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Some background: Graduated in 2008 with a BA in English and $120k in student loans. I posted a thread here a few years ago because I had just come through a family tragedy and it woke me up to an urgent need to get my poo poo together financially. At the time that it happened, I had been bouncing around between low paying (30k or so) social work and administrative assistant type jobs, and starting and dropping out of grad programs. Since then, I made a career change to IP law. At the time I posted the thread I was making ~$50k/year which was the most I had ever made up to that point. Since that thread, my career has advanced. I started as a patent paralegal but then made a deal with my boss that he would pay for me to take computer science classes and I would start to gradually take on patent drafting work. I have turned out to be decent at patent drafting, so things are moving faster than I anticipated. This is great, but it leaves me in a position that my original 5 year plan is sort of irrelevant, because it is easily attainable. I would love some help adapting my plan to account for my higher pay. I have never had this much disposable income before. I don't want to waste this opportunity to get ahead. The original 5 year plan, 2015-2019: - pay off student loans - Max Roth IRA for 5 years - Save $20k cash - Stay in one job for 5 years - Get post-bacc BS degree in computer science - take the patent bar exam and become a patent agent Me: Age: 32 Education: BA in English Job: Technical Specialist (drafting patents). I also do work that is hard to categorize... I review all of our firm's patent docketing for accuracy and review filings before they go out. Compensation: Salary: $100,000/year + bonus(?) + annual contribution to SEP IRA My boss pays tuition for computer science and other science classes necessary for becoming a Patent Agent. The classes will ultimately culminate in a second bachelors degree (BS in computer science). This is something like 1800/class for 3-4 classes a year. I get health + dental (had a great plan, it was downgraded recently to an OK plan, but I still pay no premium). Debts: Student loan: ~$12,000 @ 3.75% variable; I don't know the minimum payment, because I autopay ~$670/month so that it will be paid off by the end of 2019 Mortgage: ~$219,000 @ 4.125% 30yr fixed. Monthly payment is ~$1600/mo I share the house with my girlfriend, and she pays a fixed amount of $850/mo Savings: $13,000 cash emergency fund $7100 Roth IRA $10,800 SEP IRA (company contributes to this) $2,500 traditional IRA (rolled over from 403b at an old job) Assets: House (bought for $235,000, probably still worth that much) Car (2005 prius worth about $2500 probably because it's beat up) Very basic breakdown of monthly expenses: 5500 take home pay (for most months--I am paid biweekly) 850 girlfriend rent -3200 bills and living expenses -458 roth contribution -671 debt payments ----------- 2,021 left over I have only been making this amount since January. Currently, with that 2k left over, I have been putting 1k/mo into my emergency fund (which I drained last year to buy my house.... we can talk about if you think that was stupid, but it is done now). The remaining 1k seems to be "disappearing," which is to say I have been spending it, I guess. I treated my girlfriend to a trip in January as her Christmas gift. I had a few car repairs. I went on another trip with my girlfriend to visit my family and paid for my girlfriend's plane tickets. Stuff like that. For the most part, my everyday spending is under control. I set a budget and sometimes go over, but not by much, and other months I stay below. I don't really buy a lot of stuff, but since I got a raise I find myself being more casual about ordering small stuff like books on Amazon or Audible from time to time (~$10 a pop). In the past, I had a bit of a feast or famine problem where I would deprive myself in an extreme way and then get manic and spend a lot ($500+ sometimes). One thing that you should know is I am crazy busy. I have a long commute. I work full time and also take classes (which previously was only 1 class per term, but recently I tried to up that to 2 classes... I have been humbled and am taking the intensity down a notch by skipping this upcoming term and not taking another class until September). The point of saying this is I'm very much in a phase of life where I find it appealing to throw money at problems if it saves me time, and I understand this may be partially why that 1k is disappearing each month. I am currently resisting the temptation to get a new (or newer) car. My current car has ~180,000 miles and I had to replace the hybrid battery last year. At the time, I considered my options and decided to put in a rebuilt battery for about $2500 and it comes with a 3 year warranty. At the time it seemed like the equivalent of buying a used car for 2500, because everything else with the car is in decent shape. Since then, the rebuilt battery has failed like 3 times but I have paid nothing for the repair because it is under warranty. I live far from work.. about 30 miles. My thinking is that the amount I am paying in these repairs is less than what I would pay for a new or even a used car. Like it's just a transportation cost, and this car is still the cheapest option. I'm not sure how to determine when that's no longer true, and I'm also fighting off a manic part of me that wants a new(er) car. There are other things I am tempted to spend money on: - new car - work on my house - personal trainer - day care for my younger dog on days when we are both out for a long time - house cleaning (I am having a really hard time keeping up with this) Regarding personal training. Two years ago, I moved in with my girlfriend and her sister, resulting in very cheap rent. So I put some of the savings toward a personal trainer and lost 30 lbs and was in the best shape of my life. But then last year I moved to my new house, which disrupted my routine (and took a little bit of free time away each day as I had a longer commute). Since then I have gained 20 of those 30 lbs back and feel awful--like I'm in the worst shape of my life. Long term, when I have debts paid off and I shore up my savings, I want to simplify everything, shorten my commute, walk and bike places instead of driving, maybe work somewhere less demanding (possibly for a pay cut) so I can pursue more projects outside of work, and stuff like that. But I see myself now at this intermediate period where I'm living a kind of rat race lifestyle because it is lucrative and it is giving me an opportunity for financial security that I never would have thought possible with an English degree. I am prepared to suffer a little bit now to make up for those past excesses. But on the other hand, I want to have a lifestyle that is enjoyable enough that it is sustainable for the time it takes to get myself in that position. And maybe most importantly, I don't want to completely gently caress over my health in the meantime. Anyway, what I'd like to get from this thread is: - feedback on how to adapt my 5 year plan to account for my increased income - basic feedback on my financial situation - suggestions for where to direct my leftover money each month - some tips on how to discern between things I want (but don't need) that will make my quality of life better versus things that are just excessive or mindless spending, or "throwing money at the problem" - also open to feedback on monthly spending, if people think it is necessary to delve into it Thanks for taking the time to read this.
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Apr 23, 2018 13:40
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I am quite a bit older than you, early 50's working in tech with a fairly high salary Wife, kids, house two cars. Fairly conservative approach to finances So if you would like some feedback from an old gently caress looking back, here you go. Congratulations on being lucky and ahead of the game -You have a great paying job with benefits, you have choices in life! -You have a flexible job and a good boss! -You have a girlfriend that seems to be a partner and not a drain! Congratulations on a number of things you are doing well -Having a plan, and consciously managing your finances -Choosing to be conservative in your approach, emergency funds, etc. -Saving early (way to go choosing a Roth!) , and paying down your student loans -Buying a house Here are some suggestions: The magically disappearing $1000 a month This is common. You list the big ticket budget items. But an amazing amount of smaller variable expenses and 1 off items occur each month. That's life. Its entertainment. Eating out. A flat tire. The morning latte. It all ads up fast. You appear to be a good at auto paying and not spending money you don't have. So take another $400 a month out of the 2K and; -Maximize your Roth contribution. You could double your current contribution with no problem. I wish I had done this at your age. In 20 years it will make a huge difference In fact I urge to periodically see if you push this up until you hit your max contribution. -You can accelerate your paydown of the student loan. Pay it off a year early and in a year you will have another $600 a month to use. That can go toward your Roth, or your Emergency/Savings fund The Emergency Fund A balance of $13k is big. Your living expenses are $3200. Most advise 2 months expenses. You are at 4 months. That should be enough There is nothing wrong with using the emergency money to buy big ticket items like a car so: -Start redirecting the money you are putting into the emergency fund into a savings fund while keeping the $13k in the emergency account. The psychological distinction will help you feel secure while making you resist the temptation to spend the emergency fund -This second bucket is what you can use to buy the car. Get enough in there for a down payment. If you choose to accelerate the payoff of your student loan then in a year you will have a down payment and $600 a month more to split between a car payment and your Roth -Also $1000 a month into this is alot. Why not make it $800. Take the $200 and spend it on the personal trainer. Live a little and do something for yourself -In a year after you have the car down payment start filling this bucket again. You will have $5k in 6 months to spend on a house project or a nice vacation. Rinse and repeat, all while having that $13k emergency safety blanket Other questions: -Do you plan on getting married soon? -Kids in your future? -Moving anytime soon? You have a great plan and a great set of current circumstances. My advice is tuning at the edges. Weener Beater fucked around with this message at 16:09 on Apr 23, 2018 |
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Apr 23, 2018 16:01
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What are the interest terms on the student loan? I generally agree with Weener Beater's advice other than paying down the student loan early. 3,75 is pretty low. Of course depending on terms if interest rates rise you are looking at something different - so what are the terms? I am conservative and so six months in an efund is fine to me. You are maxing your Roth IRA contribution so that is good. You're short on tax-advantaged space since SEP plans don't allow you to contribute to an IRA and the SEP. I would try to negotiate some amount of future raises in the form of additional contributions to SEP. You will need a new car, or your current car is likely to need some repairs at some point in the next couple years, so I would start budgeting for that as well. How much equity do you have in your home? If you're planning to work at the same firm long term and you have a long commute, that seems like a less-than-optimal situation. I recommend spending money on house cleaning. It is very nice for peace of mind and you can afford it.
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Apr 23, 2018 16:57
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Thanks for both of your perspectives... very helpful. I'm going to consider all the suggestions. In the meantime, to answer your questions:Weener Beater posted:Other questions: Getting married and/or having kids is not part of my plan or my girlfriend's plan at this time. When we talk about it we pretty much both agree that it would be fun to get married and if there was some advantage to it we would go ahead and do it but otherwise we're not in a rush to do it. In the meantime, we consider each other long term partners but we have mostly separate finances. We are very slowly joining finances. I might "propose" to my girlfriend in the next year or so, which would mean getting her a nice ring to symbolize our relationship but even then it would not be an ultimatum for getting married and it could also be a longer-term engagement where we don't set a date for a good while. As for kids, my girlfriend most likely does not want to have kids. My perspective is that if I'm wealthy in 10-15 years I would consider adopting but otherwise I'm not planning to have kids. KYOON GRIFFEY JR posted:What are the interest terms on the student loan? The student loans are standard (for the early 2000s) private loans, which have variable rates pinned to the prime rate. So they are definitely going up in the years to come. If the house is still worth $235,000, and the principal is $219,000, then my equity is $16,000, which is about 7%. I put 5% down and have only made the minimum payments since purchasing it (about a year ago).
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Apr 23, 2018 17:27
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I assume you have PMI then, so if you intend to keep the home for a long time you should probably try to clear the 20% threshold
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Apr 23, 2018 17:41
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KYOON GRIFFEY JR posted:I assume you have PMI then, so if you intend to keep the home for a long time you should probably try to clear the 20% threshold Yes, I believe the PMI is about $70/mo. If I wanted to increase one of my loan payments, I'm aware of the conventional wisdom of paying down higher interest rates first, but I'm not sure how my variable rate student loans should factor in. I know that they're most likely going to increase soon, but for now they are below the mortgage rate. Does this kind of hair-splitting even matter? It sounds like so far no one is seeing a glaring problem that needs to be addressed with lots of urgency, so fine tuning the amounts can be based on preferences and risk tolerance, correct? I'm very much encouraged by that. In particular, I wasn't sure if my retirement situation could be considered a crisis. I know that I'm behind, but it's not clear how much I should sacrifice in order to catch up. For example, at what point do I need to consider investing in taxable funds (or whatever the terminology is) since my tax-sheltered options are exhausted. KYOON GRIFFEY JR posted:If you're planning to work at the same firm long term and you have a long commute, that seems like a less-than-optimal situation. This is definitely true. I have no plans to leave the firm that I'm at (my boss is very flexible and has a lot of trust in me, which results in lots of perks). I have in the back of my mind a long term plan to try to move toward working remotely. I felt my boss out on the idea a few months ago and he was at least willing to consider a few days a week from home. I do great working from home. The background of why I ended up so far from where I work is that it's the Boston housing market, and I have dogs. Rentals are so expensive, even outside the 495 belt (which is a reasonable cutoff for what you would consider the Boston metro area versus other areas). And rent seems to be increasing really quickly, and dog-friendly rental options are limited. Before I bought my house, my girlfriend and I brainstormed our options and basically any situation where my commute shortened (or even stayed the same...) resulted in us having to pull in a random roommate or live in a tiny place (with no yard, for example). I had really good credit so we looked at buying, and the only places in my predetermined budget were farther away. I admittedly didn't fully grasp the effect of the extra commuting time, but I'm adapting. We now have a house that is comparable in size to the condo we were renting (actually with 1 more bedroom and 1 more bathroom) for a monthly payment that is less than the rent at the apartment was, even less considering our landlord was going to raise our rent by $100 after only a year living there. I also chose the house that seemed least likely to require lots of repairs early on. For example, the roof was 5 years old, and the furnace was only a few months old when I bought it. Weener Beater posted:-Start redirecting the money you are putting into the emergency fund into a savings fund while keeping the $13k in the emergency account. The psychological distinction will help you feel secure while making you resist the temptation to spend the emergency fund I am strongly considering some variation of this plan. Thank you for laying it out!
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Apr 23, 2018 23:21
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qmark posted:
No Problem. If I had it to do over again I would max out my tax deferred savings as well as make non-tax deferred contributions to retirement. Its pretty amazing how fast this ads up. I have been commuting 30 miles to and from work for years. The only thing that has saved my sanity is the special commuter sticker we have here in California for high mileage vehicles. I am able to use the car pool lane. My boss lets me go in really early and come home early too. It means I can work out and blow off steam without it being late in the evening. If your boss is flexible see if you can shift your schedule. But working from home a couple days a week also helps
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Apr 24, 2018 02:19
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qmark posted:Yes, I believe the PMI is about $70/mo. I'd try thinking of that $70 PMI as another .45% on your mortgage rate that isn't helping you at all and see if that alters how you want to spend it down, at least until equity hits 20%. Also echoing that the little things could be adding up a lot higher than you're thinking. Try splitting up common expenses into buckets. It helps me think that this $60 pair of pants is coming from my clothing budget, rather than leftover money.
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Apr 24, 2018 12:36
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i am a boston goon (well ex), where do you live and work
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Apr 24, 2018 17:15
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Coco13 posted:I'd try thinking of that $70 PMI as another .45% on your mortgage rate that isn't helping you at all and see if that alters how you want to spend it down, at least until equity hits 20%. Also echoing that the little things could be adding up a lot higher than you're thinking. Try splitting up common expenses into buckets. It helps me think that this $60 pair of pants is coming from my clothing budget, rather than leftover money. Oh yeah, good point. Thank you! I actually have all my transactions categorized, so I'm in the process now of running some reports (on YNAB) to get some better insight. At first glance, I should probably start budgeting monthly for travel and car repair (and/or purchase). From January-March I had big expenses in both of those categories that weren't previously budgeted for but were easily absorbed by that unallocated excess income. KYOON GRIFFEY JR posted:i am a boston goon (well ex), where do you live and work Oh, awesome. I live in Nashua (...NH) and work in Lexington. Before Nashua I lived in Lowell for a few years. My commute is about 45 minutes. I'm allowed to do a 10-6 schedule so I mostly miss rush hour (at least on the way down).
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Apr 24, 2018 18:34
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that's not so bad, it's probably sustainable in the long run
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Apr 24, 2018 21:33
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I put some thought into everyone's suggestions and took a much closer look at my monthly expenditures the past few months. Most of the money was going to car maintenance/repair and travel. There were a few other recurring categories that I noticed were not being funded. So I added a proper line in my monthly budget to fund these categories so that there is less slack that can just be consumed by mindless spending. Plus, at least for the car expenses, they were going to come up whether I budgeted for them or not, so this is more of an honest accounting. I added a monthly buffer to cover unexpected expenses so it doesn't feel too constrained. When I feel really constrained I think I end up spending more. I decided to lower my cash saving (e-fund) to 400/month, which will be enough to accomplish my goal of having 20k. I also double checked my math on how much of an e-fund to save up, and it came out to $20k after all. I wanted 6 months based on the assumption that my girlfriend would not be paying toward our monthly bills (in case we break up, or we both lose our jobs, or whatever else). With the rest, I decided to increase my student loan payment to about 1600/mo, which will pay it off by the end of 2018. This will then put me in a position where I can double my mortgage payment starting in 2019. As a result of this increased saving, I'm going to hold off on the spending I had proposed in my first post, especially the personal training. I'm just going to see if I can get into a routine like the one I was in before without having the monthly expense. If I can't, I can reconsider later. Same with the car--I'm just going to go as long as I can repairing the one I have so I can meet these other goals first. If my car dies for good, I'll reconsider. I told my girlfriend that money would be a little tighter on my end since I'll be saving more of it. She was supportive. One last bit of news, my girlfriend was randomly gifted by a family member Your Money or Your Life, which I read a few years ago but have had trouble getting my girlfriend interested. I'm excited for her to read it, because she isn't very interested in personal finance in general (although she's not exactly bad with money either--no debt except a reasonable car loan, which is almost paid off). It has felt like my enthusiasm for some of the practices from the book is a little harder to sustain when I have to do it myself. So maybe this will get us to the next level. Thanks for everyone's feedback.
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May 2, 2018 17:02
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Best of luck. Hope the car holds together for awhile longer
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May 2, 2018 18:36
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Re: personal training If you are capable of being self directed, I wouldn’t go with an actual personal trainer. I’d stop by the YLLS exercise equipment thread and buy your own weights and rack / bench. If you have space at home you can just set it up and work out on your own schedule, without having to go from home to gym to work to school or whatever.
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Jun 13, 2018 01:01
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I don't see this mentioned anywhere; does your employer offer a 401k plan or is the SEP IRA the only form of retirement funding that's offered?
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Jun 17, 2018 10:44
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Hotdog In A Hallway posted:Re: personal training Thanks for the advice. This is pretty much what my plan is for now. I have plenty of space and already have some power blocks. My girlfriend is very good at finding free and cheap stuff on craigslist and yard sales, so we'll also keep an eye out for the stuff I have gone to the gym for in the past like a rack/bench. I have never been more motivated and consistent than when I had the personal trainer, but it is so expensive. Also, the rigid scheduling (which is great for motivation) is going to be tough with my busy lifestyle. If I'm being honest with myself, I think it's going to take a long time of start and stop to get going again on my own, but I'll just keep pushing and squeeze out some progress here and there (and not let things get worse) until I have more free time and energy. QuarkJets posted:I don't see this mentioned anywhere; does your employer offer a 401k plan or is the SEP IRA the only form of retirement funding that's offered? Employer does not offer a 401k. SEP IRA is the only form of retirement funding at this point (from work--I'm still maxing my Roth IRA). We didn't even have that when I started here a few years ago. My boss is always looking for ways to increase our compensation in efficient ways (not paying a ton in payroll taxes I guess). I mention this because he would probably be open to a discussion about more retirement funding if it's on those terms. I'll start doing some research. Weener Beater posted:Best of luck. Hope the car holds together for awhile longer Thanks. So far so good! qmark posted:When I feel really constrained I think I end up spending more. After a month and a half on the tighter budget, this seems like it's becoming a factor. I haven't spent any significant money, but the feeling is definitely there, and I had to fend off a potential huge impulse buying spree (~1500) a few weeks ago. I was successful, so maybe it's not an issue. Has anyone else ever felt this way? In this case, I managed to put a stop to it by basically saying to myself "OK, you can buy all that stuff, but do it later" and then when "later" came, I was back to thinking rationally about it.
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Jun 18, 2018 16:10
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As a fellow BFC goon who gains and loses 20 pounds every year (see my BRCT that I'm working to get rid of this year), a reminder that food is much more important to gaining and losing weight than exercise. Exercise is of course really important, both for health and looks, but if what's getting you down is those extra pounds, you should think about that side of it too.
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Jun 22, 2018 17:10
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| # ? Apr 19, 2024 23:22 |
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qmark posted:Thanks for the advice. This is pretty much what my plan is for now. I have plenty of space and already have some power blocks. My girlfriend is very good at finding free and cheap stuff on craigslist and yard sales, so we'll also keep an eye out for the stuff I have gone to the gym for in the past like a rack/bench. If you join a team of some sort you won't have this issue of having to pay for a trainer. Lotta rec leagues out there.
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Jun 22, 2018 18:45
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