The following is the latest post on my new "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. I need more people to sign up! If you're enjoying this series, you need to contribute to keep it going. Ok, enough begging from me. :-)
Next in the series is FMF reader SS. She answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I'm female, 24, and almost done with a Master's degree in environmental science. My parents are both teachers (though my mom was stay-at-home until about 7 years ago), and although we never had a great deal of money growing up, my mom taught me a LOT about being financially responsible. I feel really blessed that I had parents who taught me sound financial principles, because I know a lot of people my age who never really learned how to manage money or set up even a simple budget.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
Because I'm a grad student in the physical sciences, my tuition is covered and I earn a living stipend of ~$1500/month through working either as a teaching assistant or research assistant.
I live in an area of California with an extremely high cost of living, but I've got a tiny studio for $550/month (reduced from $600/month after being a good tenant for a year). It's smaller than my college dorm room, and all I've got to cook with are a microwave and toaster oven, but I don't mind because I pay $200-$300 less per month in rent than most of the other graduate students I know.
The rest of my budget, including groceries, household supplies, phone, and a bit of spending money generally runs to $200/month. About half of that is for groceries, because although I cook all my food from scratch, eating healthily is important to me. Mostly I buy a lot of whatever fruits and veggies are on sale, and then supplement that with eggs, chicken, and other cheap protein sources. I also make my own bread, which helps a lot :)
This leaves me with about $750/month, which is broken up like so:
- Tithing: $150
- Roth IRA: $100
- Student loans: $500
I live extremely frugally because it's important to me to save for the future, and to quickly pay off my small remaining student loans, which are unsubsidized.
What are the current financial issues you're facing (saving, paying off debt, etc.)?
Hard work in high school earned me a full-tuition scholarship for my undergraduate studies at a private university, but I still had to cover room and board, which was $11,000/year. I worked in the summers and during the school year, but still had to take out some student loans because my parents couldn't afford to help me financially. I graduated with ~$15,000 in loans, but in the two years I've been in grad school, I've reduced that to ~$3000, and I'll have the loans completely paid off by the time I graduate this fall. I've chosen to aggressively pay off loans rather than contributing more to a retirement account because:
a) my loans have an interest rate of 8%, so interest builds up faster than it would accrue if I put my loans payments in an index fund instead.
b) I really want to graduate loan free so that I can make future plans based on what I actually want to do, rather than what is necessary to make my student loan payments. I'm toying with the idea of traveling for a year, and I couldn't do that if I had loans hanging over my head.
I do understand the value of saving for retirement early, so I started a Roth IRA during my senior year of college, and though I haven't been able to contribute as much as I'd like, it's up to about $3000.
I also have an emergency fund of $5000, because I think it's important to be prepared for unexpected expenses.
What are your plans for the future. (retire early, build your career, etc.)?
I've got a couple job prospects for after I graduate, but things are still quite uncertain at this point. If I can't find a job relatively soon after finishing, I'll probably take off to travel for a while, working as I go (I've got a dual citizenship that will allow me to get a work visa pretty easily in most European countries, which is very useful...)
Once I do settle down with a job, I plan to continue to live like a starving graduate student for as long as possible, so that I can continue to save most of my paycheck. Most of that will probably go to retirement savings, since I know that starting to save early makes a huge difference in the amount of interest that builds up over the years. I'd also like to increase my cash savings, because eventually I'll probably want to buy a house.
My plans will obviously have to be adjusted depending on what the future ends up holding, but I'd love to retire early. Alternately, I'd be equally happy with a flexible job that may not pay a lot, but provides spare time enough to travel and pursue my hobbies.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
I think my general philosophy for personal finances is based on contentment. A lot of the grad students I know complain a lot about how we don't make enough to live on, but I honestly feel like our stipends are generous. I know that by living frugally now, I'm setting myself up for a good financial future, so I don't mind that I don't have all the newest electronics or a pretty car (or a kitchen... that's actually what I wish for the most). Being content with what I have (and reminding myself that I'm quite well off compared to 99% of the world) makes it so much easier to stick to my budget. I owe a tremendous amount to my parents for modeling this attitude for me growing up.
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