Author Topic: Anything major I'm missing? - Also, advice on income?  (Read 1269 times)

kayonfire

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Anything major I'm missing? - Also, advice on income?
« on: May 01, 2021, 12:03:34 PM »
I'm relatively new to this, and I'd like to see if there's anything major I'm missing.

Life Situation: Single, no dependents (except two cats).

Gross Salary/Wages: $20.87/hr with small amounts of overtime.

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc.: None; my employer completely covers my health insurance, but I'm not yet eligible for any other major benefits.

Other Ordinary Income: I'm interviewing for a couple of potential second jobs, either of which would be an extra $400 after tax every two weeks.

Adjusted Gross Income: $20.87/hr.  Net is about $1400 every two weeks.

Taxes: A bit under 20%.

Current expenses:

<=$100/week daily expenses ($10 gas, $20 coin laundry, $70 groceries and misc).  I'm trying to lower this, but it's a process.
$100/month phone
$60/month internet
$575/month rent and utilities
$85/month car insurance (soon to increase)
$40/month medication
$329/month medical debt payments
$450/month car loan starting soonish (see below)
$30/six weeks haircut (necessary for professional appearance)
$250/year replacement clothes and shoes
$120/year necessary doctors' visits
$250/year vet bills

Total: about $2200/month

Expected ER expenses:

$1300/month (no debt payments, cheap car and insurance)

Assets: About $2.2k in an old 401k; about $1k in savings.  Usually the savings is higher, but I was unemployed most of last year.

Liabilities:

$6800 medical debt ($2500 in collections)
$2000 personal loan from relative from recent unemployment, no interest or set payments but needs to be paid off within two months
$1200 student debt; needs to be paid off this year so I can take advantage of tuition reimbursement benefit at work.
I'm also going to take on a $13,000 used car loan this summer.  This is not negotiable and not up for discussion.  (Long story, but the current car is going to go to someone who needs it more than I do, the bought car needs to be new enough that I've got a plausible reason for selling my old but functional beater for dirt cheap, and yes, I love this person well enough that I'm willing to stay in debt an extra nine months or so to help them out.  This is a one-time thing and there's no one else in the world I'd do it for.)

Specific Question(s):

Again, the car loan is not up for discussion.

The current plan for this year is to pay off the debt to the relative, then get to $3500 in my emergency fund, then pay off the student debt, and then near the end of the year start aggressively paying down the car loan.  Next year I'll finish paying off the car loan and the medical debt.  I intend to put the second job's income (if I'm hired and my health allows me to work that many hours a week) towards the car loan first.  Once all the debt is paid off, I should be able to save almost 60% of my primary job's income towards early retirement, invested fairly straightforwardly in index funds (plus a 401k plan that will be available to me in a couple of years), which should get me there in about fifteen years with no inflation but no raises (including two years max to pay off the debt).  I'll also plan to keep working the second job for one more year after the debt is paid off, then quit for quality of life's sake; a year of its income should cover the down payment on an FHA loan, and a thirty-year mortgage payment on a two-bedroom in this area would be equal to what I pay on a studio even before renting out the spare room.

I keep track of my spending and my budget using a spreadsheet tracking actual expenses/income and projecting them into the rest of the year.  It matches the numbers I've given above.  I expect my total cash on hand to dip down below $100 at one point next month as I pay off the relative's loan, but after that I should have a fairly good margin of error.

This does depend on keeping the current job or a job comparable in pay to it, which is why I want to pay off the student debt as quickly as possible and begin using the tuition reimbursement benefit; I don't have a degree or any specialized skills, and I'm not sure I could currently find as high-paying a job as I have.

Besides not taking on the car loan, are there any amendments to the plan that the forum would suggest?

Edited to add: A couple of you have suggested increasing my income.  If you have suggestions, I'm game.  More details on my career situation here.
« Last Edit: May 02, 2021, 02:49:19 PM by kayonfire »

nereo

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Re: Anything major I'm missing?
« Reply #1 on: May 01, 2021, 12:16:05 PM »
What are the yields on your debt?
Iím concerned about the ďin collectionsĒ line for your medical debt.  Generally, thatís something you should tackle right away, not down the road after other items.

Youíve made it very clear your car debt is non-negotiable, so be it. Iím still not clear why a new (to you) car must cost $13k, but it is what it is.

Your monthly phone plan is about double what our plan is for two people.  Yours is $1,200/mo... seems an easy way of putting several hundred more towards debt reduction.

ETA:  You arenít at the point yet where you need to consider what your ĎER expensesí might be.  Currently you appear to have a negative NW; once you get into positive, 6-figure territory you can address your post-FIRE lifestyle needs.

Increasing your income will have the most substantial impact on your FI - provided you can keep your spending in check. Some of your comments there make me worried you will not.
« Last Edit: May 01, 2021, 12:21:03 PM by nereo »

kayonfire

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Re: Anything major I'm missing?
« Reply #2 on: May 01, 2021, 12:44:19 PM »
There's no interest on any of the debt except for the car loan, which will be fairly high.  I'm limited in where I can buy a car -- given that I just opened my first credit card earlier this year and I have the bad medical debt, my credit score is terrible -- and from the shopping around I've done, that seems to be about the lowest I can pay for something newer than my current car that's still relatively gas-efficient and safe.

The phone plan is higher than I'd like it to be; I was dumb enough to forget that the actual price would be about 25% higher than the stated price, and I was exhausted enough by other life events not to shop around as much as I should've.

Except for rent -- I've moved out of a very bad but rent-free situation -- and except for the payments on the new medical debt, my expenses are about in line with what they were when I was working fast food.

I've been assuming that increasing my stability via going back to school would be more pressing than paying off old debt, but if that's not the case I can call and set up a payment plan today.

MDM

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Re: Anything major I'm missing?
« Reply #3 on: May 01, 2021, 12:59:55 PM »
You could read the Investment Order post to see how that might apply to you.

As you mentioned a spreadsheet, you might find the Case Study Spreadsheet useful for estimating your actual tax liability for 2021, and adjusting your withholding so you are close to owing nothing and getting no refund when you file in 2022.

kayonfire

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Re: Anything major I'm missing?
« Reply #4 on: May 01, 2021, 02:44:41 PM »
Huh -- so you'd argue I should do the emergency fund first, then pay off the car loan next, then put $6000 into an IRA, and only then deal with the rest of the debt (besides minimum payments)?  That would slow down getting out of debt, and that would mean both delaying taking advantage of the tuition reimbursement benefit and improving my credit score.  Why is an extra year of contributions worth it?

That calculator is interesting -- thank you.

MDM

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Re: Anything major I'm missing?
« Reply #5 on: May 01, 2021, 03:03:42 PM »
Huh -- so you'd argue I should do the emergency fund first, then pay off the car loan next, then put $6000 into an IRA, and only then deal with the rest of the debt (besides minimum payments)?  That would slow down getting out of debt, and that would mean both delaying taking advantage of the tuition reimbursement benefit and improving my credit score.  Why is an extra year of contributions worth it?
Yes, establish an emergency fund "to your satisfaction" first.  If you are satisfied with $0, go to step #2. :)
But "at least one month's spending" in the bank would not be unreasonable.

Don't know the interest rates on your debt (including the effective "interest rate" tuition reimbursement would provide), nor the tangible effects of your credit score, so I won't comment on those.

six-car-habit

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Re: Anything major I'm missing?
« Reply #6 on: May 02, 2021, 12:37:31 AM »
 Well I see you said discussion on the car $$ + car loan  %% was taboo, but i'm going to try anyhow....

" I'm also going to take on a $13,000 used car loan this summer.  This is not negotiable and not up for discussion.  (Long story, but the current car is going to go to someone who needs it more than I do, the bought car needs to be new enough that I've got a plausible reason for selling my old but functional beater for dirt cheap, and yes, I love this person well enough that I'm willing to stay in debt an extra nine months or so to help them out.  This is a one-time thing and there's no one else in the world I'd do it for.) " 

"   I'm limited in where I can buy a car -- given that I just opened my first credit card earlier this year and I have the bad medical debt, my credit score is terrible -- and from the shopping around I've done, that seems to be about the lowest I can pay for something newer than my current car that's still relatively gas-efficient and safe. "

  Ok, so you're willing to sell cheaply / give away your current 'functional beater' .   Why are you limited in where you can buy a car ? .   Don't just walk onto a dealers lot thinking you are willing to get a $13,000 high interest loan, whether thru their financing or something you line up with your own bank institution beforehand.   Why not save some cash yourself, look thru Craigslist for 1/2 hour nightly for a month or 2 , until you get a feel for what a great car you can get for $5000 - buying it thru a private owner sale.
     Is there a huge rush to supply your friend with your current car ??  Can you let them borrow your rig sometimes , until you save cash to upgrade your vehicle and pass the beater to them ?  Is their need for your current car, greater than >> your need to start paying down the $10K debt ?

 For safety in a car , nothing is more helpfull than situational awareness. Most any car built after 1995 + many earlier, will have drivers airbags and decent brakes. You dont need stability control, lane departure warning and other crap the dealer is going to try to upsell you into.

 when i take $ 1400 biweekly net income, thats roughly $3000 a month.  Your $13K car loan will end up being $450/ mo for 3 years alone [ if i add in some $ for interest, initial tax title and registration, etc].  When that car loan is gone [ in late yr 2024 ] you'll have hopefully only $1750 in monthly bills.  I think most here will tell you it'll be more if you decide to buy a house and have to foot the repair bills + higher utility costs + personalizing your home.
Pull that 1750+ number out of the $3000 monthly and its not near enough left over to save 60% of take-home.

 Spoken as a person who has spent way to much $$ on vehicles in their life , dont jump into a $13K loan for a car now.  Get the $10K in medical / personal / student debt paid off first.  That will take a year on its own.  Then save- or- borrow $5k from a bank "pre-approval" loan , and scratch the' improved vehicle itch' in mid-year 2022.




kayonfire

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Re: Anything major I'm missing?
« Reply #7 on: May 02, 2021, 04:02:27 AM »
I'm not doing very well at enforcing "not up for discussion," am I?

But to answer the question -- this person doesn't live near me anymore, and I'm worried enough about them and their current situation that I'm determined to make sure they have options.  Where they're living now is rural enough that without a car, there aren't many.  They would like to own a car and will be able to manage the insurance, gas, etc., but won't accept help on the car itself if they think it's charity, even though I owe them things that aren't financial.  For my own sake I've told them I'm upgrading mine this summer and talked them into buying the current one for less than it's worth, so the new one has to be "better," and it seems like it's a pretty tight market for stuff between beater and new right now.  Even Craigslist isn't pulling up much, and most of what it does pull up is from dealers.  But if I buy carefully enough, I can make the bought car last three or four times what mine usually do, and then I'm only out the interest and the increased insurance, which is worth it.

I'm limited in where I can buy a car because of my credit.  My bank refused me for a $5000 loan when my last beater broke down because I'd never had a credit card.  Now (because of the old medical debt being posted to my credit report) I don't just have no credit history, I have bad credit.  So I have to buy from a fairly predatory lender and just plan on paying it off quickly enough that I don't end up too badly off.

When the car loan is paid, there'll be a pretty good chunk taken out of the medical debt just from throwing the $329 minimum payments at it every month.  When they're both clear, that brings my monthly expenses down to $1400 or so even with increased car insurance.  Spending twelve paychecks out of twenty-six gives me 54% savings, and I can get within a couple of percent of sixty with some extra overtime and some extra saving.  (I buy gas more like every eight days, I'm getting the groceries-and-household down to sixty now and hopefully fifty eventually, etc.)  I know there are some things I haven't considered like emergency car repairs or sudden vet bills, but I'm not sure how to plan for those.

Renting out the spare room should cover some of the extra I'll be paying over rent, but I have to admit that that one's partly another fear thing.  I want to prioritize getting permanent, stable housing because I've seen what happens when a person doesn't have it, and I don't think a lower-middle-class person can afford to retire without it.

FIRE 20/20

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Re: Anything major I'm missing?
« Reply #8 on: May 02, 2021, 11:52:28 AM »
I'll set aside comments on the car loan as requested. 

Other than the car, it doesn't seem like your expenses are wildly out of line.  The only thing that looks horribly excessive is your phone plan at $100/mo.  You should be able to trim that to $25 pretty easily.  Do you have an Android or iPhone?  How much data do you *NEED* each month?  Do you owe money on a purchase plan for the phone? 

Aside from that relatively minor point, I'd look at income.  Do you have any way to increase your income?  Do you have a high school diploma, 2- or 4- year degree?  I'd always prefer to focus on increasing income and job stability from the primary job over adding a second job.  That's not to say you shouldn't keep looking for a second job, but increasing your pay at your main job should also be a focus.  Will your pay likely increase significantly at your current job?  If not could you change fields?  Could you move into a higher role at your current place of employment?  After you fix your credit score, do you have the skills and interest in becoming a landlord?  Do you have skills you could monetize on Etsy or something similar? 

kayonfire

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Re: Anything major I'm missing?
« Reply #9 on: May 02, 2021, 02:47:17 PM »
So, a couple of you have said I should increase my income.  This seems like a pretty decent middle-class living to me and a solid place to be right now -- my last job was $11/hour, and I'm not sure my mother ever made this much (even adjusted for inflation) in her entire working life -- but if you all have advice, I'll take it.

Relevant factors:

1) I've only been in my current job six months.  It's an entry-level position where I was hired mostly for data entry but, because I showed I was good (though self-taught) with spreadsheets and because I decided to pick up the basics of SQL when I found out it might be useful, I now have some more complicated and interesting responsibilities involving processing and manipulating the data after it's entered.  I've also been told I'm unusually good at the multitasking necessary to get the right paperwork to the right people at the right time, and I do enjoy how busy it keeps me.  I've had very good feedback in general at this job, and it's the first job I've ever enjoyed and the first work environment I've had that wasn't toxic, so I'd like to stay with this (small) company as long as is practical.

2) I have a GED and some college (about half an associate's degree in chemistry and an overlapping half an associate's degree in biology, neither of which I'm still interested in pursuing).  I left due to mental illness with a very low GPA.  I can't go back to school until I pay off a canceled Pell grant, but once I do, I'll have tuition reimbursement available at work for anything relevant to my current position; I've specifically asked about studying mathematics and then sitting the actuarial exams and have been told that would fit.

3) I don't really want to move out of my current small city, and I definitely don't want to move to a HCOL area or an area with a bad housing market, but I can if necessary.

4) I'm youngish but not young.

In the short term, I've already been thinking about asking to apply tuition reimbursement to that data analysis certificate course nexus has been going through.  It seems like something I can argue is relevant to my position, it's not college so FAFSA doesn't apply, and I might get more value out of it (both career-wise and knowledge-wise) than they do.  Anybody have any other suggestions or more general advice?

FIRE 20/20

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Re: Anything major I'm missing?
« Reply #10 on: May 02, 2021, 03:56:50 PM »
So, a couple of you have said I should increase my income.  This seems like a pretty decent middle-class living to me and a solid place to be right now -- my last job was $11/hour, and I'm not sure my mother ever made this much (even adjusted for inflation) in her entire working life -- but if you all have advice, I'll take it.


I can't speak for other people, but I suggested looking at increasing your income only because you posted a case study and there's not a lot to work with on the expenses side.  Income is obviously the other piece if you're trying to save for FIRE.  Once you have the expenses side down, the income side is the only place left to work.  I wasn't suggesting your current income is inadequate. 

With that said, nearly doubling your income and working at a place you like to work is great.  Given the additional information you posted, it seems to me that staying where you are is probably the best idea.  It also sounds like you're already doing the things you need to do in order to be as close to last on the layoff list if the company starts to struggle, and you're taking on more responsibility early in your time with them.  You're also getting positive feedback, which is critical.  And since you have a little while before you take on more schooling, that's out in the short term. 

If you envision a long career with this company and you're happy where you are now, my approach would be to plan for the long term.  I would try to kick butt for a full year (which you're already halfway through) and after a particularly good week I would set up a time to talk with your boss.  I'd explain that you love working for the company and that you hope to have a long career there.  I'd also ask what your boss thinks you can do to increase your value to the company or how you can take on more responsibility.  Some places place a high value on certificates and others don't.  It sounds like your company is open to you teaching yourself, and if that's the case then I would continue to develop any skills you see that might be useful.  There's an enormous amount you can do with spreadsheets and SQL, so the learning opportunities there are endless.  But, it sounds like you're already doing most or all of that.

The main thing I would say that you might not have considered is that they thought you were worth hiring at $20.87 when you had no knowledge of the work they needed you to do and when they didn't know you would excel and take on more responsibilities.  That means you should be worth a lot more than $20.87 to them now.  Unfortunately companies aren't always rational and you have only been there 6 months, so I wouldn't expect a huge raise in the near-term.  I do think that it sounds likely that within a year or two you *should* be worth $30/hour to them.  They probably won't see it that way because someone will always have the idea they could hire someone at $22/hour to replace you if you ask for too much, but I think it's totally reasonable to work towards that goal even if you never get there.  And you might be able to learn enough about the business to move into a totally different role, depending on the type of work they do. 

nereo

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Re: Anything major I'm missing? - Also, advice on income?
« Reply #11 on: May 02, 2021, 05:22:24 PM »
OP - what steps are you taking to repair your credit?

jeroly

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Re: Anything major I'm missing? - Also, advice on income?
« Reply #12 on: May 02, 2021, 10:57:06 PM »
Savings:

- phone should be $35/mo or less
- Haircuts: look into getting clippers and doing it yourself, save $250/yr
- Car insurance: shop around as it seems high; consider higher deductibles, dropping things like rental car replacement.
- Agree on the credit repair issue: can save $$$ on future loans, provide some extra security with having access to a credit card.


Car:

Iím not going to argue with you over the $13k car loan, but I will argue with you on the justifications youíve provided. They just donít make sense. If you want to give someone else your car, just do it. If they live far away from you, they may not even have any idea what car youíve gotten to replace it with. Even if they will definitely find out, if itís an old beater youíre giving them, then replacing it with even a slightly less beater of a car will be an upgrade and would serve as an excuse to sell the old car.  In any event, a $319 monthly payment wonít break you despite it being more than 10% of your pretax, even if many here might question the decision.

I worry for you though, from two perspectives: it seems that youíre either going to elaborate lengths to justify buying more car than you need, or that youíre making bad financial decisions in pursuit of some romantic interest.

six-car-habit

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Re: Anything major I'm missing? - Also, advice on income?
« Reply #13 on: May 03, 2021, 12:42:42 AM »
    Go down to your closest local credit union [ not bank ] and get an account with a $100 deposit . Start to put money into that account until you've reached $ 4000-5000.  Then apply for a "share secured " or " certificate secured" loan - where you pledge the money you've saved as collateral. { in case the borrower skips town and/or quits paying, the credit union just takes what is still owed on the loan from the savings account/ savings certificate } . Use this method to avoid a car loan.

   My local credit union offers this for 2% above whatever they are paying you on the savings account.  Example - If you have $ 4000 in a savings account earning 1% interest -you pledge the savings account as collateral - they would charge 3% interest for you to borrow $4000 from them. And they would still pay the 1% on the savings account.   I Imagine your local credit union has a similar program.  Now you are repairing your credit for the future when you are ready for a home purchase.  And you are not paying a dealer @ 18 % interest...

 Tip for Craigslist, on the cars for sale page, in the top left corner, you can screen the ads by hitting the owner tab.  The dealers spam the heck out of that site, so just look at the owner adverts / owner sold cars , and save much time. Also look at the nearest major metropolitan area closest to you, if you are not already. Often sellers will neglect the "localized / county " choices, even if they live there, and just post to the big city choice instead.