Reader Profile: MB

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 MB. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am a 29 year old, single woman who still (sort of) lives at home. The past 6 years I’ve had jobs that keep me away from home 8-11 months out of the year, so my mail pretty much just goes to my parent’s house. I don’t see a persuasive reason to pay for rent when I would just use my vacation time to visit them anyway. I work in the arts, which is not a lucrative job and come from a family where nothing about finance was ever discussed, so I’ve pretty much been trying to figure out what you do with money on my own.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

I work as a stage manager, but I’ve had unusually good luck to have a steady job. I worked for a cruise line for about five years, which was nice since I was able to pay off all my student debts and save up some money. I then went to grad school, which took up all those savings and put me $23,000 in debt ($20,000 personal loan with 0% interest from my grandmother and $3,000 from Sally Mae – the latter is already paid off). I went back to my job on the cruise ship for another year and a half after graduating and have now switched to working for a circus.

My current base salary is $38,000 before taxes (which are a killer), my 401(k) contribution ($58.46 per paycheck), and health care ($60.78 per paycheck). I usually bring home $1,060+/- (since the taxes change with each state we are in) every other week.

Assets:

• Emergency Fund: $3,300
• IRA: $11,100
• 401(k): $2,000
• Non-retirement Investments: $3,900

Liabilities:

• Student Loan: $3,500
• Groceries: $200/month
• Gas & Car Maintenance: $400/month
• Internet: $50/month

Other than that, I try to contribute $100/month to my emergency fund, $458 to my IRA, and a $200 tithe.

What are the current financial issues you're facing (saving, paying off debt, etc.)?

I’m trying to finish paying off my student loan and building up my emergency fund, as well as beginning to invest and max out my IRA contributions and I feel stretched very thin all the time. I’ve been researching multiple streams on income to supplement mine (since stage management will never be very lucrative), but keep winding up unsure of exactly what to do next.

What are your plans for the future (retire early, build your career, etc.)?

Since my job houses me, I don’t have to pay any rent, but I am dissatisfied with the type of work I’m doing here as well as the pay cut to work a lot more compared to my previous job, so I would like to get my debt fully paid off, build up an emergency savings account and have the freedom to find work that is actually fulfilling instead of feeling like I sold my soul to a corporate devil.

I’d also like to create multiple streams of income (ideally ones that could eventually be passive), so I can continue to stage manage, since I really enjoy it, but be able to worry less about making ends meet since there are few jobs out there that do pay a living wage in this field.

I would also like to go on and get my PhD in the next few years and I feel like working hard now to generate passive income could make those years much easier as well.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

My general philosophy has been financial success is 80% attitude and 20% money. All my initial steps in the right direction took just breaking bad habits and forging new, better ones.

Comments

[MoneySheep]

quote: "...so I’ve pretty much been trying to figure out what you do with money on my own."

This is an unfortunate issue that continues often in most families. The money wisdom of the older generation doesn't get accumulated to the following generation. Even if the previous generations are not rich, talking about the mistakes they made will be helpful to the next generation.

I remember watching a documentary on PBS. In a lab experiment, an octopus would get out of a tank, walk/crawl on dry ground, and get to a distance tank to get food. I think "wow"! If only they could pass on what it learn in the sea to its next generation we could be competing with octopus. Fortunately, they die right after they lay their eggs.

[Scott]

Getting additional passive income streams is a great goal given your current income. Learning how to monetize your knowledge and expertise will be a fun adventure if you have time to hustle on the side. Good luck!

Is your PhD going to support that future? I don't know anything about your industry, but was a MS really necessary? Is a PhD going to help you or just pile more debt on top of your future?

Godspeed!

[Old Limey]

I manage each of my three children's investments for them and have done so for many years. The children are now 50, 53, and 55. They have approx. $600K, $3M, and $3M. The younger one works as a sales manager for a large international company and has been salesman of the year for the last two years. The middle child married a wealthy attorney and divorced 5 years ago, she doesn't work because she is receiving $240,000/year in alimony (all taxable). The oldest daughter works for the same attorney and does his billing by telecommuting from Maui.

The disadvantage of having me manage their money is that they haven't developed any investment skills of their own but I hope to soon start training the younger daughter since I am now 79, I hike with her every week and she is the best educated child and very good at Math.

You currently have so little money that about all you can do is to continue adding to your IRA and 401K by making the largest possible contributions. I have my son's 401K 100% invested in a Nasdaq Index fund and it has done very well recently and should continue to do so.
I would forget completely about the PhD. Your line of work would seem that it's not conducive to forming a serious longterm relationship since you are moving around all the time. Life as a transient seems very undesirable to me, maybe you need totry to settle down in one place and put down some roots.

[joe]

MoneySheep, I'm not sure money wisdom can be credited to any specific generation. Each generation brought with it both money-wise and money-foolish people.

MB, my only advice is to always make certain that you "run the numbers" whenever you are presented with options. Don't automatically assume a particular option is best, don't just use your gut, and don't assume what worked for someone else will work for you too.

Context is key.

One excellent example of a misleading recurring theme on this site...paying with cash rather than financing. If the return on current investments is greater the cost of financing then it doesn't make sense to divert cash to the purchase, nor does it make sense to pay the loan down more quickly. It might feel good...but financially it makes no sense. Of course, that's without taking into consideration other relevant context.

However, if your money is stuffed in a mattress or in a low/no interest bank account and you have no plans to otherwise invest it, perhaps then a higher downpayment or cash purchase might make sense. Might.

[M]

Its great to see such a unique profile here.

I think the biggest challenge here is the relatively low income, especially with so much education. If the field you're in does not pay a living wage, I think that you need to find work in an adjacent space that does pay what you could live on.

You might be surprised at how you'd be able to parlay your experiences and people management/organizational skills into a lucrative steady corporate or non-profit career. You've undoubtedly worked to produce a show every day, with the requisite "prima donnas".....You may find that some aspects of a different field--perhaps "producing" conferences or meetings-- would be very similar to your experience, and embody elements of what you love about your current job.

As for the way you handle your money today, I think you're doing well. You have the right idea of e-fund, retirement and savings. Just need to continue doing it.

Best of luck!

[Old Limey]

If you have an analytical mind and a strong background in mathematics, a lot of time to spare, and a strong interest, it is possible to educate yourself in the subject of analyzing the trends of stocks, funds, and market indexes.

It is then possible to greatly improve your choices of investment vehicles and also learn how to make good decisions on when they should be bought and when they should be sold. This whole process takes a lot of time to learn and is certainly not for everyone.

It wasn't until I retired, at age 58, that I had the time to delve into this. Step one is subscribing to a comprehensive database of mutual funds and market indexes, that is updated daily, and adjusted for all dividends and distributions. The database that I subscribed to back in 1992 (and still do today) also comes with charting software and a great many analytical methods that have been programmed into the system. After using it for a year or two I started programming new techniques that weren't in the system and giving them away to other subscribers. Eventually I produced my own analytical software and sold it to a large number of my fellow subscribers that also used it with great success, particularly during the dot.com bubble when a lot of fortunes were made.

The vast majority of investors that I read about on this blog however don't have the time, tools, or interest to do what I did and instead prefer to buy and hold index funds. This works well in up markets and naturally you lose a lot of money if you hold them through down markets.

Since the end of 2007 our portfolio had grown to a size where the daily fluctuations started to exceed my comfort level. That's when I decided to switch completely over to corporate and municipal bonds. You won't make your fortune in bonds but once you have a large portfolio you can protect it while receiving bi-annual interest payments. In my case the average annual interest rate is right around 5%.

[MoneySheep]

@joe, I concur that money wisdom does not necessarily can be credited to any specific generation. However, I am sure every generation in its early years would have done foolish things such as over-consume by charging on credit cards. Why not share and explain to the kids about the experience and the hardship (I do mean share and explain, not just telling them not to charge on credit card). But most parents don't even talk about the subject of money, let alone talking about their mistakes. ...how about talking about not getting a divorce, it is financially expensive.

@Old Limey, With your astute money management experience, I would think that your children will learn something every time you talk to them about your approach about managing their money. It is not that they have to do it themselves right now. In the event that they are to delegate the task to other people, they know if their money is being handled properly. I am no tax accountant, but I know enough to talk to my CPA that make sense.

[Mark]

I like all the comments here and I also agree this is a unique profile.

I also wonder if getting a PhD is really worth it. It really doesn't sound like the master's degree helped you at all.

Also, I have to say, I don't get where 38K isn't a living wage when you don't have to pay rent. It may not be as much as you want, and granted, it's a tough gig....but a lot of people would give their eye-teeth to make that much and not have to pay rent. I make about 47K and my rent on my studio apartment is $985 (below average rent for my area), yet I still sock away over 1K per month in retirement accounts (although I don't have to pay off debts, I have to pay over 14% of my salary toward a pension, much higher than the SS tax).

So I guess what I'm trying to say is if you're waiting for a time when money doesn't feel tight, you'll be waiting forever....it always feels that way unless you have a very high income or are very frugal by nature. Most of us are neither. This is not to say you shouldn't try to find a better job if you don't like the one you have. I wonder if that is the core problem. If you really liked your work, the 38K salary would be less of an issue.

Otherwise, It seems like you're doing a pretty good job and have your financial priorities straight.

[jim]

I'm agreeing with Mark here that I do not see how money is 'tight' here. Theres >$2000 monthly take home and less than $700 expenses and over $600 in savings itemized. Thats at least 18% savings rate. Wheres the other $700 or so going? And no... taxes are really not a 'killer' in your situation.

[Mrs. Pop @ Planting Our Pennies]

Filing taxes must be a nightmare if you're paying taxes for each of the various states and municipalities you work in (however briefly).

Other posters have asked why your salary feels so tight when you aren't paying rent and I wonder if that might be in large part because you often pay for convenience when on the road. (I know I pay for convenience more when traveling... single serve food, etc.) Have you done some hard core tracking of where your money is going to make sure you're aware of all the leaks?

Also - have you thought about trying to find more stationary stage work? (It might pay off in the long run even if you do need to pay rent.) An old friend of mine is employed in the same field and has done pretty well by moving to a location where there are quite a few stage shows going on all the time - Las Vegas. (She's been working the production of the same Vegas show for many years now.) Vegas also has the benefit of being significantly lower COL than a place like New York or London which also have a lot of staged productions.