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You could certainly do worse, but I'd say you're doing a lousy job. Saving $1000 a month is a very small safety net based on your expenses. Anyone who lives their lives as if they have job security is delusional. I say this as a government worker myself. You have very little margin for error if something were to go wrong.
Blowing a lot of money on eating out, etc, is not only a waste of money, but is also usually unhealthy, which will translate to higher health care costs down the road, and potential disability in your 50s, which will really kill your ability to earn an income. It sounds to me like you're spending a lot of money on stuff that really don't bring much happiness or long term satisfaction, which is a shame.
If you were to invest an additional $1000 a month that you're blowing on your car, random toys, and eating out in your 401K or IRA in a fairly boring mutual fund like Vanguard Wellington, and you managed to get 8% returns you'd have:
$184,000 at age 36.
$592,949 at age 46.
$1,500,295 at age 56.
$2,120,630 at age 60.
Oh, and 8% was a fairly conservative (but admittedly, not super conservative) estimate for returns for the fund. It has returned 9.67% over the last 20 years.
And by the way, if that money is invested in a 401K or IRA, you don't have to pay income tax on it, so $1000 invested is probably only $800 out of your pocket, which still gives you $200 out of that $1000 to spend or put into a savings account.
I think you need a meaning and a purpose for your life and for your money beyond short term pleasure and gratification, which you are lacking now. That's where Mr. Money Mustache comes in handy:
I also agree with the other poster said about the car. Having a $512 car payment is crazy, and doubly so when you don't even drive that much.
Because this was a thread asking for financial advice, I don't disagree with your stance. I will however post something interesting to think about.
Quote:
An American tourist was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked.
Inside the small boat were several large yellow fin tuna. The tourist complimented the Mexican on the quality of his fish and asked how long it took to catch them.
The Mexican replied, "Only a little while."
The tourist then asked, "Why didn't you stay out longer and catch more fish?"
The Mexican said, "With this I have more than enough to support my family's needs."
The tourist then asked, "But what do you do with the rest of your time?"
The Mexican fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life."
The tourist scoffed, " I can help you. You should spend more time fishing; and with the proceeds, buy a bigger boat: With the proceeds from the bigger boat you could buy several boats. Eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor; eventually opening your own cannery. You would control the product, processing and distribution. You could leave this small coastal fishing village and move to Mexico City, then Los Angeles and eventually New York where you could run your ever-expanding enterprise."
The Mexican fisherman asked, "But, how long will this all take?"
The tourist replied, "15 to 20 years."
"But what then?" asked the Mexican.
The tourist laughed and said, "That's the best part. When the time is right you would sell your company stock to the public and become very rich, you would make millions."
"Millions?...Then what?"
The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos."
While I don't disagree with the financial aspect, there is something to be said for balance. Forgoing things today simply so you can do them 30 years from now isn't always a worthwhile trade off. Obviously in the fisherman story, he needs to worry about what happens when he can't fish anymore, but at the same time saving up and slaving away for 20 years just so he can enjoy the things he does today doesn't really make sense either.
While I don't disagree with the financial aspect, there is something to be said for balance. Forgoing things today simply so you can do them 30 years from now isn't always a worthwhile trade off. Obviously in the fisherman story, he needs to worry about what happens when he can't fish anymore, but at the same time saving up and slaving away for 20 years just so he can enjoy the things he does today doesn't really make sense either.
I know the story. My response is the following:
1. A high savings rate means you can be financially independent much sooner than 30 years in the future (as the blog piece I linked to talked about in depth). I'll borrow/paraphrase a quote from the blog to make my point. "The typical middle class American lifestyle is an exploding volcano of wastefulness". Indeed, it is. Our OP is a perfect example of it. To his credit, he could be far, far worse...but that just goes to show how so many people in America take what they have for granted. If he lived more simply like the people in your little parable do, then he'd have a high savings rate anyway.
2. Most of what the OP would be forgoing isn't going to bring any lasting happiness, anyway ($500 car payments for a car he barely drives--at 6% interest no less? Money regularly spent on take out food that he won't remember eating in a few days? These things do not bring happiness). Financial independence is not a guarantee of happiness, but it certainly brings the potential for much greater happiness and fulfillment than working a ho-hum job for 30 years (assuming he'll even be able to maintain such a job, which seems less and less likely for everyone these days).
What I got from the OP is he really isn't living his life very mindfully, and that is reflected in the way he spends his money. He hasn't been looking for getting the most satisfaction out of every dollar spent. He doesn't really know what's important to him (or has a misguided sense of what brings happiness and fulfillment...yes this varies from person to person to a degree, but not that much). He's just sort of drifting along not really taking an active role in his own financial life.
Last edited by mysticaltyger; 10-22-2014 at 11:50 PM..
Oh, and the OP should also read the thread that was asking people with pensions if it was a good idea to save additional money for retirement despite having a pension. Almost everyone in the thread answered some version of "yes".
Blondy in post #39 had some particularly good real life examples of why she was glad she saved a healthy amount for retirement on top of the pension, but there were many other good posts as well:
Because this was a thread asking for financial advice, I don't disagree with your stance. I will however post something interesting to think about.
While I don't disagree with the financial aspect, there is something to be said for balance. Forgoing things today simply so you can do them 30 years from now isn't always a worthwhile trade off. Obviously in the fisherman story, he needs to worry about what happens when he can't fish anymore, but at the same time saving up and slaving away for 20 years just so he can enjoy the things he does today doesn't really make sense either.
One important thing: The Mexican would be playing with the grandkids at that point, not the kids!
First off, Great thread, thanks for sharing your personal finances and asking for help..
Now to business..
1. Just like what other posters said, your car seems to be a big waste of money if you don't use it daily or weekly. You can easily rent a car when you need to go out of town and it will be cheaper than what you pay every month and most the time the credit card you use to rent have car rental insurance.
2. Eating out, I understand that but you can cut back a bit on it, if not for the money for health, and try to cook simple meals for yourself once or twice a week. Buy a slow cooker ($20-$30) investment and put some stuff in it before you leave to work and come back to some good hearty meal and left overs for the next day.
3. Savings.. When I learned about Roth IRA I was upset that I didn't start saving in it since they passed that law, it's simple.. this year you are allowed to save $5500/year and any money it makes over the years till you reach 59.5 is tax free. You can withdraw your deposits (the $5500) any time, no questions or tax issues. Vanguard, Fidelity and others offer funds that you can invest this in. Just pick something simple, an index fund, and watch your money grow.
4. Check into the 401K, again, I feel I missed on lots of savings if I started your age and didn't wait. The earlier you start the better. You don't have to put tons but it adds up. Make sure that this money is not needed for anything since you can't touch it till you reach the good age of 59.5
5. Save at least a 6 months worth of living expenses, this is the emergency fund, in your case 20K-30K that are accessible, these I would keep in a savings account or money market account.
6. Home ownership, maybe this is not for you, but see if this is something you want to do.. It's good if you will stay in the same place for at least 5-7 years to recover the cost of getting a loan and all the expenses related to buying and if the total as another poster said is less than what you are paying for rent. Also, if you are handy and like to fix and maintain things.
Finally, you sound like a smart young person and you have a great future ahead of you.. Good luck with your choices and keep us posted with what you do.
I'm a regular poster on CD but I made this as a throwaway account because I didn't want anyone thinking I was showing off or anything under my regular account. I just wanted someone willing to look over my budgeting and see if it looks good or if I should make improvements somewhere.
Me: single, no kids, 26 years old, not much of a social life. I live in a large city with a somewhat high cost of living. I'm not interested in dating anyone, I like to keep to myself. Job security is good. I'm good at my job and even if I wasn't it's a very technical job so it'd be cheaper to keep me than to replace me. I'm seven years in and counting.
Monthly net income: $4168
Expenses:
Rent + utilities $1200 (average)
Car payment with insurance: $512
Gas: $15 (I don't drive much, I fill up maybe once every two months)
Phone: $85/mo
Internet: $75/mo
other monthly expenses (game subscriptions, Netflix, etc): $40 (estimate)
Savings allotment: $250
I order out a lot so I allocate $25/day for food (including coffee, snacks, whatever). I usually eat less than that but I like to be on the safe side with budgeting. That comes to about $750/month but with probably 1/3 of that remaining after considering actual food expenditure.
With these budgeted items, it leaves me at around $2000 unbudgeted (plus whatever amount left over from overestimating food and utilities).
I don't have much of a social life so I'm not out spending money on clubs or drinking or whatever. I buy games, new electronics, books, etc, whenever I feel like it without paying much attention to cost. I'd say it's safe to estimate anywhere from $500-$1000 a month for random toys I feel like buying.
I try to end each month about $1000 ahead of the previous month.
With all this, do you have any thoughts or suggestions? Am I handling things fairly well given my income compared to my responsibilities?
the costs of buying and insuring a car that you seldom drive is ABSURD!
You could buy a used "runabout" with cash, save on the car loan and carry ONLY liability insurance and free up a big 'ol wad of cash every month.
the costs of buying and insuring a car that you seldom drive is ABSURD!
You could buy a used "runabout" with cash, save on the car loan and carry ONLY liability insurance and free up a big 'ol wad of cash every month.
Or he could look into zip or worse a rental car, for way less then insuring and maintaining that "runabout"... He drives about as much as I do and I commute via bike or bus.
I agree, lose the car and get a cheaper one that you can pay cash for. A used Honda/Toyota is perfect for you. Don't listen to people telling you to buy a house. Homes are an enormous money/time suck, and they are relatively poor investments. You definitely need to start investing, regardless of your pension. You make enough that you could max 401k and IRA each year, and doing so would not affect your qol. And you are young enough that doing so now will pay off HUGE down the road. You're in really good shape for someone your age and if you do a little planning the sky's the limit.
The way I see it, the OP is looking for a solution to a problem he doesn't have. He's doing fine.
The "no interest in dating" and "not much of a social life" parts are great ways to save money and have absolutely no fun, but what do I know. I've been married (which is a type of "dating") for 34 years.
The way I see it, the OP is looking for a solution to a problem he doesn't have. He's doing fine.
Meh. He's doing mediocre at best.
Quote:
Originally Posted by Larry Siegel
The "no interest in dating" and "not much of a social life" parts are great ways to save money and have absolutely no fun, but what do I know. I've been married (which is a type of "dating") for 34 years.
Actually this part worries me a bit. I don't think marriage is a cure-all, but a lot of men like this tend to get kind of weird as time goes on. Unmarried men generally are not as happy or healthy as married men.
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