sea's journal

Where are you and where are you going?
sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

sea's journal

Post by sea »

I did a rather lengthy introduction that was starting to become a journal in its own right. So I will continue over here. I just got the ERE book today.

I'm currently budgeting and tracking my solo monthly expenses for November which will be the first full month without my former partner (of 5 years). It's hard for me to estimate exactly what my expenses are (or could be) but I have plenty of personal lifestyle bloat I can trim. My somewhat core expenses currently are:
  • $800 - rent (includes water, radiant heat and "free" laundry)
    $47 - cell phone
    $300 - groceries
    $45 - internet
    $60 - natural gas & electricity
    $30 - cats
    ------------
    $1,282
Of course, none of these expenses are currently set in stone forever either, and I've spending more discretionary money on other stuff (like over $200 at restaurants and $150 on clothes I didn't need last month !). I have 401K, a monthly bus pass, charitable contributions, LTD insurance, health insurance, extra purchased PTO, and of course taxes taken out of my paycheck. I definitely need to adjust some things around for next year since my gross is about $1k more. For example, I am salaried but have gotten so much comp time in my new role that I haven't even been able to dent my regular PTO, so there's no reason to pay for an extra two weeks of vacation that just gets refunded back to me at the end of the year. I liked having extra PTO just in case I needed to go on a spontaneous international music tour with my old band. Quite the optimist, right?

My first goal is to reach a 50% savings rate.
I'm going to have to read more about how this calculated with my 401K contributions. My employer's match (7.5%) is fully vested next year, but I'm not sure where to count that once it's vested either. I'll adjust my payroll deductions. I think I will be switching back to a high deductible ($1250 - not that high) HSA plan next year instead of the low deductible plan ($400) that had a lower premium. But then where do I count my HSA? Perhaps my first goal should be to learn how to calculate my savings rate with all the pre-tax components. :)

I also posted my core expenses above because even with a few hundred in extra fun expenses, it's totally possible to live on half of my take home pay with some lifestyle tweaks. I needed to see it typed out somewhere. And I'm open to adjusting the fixed expenses above over time as well as long as I don't have to give up my cats. I know I have a lot to learn. I've been living slightly below my means for years and rationalized it of course, but haven't been doing very much at all beyond that. I've gotten back into patterns of consumption and a sedentary lifestyle that don't serve my overall well-being. And I need more accountability and community around changing this.

Currently Reading:
  • ERE
    Hunger Makes Me a Modern Girl by Carrie Brownstein
    The Heart Goes Last by Margaret Atwood
Last edited by sea on Thu Jun 30, 2016 8:46 pm, edited 2 times in total.

George the original one
Posts: 5404
Joined: Wed Jul 28, 2010 3:28 am
Location: Wettest corner of Orygun

Re: sea's journal

Post by George the original one »

If you're following the usual "savings rate = % saved after taxes", then the employer's match should be added to your post-tax income and counted as being fully saved.

Some people prefer to count gross savings rate, that is the amount income saved before taxes are taken out. In that case, you'd do the same thing, but the savings rate will look a little more anemic.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

George the original one wrote:If you're following the usual "savings rate = % saved after taxes", then the employer's match should be added to your post-tax income and counted as being fully saved.
Ah, thanks. I was more musing to myself about next steps, but assistance is also appreciated. I was probably overthinking it and could handle doing the usual after-tax calculations. Do you know why some people prefer to count gross?

George the original one
Posts: 5404
Joined: Wed Jul 28, 2010 3:28 am
Location: Wettest corner of Orygun

Re: sea's journal

Post by George the original one »

Counting gross is probably a good idea if your tax situation won't change due to retirement, when you have a lower income. This isn't usually the case for Americans and Canadians, but other countries have oddities that we don't have to consider (like the Dutch wealth tax).

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

I'm about 1/3 of the way done with the ERE book. I was reading it on the bus to work this morning when the woman sitting behind me purposely knocked the beverage out of a woman exiting the bus's hand. They lept at one another like panthers and started wrestling and hair pulling almost on top of me. I was also splattered by coffee.

I haven't had a car since 2009 mostly for environmental reasons, but I've been thinking of getting one again this spring because the winters here are so cold (I've had electronic devices turn off and my eye has frozen shut before), to see my Grandma more often, to drive out to my family's property, and visit friends in neighboring states. But also to not have hair pulling occur on top of me, I suppose. I'm hesitant because I don't want to add expenses on when I'm working on reducing them overall. I've looked into the car sharing programs in my area, and it seems like it would be more cost effective to own an inexpensive and reliable vehicle. I'll have to think about this some more.

I was also talking to a close friend of mine today about financial independence. She's interested in it too, but she's a single mom and thought it was pretty unattainable for her. But the more we talked about it, the more she thought it would be possible for her too - just on a higher difficulty level. Regardless of what she decides to do, it's really lovely to be able to talk about simple living and FI/ER(E) and not have it be a point of contention. I'm really grateful for that.

I realized how much I had been missing working toward FI. I feel so trapped if I'm being honest with myself even though I really like my current job/employer/manager. It's not like FI has any iron-clad guarantees that go along with it either, it's more the act of doing what is in my power to be a more autonomous (and collectively minded) human being is a kind of virtue all by itself. When I came back to the US, it was part of my plan but I was more focused on other things. I couldn't get much momentum or focus around it besides treading water to slowly accumulate a more positive net worth. Now it's snapped back into the forefront.

I don't know how fast I'll be able to achieve a 50% savings rate. This weekend, I'm taking a mini-vacation with my sister and niece to Wisconsin Dells to celebrate their birthdays. And the next month is December. I'm pretty minimal with holiday gifts but there always seem to be more expenses around the holidays. I also am starting to fund-raise the rest of the money I need for a new music production program for kids I'm working on with a non-profit. I already have $5K worth of equipment donated, but need another $2,200 to launch the program if I don't want to wait for grants. The way this impacts my personal finances is that I had been planning to buy/donate the ingredients to have a few holiday cookie bake sales and haven't figured out how much that will actually cost yet.

I'd also like to travel somewhere warm this winter, and I haven't had a big trip since I went to Costa Rica in early 2014. I'm getting the wanderlust/travel bug again and need to temper it with my longer-term goals. More things to think about. I'll do my best to reach my 50% savings goal as soon as possible (looking like January), but also be content if I continue to make progress.

IlliniDave
Posts: 3845
Joined: Wed Apr 02, 2014 7:46 pm

Re: sea's journal

Post by IlliniDave »

Calculating savings rates can be tricky if you are interested in being super precise about it, especially if you are saving with both pre-tax and post-tax money (when you save pre-tax part of the money really isn't yours in most situations and the gov't will be looking for their slice whenever you withdraw). You might consider just using a dollar target and don't worry too much about whether it is pre-tax or post-tax. I do that using my base pay, and when I get any extra income I try to save all of whatever is left after taxes.

If your employer has a 401k you can put up to $18k in it, and another $5.5K in a backdoor Roth IRA, potentially $23.5K total which would get you a little over 50% of gross saved and wind up with maybe a little above 50% of your current take home, but that's not a trivial accomplishment.

Since you are in a transition phase in your life anyway, it might be better to start at a lower % (or corresponding dollar figure) and work up to you bigger goal incrementally. You seem to sense a need for this anyway. One bit of unsolicited advice--decide on a savings plan and start with your next paycheck. Waiting until after one more trip or one more purchase to start getting serious about saving is a slippery slope (experience talking). Better to reverse that and start learning to delay the optional expenses until after you accumulate the money net of your savings plan. "Pay yourself first" is the oft-repeated slogan.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

@IlliniDave - Pay Myself First is my first YNAB category. :) I currently have $300 a paycheck go directly into my savings, $100 go into a Roth IRA and 5% into my 401K (also had 5% going to my Roth 401K, but I dropped that to refund my emergency fund). But I need to adjust this around spending reductions. I also need to adjust my payroll deductions for next year.

I'm not too worried about being super precise about it at this point. I'd have to save a bunch for it to be 50% of gross though - definitely not a trivial accomplishment. Did you mean 50% of net? I'll settle for being able to save 50% of net including adding back in my pretax contributions at least until I level up in frugality. I plan on maxing out my Roth IRA, and increasing my 401K contributions, but I'm still researching other types of investments.

Why would I need a backdoor Roth IRA? I already have one and make less than $116,000. I thought backdoors were only for people that made too much for regular Roth IRA contributions? Am I missing something?

Thanks for your feedback.
Last edited by sea on Thu Jun 30, 2016 8:48 pm, edited 1 time in total.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

Black Friday is making me gag and not want to buy anything for awhile. I already have some cash out for any incidental expenses for the rest of this month that are included in my totals, so I'll post my November totals and edit later if anything significant comes up.

I still have a lot research I need to do around investing. I had been planning to max out my Roth IRA before my 401K, but now I'm thinking my tax rate will be lower when I retire. I also switched my health insurance for 2016 to a HDHP again, and set up my payroll deductions to max out my HSA beyond what my employer is contributing.

My former partner came to visit and we had some very good talks. We'd both like to get back together, but both have things to work on before that would happen. If we did get back together, he is on board with FI as well, and it would most likely happen more quickly with both of us working toward it. He is very anti-consumption except in food areas, he likes to eat out a lot and get delivery food. And we both like to travel although he is more limited by the current state of his health.

I am thinking about long-term goals in terms of net-worth. It really comes down to getting my expenses further down. If I used this month's expenses as a guide, my expenses would be over $33,000 a year which is much more than I would like. My first goal is to have a 50% savings rate. I would hit it this month and then some (71%!) if I just look at my total savings divided by net income + my 401K contributions. I use YNAB and so had over $700 saved from October for just my travel and had part of my rent and other things already saved as well. But I'll calculate everything from my actual expenses since that's what I want to get as low as possible while still having good quality of life. I also am more focused on FI than RE. I don't know if I'll ever fully retire from work.

November Savings Rate: 42% - without travel 52%
Food is the category I have my eye on right now because I don't cook from scratch some of the time and eat out for convenience pretty often. I still want to go out to eat occasionally, but I want it to be special instead of just for convenience. And I am a vegetarian that knows how to cook, so I don't really have an excuse for my grocery bill being so high even eating organic.

Besides cutting down my food/restaurant budget for December, I would also like to cut down on my spending money. Some people spend less when they use cash, but not me. I don't track it very well so it usually just becomes blow money.

I also found out at the dentist this month that I most likely need a gum graft for two teeth. I'll know more once I visit the periodontist next month (on my birthday - boo!) but I'm not sure how much will be covered by my insurance or if there will be extra uncovered expenses for anesthesia or donor tissue. A portion of my household good expenses were for special mouthwash, gum cleaners and sensitive electric toothbrush heads.

I also resisted the strong urge to go to Movement in Detroit this year. After I calculated it would be over $1K, I decided I'd rather finally go to Europe to visit some friends and dance to techno there since that's the cost of a plane ticket. But that also is dependent on how much my dental work will cost out-of-pocket.
Last edited by sea on Thu Jun 30, 2016 8:49 pm, edited 1 time in total.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

December was a hard month. I lost someone to suicide, was slightly and functionally depressed and work was intense. I still need cut down on the food, spending money (cash) and restaurant categories. I did start cooking more often and loaded up my pantry, but spent way way too much on food because of lack of planning.

November savings rate: 33%

I did increase my 401K contributions to 15% and am about halfway to refunding a fully funded emergency fund (6 months of expenses). I also got a credit card with cash back because my credit score was disappearing because I haven't taken on any debt for years. I really would like to buy my own place in the next 2 years if it makes sense financially.

My current goals are still to get my SR over 50% and specifically to cut down my food, restaurant and spending money (cash) categories. I'll be back with 2016 goals as well.
Last edited by sea on Thu Jun 30, 2016 8:49 pm, edited 1 time in total.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

So I've been relaxing these last few months around digging into expenses. Instead, I've made adjustments to automatic transactions for my 401K and Roth IRA and just adjusted it accordingly with a recent raise. I've hit a 42% SR with these changes and lowered my taxes too. Then I have still have $300 out of each paycheck go into a special savings accounts. It's been working well. I still am spending too much in some categories and traveling, but that's ok. It's a good balance for now.

I'm making progress on a fully funded emergency fund. The image below is just savings and not investment accounts.

Image

The debt is the credit card I opened to raise my credit score. I haven't had one in years. It's so silly to be penalized for saving up cash for everything, but oh well. I'm also going to start saving up for a down-payment on a house (probably a co-op apartment or duplex). I've started researching some of this and was using a tool that told me my "sustainable homeownership affordability range" is $241,857 - $268,730! :o And this was from a community organization that also helps people manage and understand their finances!

Besides financial stuff, I've taken a few trips, worked on music stuff and am generally excited for spring and to be outside.

inchicago
Posts: 134
Joined: Wed Jun 10, 2015 12:03 pm

Re: sea's journal

Post by inchicago »

I have contemplated the same thing myself, opening a credit card to bring my credit into the 800 range. It's in the high 700s right now. However, it goes a few points down every year due to the fact that I haven't had any debt for the past two years. It's ridiculous! But, of course, the game is to keep the American consumer a slave to the companies. Buying on credit is far more profitable for corporate America than someone paying with cash.

thrifty++
Posts: 1171
Joined: Sat May 23, 2015 3:46 pm

Re: sea's journal

Post by thrifty++ »

I actually dont know how you can go without a credit card. Quite often my only option for buying some things online, such as plane tickets for example, has been through using a credit card. I have it for practical purposes rather than to use credit I don't need. Also most credit cards are interest free for 50 days so it makes sense to use sometimes as long as you always pay it off before the interest free period ends ( I have never paid any interest). Also some cards have interest free deals for like 12 months.

George the original one
Posts: 5404
Joined: Wed Jul 28, 2010 3:28 am
Location: Wettest corner of Orygun

Re: sea's journal

Post by George the original one »

thrifty++ wrote:I actually dont know how you can go without a credit card. Quite often my only option for buying some things online, such as plane tickets for example, has been through using a credit card.
Debit cards branded by the credit card companies work just the same as far as transactions go.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

inchicago wrote:Buying on credit is far more profitable for corporate America than someone paying with cash.
Yeah, I know why it's that way, but I still think it's asinine.
George the original one wrote: Debit cards branded by the credit card companies work just the same as far as transactions go.
Yep, I just used a debit card before for many years. I do think a credit card is a little more secure for online purchases, another layer anyway.

I think I just need to get my score over 740 again for optimal interest rates. It's 705 now.

Ydobon
Posts: 412
Joined: Fri Aug 29, 2014 9:15 am
Location: Scotland

Re: sea's journal

Post by Ydobon »

Late to the party I know, but what did you think of The Heart Goes Last? I found it very weak compared to her recent dystopian fiction and sat scratching my head as to why she bothered. Not along the same lines (but perhaps relevant to someone avoiding debt!) is Payback: Debt and the Shadow Side of Wealth by the same author. I found that fairly refereshing for a short read and primer on the history of debt.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

Ydobon wrote:Late to the party I know, but what did you think of The Heart Goes Last? I found it very weak compared to her recent dystopian fiction and sat scratching my head as to why she bothered.
I didn't hate it, but I didn't think it held a candle to some of her other works especially the MaddAddam Trilogy or The Handmaid's Tale.
Not along the same lines (but perhaps relevant to someone avoiding debt!) is Payback: Debt and the Shadow Side of Wealth by the same author. I found that fairly refereshing for a short read and primer on the history of debt.
I'll have to check this one out. I also had been meaning to read David Graeber's Debt: The First 5000 Years. Are you familar with that one?

Currently reading:
  • The Life of Elves - Muriel Barbery
    The Four Pillars of Investing: Lessons for Building a Winning Portfolio - William J. Bernstein

Ydobon
Posts: 412
Joined: Fri Aug 29, 2014 9:15 am
Location: Scotland

Re: sea's journal

Post by Ydobon »

I am not familiar with that one, but have reserved a copy at my local library, thanks for the question.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

Hit my first goal of 50% SR! Took a little longer to get to there than I wanted, but I know that patience is a key virtue as far as FI goes. I also upped my 401K contributions to the percentage it needs to be to max out on a yearly basis. I need to increase it a little more to max out for this year.

My HSA is also maxed, and I flipped the excess over $2K into mutual funds (from previous HSA). I also have been putting a bit into a Roth IRA, and playing around with very small amounts in a taxable roboadvisor account. I'll max out the Roth once my emergency fund is fully funded.

I also have more than doubled my net worth since October. Doubling it again won't be quite as "easy".

Current goals:
1. Fully funded emergency fund
2. Max out 401K for 2016
3. Max out Roth IRA for 2016
4. Cap monthly expenses at $2.5K
5. Go dancing at least once per week

Kriegsspiel
Posts: 952
Joined: Fri Aug 03, 2012 9:05 pm

Re: sea's journal

Post by Kriegsspiel »

Good job little champion.

sea
Posts: 44
Joined: Thu Oct 29, 2015 10:28 pm

Re: sea's journal

Post by sea »

Kriegsspiel wrote:Good job little champion.
I'm not used to being called little, but I have a long ways to go in terms of extremity especially for expenses. :)

Post Reply