4. Baby steps

I know I’ve already made a post about my main goal, which is getting out of my house BEFORE I turn 28, but that’s a pretty big and more long-term goal (deadline close to two years away).  In order to keep myself motivated and put myself in a spot where I can comfortably afford that, I need to set and accomplish some short-term goals that will help lower my total expenses, allowing me to put more money towards my rent when I move out without having to increase my income (assume I mean utilities, as well, when I say “rent”).

The only real debts I have right now are my motorcycle loan (~$4,500) and my student loan (~$13,500).  All of my other expenses are necessary, every day/every week/every month type living expenses that I can’t reasonably get rid of (food, gas, rent, insurance, etc).  If I cared about nothing else in my life aside from getting out of my house, the obvious first step, and the one that all of the financial gurus would tell me to do, would be to sell my motorcycle.  Trust me, I fully understand the thought process of “any interst paid is money utterly wasted”.  But while selling the motorcycle would make the most sense financially, the bottom line is that having a few “toys” that make me happy is very important to me.  Being happy in general is very important to me.  As the Dalai Lama says, “The purpose of our lives is to be happy.”  Being that I’m not in a terrible spot financially (ie no major credit card or high interest debt) and that the loan is only $4,500 and a 3.99% interest rate, this is one exception I’m willing to make to keep myself happy.  The bike stays.

Number one…

And this leads me to my first goal:  paying off my motorcycle loan.  Since the motorcycle loan is not only the highest interest rate (which is still pretty low at 3.99%) but also the smaller of the two loans, it makes the most sense for me to pay it off first.  This will eliminate my highest interest loan and then allow me to put the money I was paying toward the bike towards paying off my other loan as soon as possible.  My plan is to try to pay off the motorcycle loan by the end of this coming Winter.  It is currently the middle of August, so this gives me roughly 7 months to pay the loan off.

$4,500 divided by 7 months equals $643 per month.

That’s a mighty large chunk of change every month, but if I can keep my non-expense spending to a minimum, there’s no reason I shouldn’t at least come close to hitting this goal.  And since the minimum payment of $88 per month for my bike loan is already figured into my expenses, you can subtract $88 from $643 and see that it’s actually only an extra $555 per month I have to put towards the loan to accomplish this goal (roughly, add a few months of interest on to that).

Number two…

The next goal I will be setting once I accomplish my first goal of paying off my motorcycle loan will be to pay off my student loan.  This is a pretty big step and because of the size of the loan will definitely take significantly longer.  Unfortunately, without knowing just how much money I might be making at the time I start working towards this goal and without knowing exactly how long it will take to accomplish my first goal, it’s hard to set a deadline for this one.  I will come back to this and reevaluate in a few months when I see how well I’m moving along with the motorcycle loan.

The light at the end of the tunnel…

Once I payoff both the motorcycle loan and my student loan, which could take all of those nearly two years before I turn 28, I will then be debt free.  This is basically what I need to accomplish to be able to comfortably afford my own place.  The reasoning behind this is that if you take my current expenses of $1,267 per month and then subtract the monthly payments of $128 and $88 for my two loans, this drops my total monthly expenses to $1,051.  After doing a bunch of calculations that I won’t repeat here at the moment, I’ve discovered that having my own place will increase my monthly expenses by an estimated $600 or so (higher rent, utilities, cable/phone/internet).  This will bring my expenses up to roughly $1,651 per month, while my minimum monthly income is $1,800 and my max income is as much as $2,360 (assuming my income neither increases nor decreases from where it currently is – and I would actually hope it increases, although I don’t like to count on that).  Even during a terrible $1,800 month, I would be able to scrape by and on an average $2,000+ month, I would be doing just fine.  Average to above average months would even allow me to start working towards my next goals after I move out, which will be setting aside a good-sized emergency fund in the event of a loss of income.

Next up, I’ll be getting a little specific about where I stand with my current funds and figuring out how much extra I can actually afford to put towards my loans right now to make this whole debt-free thing happen.

-Jeffrey D-

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3. Financial Details (Expenses, income, etc)

It’s a rainy Monday and since I can’t be out on the bike, I figure this is as good a day as any to make my first post that details my entire financial situation.  Below, you’ll find my list of expenses and income with amounts and other relevant details.

Expenses

  •  Health Insurance – $102 monthly
  • Student Loan – $128 monthly
  • Rent – $300 monthly
  • Motorcycle Loan – $88 monthly
  • Cell Phone – $48 monthly
  • Food – $40 weekly
  • Netflix – $10 monthly
  • Gas – $50 weekly
  • Car Insurance – $473 semi-annually
  • Car and Motorcycle Taxes – $375 annually
  • Car and Motorcycle Upkeep – $500 annually
  • Motorcycle Insurance – $562 annually

MONTHLY TOTAL – $1,267

Note:  To get the above totals, I add up the total cost of each expense for the year and then divide by 12 months (weekly expenses are multiplied times 52 weeks), always rounding up to the next dollar, then totaling the whole thing.

Income

  • 8am-1pm Paycheck – $330 weekly
  • Minimum Lessons – $120 weekly
  • Maximum Lessons – $260 weekly

TOTAL MONTHLY MINIMUM – $1,800

TOTAL MONTHLY MAXIMUM – $2,360

Note – Minimums are based on multiple lesson cancellations.  To calculate these, I just take the weekly totals for each (min/max) and multiply times four weeks.  I figure this way, on the months where I have five weeks of pay, that’s just extra income I can put towards things paying off loans, etc.

So what does all of this mean?

A quick overview of this info shows you that even with just my weekly paycheck from my 8am-1pm job, I can cover all of my expenses.  But if I were to move out into my own place right now where my rent and other expenses would clearly go up big time (just rent alone would probably double, nevermind utilities), I wouldn’t be able to cover this with just my 8-1 paycheck and on bad lesson months, might not even be able to cover it with my lesson income, either.

For my current situation, though, this is promising because it’s what allows me to have my other income be changing depending on lesson cancellations, student changes and other variables.  And since even my minimum lesson income is completely on top of my expenses, which are fully covered by my 8-1 income, I always have extra money for spending and to now put towards paying off my debt (student loan and motorcycle payment), which is the first big step towards putting myself in a financial spot to be able to move into my own place.  The bottom line is that if I decrease extra expenses (ie debt) then that increases the amount I can put towards rent and new expenses at my own place.

Next time, I’ll discuss my plans for how I want to distribute my money over expenses, spending, and paying off debt.

-Jeffrey D-

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2. My motivation and the big goal

I thought it might be beneficial (and fun for any readers) for me to make a post stating my first big goal and talking a little more about my motivation to achieve this goal.  To begin, I don’t know if anyone reading this has been in the following situation, but if you have, you understand where I’m coming from.

The embarrassing living situation…

After meeting my girlfriend a couple months ago, we went out on a few of the typical first dates and then spent some time at her place since I was picking her up and dropping her off anyways.  After about a month, my birthday arrived and since my mom is a great cook and always offers to make my brother’s and I whatever we want  for our birthday, I decided to invite my girlfriend up to my house for this dinner and to meet my parents (I had already met hers and spent some time with them on an unexpected trip to visit a friend of mine near where she grew up, so it wasn’t anything weird to have her meeting my parents so soon, plus I’m sure she wanted to see where I live).

I’m gonna side track for a second to explain some of the details on my living situation.  Since my parents are retired and spend about half of the year down south in the warm weather, they needed someone living at the house to take care of it.  My two younger brothers still live at home and the rent money we all pay helps my dad cover the expenses on the house while he’s gone (hey, New England ain’t cheap to live in).  So, combine that with the fact that cheap rent helped keep my own expenses down and I really had very little reason to move out.

When I graduated from school back in 2006, I had been with my girlfriend at the time for a while and we were both living at home, so it was no big deal; it was sort of a mutual situation.  After we broke up, I dated a few other girls but it always seemed to work out that when they came over, my parents were down south, so it was like I was just sharing a house with two of my brothers.  But now, I’ve finally run into the situation where my parents are home for a few months and the “privacy” I’ve enjoyed in the past is gone.  Bringing my girlfriend over to the house to have dinner and meet my parents is one thing, but going into my room with her to “watch a movie” while my parents are right on the other side of the wall is COMPLETLEY different.  It took all of one visit for me to realize that this situation just isn’t going to work out for me long-term.

Of course, my girlfriend says it’s no big deal because she has her own place, but that just seems to make it even more embarrassing that I have someone a year and a half younger than me who is still in school trying to comfort me about MY living situation because we can just take advantage of the privacy of HER living situation.  In my mind, this is just unacceptable and it’s time to make a change.

The biggest goal in my mind right now…

I think I actually stated this goal as succinctly and straight-forward as possible to my parents a few weeks ago:  “I don’t want to be 30 years old and still living at home with my parents.”  There’s nothing too lofty about this goal and even having to state this is, in itself, a little embarrassing for me.  But I can’t go back and change how I’ve handled my finances and living situation in the past; the best thing I can do is fully evaluate where I stand right now and figure out what I need to do to get there.

And while I said “30 years old” to my parents, I really only said that to help give an impression of that guy you see in the movies who lives in his parents’ basement and does nothing but get stoned and party with no real goals in life and nothing to look forward to (by the way, no, my room isn’t in the basement and no, I don’t get high).  In reality, I just turned 26 and if I’m still living at home at 28….well, that’s just not going to happen.  If I could, I’d obviously be moving out and into my own place right now instead of typing this blog, but the extra expenses of higher rent, utilities, and anything else needed to maintain your own apartment would just add up to more than I can actually afford on top of my current expenses (which you will see in the next post when I do a full breakdown of my income and expenses).

So put it plainly, Jeffrey D…

I guess what it comes down to is that I want to move out of my house and into my own apartment before I turn 28.  I’ve been 26 for a month, so this gives me less than two years to set and achieve the step-by-step goals necessary to put myself in a situation where I can move out and comfortably afford it.  I believe it is more than possible without really changing my current lifestyle, but rather, just making a few small tweaks to my spending and managing the rest of my money better than I do now.

If you continue reading, you’ll see in my next post why I will most likely need a good portion of these next two years to get to that point.  I’ll also go into some detail on setting those step-by-step goals and lay them out in black and white with rough deadlines.

-Jeffrey D-

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1. Who am I and why am I doing this? A little background…

Who am I?

My name is Jeffrey D and as of just over one month ago, I am 26 years old.  I grew up and live in the northeast USA and love it here.  I’m into various hobbies ranging from music and guitars to cars, motorcycles, computers, and a few sports here and there.  I would go so far as to say I’m obsessed with music and guitars, and the same could be (and has been) said about cars and motorcycles.  I like to go on vacations and travel to pretty much anywhere, Vegas being a particular favorite (hey, a little video poker here and there never hurt anyone, right?).  I have a girlfriend that I met about two months ago and things are going very well, so that has me in good spirits.  It could be said that I’m just your “average guy” living and enjoying life the best way I know how.

What’s my financial situation?

My current situation is that of many young adults in their 20’s:  I have a college degree but still live at home where I pay cheap rent because I can’t exactly afford my own place at the moment.  I work two part-time jobs that provide enough income for me to “get by”, but I’ve basically been living paycheck by paycheck to cover expenses and spending.  My debt consists of a student loan (about $13,800) and a motorcycle loan (about $4,500); I’ve always made on-time but minimum payments on these.  Besides the motorcycle, I own a daily driver (reliable car with good gas mileage) that I bought new last July but was able to pay it off completely a few months ago when I sold my previous car for more than I paid for it (although I had put quite a bit of money into it, so it was technically a loss).  Lastly, I have no credit card balances at the moment, which probably puts me a step ahead of many people in my age bracket.

A little more on the financial situation…

I have expenses totaling around $1,280 per month (which I’ll break down in further detail in one of my next posts) and my take-home income ranges anywhere from $1,800-$2,360 a month at the moment, usually a little over $2,000 on average.  The reason for the variation in income is because of the type of job I have.  In the mornings, I work 8-1 as an assistant for a fairly small business, which provides me with a steady paycheck of $330 a week net.  In the afternoons on certain weekdays, I teach guitar lessons to about 7 students currently, and this number fluctuates depending on how many students are signed up at any given time and if I get any cancellations each week, which I usually do.

*Note – My degree is in music so one of my goals is to eventually have my own music school and guitar store, although my career goals tend to change on a day to day basis depending on how I feel.  On top of these two jobs, I have recently been asked to start teaching private lessons again at the local music school I used to teach at, so that will provide further income in the near future but hasn’t started yet.

Why am I starting this blog?

I’ve always been very interested in anything financial but have never been too great with setting goals and sticking to them.  I think part of the problem is that I either set goals that are too large and long-term, then lose the motivation to keep up with the plan because I’m not achieving any of them, or I just flat out come up with a plan that won’t work for my situation.  On top of that, I’m not gonna lie:  I enjoy spending money just like anyone else.  I tend to go out to eat a few times a week with my girlfriend, brothers, or other friends, and without any other spending, that could easily be $100 or more a week right there.  It’s just easy to spend money.  Don’t get me wrong, though, I’m not racking up the credit cards or anything.  I keep it “under control” and try my best to limit myself, and most weeks I do a pretty good job of it.

That said, the real motivation for me starting this blog was probably meeting my girlfriend a couple months ago.  She is a year and a half younger than me (so currently 24), works almost full-time, has her own place with no roommates (a small apartment), is debt free even though she still has another year left of grad school, has an “emergency fund” set aside with X number of months worth of income in it, and is now starting to save for a down payment on a condo.  She’s obviously very financially minded and reads all of the financial magazines, watches the “Eye on Money”-type segments on TV, and just does a great job at setting goals, achieving them, and then moving on to the next one.

Seeing the situation she’s in has sort of embarrassed me a bit about my own.  Let’s compare:

ME – 26 years old, graduated 4 years ago, live at home still, owe a significant amount on student loans, owe a smaller amount on my bike, no real savings set aside, living paycheck by paycheck pretty much.

HER – 24 years old, still in grad school, has her own apartment, debt-free, large emergency fund set aside in savings, saving up for a down payment on a condo.

What the hell am I doing with my money?!  Well, that’s what I’m here to find out.  The purpose of this blog is for me to have a somewhat consistent record of where I stand financially.  I want to be able to use the info I post here to analyze my situation, set goals, achieve those goals, and then set the next goals.  I want to be able to go back to this first post six months, a year, two years from now and see the progress I’ve made.  I want to be able to track how my life is changing and improving as I achieve those goals.

I’ve found that I often send emails to my brother, who is also into financial planning, outlining goals I come up with on a fairly regular basis in terms of how I want to handle my finances.  Sometimes it’s just a simple idea that I sum up in a few sentences and sometimes it’s this massive book of an email outlining in detail my entire life’s financial plan…and that plan changes regularly.  To be honest, I’m sure he doesn’t even read half of them,but I remember telling him that it’s fine if he doesn’t, I just needed a way to put the ideas down on paper (or computer) since I think better when I write.  Realizing that I was doing this also made me realize that a blog might help organize and keep track of these thoughts easier than my current method of bombarding my brother with random emails.

In conclusion…

I guess I don’t really care if anyone ever sees this except me because I’m not doing this for anyone’s benefit except my own.  But if someone happens to catch on to my blog and maybe use the info and my experiences to help improve their own financial situation, then more power to ya.  I’m going to try to keep this blog as detailed as possible because I think honesty with myself about how I’m handling my money is going to be important.  I’ll also do my best to make regular updates, hopefully daily but no less than a couple a week (and maybe even two or three a day depending on how I’m feeling).

Next up will be a little more on the story of how I got motivated to start this blog and my main goal, then a detailed breakdown of my expenses, income, debt, and situation as a whole, along with some smaller, first-step goals.

– Jeffrey D –

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