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 PA. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
24, male, single, no children
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
I graduated from a flagship state school two years ago, with a bachelors in business. I got a good amount of scholarships which kept costs down, and then my parents were able to pay a decent amount of the tuition, with loans covering the rest. While I only worked a couple hours a week during the school year (security at school basketball and football games), I was able to pay for all my rent, food and other living expenses (including study abroad travel) out of my earnings from internships and other random jobs in the summers. A key part of that was relocation money - All three of my jobs were on the opposite end of the country, which resulted in sizable relocation payment, which usually paid for all or most expenses in the summers, leaving my salary to cover the other 9 months of the year. So in the end I only accumulated debt for the $15K I received in federal student loans.
I currently work for a manufacturing company earning a little under $60K, with a bonus that could potentially be another $8K or so. I put 7% in my 401K which maxes out the company match at 3.5%, plus I put another $200/month in my HSA (although my health expenses are currently less than a third of that - I'm going to contribute a lot less next year). I fully fund my Roth IRA (Vanguard), and the rest then either goes to new index funds, or Prosper and Microplace investments (I really like both of these sites a lot - for someone who is not very good at stock picking you can get some really good returns on there - even when lending to AA rated borrowers with 800 credit scores. My expenses are mostly:
- Housing (rented w/1 roommate - $450 each plus utilities)
- Car payment ($350/month)
- Gas ($120-200)
- Groceries $150
- $100 eating out
I like traveling, and each of the past couple years have flown to South America for my vacations. So normally that would a relatively large expense, however I have taken advantage of most of the good credit card bonus offers lately, and so have been able to fund all my flights with miles (and I still have a ton left), so the trips are considerably less expensive.
What are the current financial issues you're facing (saving, paying off debt, etc.)?
My only debt is my car loan, which is at 0%, so I'm in no hurry to pay that off :-) So right now all of my excess goes into savings/investments, which is currently around $28K for everything including Roth and 401K. One of my issues is I don't really do any investing systematically - right now I'm just investing by promotion. What I mean by that is I'll leave money in my checking account, then every couple weeks transfer a couple thousand to whichever investment option is offering a deal - so for example today Prosper has a 2.5% cash back on featured listing loans, so I transfer a grand over there. Often times I have a minimum spend on a credit card promotion, and so my current preferred way of meeting the minimums after the demise of the dollar coin program is investing in Microplace, which is actually pretty cool (yes I also pay for my auto insurance, and any other large expenses, but there is always at least $1,500 I can't meet with normal spending). So while right now the amounts I'm investing aren't large enough for me to be really concerned by this lack of a strategy, but I know that going forward I'm going to need a personal investing (i.e. non-retirement account) strategy that is more sophisticated than responding to investment promotions. I've recently bought into a few more Vanguard funds, and am currently toying with a twice-monthly automatic investment plan - just have to figure out what percentages I want.
I also am somewhat of a credit card offer junky, with my count of active card at 6 (4 of which were opened in the past year for especially lucrative bonus offers). Now of course I pay them all off on time, and I make sure that after the first year I don't pay an annual fee (either by calling and cancelling, or letting them talk me into downgrading to a free card or an offsetting statement credit), and I know the affect on my credit score is minimal. But I still think I'll probably have to scale this back a bit, which probably won't be a problem as the offers seem to be declining in quality in the past year or so.
What are your plans for the future. (retire early, build your career, etc.)?
Right now I love my job - I'm basically being allowed to work on what I want, they've invest a ton in putting me through all sorts of training, and I generally do like the company and people there. My first concern is that the company is very cyclical, and is historically known for going on hiring binges in good times and mass executions in down times. The past two years or so have been good times for us (overseas markets), but I'm starting to see signs that concern me. Now the company is probably on much stronger footing now than it was in 2009 (the last time we had layoffs), but all the same I'm fortifying my position, and beginning to follow up with the recruiters who contact me on LinkedIn, instead of sending them polite rejections as I had mostly done before.
My second concern has to do with quality of life. Within the US, and even in our international locations we are predominately located in small towns, including the town I am moving to right now (which is less than 10,000). On the one hand, it does keep living costs down. On the other hand it increases my travel costs as I end up driving several hours to nearby cities many weekends. Now we do have some locations in three decent cities,including the location I am currently, a very fun yet low cost of living city in the South. However my job options were quite limited here, and so to advance my career I am taking my next role in a smaller town, which I've come to realize is more of a sacrifice for me than I thought it would be before taking the job. So in several years (assuming I stay here that long, which I plan to) I will probably have a decision to make:
1) Do whatever it takes to maximize my number one asset, including living in smaller towns
2) Guide my career path in a way that keeps me in cities at the possible sacrifice of career maximization
3) Look at jobs in a different company. Still a bit away for me, but something I'll be thinking a lot about.
Also on my mind is an MBA. Having done business for undergrad, and seeing the textbooks of some of my friends doing MBA, it seems there would be a lot of repeat. However I'm beginning to believe it is something that would help a lot, no matter if I stay with the company and build a career here, or if I want to move somewhere else. My first inclination is to do it part time while working, as I don't want to stop earning for several years, and the company would pay a small, but non-neglible portion of my tuition only if I keep working. However I'm wondering if there is value in doing it full-time. Anyone have an opinion on that?
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Well apart from the advice already dispensed by other readers, I have two pieces of advice:
1. Focus your savings on the areas that matter. I'm naturally a cheap person, and so I always look for the lowest prices on everything. So this meant that until recently I would visit as many as three-four grocery stores a week to buy the items that were on sale in each individual store. This did save me money (even net of extra gas), but my focus on saving on all these everyday purchases meant I wasn't spending time planning savings on some of the big ticket items (for example I overpaid slightly for my car because I rushed into it and didn't walk away when I probably should have). So while I still can't shop at only one store, I am bringing more balance to this equation.
2. Reduce your suppliers for strategic items. This is sort of a continuation of 1. In the beginning of my car ownership years, I clipped coupons and got my work done at various shops for cheap. However when it came time for my first major service I took it to the dealer.....and you can probably guess the rest. Since then, I've got all my work done, at a good mechanic. So this means I do pay a little bit more for each oil change, but then it means I don't get ripped off on the big ticket items. Similarly, because of moving around I had gone to various doctors for check-ups and bloodwork. My insurance is supposed to cover all that preventative work....but some hospitals code things different ways, and I got hit with a hospital charging me an insane amount for routine bloodwork (after the insurance discount, and after me negotiating with them). So my lesson is that the switching cost, which I had not considered, can be extremely important. So for these and a few other items, one of my biggest priority this year will be to do the research to find one good provider, and stick with them, even if a different company offers a coupon that saves me a few bucks on one visit.
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