The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Next in the series is FMF reader OR. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I’m a 27-year-old man, and have been happily married for eight years. My wife and I relocated from upstate NY to central NJ this past January when the company I work for decided I should move.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
We have no children, and both work full time. After our annual raises take effect in January, our joint income will be just over 90k. We both contribute to our 401(k) accounts up to our companies’ match limits. I kick in a bit more to reach an even 10%, plus 2% to purchase my company’s stock at a sweet 15% discount. As that money vests, I will keep an eye on its total value and dump as necessary to preserve diversification in my portfolio. My company also has a pension “kicker” of 2.5% that they throw in because they’re nice people.
Witness the power of company matching / pension / discounted stock: that 12% I put in is instantly worth almost 20%...before any capital gains! BOOYAH!
We also have rollover IRA’s from our previous employment worth a total of about $16k. Both of those accounts and our 401(k)’s are invested in low-expense mutual/index funds.
Short and medium-term we don’t look quite so good. We live in an expensive area. To illustrate: we're currently moving again because our landlord tried to raise the rent to $1,451…for a one bedroom. Our apartment is now listed for prospective tenants on our landlord’s site…at $1,675. Wow. We managed to find a crappier place for $1,242, which is still highway robbery for what it is.
We have massive student loan debt – about $120K between us. We both changed schools and majors too much.
When the company we both worked for went out of business in 2010, we blew through our emergency fund in two months and then had to start charging everything to our credit card. Consequently, by the time we both found work again, we had close to $10k in revolving debt. The only silver lining there is that I have a wonderful card from before the recession; it’s a Citi MasterCard and it’s FIXED at 9.99% APR. At present, we still have about $6k on that card and are trying to pay it down by throwing $1,000/month at it.
Our savings account just reached $2,000 recently for the first time since 2010.
What are the current financial issues you're facing (saving, paying off debt, etc.)?
1. That thrice-accursed card. With the crazy expenses around here and our student loan payments of nearly $900/month (and that’s with my $300 consolidation loan on deferment…), we’re still charging large unexpected expenses to that card, even as we fight to pay it down.
2. That $1,200/month in student loan debt (once my consolidation loan comes off deferment in 2015) is nasty.
3. We are not saving as fast as we should, because we’re focusing on paying down the card. Our savings plan at this point is just putting any windfalls (random checks, leftover weekly money, tax refund, etc) in there.
What are your plans for the future (retire early; build your career, etc.)?
I am currently in a professional MBA program at Rutgers which ends in May of 2014 (my company is paying for half of it). The additional Federal loans I take on for my half will amount to much less than I expect to get out of the degree.
At that time, we will be moving again – hopefully somewhere with better living expenses and fewer people. Not only are we fed up with the population density here in New Jersey; my job will certainly be moving us anyway for the next stage of my training.
We would love to save up and buy a house, and have a kid, but we’re stretched financially so it’s going to be a struggle to come up with the 20% down payment. I am hesitant to put less than 20% down on my primary residence. If I ever dabble in real estate, I’ll look into different leverage options for those properties, but I really want to stay right-side-up in any non-income-generating property.
It’s always been a dream of mine to retire early, but I fear that’s just pie in the sky. Breaking into real estate investing (rental properties) seems to be the best way to make that happen, but unless I experience a dramatic salary jump from the MBA that isn’t likely.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Here are some pointers that would have saved me some bucks had I known them earlier:
1. Don’t have all your income coming from the same company. If it goes bust, you’ll be screwed (diversification is as important to income as it is to investments).
2. Reliable transportation can be had for less than $10,000 if you negotiate aggressively for a two to five year old domestic certified used car. I could easily write a whole post on financial strategies for buying a car, since I used to sell them for a living; however, I'll just say "trust me" for now.
3. The golden rule: minimize your fixed expenses.
I’ll leave you with a quote I heard on an otherwise awful radio program: “Gold is the currency of kings. Silver is the currency of gentlemen. Barter is the currency of peasants. Debt is the currency of slaves.” Obviously, I didn’t follow that advice (and still don’t…MBA…) but that doesn’t make it less true.