Author Topic: Hit 90% savings, avoid bad influences  (Read 7355 times)

Donovan

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Hit 90% savings, avoid bad influences
« on: April 18, 2013, 08:05:50 AM »
   In a few weeks I'll be moving to Chicago for my last summer internship before I graduate in December.  I can't wait to get underway, as this will be my first work experience outside of my home town (Indianapolis).  As this is my first opportunity to live entirely on my own, I want to make it one that will lead to an easier future by avoiding any sort of lifestyle inflation and creating the highest possible savings habit that I can.  I'm aiming for 90% of my take-home pay, which would do a great job of paying for my wedding next year and helping my future wife with her transition to grad school in the fall.

   In order to do this, I am trying to take advantage of every trick and perk I can get my hands on.  This includes leaving my car behind and going bike-only for the full 3 months, avoiding public transportation like the $2.50 plague, and cooking at 'home' constantly.  I have also been provided an absurdly good opportunity in the fact that my employer, in addition to an exorbitant salary, is providing me with housing and also provides free breakfast and lunch to their employees on workdays!

Details:
Gross pay: $5500 /month (I about fainted when they told me this)
Estimated post-Tax pay: $3900 (based off of an online calculator)
Total throughout summer: ~ $11700

So this gives me ~$1170 to use over the next 3 months and retain a 90% savings rate.

Monthly budget:
Food: $100 (very easy for me given the free food I get)
Transportation: $60 (bus fare to visit my fiance one weekend a month)
Bike repair: $50 (a buffer in case I pop tubes or my seat gets stolen)
Entertainment: $50 (only to be used to spend time with the other interns)
Discretionary: $50 (will probably go towards sheet music or rock climbing day passes. I'm not a monk :p)
Car insurance: $50 (sad, since I won't be driving it.  My fiance will have it)

Total monthly budget: $360
Total over 3 months: $1080 (leaving $90 unaccounted for!)

   So there's the gauntlet for myself: start out post-school life right and rack up a 90% savings rate at my first extramuros work experience.
   
   For those who want a challenge of your own, I offer a subset of my personal challenge.  Sometime over the next 3 months, try to organize events with less frugal friends that fit within a mustachian lifestyle.  For example, convincing them to have parties in rather than going to bars, or to go out for a day in the park instead of a movie.  For me, this may be one of the most challenging things about the summer, as I have a feeling that the rest of the suddenly highly paid tech interns that I will be living with will be drawn to all sorts of unnecessary spending as a group.  In order to limit this some, I hope to organize a cooking group that will take turns making dinner throughout the week in order to save us all money without making each of us cook something every night.  I also hope to get very well acquainted with the free local zoo within walking distance of my given apartment.

P.S. For anyone living in Chicago, I'd love tips on free/very cheap events in the area.  I'll be living in the Gold Coast area, just a block East of the Hancock building.

Reepekg

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Re: Hit 90% savings, avoid bad influences
« Reply #1 on: April 18, 2013, 08:21:06 AM »
You are walking distance to the Oak Street Beach, which will be perfect for the summer. Convince your new friends with unfamiliar cash burning a hole in their pocket that (free) sun, water, and volleyball is way more awesome than sitting in a bar.

Also, on the cultural side, you can avoid the pricey architecture tours (which my parents love). By doing a little research beforehand, you can hop on a train out to Oak Park and see a bunch of Frank Lloyd Wright's houses by just walking around the neighborhood.
« Last Edit: April 18, 2013, 08:26:20 AM by Reepekg »

arebelspy

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Re: Hit 90% savings, avoid bad influences
« Reply #2 on: April 18, 2013, 09:11:48 AM »
Live a little! 

Loosen the purse strings!

You just graduated, go have some fun!

Wouldn't 50% savings rate be enough?

You're young, you can save later!

/ignore all the above.. Just preparing you for the stuff you'll hear to harden you towards it. :)   Way to be badass.
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Donovan

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Re: Hit 90% savings, avoid bad influences
« Reply #3 on: April 18, 2013, 09:38:47 AM »
Live a little! 

Loosen the purse strings!

You just graduated, go have some fun!

Wouldn't 50% savings rate be enough?

You're young, you can save later!

/ignore all the above.. Just preparing you for the stuff you'll hear to harden you towards it. :)   Way to be badass.

Haha, you actually had me for a second :p I was so confused because it went against the usual nature of your posts.

And thanks for two great suggestions Reepekg.  I've never been much good at volleyball, but this seems like the perfect time to improve! (I think there's one at home I can bring so I don't have to buy one too!)

Rickk

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Re: Hit 90% savings, avoid bad influences
« Reply #4 on: April 18, 2013, 09:41:41 AM »
I went to school in Chicago (Depaul University - lived in Lincoln park) a long time ago, so my info here may be dated . . . .
Riding around the city is a great way to get around - there is tons I managed to do and see for free.
The Lincoln park zoo is great.
Riding along the lake front is fabulous - you can ride north and south for miles.
I highly recommend the free improv shows at Second City after their regular shows.  I went there all the time on my bike - the improv is not long, but is free - and often quite funny. http://www.secondcity.com/
If you don't have, or haven't budgeted for a good lock yet, you might want to . . . .  Bike forums can help with that http://www.bikeforums.net/forumdisplay.php/20-Commuting
Navy pier is something to go see http://www.navypier.com/
Millenium park is fun to see, and watch people at the water sculpture http://www.cityofchicago.org/city/en/depts/dca/supp_info/millennium_park.html
Jazz fest and Chicago fest are must sees (Just avoid buying food and drink and you can have a whole day of fun for free.

Donovan

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Re: Hit 90% savings, avoid bad influences
« Reply #5 on: April 18, 2013, 10:25:38 AM »

If you don't have, or haven't budgeted for a good lock yet, you might want to . . . .  Bike forums can help with that http://www.bikeforums.net/forumdisplay.php/20-Commuting


I currently have a big Onguard Pitbull u-lock and an old Kryptonite chain (no, not with a round tumbler luckily). I plan on always locking the back wheel and frame with the U-lock, and locking the front wheel to the frame with the chain.  I'll also be bringing the bike up to my room every night (no overnight parking ever), and may use $10 of my bike budget a month to pay for indoor parking at my work's garage.  My bike is my baby, so I'm trying to be as safe as humanly possible.

jrs

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Re: Hit 90% savings, avoid bad influences
« Reply #6 on: April 18, 2013, 10:37:54 AM »
Entertainment: $50 (only to be used to spend time with the other interns)
Discretionary: $50 (will probably go towards sheet music or rock climbing day passes. I'm not a monk :p)

I'd be looking for a climbing gym with a sub-$50 monthly membership fee.  If there's one within bike range, you may well find yourself climbing an hour or more a day, 4+ days a week (while making new friends).

superheropunk

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Re: Hit 90% savings, avoid bad influences
« Reply #7 on: April 18, 2013, 12:14:31 PM »
So your going to save 90% of take home for 3 months then going to blow that money on your wedding and finance grad school cost.... What about building savings to reach FI?





Donovan

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Re: Hit 90% savings, avoid bad influences
« Reply #8 on: April 18, 2013, 12:41:12 PM »
So your going to save 90% of take home for 3 months then going to blow that money on your wedding and finance grad school cost.... What about building savings to reach FI?

I'm not sure what you mean.  The wedding won't be too large of a portion of this, but is something that my fiance and I want to do.  These savings will make it easy to do without dipping into my salary next year.  As for grad school, it is probably the most important investment that I will ever make considering that my fiance will probably end up with a salary that outstrips mine inside of seven years...and be able to work from home to boot. In addition, isn't it the general consensus that AVOIDING loans (and/or paying them off early) is fairly equivalent to investing that money at a guaranteed return rate equal to the interest rate of the loan (so probably around 6.8% for the student loans she would otherwise need)?  I probably will find a way to invest some of this saved money as well (either in a 401K or a Vanguard account, pending some math), but one of my largest considerations at this particular point in my life is keeping us out of the crippling pile of student debt that so many of my peers have fallen into.

Would you rather I go out to eat every night and not put any money back to improve my future financial outlook?

In addition, this summer is an exercise for me to see how far I can push my costs down while I have an easy environment to do this.  I figure that if I can keep myself at 90% savings this summer, then something more like a 60-70% savings rate once I am actually responsible for rent, utilities, and another person will be a piece of cake from now until the end of work (I'm aiming for 35, giving me 12 years).

Jrs, I have looked but the only rock gym I have found has a $55 monthly pass.  They sell a 10 punch card for $80 that I have considered (if I only buy one that's a bit more than $25 /month amortized cost) that will get me in once a weekend (minus my visits to my fiance).  I'm waiting til I get there to see if it is a good enough facility to justify that much of my budget.

arebelspy

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Re: Hit 90% savings, avoid bad influences
« Reply #9 on: April 18, 2013, 12:47:22 PM »
Rather than get defensive Donovan, it may be worth it to revist his comment at semi-regular points and think about it.

Also I wish I had taken out loans for grad school (which we paid for both myself and my wife in cash).  So it isn't always the case that avoiding loans is best.  YMMV.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Donovan

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Re: Hit 90% savings, avoid bad influences
« Reply #10 on: April 18, 2013, 01:02:15 PM »
Also I wish I had taken out loans for grad school (which we paid for both myself and my wife in cash).  So it isn't always the case that avoiding loans is best.  YMMV.

Could you explain why in more detail?  I could see doing this if you could get very good loan rates that you could beat in other investments (I am currently doing this with some undergrad loans that are at 2%, and plan to continue), but I'm curious if you have other reasons.  I'm not against looking at other ideas, but my fiance is very debt adverse due to some trouble her family has had in the past and I would need a very strong argument to convince her of anything.

Thanks for your input.

arebelspy

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Re: Hit 90% savings, avoid bad influences
« Reply #11 on: April 18, 2013, 04:37:44 PM »
Also I wish I had taken out loans for grad school (which we paid for both myself and my wife in cash).  So it isn't always the case that avoiding loans is best.  YMMV.

Could you explain why in more detail?  I could see doing this if you could get very good loan rates that you could beat in other investments (I am currently doing this with some undergrad loans that are at 2%, and plan to continue), but I'm curious if you have other reasons.  I'm not against looking at other ideas, but my fiance is very debt adverse due to some trouble her family has had in the past and I would need a very strong argument to convince her of anything.

Thanks for your input.

You nailed it.

Student loans are generally cheap sources of free money that I can put to better use.

Significant others can be tricky, however, and it's probably worth the small mathematical inferiority to keep the spouse on board.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

caligulala

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Re: Hit 90% savings, avoid bad influences
« Reply #12 on: April 18, 2013, 07:43:44 PM »
There are loads of free concerts and movies in the parks in the summer. Ravinia has free entry for students to the CSO concerts and probably some others some nights are only $5. Biking up to the botanic gardens, going to the Garfield Park Conservatory and just walking the many awesome neighborhoods are all fun, free things to do.

Dr.Vibrissae

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Re: Hit 90% savings, avoid bad influences
« Reply #13 on: April 18, 2013, 09:11:29 PM »
Also I wish I had taken out loans for grad school (which we paid for both myself and my wife in cash).  So it isn't always the case that avoiding loans is best.  YMMV.

Could you explain why in more detail?  I could see doing this if you could get very good loan rates that you could beat in other investments (I am currently doing this with some undergrad loans that are at 2%, and plan to continue), but I'm curious if you have other reasons.  I'm not against looking at other ideas, but my fiance is very debt adverse due to some trouble her family has had in the past and I would need a very strong argument to convince her of anything.

Thanks for your input.

You nailed it.

Student loans are generally cheap sources of free money that I can put to better use.

Significant others can be tricky, however, and it's probably worth the small mathematical inferiority to keep the spouse on board.

Grad School Stafford loans are now fixed at 6.8%, so they're not as cheap as they used to be.

arebelspy

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Re: Hit 90% savings, avoid bad influences
« Reply #14 on: April 19, 2013, 07:08:47 AM »
Grad School Stafford loans are now fixed at 6.8%, so they're not as cheap as they used to be.

Ah, curious.  When did that happen?

Wonder if they did that to try and cool the market?

Anyone have any interesting reading around that topic?

Still, most people don't think ahead on that sort of stuff, so high tuition + high interest rates is bad news.

OTOH, I'd probably still take as much as I could at 6.8% right now, but I probably wouldn't recommend others do so (I'm less risk averse than most, at this point in my accumulation stage).
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

mushroom

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Re: Hit 90% savings, avoid bad influences
« Reply #15 on: April 19, 2013, 07:25:17 AM »
There are so many free events in the summer in Chicago it's crazy. Millennium Park concerts, festivals, movies in the park, way more stuff offered than you'll be able to go to.

And it's always pretty to go along the lakeshore, go to the beach, etc.

AJ

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Re: Hit 90% savings, avoid bad influences
« Reply #16 on: April 19, 2013, 11:07:39 AM »
Grad School Stafford loans are now fixed at 6.8%, so they're not as cheap as they used to be.

Ah, curious.  When did that happen?

Wonder if they did that to try and cool the market?

Anyone have any interesting reading around that topic?

Looks like they went to fixed rate rather than variable most recently in 2006: http://www.dpc.senate.gov/docs/fs-112-2-90.pdf

Here is an interesting history of the rates: http://www.nerdwallet.com/blog/nerdscholar/2012/federal-student-loan-interest-rate-timeline-events/

It sounds like it has more to do with lack of funding than with trying to discourage people from taking out loans. Remember that 6.8% is still super low for an unsecured loan to people with no credit and no job. And while you can't write them off in bankruptcy, you can get them forgiven. That money has to come from somewhere, and if the program doesn't get enough funds allocated from taxpayers then it has to come from the borrowers themselves in the form of interest.

anastrophe

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Re: Hit 90% savings, avoid bad influences
« Reply #17 on: April 19, 2013, 11:29:17 AM »
Grad School Stafford loans are now fixed at 6.8%, so they're not as cheap as they used to be.

Ah, curious.  When did that happen?

Wonder if they did that to try and cool the market?

Anyone have any interesting reading around that topic?

2006, but the interest rate change was decided in 2001. Not exactly interesting reading, but here it is: http://www.gpo.gov/fdsys/pkg/BILLS-107s1762rs/pdf/BILLS-107s1762rs.pdf

arebelspy

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Re: Hit 90% savings, avoid bad influences
« Reply #18 on: April 19, 2013, 12:11:28 PM »
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

atxgirl

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Re: Hit 90% savings, avoid bad influences
« Reply #19 on: April 24, 2013, 09:09:57 AM »
Hey I think what you're doing is awesome...goodluck!

Here is an FI blog written by a guy who lives in Chicago. Maybe you can ask him questions about frugal activities: www.cashreb.com
MMM did a case study on him here: http://www.mrmoneymustache.com/2012/11/14/doubling-your-salary/