Wanting more

The thing about the whole pay-off-my-grad-school-debt-in-a-year was driven by the twin feelings of panic (in the months before graduation, when it wasn’t at all clear that I was going to get any kind of job at all) and tremendous relief (when I semi-magically landed a one-year job that paid much better than I’d expected to be paid.) I knew, at the moment that I ran the numbers on my new salary vs. my debt, that it was possible to get it done and that I ought to do it in order to avoid future feelings of panic in case I couldn’t get a job the following year. I did a couple things right immediately in July 2013: I committed to the goal, and I signed up for mint.com so I could get a better handle on what was going on with my spending.

I also did some things wrong: I didn’t set a budget that assumed debt came first, to be followed by other urgent priorities (rent payments, buying a car, at least a tiny bit of savings), to be followed by discretionary spending. Instead, I just shopped for food and clothing and furniture and the car on what I felt was an as-needed basis and paid debt out of what was left at the end of the month. This meant that to make my goal, I ended up having to throw crazy percentages of my salary at the debt in the last five months, instead of smoothing out the expenses all along by strictly limiting the discretionary spending.

Now that I’m (mostly) out of debt, though, I’m hoping that I can turn the same wake-up I had in March, to be summarized as “pay yourself first,” and apply it to savings — that $500 a month I talked about in my last post. Because I want to do things, things that can’t necessarily be cash-flowed every month. A decent pair of boots (which I want like you wouldn’t believe), I could probably cash-flow. Retirement? Having a house I like and furniture I like? A car I find more comfortable and convenient than the one I was able to pay cash for last summer? The ability to travel when I want to? These things will require a long-term attitude towards savings that is like the attitude I developed about the debt towards the end: this is first. Everything else is negotiable.

Man, it would sure help if I made twice as much money, though 🙂

Fidgeting with the EF again (a 2015 goals preview)

I have been bouncing around on what I think about emergency funds all year. I know I want cash savings for car maintenance, for travel, for health stuff, and for general emergencies (which in my case is really only going to mean one thing: I need to make a “career transition” in July 2016, 18 months from now, and will need cash for expenses associated with that.)

For a while I had a goal set at $6000, then I upped it to $10,000 because that sounded like it could realistically cover a *lot* of “career transition,” especially when coupled with unemployment ensurance. But I’ve been thinking about what I want to accomplish financially in 2015, in preparation for setting those goals, and just now I did this:

(Yeah, I included the bottom part of that screencap just so I could bask in having the loans paid off again. Sue me.)

If I save $500 every month from now until I leave this job in July 2016, I will have $10000 in cash by that time. I intend to do this — it seems like a weirdly miniscule amount for that much work, but I have to keep reminding myself it’s in addition to the retirement savings and the cash I’m setting aside monthly for yearly costs of car maintenance, health, travel, etc. We’re just talking about medium-term savings here.

I re-set the goal explicitly entitled “Emergency Fund” to $5000, though, not because I plan to blow the other $5000 but because I feel really, really protective and defensive about that EF money. In my head, it’s in a glass case marked “Break In Case of Job Loss.” That’s a good thing, because it means I won’t randomly spend it on travel to Europe, but a bad thing, because it means I’m going to resist drawing on it for other long-term goals I need cash for.

So, once I reach that $5000 mark — I’m estimating August, at $500 a month — I’m going to stop contributing to that particular targeted savings account and open two others. One will be for “house/car” — because I’m going to have to get one or both of those at some point, and I don’t have anything saved for a down payment, and I figure I really should start — and the other will be for something I’m going to have to invent a category name for. I’m thinking things like a new laptop, when I need one, or moving expenses. Things that aren’t wants, but real needs, but are too big and lump-sum-like to be absorbed into monthly cash flow. The way I used to deal with this stuff is putting it on a credit card and then paying it down, but, well, yeah. Trying to avoid that in the future. So the way I look at it, if I put $250 in each of these accounts monthly after the EF is done, I should have $2500 in the car/house fund and $2500 in the “life expenses”[name TBD when I actually open it] account, assuming, of course, that my laptop doesn’t die in that time frame 🙂

December is going to be so weird financially

Weird enough that you may not get my big New Year’s post until mid-January!

–Right now I’m waiting for about $870 in reimbursements from the conference trip I just took, so my mint.com numbers look really different than the numbers I reported in my last net worth update, which is unsettling to me even though I know that my numbers are accurate. I hope to get these back in the next couple weeks so I can pay off my credit card before Christmas and not see that little red bar anymore.

–Speaking of which, in theory, I’m paying off my credit card — actually, I definitely intend to make the last payment on the debt I’ve been carrying on it. I’m waiting for my statement to hit next week so I can see how many cash-back points I can apply against it, to reduce the amount of $$ I have to use to pay it off.

–But in practice, I can’t celebrate that because I’m afraid my medical+travel+gift expenses for December are going to put me right back in the red, so I can’t really have a big to-do about being debt-free until I’m sure I’m staying that way.

–Also, my university is switching retirement plan coordinators. Right now, my 403(b) is at Vanguard; in a few weeks, it will be at Fidelity. I’m a little annoyed, because I have my IRA at Vanguard and I like to keep everything under the same roof and Vanguard is a better company, but it shouldn’t mater that much: I can keep the same funds (Vanguard lifecycle fund) even with the new administrator, and when I leave this job, sometime in the next 6-18 months, I’ll just roll it back over to a Vanguard IRA anyway, so it’s not that huge of a deal.

–BUT the point is that it’s not actually clear to me that come net worth update time at the end of the month, I’ll know how much is actually in my 403(b)! There’s a “blackout” period of several weeks, between December 16 and sometime during the week of January 4 depending on how fast stuff happens, during which we can’t make any moves, because they’re just going to be working on transferring everything over. I’m getting the strong impression from the literature they’ve handed out that during this time, my account balance will be invisible to me. I really don’t like that idea. It’s not that I think they’re going to lose the cash (PROBABLY), but I like to be able to log in and check my balance, you know? And again, it’ll really mess with the net worth update.

Like I said — nothing’s wrong, it’s all just weird. It’ll be good to get everything hashed out and looking normal in mint, which I guess should happen sometime during the first week of January. Harshing my buzz for a planned new year’s post though! Maybe I can make one on January 8 and then backdate it or something 🙂

Living on less vs. living well

As you may have noticed, my regular monthly expenses since I moved have dropped dramatically. (And a good thing too, since so did my income; between the lower salary, and aggressively contributing 25% of gross to my 403(b), my take-home pay is only about 55% of what it was. On the other hand, I don’t have to pay off student loans with it — I’m not really living on all that much less than I was before.)

Some of this was really intentional: I gave myself a food budget and have been mostly sticking to it, resisting temptation to buy vast quantities of cheese and take myself out for Vietnamese food when I’m too tired to cook.

Some of it, though, was partly just luck. It’s cheaper to register, insure, and maintain my car here. And housing is really inexpensive. I made one big decision, though, that’s helped keep it super low: I decided to live with a roommate. I’ve been paying $300 in rent plus half the electric bill, which has meant that in some months my housing expenses were only in the $325 range. With winter coming on, my December rent/utilities will be up to $350 (gasp!)

However, I needed to find a new roommate for the spring semester — it’s a long story, mostly not bad, just kind of a pain. I went and saw five places, after writing emails to about a dozen people. The first three were totally unworkable, for different reasons, but one of them was tempting, because it would have been very cheap — just $275 a month including everything, with no electric bill. (The dealbreaker problem there was no real kitchen — they have a toaster oven, microwave, and mini-fridge, but since a lot of my budget-balancing involves heavy cooking, I didn’t think I could handle it. There were other problems in that situation too, though.)

I ended up going with a room that’s $400, all-inclusive. So in the winter, it won’t be much more than I would have paid here, although an extra $50 a month does add up…still, it feels like quibbling when I compare it to anything I ever paid in New York. My lowest rent there (to share a room) was $600, and that was nearly fifteen years ago, and in a neighborhood a long commute from my job. My highest rent was — holy Jesus — $1900, though that was when I was paying the whole rent on a 2-bedroom by myself for a few months when I didn’t have a roommate. (This is why I had student loans, folks: I should never have taken that particular apartment. Moment of panic. I should talk about why I did it sometime.)

OK, but this is all a really long way of talking my way around to commenting on the posts about living on 50% of your income (or less) that J. Money and Cait have recently made. In particular, Cait does a thought experiment: What if we’d been told, all our lives, that what we should do was to live on as little as possible and save the rest?

For me, the answer is: I’d have a lot more money. I wasn’t encouraged to be a spendthrift or anything, but nobody ever really talked to me about saving in a more than theoretical way. My parents have done pretty well, largely because their salaries got very respectable as they got older and, as many have noted, the period during which they’ve invested in their retirement accounts has been a very good one for the markets by historical standards. But they’ve never had a budget and I’m pretty sure have never said things like “I’m going to save 10% of my income” (or 20% or whatever.) They just have income, spend, and save what they don’t use.

I always knew saving was something I needed to do at some point, after student loans and grad school, or for certain goals (like when I wanted to quit my first job out of college, I saved like mad for six months so I had enough to live on while I interned.) But the idea that you should save a percentage of whatever came in, even if your overall income was low, was totally new to me, aged 35, when I first started to look into money management earlier this year. Let alone the idea that you should live on as little as possible and bank the rest! In this case, right now, that would have meant I should’ve taken the $275 option, not the $400 one.

$400 is still a great rent/utilities cost, by American standards, and the room and house are much nicer than the two cheaper options I saw (and also nicer than the two more expensive options I saw!) But part of me is probably going to continue to have a nagging feeling that I should have tried to save the $125/month and live in the $275 place…. Honestly, I’d probably just have ended up spending the savings on getting takeout though. Or at least a big chunk of them. “No real kitchen” is my dealbreaker, it seems.