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.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader MP. She answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I'm a single, 26 year old living in Washington DC. I've lived here for 4 years though I'm originally from a southern state. I worked in politics right out of college and soon realized that career path was not for me. I quickly regrouped and have been in a good, yet not very challenging, admin/sales position for the past 3 years. I've received one promotion, merit-based bonuses and on average an 11% raise every year. I've stayed longer than originally planned due to the fact that I feel valued by my colleagues and managers. However I cannot shake the feeling that I'm not challenging myself to take the next step in my career. Franly I am fairly over-qualified for my position and need a real change. There is no real room for growth at my firm due to its size, so I'm at a bit of a cross-roads.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
I live within my means though I could cut my spending more. My parents set a very good example for my siblings and me by being open about the fact that they never took on non-mortgage debt. With their encouragement, I finished college without any student loans through scholarships and I carry no personal debt. However, right after I moved to DC I did overspend and had no savings to speak of. I kicked that behavior and started my 401K and Emergency Fund approximately two years ago.
- Bonuses around $5000/year
- 401K: $22,000
- Emergency Fund: $7255
- Other savings (marked for purchases, gifts or travel): $1100
- 401K Contribution: 15% (including employer match)
- Savings Contributions: $600/month
- Rent: $1022/month with 1 roommate. This is super low for my location.
- Utilities: $20 - 70/month depending on the season
- Health insurance: $30/month
- Renter's Insurance: $13/month
- Cable/Internet: $70/month (I would LOVE to get rid of cable but my roommate does not agree
- Groceries: $300/month
- Gym: $79/month
- Entertainment: $600/month (This mostly includes going out to eat and to bars.)
- Travel Budget: $100/month
- Gifts: $50/month
- Miscellanous (toiletries, home maintenance items, clothing, irregular expenses): $200/month
What are the current financial issues you're facing (saving, paying off debt, etc.)?
I consider myself fairly frugal. I don't have a car, I walk to work and bring my lunch everyday. However I struggle with finding the balance between saving for the future and enjoying an active social life in my twenties. I would like to cut some of my entertainment spending and use that money toward a more productive purpose (read: not toward alcohol!). Unfortunately I feel social and personal pressure to spend more than I'd like. I have an introverted nature but I am social and have a large group of friends. I tend to never initiate social gatherings but almost always say yes when invited. Would appreciate some suggestions on how to socialize on the cheap without feeling like a loner.
I am also struggling with a general lack of direction. I'm comfortable with my emergency fund so it's time to move on to saving for specific goals. The problem is I do not know what my goals are right now. I would eventually like to purchase a home, but I don't want to buy in DC since I don't want to live here long-term. I am also torn between going back to school and looking for a new job. I am studying for the GMAT and considering business school. I think an MBA program would allow me to learn a lot about myself and my career options while opening doors to new opportunities. However I am petririfed of going into debt and the opportunity cost of a full-time program. My employer does not offer tuition reimbursement. Finding a new job would cost less up-front but I'm not sure if it would set me up for as much long-term earning potential (and long-term job satisfaction) as a graduate degree would. Also I don't even know where to start looking for a new job considering I'm not sure what exactly I would rather be doing.
Reading over this I am realizing how paralyzed I've been. I tend to think through decisions very carefully but sometimes that means life marches on while I'm deciding. I'm ready for a change and would appreciate any and all advice!
What are your plans for the future (retire early, build your career, etc.)?
My long-term plans are to build my career and set myself up for financial independence. I'm still up in the air about how exactly to achieve these plans, obviously. Eventually I would like to settle closer to my family though I'm not sure I'm ready to make that move yet. I love living in a large city but the hustle and the cost can get to me. Conveniently, cost of living is much cheaper in my home-region, so I would be setting myself up for financial stability (provided I can get a well-paying job in that area).
My short-term plan (which is not set in stone) is to apply (and hopefully be accepted) to a good, but not totally out of my league so I can hopefully get a scholarship, MBA program in the South. I am hopeful that this would open doors for a good job in my home-region and set me up to be closer to family.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Live within your means. Also avoid lifestyle inflation. As soon as I get a raise or bonus I adjust my automatic transfers to keep my monthly budget roughly the same.