Young, stupid, and adopting the Mustachian Philosophy

[darkelfx]

So I recently stumbled upon the MMM from another forums and was rather intrigued by the concept, so much so that I've decided to make the complete plunge into it.

A little about my background:

I recently graduated from Uni last year and spent the past year abroad looking for work (to no avail). When I was in college, I was the exact opposite of what you would call Mustachian. I had a campus job paying minimum wage, but was going out to eat a lot, and spending money leisurely (especially since I had credit cards). I took advantage of several 0% Purchase/Balance Transfer APR offers, which allowed me to transfer my big balances and only pay the minimum without paying interest (yes, I know I'm stupid). Knowing this, I felt a lot of financial freedom, prompting me to invest in $1500 worth of archery equipment so I can compete collegiately (worst idea ever). At the time, I was already $3000 in CC debt (interest-free) accumulated from earlier years, and my last year, I could've paid it off since I was working that summer. Instead, I decided to go into more debt and buy the equipment. Here's the kicker: I didn't even end up competing due to time constraints and school. Very un-mustachian like.

Nonetheless, I ignored the problem since everything was interest free anyways and figured I would find a job after I graduate and would pay off the balance then. That obviously didn't happen. I decided to move to Asia to look for work, partied my ass off, accumulated more debt, and ended  up without a job moving back to the US. Keep in mind, I had $30k in student loan debt upon graduation. I applied for deferment and was approved up until May 2015 (but the loans were still accumulating interest).

I was back in the states by March and found a job very quickly. I wish I found MMM sooner, because I've only discovered this a few weeks ago. Had I known earlier (back in March), I would've tackled more debt off. I was actually still going out to eat a lot and spending money unnecessarily on material items (board games especially). I've been adopting MMM for 2 weeks so far and things have been great!

I am in a fortunate enough situation to currently be living with my parents, therefore most of my expenses are covered. I read the article on treating debt like an absolute emergency (horde of bees waiting to sting you haha) and started adopting this philosophy 2 weeks ago.

Here's my current financial situation now (after adopting MMM):

Income
$2500 Take-Home Pay/Month

Expenses
$220 Gas Expense/Month (Driving only to work and back, occasionally around my neighborhood, but negligible mileage)
$100 Miscellaneous/Emergency per Month (I don't plan on using this, except for emergencies)

Loans/Debt
Student Loans (@5% average interest rate) : $27,000
Credit Card Debt: $2000 (Interest-Free until 2016), $1000 (Really high-interest)

Since I'm living at home, I choose to not eat out at all and eat all my meals at home, but I do budget $100 per month in case of emergencies for any miscellaneous expenses that may come up.

I am currently studying for the CFA Level I and the registration deadline is August 19th. The cost to register for the program + Level I is $1500, which means my August paychecks will be tied up paying off the $1k CC debt and the CFA exam.

Now, this may be a bit of a stretch, but I do have a predicament that I need fellow Mustachians' advice on:

I want to figure out a way to eliminate all my monthly expenses completely, and decided that biking to work would save me that money. However, the bike commute is 20 miles one way (2-2.5 hour est. travel time). So I would be spending 4 hours each day biking 40 miles, which would improve my fitness health drastically. However, it is 4 hours of my life away to save $220 a month. Right now, my driving commute is approx. 40 minutes to work and 60 minutes driving home (40 miles total). I actually calculated the cost per trip and it costs me approx. $11 per day (round trip). When I choose to bike, I save that $11 (and get one hell of a workout). My car is a gas guzzler (20-25 miles/gallon avg) because it's a very old car (96 Nissan) and I do not have the resources to buy a more fuel efficient car so I'm stuck with the one I have. Also, I have no plans to move closer to work until my loans/CC debt are all paid off so that's out of the question.

 There are a few options that I've considered that will still save me money:

1) Ride bike to train station (5 miles/20 minutes) and take the train to work (25 minutes). The train station near my office is only 8 miles away (8 miles/25 minutes). Ride bike back to train station (8 miles/25 minutes) and take the train home (25 minutes). Ride bike back home (5 miles/20 minutes).

Total Travel Mileage/Time: 26 Bike Miles/90 minutes on bike + 50 minutes on train = 140 Minutes or 2.3 hours
Total Cost: $7.9 One Round Trip or $158/month
Savings: $62/month

2) Ride bike to work (20 miles/120 minutes). Ride bike back to train station (8 miles/25 minutes) and take the train home (25 minutes). Ride bike back home (5 miles/20 minutes).

Total Travel Mileage/Time: 33 Bike Miles/165 minutes on bike + 25 minutes on train = 190 Minutes or 3.17 hours
Total Cost: $5.75 One-Way Trip or $115/month
Savings: $105/month

3) Ride bike to work (20 miles/120 minutes). Ride bike back home (20 miles/150 minutes due to inclines/hills on the way back)

Total Travel Mileage/Time: 40 miles/270 minutes on Bike = 270 minutes or 4.5 hours
Total Cost: $0
Savings: $220/month

I'm a relatively fit person, but have never biked 20 miles in one setting. I'm not an expert cyclist either or even an enthusiast, so 40 miles may seem like a stretch, but I'm willing to build up to it as well (Doing option 1 to start and build up to option 3). I think option 2 is the best for me just because I know most of the commute on the way to work will be either flat or downhill, which should make things a bit easier.

I also haven't decided on a bike. My friend suggested a $600 budget road bike off Bikes Direct, but I've read on other forums about people with 30+ mile bike commutes suggesting not to skimp on buying a more expensive higher quality bike because if you buy a cheap one, it'll be a miserable commute (and it might break on you on the way). If I go with the $600 one, my investment will pay off in 3-6 months (going with option 2 or 3). There is another option to buy a diamondback century 2 for $900 on Amazon. It's $300 more but is much higher quality.

I know this has been a really long post and if you've actually read all of this, I applaud you. Hopefully, you've at least read my bike commuting dilemma above haha. Suggestions would be greatly appreciated! (General as well, doesn't have to be bike related)

Thanks again for everything MMM and I look forward to learning more from fellow Mustachians as well as contributing my experiences to this forum and helping others along the way.

Cheers!

[ditheca]

Option #3, but with an e-bike. I average 25 mph using a motor + pedaling, even in hilly southwest Ohio. 25 mph would get you to work faster than the train, and you'd get more time on wheels.  You also get to work invigorated from moderate excercise, but not drenched in sweat.

My own setup:

Trek 7.2 hybrid, disc brake model
Rear wheel geared motor from ebikekit.com, on 700c wheel
36V 10Ah V5 LiFePO4 battery with high rate BMS from pingbattery.com

The motor gets you 18-20 mph on a flat road, makes hills far easier, and you can still pedal for exercise and to increase your speed.

Downside: I had to spend about 80 hours on researching ebikes, many hours of tinkering to find a good setup, learned the hard way that you need a very sturdy tire for the motorized wheel, etc.  Added $1100 to the cost of the bike.  (You can use the coupon code 'mmm' at ebikekit for a small discount.)  Even if you're just thinking about it, contact support@ebikekit.com to get great advice from Jason and his team.

I recently took off my motor and biked 17 miles in a day, and it wiped me out for 24 hours.  Think I'll stick with the motor!

[sleepyguy]

Good luck, I suggest also you give your parents $200-300/mth to help with groceries/utilities/repairs/etc.

Also don't stress too much, I was the same way... I probably had a less than $5k to my name at 26.  You live you learn, you caught on A LOT earlier than I did.

[Retired To Win]

If you stick with Mustachianism, you may still be young but you will no longer be stupid.

Good luck.

[Guesl982374]

darkelfx, you are thinking too hard about this. Right now you are in the absolute best position as you haven't signed up for any of the "normal" life stuff (housing, fancy cars, family expectations, etc). Imagine being 40, wife and 2.5 kids in a mcmansion and you're driving a fancy car you can't afford, then realizing that you want FIRE and having to unwind as much of that as possible. Be thankful you've begun to understand how to master money and that you can move forward in life with both eyes wide open.

With that being said, your focus should be on increasing your income and investing, not on how to cut your $320/mo worth of expenses. Start a side business, study harder for your CFA exams, network, etc. Some of these things will cost you extra money but they are an investment in yourself and your future. Do not look at these items as an expense.

[zephyr911]

You're doing awesome! While I applaud your detailed analysis of your transport options, holistically speaking you're already doing great. Don't agonize over it - build up your biking skills and maybe try adding it to your week one day at a time to find a happy medium. Start with the multimodal approach and then throw in a full 40-mile roundtrip once your legs are up to it.

Personally, I've had no problems with my $200 Walmart road bike... yeah, I'd like something nicer but I also like knowing I wouldn't freak out if it got stolen. If it ever gets wrecked I'll spend a little more. I did upgrade to a nice Bontrager saddle, but everything else is straight stock, and as long as the tires are pumped up and the chain is greased, it flies.

I spent an entire summer in FL doing a 12-mile roundtrip 4-5 days a week, on an even cheaper road bike. No problems. Carry a spare tube and basic tools and learn to fix your bike, and you'll be fine.

[darkelfx]

Wow, the responses on here have been great! Thank you everyone!

@ditheca, I was considering getting something electrical, but it's currently out of my budget, and I'd rather kick my own butt with extra mileage/effort than kick my wallet. Thanks for the suggestion, I will probably end up going this route in the future.

@sleepyguy, I actually offered numerous times to help pay the bills, but they said don't worry about it until I pay off all my loans.

@retired to win, Thanks! Yeah I was really stupid with money back then, and got trapped in the mindset of if I can card it, no problem. If I can't pay it off, just balance transfer it at 0%, no problem. Haha, terrible strategy I know.

@Liberty Stache, Yes and I'm very grateful for being in the position I'm in, but I don't believe investing is the greatest choice given my situation. I want to devote all my earnings to paying off my loans/debt before saving a dime. I know I read in other places that I should still save/invest like 15-20% while still paying off debt, but with the interest I'm paying on loans, unless I earn a higher ROI (above 6% annually), I'm better off paying my loans. Especially since I'd be investing very little in comparison to my big chunk of loan debt. And I probably shouldn't worry too much about saving $220/month as it's not much. However, I'm not just doing it for the savings. I wanted to incorporate a way for me to exercise while still being able to work full-time and study 3 hours a day. I used to go to the gym and spend 2 hours there (includes driving). Biking to work is the best way (not the most efficient though). And if I can save money in the process, that'll be great. But you're spot on about increasing my income. I'm still exploring my options with that to see what I can do.

@Zephyr911, I agree. I plan on going with option 2 for now as I don't think I'm ready to plunge in 50 mile/day cycling. The reason why I want to spend a bit more is I'd rather pay more to have a bike that lasts me and is comfortable. Since it's a 4 hour commute round-trip, it'll be miserable if it ever breaks down on me half-way. Or worse, the bike just isn't comfortable at all (or really slow). Of course, I don't want to break the bank either, so just trying to find a good fit for me.

[Guesl982374]

@Liberty Stache, Yes and I'm very grateful for being in the position I'm in, but I don't believe investing is the greatest choice given my situation. I want to devote all my earnings to paying off my loans/debt before saving a dime. I know I read in other places that I should still save/invest like 15-20% while still paying off debt, but with the interest I'm paying on loans, unless I earn a higher ROI (above 6% annually), I'm better off paying my loans. Especially since I'd be investing very little in comparison to my big chunk of loan debt. And I probably shouldn't worry too much about saving $220/month as it's not much. However, I'm not just doing it for the savings. I wanted to incorporate a way for me to exercise while still being able to work full-time and study 3 hours a day. I used to go to the gym and spend 2 hours there (includes driving). Biking to work is the best way (not the most efficient though). And if I can save money in the process, that'll be great. But you're spot on about increasing my income. I'm still exploring my options with that to see what I can do.

FYI - I understand about the debt situation. I should have been more clear: investing/paying down debt not just investing. Now go out and start working towards a higher income.

[MrsPete]

I agree with the above poster who says put your efforts into studying (which will bring you more money) and learning about investing (so that once you're out of this fix, you're ready to invest).  Keep your priorities straight:  These are your BIG DEALS right now because they will help you most long-term.  You're new to frugal living; don't burn yourself out over small things.   

The $220 a month is real money, but spending two hours one way on a bike isn't realistic.  You're talking about putting in 80 hours to save $220.  You're talking about increasing your work day by 50%.  I could see the bike-train combo working, but still that's not where your real focus should be at this point.  Plus, if you spend $$$ on a bike, you're cutting into your savings.

Consider other reduce-the-commute options:   

Do you have to go into the office every day?  Could you work from home a couple days a week; thus, saving the cost of commuting?  This may not be an option, given that you're young and new to the job, but perhaps it's something towards which you could work. 

Could you car pool with someone else, thus cutting the cost and making the trip more enjoyable? 

Even if you keep driving your gas-guzzler car, you're still coming out ahead of the game by living at home.

About the debt:

All debt is bad (the marketing guy who started that concept of "good debt" was a genius, but also a liar), but yours isn't insurmountable.  The poster who pointed out to you that your youth is a big advantage is right.  Your situation is better than that of a guy who has already has the responsibilities of a mortgage, multiple cars, and kids.  You can get this fixed within a year or two, and then you'll be ready to start accumulating some real money.

You said you spent frivolously on material goods like archery equipment and board games.  Can you sell some of these items and apply that money towards your debt? 

Consider ways to increase your income (even if it's temporary).  For example, could you give archery lessons?  In my area you can sign up through parks-and-rec, and they'll advertise your services for you.  You set your own prices.  When my kids were little, they went to cooking classes in the summer.  A friend of mine teaches photography.  I've considered teaching canning and other methods of food preservation. 

Or, could you sponsor a board game tournament?  I'm not sure how profitable that might be because you'd have to pay for a venue and you'd have to pay out prizes, but I'm trying to brain-storm ways you might monetize things that interest you.

Or, could you wait tables or mow lawns a couple days a week?  A second job would speed up your debt repayment. 

However, remember the first thing I said:  Keep your priorities straight.  Do not forego your important studying so you can earn $15 teaching archery on a Saturday afternoon! 

And I also agree with the above poster who says you should give your parents a couple hundred dollars a month for allowing you to live at home.  Also help around the house:  Mow the lawn, ask if you can help with big projects.  You're an adult.  Don't be a mooch in the name of getting ahead financially.

[KCM5]

Anther option: drive to work with bike in car, bike home. Bike to work the next day and drive home.

That halves your costs, so saves $120/mo.

Also, remember Craigslist for used bikes. That's where you'll get the best bike for your money. Only downside is that it's quite a bit more research.

[zephyr911]

@Zephyr911, I agree. I plan on going with option 2 for now as I don't think I'm ready to plunge in 50 mile/day cycling. The reason why I want to spend a bit more is I'd rather pay more to have a bike that lasts me and is comfortable. Since it's a 4 hour commute round-trip, it'll be miserable if it ever breaks down on me half-way. Or worse, the bike just isn't comfortable at all (or really slow). Of course, I don't want to break the bank either, so just trying to find a good fit for me.

Just keep in mind that almost no bike is going to be comfortable on a 2-hr ride until after you're in much better shape. This sort of veers into tangent territory but I think it's important if you've never biked much.

I read an article by a bike tech about droves of people showing up early in the "season" to buy new saddles, when the real problem is that their legs and arms are out of shape. Road bikes are meant to support your weight through five (5) points of contact, with only a portion (say 1/2) resting on your butt on average. Until all your limbs are used to bearing their fair share via the handles and pedals, your glutes will not be happy on any saddle. He says these people tend to show up weeks later gushing over their purchase, not realizing the natural conditioning process would have produced the same results without it. They write off any temporary awkwardness with the new one as "breaking in", and thereby validate the misunderstanding.

I actually went in to replace the saddle on my first road bike, and the tech (fortunately an honest guy) laughed and told me it was just cocked too high (no pun intended). DERP!

So, don't be that guy.

[PizzaHawk]

If you do end up buying a bike, don't just do it spur of the moment and order one from amazon. Go in to a bike shop and try out a few models/sizes. Even when you don't end up buying a bike from them, every shop I've been to is more than happy to help you out and make sure you know what size bike works for you. When I bought mine, I ended up buying a drastically different model type than I would have if I hadn't test rode a few and talked through each one's capabilities with the guys in the shop.

Internet research is awesome and I'm not knocking it, but especially if you may be riding 40 miles a day then there's no substitute for a test ride. You'd be miserable if you get the wrong size bike.

EDIT: after doing all this, THEN go to amazon or wherever and find the best price for the bike you want

[Dexterous]

I know this sounds un-mustachian... but I suggest against the bike for your situation.  That distance is just too far and time consuming for the little savings it provides.  I'd do the following in your shoes:

1)  If the next CFA exam is only a 2-3 months away, then I'd wait and study more... especially if I didn't have a job already lined up
2)  Payoff the entire credit card balance ASAP without investing until that's done (should be paid off in August or September depending on step 1).
3)  Contribute max to a Roth IRA for this year ($5,500)... and be prepared to do the same next year also (I suggest a simple 3 or 4 fund portfolio via vanguard)
4)  Do not miss any student loan payments, and pay that off as quickly as possible -- while still maxing your Roth each year, but no other investments
5)  Pay your fair share of bills at home, because you're in a great situation now and want to keep that until your income increases

Reminder:  You can continue funding this year's Roth until April 15th.

[2Cent]

Just get a good second hand bike for like 200. You can sell your old bike and it will be even less. Depending on the terrain 30 miles is definitely doable in 1 hour. I used to bike that to school when I was studying in the next town. Just eat lots of protein and fat in the morning and afternoon. Keep an option for rainy days. You don't want to go 30 miles through the rain before work. And keep a change of clothes at the office.

Biking is also a low mental effort task, so when you get home your body is tired and your brain is rested instead of the other way around. Also it is something that you can brag about for the rest of your life and will show you that you could make it without a car if you had to.

The best thing is just to try it for a few months and see if you can make it.

[MrsPete]

1)  If the next CFA exam is only a 2-3 months away, then I'd wait and study more... especially if I didn't have a job already lined

Yeah, don't sacrifice this to save a couple bucks on your commute.  With this exam coming up soon, this may not be the right moment to make big changes in your schedule.  This isn't a lazy rationalization -- it's a matter of priorities. 

My daughter has to take the NCLEX soon (test to become a Registered Nurse), and that test costs more than a month of your commute.  I want her to pass it the first time and never have to take it again.