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 Post subject: Wandering Through Europe
PostPosted: Tue Aug 14, 2012 2:05 pm 

Joined: Tue Aug 14, 2012 1:36 pm
Posts: 8
I am brand new here, and am going to try and follow what I see as the traditional introduction format :D

I am a 23 year old single member of the US military, currently stationed in Germany. I have just arrived in this country from a 2 year tour in England, so I have been trying to take full advantage of my assignments by traveling and enjoying all that Europe has to offer. While doing this, I also want to make sure that I have a good chunk of savings set aside and some retirement fund set up (that I understand) because a military retirement will most likely not be an option for me.

There are other aspects of my life right right now that I am working on (finishing my bachelor's degree, planning a master's, etc.) ANY advice on any of these topics or whatever other things I bring up would be greatly appreciated. First, I'll start with my income / expenses:

Income: 1100 bi-weekly

Expenses:
*Car insurance $80 monthly
*Internet ~$80 monthly (depending on the exchange rate)
*Gas (my boyfriend lives about 250km each way x every weekend) $250 monthly
*Automatic Mutual Fund deposit $120 monthly (don't exactly understand this yet, but I am trying to learn)
*Cell phone ~$30 monthly (again, exchange rate)

So, as you can see, I have no rent, mortgage, etc. to worry about right now, which is why I feel it is the perfect time to really buckle down and save for when I go back to the US. Lately I have been bleeding money without really having a clue where it is all going. (Hence this journal- HEELLOOO Accountability!)

Here are my current (financial) goals:

1. Have $10,000 in a savings account
2. Max out my IRA this year (started it last year with $3,000)
3. Learn more about the Roth IRA ( I have money sitting there doing nothing.... isn't it supposed to DO something?)
4. Learn more about the mutual fund account and increase automatic deposits to $200 monthly
5. Have $5,000 in a "last minute travel" account

I really enjoy being in Europe and would like to continue to travel, but in the last 6 months or so, my savings account has dropped from $16,000 to $200. This does include a $6500 car I bought upon arriving in Germany, but still.....

Glad to be here and hope to hear some feedback and learn from all who have been here longer!!


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 Post subject: Re: Wandering Through Europe
PostPosted: Tue Aug 14, 2012 2:13 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 961
Thank you for your service and welcome!

_________________
Be what you want to attract.


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 Post subject: Re: Wandering Through Europe
PostPosted: Tue Aug 14, 2012 2:47 pm 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
Welcome.
Start tracking your every penny you spend, and you'll quickly find out where it's all going.


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 Post subject: Re: Wandering Through Europe
PostPosted: Wed Aug 15, 2012 1:54 pm 

Joined: Fri Jul 10, 2009 6:57 am
Posts: 384
Thanks for your service and welcome!

There are lots of ways to work out where the money has been going. Me, I'd look ahead rather than behind and set something up to start controlling where it goes in the future. I think the "pay yourself first" system is a great way to make sure you only fritter away as much as you want to fritter. ("Fritter" being a non-pejorative choice of word, please understand!) You have about $650/mo of expenses and $2200 per month of income. So you have about $1350 a month to do something with (including saving and frittering). Do you have target dates for any of those goals besides the IRA? Once you do, you can figure out how much you might automatically deposit towards each of them each month or paycheck or whatever. Then decide whether the leftover "fritter" money is enough, too much, too little, and adjust until it looks reasonable.

Cheers and good luck pushing those savings accounts back up! It feels really good to watch numbers increase...it's almost addictive.


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 Post subject: Re: Wandering Through Europe
PostPosted: Wed Aug 15, 2012 5:49 pm 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
In addition to the good advice you've already received, I think what you're hearing from peachy and CecilyC is to 1) track everything and 2) set up a budget. I've been tracking my income and expenses forever but I've always been allergic to budgets (in part because I have to create and adhere to budgets in my work, so I thought living under a budget in my personal life would be too much like work). But I recently started following the You Need a Budget (YNAB) system and I love it.

The first rule under YNAB, and the one I find most compelling, is "give every dollar a job." You take all your income and you assign it to categories each month so you have a plan for how to spend and save it. That plan is far from set in stone, because YNAB recognizes that life is full of surprises and you are guaranteed to overbudget for some categories and underbudget for others. But the key is that if you underbudgeted, you have to move money from another category to make up the shortfall. You have to rob from Peter to pay Paul, but that process is good because it forces you to make decisions and it forces you to deal with limits.

This is a LOT better than approaching your finances from an accounts perspective, which is what I've mainly done until recently: I looked at my checking account and my savings account, and just made sure I didn't spend any more than I had available. That's okay, but it doesn't really help you achieve any goals.

In a nutshell, tracking your spending is a good tool for seeing where your money went. Budgeting is a good tool for deciding where it's going to go in the future. Put the two together and you'll be in control of your finances.

The YNAB method is available as a free PDF book, you don't need to buy the software; the fastest introduction to the method is to read the online primer that starts here:

http://www.youneedabudget.com/method/rule-one

Edited to add: You don't necessarily have to do a full-blown budget, you could just set yourself some goals and figure out what you need to save each month to achieve them. But unless you're a lot more disciplined than I am, chances are good that a budget will do a better job of keeping you on that path than just having goals. The big difference I've found is that with a budget, if you decide to spend $800 on a new lens for your camera (which I was on the verge of doing before I started my budget), you see that this means taking $800 out of the money you had budgeted for retirement or an extra payment for the mortgage. And once I saw the impact of that decision it made me think twice. For me, the value of the budget is that you see the consequences of every deviation you make from your plan. You don't have to feel guilty about those consequences, but you do have to understand them.


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 Post subject: Re: Wandering Through Europe
PostPosted: Thu Aug 16, 2012 8:27 am 

Joined: Tue Aug 14, 2012 1:36 pm
Posts: 8
Thank you for your responses! Brad, I took a look at the website, and I am going to be downloading the YNAB system! I know I don't have a mortgage or anything right now, but I think that if I can put money aside and start budgeting now, I will be ready for a mortgage when the time comes.

Also, I was paid yesterday (military is the 1st and 15th of the month)

How do you act when you are paid? Do you pay all of the bills first? I am hoping to get to the point where with the 1st check I pay all of my bills and then live off of the rest of the paycheck for the rest of the month, saving the 15th check entirely.

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~*Val*~

My 20's financial/ lifestyle blog: http://thealmostgrownupblog.blogspot.de/


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 Post subject: Re: Wandering Through Europe
PostPosted: Thu Aug 16, 2012 8:47 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
That's great, I hope YNAB works out well for you.

Note that the system requires a bit of time to get used to -- after 20+ years of tracking my expenses in Quicken I found YNAB to be a mind-bender at first and it took me a while to understand how it all works. It's not very complicated, but one of the key things to understand is that there's a disconnect between your budget and your accounts: your budget doesn't really care where you keep your money, all it cares about is that you allocate your income to the categories you set up. If you do it right, you can't run out of money overall across all your accounts, but if you don't watch your individual account balances you could conceivably overdraw on an account if you have automatic payments set up, for example. All your account balances are displayed prominently on the left side of the software window, so there's little risk of that happening.

Anyway, when I get paid, I allocate my net pay to one of YNAB's two income categories: income for this month or income for next month. Assuming I've allocated it for this month, YNAB then shows the net value of my paycheck as "Available to Budget." I give all those dollars their jobs by assigning them to categories in this month's budget until the amount left available to budget this month is zero.

Then when I pay my bills or buy groceries, or whatever, I enter those into my account registers (exactly as you would with Quicken, Mint, or any other conventional financial tracking software) and as long as I categorize those expenses correctly they'll be deducted from the amount remaining in those categories in my budget.

When you pay your bills is up to you (well, it's up to the due dates on those bills), but as long as you've budgeted for those expenses YNAB doesn't care when you actually pay for them. The companies who sent you the bills do care, however ;-)

If you work with the YNAB system, the goal is to eventually build up a buffer so that you're living on last month's income. I've got that buffer, so it means when I get a paycheck I allocate it to next month's income, not this month's. That buffer helps you roll with the punches of unexpected expenses, and importantly it also reduces stress because you know you've got a cushion. It usually takes time to establish a buffer -- 4-6 months is typical, sometimes longer, sometimes less.


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 Post subject: Re: Wandering Through Europe
PostPosted: Thu Aug 16, 2012 10:48 am 

Joined: Fri Jul 10, 2009 6:57 am
Posts: 384
What happens when I get paid? Like you, I am paid on the 1st and 15th. My employer deposits my check directly into my checking account. I take out a set amount of cash from each paycheck for gas, groceries, and fun, and put them in marked envelopes at home from which I fill my wallet as needed during the two weeks till the next payday. Mortgage, utilities, car insurance, gym, internet, and phone are all set up automatically to be debited from the checking account, out of one or the other check. I also have various ING savings accounts set up for my different goals, and automatic deposits go to those accounts from one paycheck or the other. I spend some time at the start of each year calibrating how much I want to put towards each savings goal and my mortgage prepayment goal, and which check each deposit or mortgage prepayment should come from. I try to leave over about 10% of each paycheck after all this planning, for unexpected little things that come up. I find that if I don't leave myself a little "elbow room" I begin to feel deprived and start running up the credit cards.

You can see that a lot of what I do with the paychecks is set on autopilot. The only thing I do "manually" (aside from spending cash) is to pay off debt. I send mortgage prepayments and any credit card payments deliberately, instead of scheduling them. It's just a psychological thing.

My budget looks roughly like this:

Check One: mortgage, gym, gas/groc/ent; mortgage prepay, hobby goal, and efund goal, with about 7% of the check left over as "elbow room"

Check Two: Utilities, internet, phone, car insurance, gas/groc/ent; mortgage prepay, car goal, xmas travel goal, efund goal, and travel fund goal, with about 8% of the check as "elbow room"

If I add up all of the "bare essentials" items before each semicolon in the above budget, it works out to a teeny bit more than 50% of my monthly pay. (50.4%, to be exact.) If you throw in the elbow room, right now I'm spending 65% or so on bare essentials plus a bit of cushion, and the rest goes to my goals.

I've never tried YNAB (sounds interesting, brad!) or tracking every cent, but do what works best for you -- it's the unofficial GRS motto!!!


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 Post subject: Re: Wandering Through Europe
PostPosted: Thu Aug 16, 2012 11:01 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
CecilyC's approach is great too, and I'd echo the "do what works for you" advice. It may take some trial and error to figure out what works for you...if you try YNAB and it doesn't seem to fit, just try something else until you find something that "clicks." There are many, many ways to approach this.

My own approach (before I switched to YNAB) was to set up rotating goals through the year: From January 1 to March 1 I was focused like a laser on hitting my retirement savings goal because we have a March 1 contribution deadline. From March to August I focused on saving for an extra payment on the mortgage. From August until December I focused on saving for my emergency fund.

I also followed (and still do) the "pay yourself first" rule by shifting a portion of my paycheck immediately into my savings account so it's off-limits for daily spending.

The point of any of the approaches described so far is to give yourself the illusion of a smaller pot of available money than you really have. There is a fascinating series of studies demonstrating that if you give people a big bowl of food (even if it's stale popcorn that's barely edible) they will eat more than people who are given a smaller bowl of the same food. The same goes for money: if you have $16,000 sitting unbudgeted in your savings account, you can easily spend it down to $200 without even noticing. It's human nature.


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 Post subject: Re: Wandering Through Europe
PostPosted: Mon Aug 20, 2012 9:35 am 
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Joined: Thu May 17, 2012 10:05 am
Posts: 1150
First thanks for your service to our country. Second welcome the forums! Some great people and fantastic advice here. A few thoughts...

Income:
$1100 * 2 pay periods per month * 12 months * 2 years = $52,800

I believe that is tax free right?

Assuming $100 for Internet and $50 for cell phone…

Expenses:
Car Insurance - 80
Internet - 100
Gas - 300
Mutual Fund - 120
Cell Phone - 50
Total Expenses - 650

650 * 12 months * 2 years = $15,600

Income - Expenses - Net Income - Months
2200 - 650 - 1550 - 1
2200 - 650 - 3100 - 2
2200 - 650 - 4650 - 3
2200 - 650 - 6200 - 4
2200 - 650 - 7750 - 5
2200 - 650 - 9300 - 6
2200 - 650 - 10850 - 7

You could easily get to 10,000 in your E-fund in 7 months.

Assuming you save $10,000 for your E-Fund and spend $7,200 in your travels/fun in the next two years that would still leave you with $20,000 to save up towards a down payment on a home purchase, other investments, etc. Not to mention $5,760 plus you would've saved in your mutual fund...

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 Post subject: Re: Wandering Through Europe
PostPosted: Mon Aug 20, 2012 11:48 pm 

Joined: Tue Aug 14, 2012 1:36 pm
Posts: 8
Income - Expenses - Net Income - Months
2200 - 650 - 1550 - 1
2200 - 650 - 3100 - 2
2200 - 650 - 4650 - 3
2200 - 650 - 6200 - 4
2200 - 650 - 7750 - 5
2200 - 650 - 9300 - 6
2200 - 650 - 10850 - 7

Wow! Looking at it that way makes it seems so easy!!

Well, I have done pretty well so far, I put off buying a new camera, have dramatically cut down on going out to eat (which is rough, I literally have no kitchen), and have been focusing on saving. My bank shut off my debit card (thinking it had fraudulent charges) so I've only been using credit. This has curbed my spending a lot as well.

Thank you for all of your responses, and I'm going to try my best to get the $10,000 EF in 7 months!

_________________
~*Val*~

My 20's financial/ lifestyle blog: http://thealmostgrownupblog.blogspot.de/


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 Post subject: Re: Wandering Through Europe
PostPosted: Sat Oct 27, 2012 12:43 pm 

Joined: Tue Aug 14, 2012 1:36 pm
Posts: 8
It's been a while, life has been nuts!!

I got an unexpected bonus, putting my E-fund now at $12,000.

I have also started a blog, I am trying to keep track of my finances and experiences that can be shared with those in my age group, read: those who don't nescessarily think about finance much. I hope you will check it out!! Any tips or ideas would be greatly appreciated!!

http://thealmostgrownupblog.blogspot.com

_________________
~*Val*~

My 20's financial/ lifestyle blog: http://thealmostgrownupblog.blogspot.de/


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 Post subject: Re: Wandering Through Europe
PostPosted: Tue Nov 06, 2012 3:33 pm 

Joined: Tue Aug 14, 2012 1:36 pm
Posts: 8
A nice update: My Emergency fund is now above $15,000!!!

It is seriously addicting. I just want to see how much I can save every pay period (2 weeks)

Now on to investing. Anyone have any expertise on this area? I opened a Roth IRA, but am not sure what to do with it. I also have some money in mutual funds, and hope to invest more as time goes on.

Thanks all!!

_________________
~*Val*~

My 20's financial/ lifestyle blog: http://thealmostgrownupblog.blogspot.de/


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