgage are at 3.875%) - MFHA is 10 year fixed, main mortgage is 30 year fixed - total mortgage payment with the two of those combined is ~$670 per month
    • No student loan debt! The mortgage and credit cards are the only two things - I also have a car that is fully paid off

    I am also selling a bunch of random stuff on e-bay besides the precious metals and have started to cook at home to reduce what is probably one of my biggest financial weaknesses - buying really nice,expensive, pre-made food at the food co-op.

    The credit card balance looks a little worse than it could be because I pay my bills as soon as I possibly can so I had already paid my mortgage that was due March 1st by early February and all of my heating and stuff I have paid up mostly through march. I am also getting ~$1,000 check from an insurance mix-up and will get $1,000 from my CSR credit card after I hit $4,000. I also have ~$1,000 money on hold in my PayPal account that I can't withdraw yet from e-bay sales (starting to sell off those precious metals).


    I guess I just want some advice/critiques/punches in the face. I know I have a lot of proper leg-work and financial basis that with some fine-tuning I will be able to excel in life and eventually become financially independent sooner than most. Without information about how this new financial venture will go I want to see if I can obtain FIRE (does that stand for financial independence, retire early? - I'm pretty sure about the first two letters but not the last two) by the time I'm 40-45 years old.

    I know my spending is the biggest place for me to cut down right now and that is what I'm focusing on, I started using Mint so I an analyze trends and categories better than my personal Excel document.


    Ok final moment of honesty - I will prepare my face for the guaranteed punchings
    I spent $440 dollars on groceries for myself this month - that's my next target to lower - in addition to not spending money on random things that I don't actually need.


    My plan is as follows:
    • Pay off credit card debt - deadline 12-31-17 (although I plan to have that accomplished far sooner by significantly reducing spending
    • Begin investing (Vanguard total market index, Roth contributions, and some money for speculative investments like Bitcoin and precious metals (hey what can I say I'm young and can afford to lose some money and I like the high-risk, potentially high reward stuff and believe in those two things - especially bitcoin)
    • Potentially sell house (or rent it out) and purchase a house of comparable modesty (~1,000 sq.ft) but spend the extra money to get it in a better neighborhood or potentially different state (I like the PNW although Washington State which I looked at last night seems to be 3x the cost for a house where I am in the Midwest

    Any tips or well wishes or face punches?

    Bryan
« Last Edit: February 26, 2017, 11:12:36 AM by Bones »

GizmoTX

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Re: Young Person Looking For Advice
« Reply #1 on: February 26, 2017, 11:27:40 AM »
Your credit card debt is the first priority to knock out. Retain an emergency fund, especially with a house. Then invest.

What are your prospects for increasing your income? $20K seems very low.

Have you given your X an eviction notice for August? With a cushy deal like that, what's the incentive for her to ever move out? What if she doesn't have a job after graduation? Or she says it's not enough to live on? You don't want to wait to start eviction proceedings after August, because (depending on the laws where you live) she could continue to live there for months after you start proceedings. Start them now, so you know she has plenty of time to make the move out happen in August. Since her parents are familiar with eviction proceedings, no doubt they know what they can get away with. I'm sorry you're having to deal with this, but it could get worse. Hopefully she won't trash the house.



mxt0133

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Re: Young Person Looking For Advice
« Reply #2 on: February 26, 2017, 11:30:20 AM »
Welcome to the forums. Even tough you are in a tough spot right now financially and relationship wise, the up side is that you are young and income wise have a lot of room to improve, at 20K net you are at basically minimum wage levels. 

You can get a part-time job or go back to school to find a higher paying job.  Once you get the house situation straighten out, get roommates and have them pay your mortgage.  Continue to work on your expenses and spend the time to reflect and find out what really brings you happiness.  I'm not talking about the short-term happiness you get from buying something new or taking an exotic trip, focus on what you value and if your actions are in alignment with them.

Above all that if you really want to stabilize your finances in the long run be very selective of who you date/marry.  Nothing will derail your financial goals worse than a spouse that is not on board the MMM train or worse end up getting divorced. 

Iplawyer

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Re: Young Person Looking For Advice
« Reply #3 on: February 26, 2017, 11:37:49 AM »
You should have your X sign a lease right away.  The terms would be what reasonable rent would be and an absolute termination date.  Include a clause that if she moves out on X date then t he rent will be forgiven.  If she doesn't then it is immediately due and payable on the spot.  Then you will have a document to use to evict her legally.  If she doesn't sign it - Kick her out now.

GizmoTX

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Re: Young Person Looking For Advice
« Reply #4 on: February 26, 2017, 12:08:04 PM »
You should have your X sign a lease right away.  The terms would be what reasonable rent would be and an absolute termination date.  Include a clause that if she moves out on X date then t he rent will be forgiven.  If she doesn't then it is immediately due and payable on the spot.  Then you will have a document to use to evict her legally.  If she doesn't sign it - Kick her out now.

+1

the_fixer

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Re: Young Person Looking For Advice
« Reply #5 on: February 26, 2017, 12:36:54 PM »
I would be worried about her trashing the house or moving in her family / new boyfriend / friends and delaying eviction.

Once you have her out of the house if you keep the house and move back in you could rent out the extra bedrooms, basement, garage and even the couch especially if you are in an area where there is a college.

I have a few friends that did that in college and it worked out great and while you are young it is not as hard to share a space with people.

Bones

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Re: Young Person Looking For Advice
« Reply #6 on: February 26, 2017, 12:49:19 PM »
Thank you for the input everybody. I had drawn up a preliminary lease/eviction notice after 6 months with my dad and had his lawyer friend look over it (for free, and his wife is a real estate lawyer so it worked really well). I had set that by the wayside and I will pick that back up and pick a date and be firm with it and have the legal system on my side to back me up.

Besides that (I know that's the eye-catching thing in that novel that I wrote) how doesn't everything else sound?

I get paid $14 per hour currently and from an online calculator that equates to approximately $29k. I do have a four year degree (environmental science with a minor in forestry - specialized in GIS/natural resources). There is definitely opportunity to get paid more there. I went and looked at jobs after reading your posts and found 2 that I will apply to. At my current job I am the front runner for a promotion at the end of the year that would equate to 37k per year but I told my boss that I would for sure need a raise between now and then and even then I'm not sure that I could make it work. If I got offered the 37k right now I would take it but I will start shopping around and see what else is out there. He said reviews are in a week or so and that he will see what he can do. I will still keep looking though.

Thanks for your input everybody!

I am planning on getting one roommate with me once I move back in. You couldn't really have more than that with the way the house is set up (basement is non-livable, no garage, and the only other option for a bedroom you can barely fit a bed in there so probably just one roommate, which would help a lot).

Linea_Norway

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Re: Young Person Looking For Advice
« Reply #7 on: February 26, 2017, 01:15:27 PM »
I don't see why your X is living in your house for free, while you pay for the house. Let her pay some rent or rent out a room to another (normal) person while she lives there. You must be allowed to make some money on the house from now on.

marty998

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Re: Young Person Looking For Advice
« Reply #8 on: February 26, 2017, 01:38:20 PM »
Notice you wrote up a gigantic spiel about all the benefits and justifications on the credit cards.

Until you're in a position to use them responsibly (i.e. paying off balance in full each month) please do not fall for any of the marketing about rewards and cash backs etc... like spending $4000 to receive $1000 back.... you're still $3,000 in the hole.

This is how they get you hooked and paying interest for a long time - they make much more notwithstanding the giveaways.