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A place for Get Rich Slowly readers to ask questions
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 Post subject: new job, new apartment, new life.
PostPosted: Tue Jun 21, 2011 9:36 am 

Joined: Sun Jan 17, 2010 2:32 pm
Posts: 6
In 2007 I was working my first salaried job, a somewhat-specialized IT position in a large company. I come from a blue-collar background and was shocked at the amount of money I was making - and how little of it I was keeping. I wasn't accumulating debt, but I also wasn't saving anything, despite a huge disparity between my pay and the amount of money I really needed to live. Then I discovered Get Rich Slowly, which led me to Your Money or Your Life. I figured out where all the money was going (short answer: restaurants), got rid of my most burdensome outflows, traded my car for a bike, and "retired" with savings in 2008. I lived on my bicycle for a while, contracted when the money ran out, and decided to go back to university and finish my degree in 2010. I graduated in May of 2011 and got a fantastic job as an embedded systems programmer, for which I'll soon be receiving my first paycheck.

I'd like to skip the 'spend like crazy on dumb stuff' step this time around, and keep my money habits good. I'm moving into my own place soon, and will need to outlay a lot of money for one-time expenses (I gave away all my furniture and kitchen stuff some years ago and haven't needed it, but I'm going to need to replace that stuff now). I have about $3,000 in credit card debt to pay off, and I also need to pay back the money I borrowed to go back to school. All told, I have just shy of $20,000 in debt, of which $10,000 are subsidized Stafford loans bearing a fixed, relatively low interest rate. I don't feel an urgent need to pay off the Stafford loans.

I am paid monthly, so careful budgeting will be very important in order to avoid being short at the end of the month. On the plus side, my cost of living is not very high; I cook at home a lot, I generally don't spend much money when spending time with my friends, I don't have a car, and I don't have any kids. I will need to pay for health insurance, but I am young and do not have any chronic conditions. I plan on getting a high-deductible plan combined with an HSA.

Here is my game plan:

First paycheck (July) - set aside money for security deposit, first rent check, and a moving van rental; set aside a little for some thrift store cookware and knives; pay off highest-interest credit card and half of other credit card
August - pay off my bank's 'reserve line of credit', a relatively low-interest $400 loan. Pay off lower-interest credit card. Celebrate paying off credit cards by spending at most $300 on things for my apartment (like a desk and filing cabinets). Send a payment to my unsubsidized Stafford loan, which is my only student loan accruing interest until November.
September - Stick a little bit of money in an emergency savings account, and send most of the rest of it to my unsubsidized Stafford loan.
October - Finish paying off unsubsidized Stafford loan. Put more money in my emergency savings account.
November - Other student loans begin accruing interest. Pay off small Perkins loan from this month's paycheck. Pay minimum on unsubsidized Stafford loan (I plan on doing this until my emergency fund is more established, and will then evaluate paying it off in total).
December - Spend at most $500 on Christmas presents for my family. Continue building up my emergency fund.

I'm planning on funding a Roth IRA in 2012 once my emergency fund is at a comfortable place (that should be around April).

I'm looking forward to walking this path with all of you!

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 Post subject: Re: new job, new apartment, new life.
PostPosted: Tue Jun 21, 2011 12:39 pm 

Joined: Tue Dec 28, 2010 1:23 pm
Posts: 9
Hi yomimono. I like your plan, and I especially like the emphasis on quickly paying off your debt and building your emergency fund. Since you have a few months before you plan to start investing, I'd like to recommend reading "The Elements of Investing" by Burton Malkiel and Charles Ellis. This will give you a solid grounding in index investing, which is my preferred style.

Robert Pitts
Lakeland, FL

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 Post subject: Re: new job, new apartment, new life.
PostPosted: Tue Jun 21, 2011 1:05 pm 

Joined: Sun Jan 17, 2010 2:32 pm
Posts: 6
Thanks for the suggestion, Robert! I know a lot about saving, but very little about investing. I'll confess that I'm feeling a little fearful about what happens once my emergency fund is comfortably funded and I have to start making allocation decisions, but I can cross that bridge when I come to it.

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 Post subject: Re: new job, new apartment, new life.
PostPosted: Tue Jul 05, 2011 7:32 am 

Joined: Sun Jan 17, 2010 2:32 pm
Posts: 6
I got my first paycheck on the 1st, and threw it right at my Amazon card, which is now paid off. Since I had to pay both a security deposit and first months' rent this month, I wasn't able to pay off the other card completely, but I did manage to wipe out half of it. I will finish paying it off, as well as my reserve line of credit, next month. I'm also planning on trying to negotiate a lower rate on both of them; my credit score is 713 and those rates are just ridiculous.

I negotiated my rent down by $40/month by agreeing to clean the apartment stairs weekly and take the trash bins out front every week. I envision it will take a half-hour, tops, to do these things each week in the summer; probably more like 45 minutes in winter. It's not great in terms of hourly rate, but anything that keeps the ol' fixed expenses down is a good thing. I managed to get a used Dirt Devil on Craigslist for $6 - great deal.

I managed to get most of what I need for my apartment for a total of around $200, including a nice big third-hand Ikea desk and drawer set in surprisingly good condition. A friend gave me some old knives, which I had sharpened for $3 each; now they're good as new! I'll admit that I splurged on a really fancy cutting board made of local recycled hardwood, which I've been dreaming about for a long time. I have about $150 left in my budget for apartment stuff, and still want to get a kitchen table, a nice shower curtain, a mop, a plunger, and a lot of other cleaning stuff. I'm hoping to have some luck at the yard sales next week.

Last edited by yomimono on Tue Aug 09, 2011 1:24 pm, edited 1 time in total.

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 Post subject: Re: new job, new apartment, new life.
PostPosted: Tue Jul 05, 2011 8:04 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 2121
Good progress. You'll want to continue reducing your debt to zero over the next few months, but this is also a good time to start thinking about investing your money when you have no debts left to pay. In fact, if your employer offers a 401(k) and matches your contributions, it might be good to start right away. Go investigate what your employer offers (you'll want to know what funds are available and also the fees associated). If the funds and fees are acceptable and your contributions are matched, start right away. Free money (in the form of a match) is good. The tax break is also helpful.

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 Post subject: Re: new job, new apartment, new life.
PostPosted: Tue Jul 05, 2011 6:50 pm 

Joined: Wed Apr 08, 2009 12:41 pm
Posts: 23
Great progress, yomimono! Those Amazon APRs are crazy.

Looks like you have a solid income given how fast you're paying off that debt. I like your plan you layed out earlier. Given that you're renting and your expenses seem low, I'd aim for a higher emergency fund to get more in line with what expenses may be in the future. It's not clear to me what the target is, but just thought that might be something to consider.

Knocking out ~6k in debt over the next six months while boosting savings has to feel great.

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 Post subject: Re: new job, new apartment, new life.
PostPosted: Sun Jul 31, 2011 5:37 pm 

Joined: Sun Jan 17, 2010 2:32 pm
Posts: 6
Thanks, BikeRider! Riding bikes is one of my favorite things in life (and definitely the least expensive!). Re: income: I'm fortunate enough to have developed some skills that are in very high demand right now, and was able to take advantage of that during salary negotiation. The field I work in is notorious for lifestyle inflation - techies love toys - but I'm hoping to keep off the hedonic treadmill. As far as the emergency account goes, I'm kind of waffling on what my goal is; any number greater than 0 is good, and I'd like to eventually have $10k in there (which is probably too much, but to be totally honest it's not just my emergency fund - I'd like to be able to bail out friends and family, many of whom are not good savers, if necessary). My current "crystal ball" plan has $10k in there by April of next year, but doesn't fund an IRA at all this year - I'm considering making less aggressive contributions to the emergency account, and contributing more to an IRA. (I'm going IRA because my employer doesn't have a 401(k) set up.)

I just got my second paycheck on Friday and used it to knock out my credit card debt and the bank line of credit, as I'd planned. I also threw $500 into an ING account as seeds for my emergency fund (previously an anemic $7.14), and sent $200 toward my unsubsidized Stafford loan, which had already accrued $137 in interest! Take that, capitalization.

I had a big unexpected expense this month. There was a mix-up with the DSL installation at my new apartment, which my company is handling (and footing the bill for, which is a big win); as a result, I spent most of the month scrambling for places I could telework from. I spent a lot of money on coffee to justify camping out at coffeeshops for hours, and spent money on overpriced sandwiches to avoid getting kicked out for bringing carry-in food. Some days I had to move after discovering that the internet access was oversaturated by fellow teleworkers, meaning I had to spend yet more money at a different coffeeshop! I eventually found a very embryonic co-working space in town, where a teleworker can pay a small flat fee and get a place to work for the month. Work will reimburse me for the co-working space membership, but not for all the (effectively) coffeeshop table rentals. All told it was probably an extra $200 gone. Happily, the DSL installer is, supposedly, *finally* coming tomorrow.

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