Baby steps to being a grownup about money
December 23, 2014 5:51 PM   Subscribe

I am in a very privileged position, now that I've finished school and have a real job and no pressing financial problems. But I'm realizing I'm not managing my financial situation in any way, and it's about time to start taking care of myself as an adult. My mental block is that I find figuring out the whole "financial situation" to be such a monumental task that I can't seem to get started. Perhaps you all can help me break it down into some manageable chunks?

More on the specifics of my financial situation, as well as a few goals I have, below.

The basic facts:
--In my late 20's
--My salary is almost $50,000 a year; raises are miniscule per year and I want to stay there
--about $60,000 in savings (from divorce settlement)
--Pretty good health insurance; some chronic medical conditions that are mostly paid for by insurance
--I'm sure I'm signed up for some kind of retirement account through work, but I don't remember the details...and I doubt I selected anything other than the default for what to be putting in it
--No debt
--No assets
--No credit card (but good credit--I pay bills on time)
--No car and very low transportation expenses
--Rent $1100/month
--I spend what I fear is a ridiculous amount on food because I don't have it together to plan grocery shopping and cooking in an organized manner (even though I actually like cooking) so I end up doing takeout or delivery all the time.
--Single, no kids, expecting to stay that way indefinitely
--Risk averse and clueless about investing

Right now, I'm treading water. My paycheck goes direct deposit to my checking account...I pay my rent and my bills and use my debit card for everything...there always seems to be a couple thousand dollars in checking and other than that I basically don't look at where it's going. I'm not saving and I really should be able to in my situation.

My goals include:
--Start cutting down on those everyday expenses that I KNOW are adding up
--Start actually saving money
--Not end up in the horrible situation my parents are in. My dad had a very good income, totally overspent for many years (some because of luxury tastes and big purchases, some just being very generous in financing the educations of us kids), and now is disabled and in a big financial hole, looking at never being able to retire and constantly worrying about it.
--Phrased more positively, wanting to be able to take care of myself later should I become unable to work. (I can't imagine WANTING to retire...but I know there's not always a choice to keep working into old age.)
--I have no particular interest in home ownership or even car ownership. The fewer things to worry about the better.

I know I just wrote out a TON of information, sorry :-). What my question boils down to is this: What are some concrete, manageable tasks I can take on, to get to the point of managing my money responsibly? (And personal stories are always appreciated.)
posted by picardythird to Work & Money (31 answers total) 49 users marked this as a favorite
 
YNAB. It's on sale through Steam. Buy it, watch the videos, and be fiscally happy!
posted by Sternmeyer at 6:07 PM on December 23, 2014 [6 favorites]


I've also heard good things about YNAB - it seems like it helps put you in the mindset of knowing where your money is going. I'd also consider signing up for Mint, which links with your accounts and does some automatic categorization so you can automatically see how much is going to eating out/utilities/etc. Mint is less effort, but probably less reward than YNAB.
posted by fermezporte at 6:15 PM on December 23, 2014


Max out your IRA (or whatever your country does) contributions. Make sure you are at least putting in enough to get the full match if your employer does one. Lots of people foolishly leave thousands of dollars of these benefits each on the table. At the last corp. I worked at the uptake on the company match was 27% so almost 3 quarters of the work force was voluntarily denying themselves a 3% tax free raise! CHECK THIS NOW.

Put your 60K to work for you somehow - Retirement fund maxing each year until it is all in or invest in a vanguard index fund. Keep 5 or 6K as an emergency fund that you don't touch.

Start organizing yourself to cook at home. For a single person the best bet is to do slow cooker meals one day a week and batch freeze so you have a stock pile of quick meals you can just add fresh veg and salad too. Curry is great for this. Add frozen chapati or paratha and you're a 3 star chef. Use them for packed work lunches as well. Use frozen ready meals like Trader Joe's for backup on low energy days rather that takeout.

If you can't cook at least make it a night out with friends so you get social and well-being benefits from it rather than a netflix binge with Domino. Also don't feel bad about the occasional netflix binge with Domino. Feel bad about the regular netflix binges with Domino.

Stop buying coffee start making coffee.

Get a rewards credit card with no limit and use it in place of your debit card. Credit card have loss liability protections that debit cards do not. They also often have automatic warranty extension. Rewards can be pretty low - a fraction of a percent - but a fraction of a percent on your total spending each year adds up. You need to do more than pay bills to build good credit. You have to demonstrate that you can actually handle having credit rather than just being able to avoid credit. My wife and I avoid credit card overspending by paying off the credit card balance every week rather than every month (yeah we lose the average 15 day interest free window on each spend).

We tried YNAB - it is a nice program very usable but it didn't really work for us other than as a checkbook app (probably because our budget isn't that tight and nor is our motivation to micromanage expenses ).

The real secret to money management is to avoid the big mistakes like not saving for retirement, carrying high interest debt, investing in funds with high management rates and not maximizing the value of what you do spend on.
posted by srboisvert at 6:25 PM on December 23, 2014 [4 favorites]


These are just my basic tips if you're not doing them already. Sorry if they're too basic.

1) Figure out where the money is going. Start an Excel or Google spreadsheet and track where everything went for the past few months. Add it up in categories. Then figure out how much is frivolous spending and what you can save.

2) Automatically save. Many banks allow you to do recurring transfers to a savings account or transfer a portion of your paycheck to different accounts. Do this. Then you don't even have to think about saving. Even if it's $20 a week, still do it. The same is to be said about retirement funds - start doing them if you work offers it. It's basically free, pre tax money if you're in the US.

3) Try a cash budget for shopping/food. If you know you can eat with $X a week, only get that out in cash and don't go past it. It's really easy to swipe a card and get an extra cookie or coffee or whatever, but if you have to count out your cash from your total budget, it can be harder. Same goes for the grocery store (or you can use a calculator on your phone or something and don't go over your budget.)

4) Look for deals and money saving options. Packing a lunch and making coffee at hoe (as mentioned above) can really save money. There are even many (healthy) frozen options that are easy to pack but can be cheaper per meal than eating out.

5) If you're shopping for clothes and other non-budgeted items, try looking for coupons and sales. Don't forget about clearance racks and online shopping to compare prices.

6) Continue to track your spending. I track my monthly bills in an excel so I know how much will come out of my account, especially because I often pay different amounts depending on how much above the minimums I want to pay.

Someone else can be an expert about investing, but those are things that I've had to incorporate or plan to incorporate in our budgets.
posted by Crystalinne at 6:49 PM on December 23, 2014 [1 favorite]


Contribute whatever your company matches into your 401(k). So if they match up to 6%, you contribute 6%. That's a 100% return. If you are risk adverse but need your money to grow (and you do if you expect to retire on it,) check out Target Date funds. Fidelity calls them Freedom funds, but everyone has them, and most 401(K) offer them. You pick the date closest to your projected retirement date, for example Fidelity Freedom Fund 2040. The fund manager will automatically move the investments from high growth to more conservative investments. It's better than low interest bonds, where the interest is lower than the rate of inflation.

Decide to save a certain amount every paycheck in a savings account. Every time you get up to a benchmark number, transfer all but $1,000 into an interest bearing money market account, or a savings account that pays a higher percentage of interest for having a large amount on deposit. Put your $60,000 in that account. It's safe and earning a respectable interest rate.

Make a budget. Decide before you spend, how much you want to spend on food, clothing, haircuts, etc. Then stick to that. A lot of folks use the envelope system, and it's pretty easy to do.

Take an hour on the weekend and go through the sale flyers of your local grocery stores to see what's on special, and decide to build your meals around them. Make a recipe for 4 servings, eat one, freeze the others. If you do a couple every week, after a while you'll have a freezer full of home cooked, healthy meals. So low fuss, easy and cheap. You'll feel better too.

Think about your future, how much do you need to have in investments to retire? At what age will you retire?

Go to a fee-based financial planner, this person will lay it all out for you. This person will NOT recommend specific stocks, or try to sell you life insurance (for fuck's sake, don't buy life insurance!)

I'm with you, no need to own a car, no need to own a home, if that's not what you want. You're not missing anything with that.
posted by Ruthless Bunny at 6:54 PM on December 23, 2014 [1 favorite]


Get a cashback visa/mc credit card and stop using debit for everything. Among other things, that's dangerous for identity theft. Many credit cards now come with a spending tracker widget when you log in, so you can see where your credit card spending went.
posted by zennie at 7:00 PM on December 23, 2014


Before you make big changes it is good to know what is really going on first. I find Mint to be really helpful for two things: how much money do I really have available right now, including the checks that haven't been cashed; and for looking back over six months or a year and seeing general patterns. It feels like I spend a lot on gas and on food, because I'm always buying those things, but actually I spend a lot more on things like small DIY projects that require three trips to Home Depot, for example -- it takes being able to look at categories over time to see what is really going on and then to consider making changes.

(I'm not really a huge fan of Mint; the interface is clunky and since it is free they are making their money selling your data, but a year ago when I was looking the Mac-friendly options were pretty paltry. The good thing is that Mint is free and easy to use, so the barrier to giving it a try is minimal, and I have it set up on all my devices so I always have access.)
posted by Dip Flash at 7:02 PM on December 23, 2014


For long-term investments, put your money in an index fund with very low expenses. The Fidelity Spartan 500 is one of the best -- only 0.1% per year in management fees. A lot of index funds charge 2% per year in management fees. If your company's 401k plan (which you should max out to get the max employer match) charges more than ~0.3% per year total in fees, open another 401k at a company like Fidelity and "roll over" money from your employer's 401k to this lower-fee 401k so you get the matching money from the emplyer as well as lower fees. If you've maxed out the match and can afford to save more, get a Roth IRA. Invest as much as you can afford. 15% is reasonable. 50% or more is possible if you're single, with no car, and willing to live with roommates, and will let you accumulate savings very quickly.

Get a professional degree. ~$50k is respectable but with the right Master's degree you could make over $100k per year. Most employers will pay for college classes to the tune of ~$5000 per employee per year because they get a tax break for this -- use this money to get a Master's degree part-time. If you have the interest, get A's and talk to professors in the Master's program to prepare for a PhD program or another professional degree afterward.

Learn to sell. If you get experience negotiating at work, it will help you negotiate higher pay for yourself, and also help your company see you as someone who brings in money/business instead of someone who costs money.
posted by sninctown at 7:07 PM on December 23, 2014 [1 favorite]


Response by poster: Follow up, related question: I just did one of those free credit report things and found something for a credit card I think never had. (I had a joint one with my dad when I was in college, never actually used, but the location listed on this is not even in the same state?) Apparently, it was closed a couple years ago...and always paid on time...does that mean someone opened a card in my name, used it responsibly, and then closed it? What, if anything, should I do about this?

(And re: snictown's advice to get a professional degree: I'm an attorney, and many/most graduates from my school make six figure salaries, but I've chosen a relatively low-paying field. So, I am more interested in hearing about how to save better, not make more money.)
posted by picardythird at 7:23 PM on December 23, 2014


Go read all Mr Money Mustache's back catalog and see whether it resonates with you. There are a zillion useful tips and strategies and inspiring things to be found there. You are in a wonderful position right now and if his vision appeals to you and you follow his advice you could be retired in your early 40s if not earlier. It is great that you have no debt and don't maintain a car.

There is also a supportive community of frugal folks in the forum attached to his blog. One of the real keys to living well and happily while managing money soundly is to associate with like-minded people.

Aside from that, it sounds like committing to cook more would be a great first step that will liberate $$$ you can save/invest. There are some basic strategies you can follow:
- stock up with staples that you can add seasonal things to. Eg, always have rice, pasta, beans on hand, plus cooking oil, dried herbs and spices, and assume that suitable ingredients for sauce and side dishes, cheap because they are in season or on special, will present themselves when you do a weekly grocery run.
- commit to cooking at least one thing every weekend that you can eat portions of later in the week or freeze
- start researching recipes that have minimal prep and cooking time
posted by i_am_joe's_spleen at 7:52 PM on December 23, 2014 [1 favorite]


Some people embrace spreadsheets or other methods to track every cent they spend. I'm incapable of that kind of tracking. Tried and failed many times.

So one way to approach your finances is to consider the 60% solution, budgeting for non-budgeters. I can't find the original article but this refers to it and outlines the approach, which I've found helpful.

Nthing the advice to maximise your employer's matching and then adding more to retirement funds (most painlessly by simply having it deducted every time you get a raise or bonus, say).

FutureAdvisor.com has some good, seemingly neutral advice about investing for retirement. For example, "Fees can eat into your savings over time - look for low cost options where available. Ideally you want to pay under 0.60% in fees, and often fees can go as low as 0.05%. However, your 401(k) may have limited low fee options; in this case, invest up to the value of the employer contribution match and use an IRA to make up the balance of your saving, as you’ll have better investment options here."

Finally, the beginning of my favourite article about investing, "The Best Investment Advice You'll Never Get", by Mark Dowie.

As Google’s historic August 2004 IPO approached, the company’s senior vice president, Jonathan Rosenberg, realized he was about to spawn hundreds of impetuous young multimillionaires. They would, he feared, become the prey of Wall Street brokers, financial advisers, and wealth managers, all offering their own get-even-richer investment schemes. Scores of them from firms like J.P. Morgan Chase, UBS, Morgan Stanley, and Presidio Financial Partners were already circling company headquarters in Mountain View with hopes of presenting their wares to some soon-to-be-very-wealthy new clients.

Rosenberg didn’t turn the suitors away; he simply placed them in a holding pattern. Then, to protect Google’s staff, he proposed a series of in-house investment teach-ins, to be held before the investment counselors were given a green light to land. Company founders Sergey Brin and Larry Page and CEO Eric Schmidt were excited by the idea and gave it the go-ahead.

One by one, some of the most revered names in investment theory were brought in to school a class of brilliant engineers, programmers, and cybergeeks on the fine art of personal investing, something few of them had thought much about. First to arrive was Stanford University’s William (Bill) Sharpe, 1990 Nobel Laureate economist and professor emeritus of finance at the Graduate School of Business. Sharpe drew a large and enthusiastic audience, which he could have wowed with a PowerPoint presentation on his “gradient method for asset allocation optimization” or his “returns-based style analysis for evaluating the performance of investment funds.” But he spared the young geniuses all that complexity and offered a simple formula instead. “Don’t try to beat the market,” he said. Put your savings into some indexed mutual funds, which will make you just as much money (if not more) at much less cost by following the market’s natural ebb and flow, and get on with building Google.

posted by Bella Donna at 7:54 PM on December 23, 2014 [1 favorite]


Lots of great advice here, but I want to stick with your framing and keep it simple.

When January 2015 rolls around get yourself a cheap little pocket notebook and use it to write down everything you spend for the month. Every penny. Rent? In there. Water bill, of course. Pack of gum while waiting for the bus? Yep. Also include your income.

When February gets here, look at your notebook and start sorting all those spends into categories (budget categories, eventually?). (If you want to get complicated -- and avoid the big tally up day in February -- you could create daily sub-totals as you go along through January.)

Whatever you decide, once you sum it all up, you know what you spend and where, and what you have coming in. Knowing that opens up all the other great possibilities noted above -- where to cut, what accounts to create, what kind of investments you can start now, and what other ones you may need to save for.
posted by notyou at 8:06 PM on December 23, 2014 [4 favorites]


Buy and read Ramit Sethi's I Will Teach You To Be Rich. The Kindle version is $2.99 right now.

You may end up not necessarily agreeing with his opinions, and a lot of the advice is a bit dated in today's zero percent interest environment, but it will definitely give you an overview of a lot of different aspects of how to manage your money.
posted by zrail at 8:11 PM on December 23, 2014 [1 favorite]


I recommend using mint.com to see where your expenses are going and then budget from there. I think the rule is to have 6 months worth of savings just in case you lose your job (better safe than sorry). From there start putting as much as possible into retirement/IRAs etc. etc. I know people don't like Suze Orman but she has some good books on saving money that you can take out of the library with lots of things to think about and worksheets to fill out that would get you on the right track.

Also, you don't have to be risk-loving to do some safe investing. Mutual funds, IRAs, 401Ks (or your country's version of this) or even CDs and money market accounts are a way to get some savings going.
posted by Toddles at 8:16 PM on December 23, 2014


Max out your retirement contributions! It not only helps you save for retirement, but it lowers your taxable income now. And the money grows tax free until you take it out. So three good things for the price of one.

When I first started working I would put $250 (and it went up as I made more or could afford to put away more) a month into savings with the understanding that I could access if I really needed it. But since it was out of sight and slightly more difficult to get at, I found the money grew quickly into a meaningful amount. I guess my point is, if all your money is in the same checking pot and it's all easy to access you're more apt to spend it. So be a squirrel and make your nut hiding automatic!

A credit card is actually great for your credit. Just make sure it's one you pay off every month to avoid interest charges, has no annual fee, and gives you something back like cash rewards. It can be helpful for watching your spending too. Mine has an alert for a limit I arbitrarily set (a good bit lower than the card limit) and will text me when I reach it. It's a nice reminder than I need to slow down my spending.
posted by cecic at 8:24 PM on December 23, 2014


Get an automatic transfer of a small amount to a savings account at a low tech institution, a small bank or credit union. Don't get a card, set it up so you'll at least need to take a walk to do a withdrawal. Then forget about it.
posted by sammyo at 8:29 PM on December 23, 2014


"I'm with you, no need to own a car, no need to own a home, if that's not what you want. "

Well, maybe. Some places, rent can be almost as much as a mortgage payment. For example, I was paying around $800 a month for a 800 sqft 1 bedroom apartment in 2006, and bought a 3100 sqft house (with big down payment) and my mortgage is around $1k/month -- comparable to rent. Now I am about to sell that house, and get a big chunk of that money back. Rent is, by contrast, money that is 100% down the drain. (Not to say real estate doesn't have risks, but while rent is no-risk, well, that's because you know ahead of time that it is a 100% loss.)

Cars on the other hand are, with *very* few exceptions, bad investments, you won't make money on cars (though there are people who "flip" cars -- but you have to be a pretty good DIY-er to pull that off.)
posted by smcameron at 8:34 PM on December 23, 2014 [1 favorite]


This is purely anecdotal. When I was born someone spent the equivalent of perhaps two months rent for a house [$250] on two index funds in my name. I only found out years later when a "found asset" company got in a bit of trouble.

I lived, paid rent, ate, went to school for well more than a year some twenty years later as a result of that investment.

I am not an accountant. Having owned a couple of businesses my advice is that an accountant is always worth the investment. They see where financial planning succeeds and they see where it fails. Maybe think of them as financial doctors who are interested in your survival? If you fail then they have nobody to bill.
posted by vapidave at 9:01 PM on December 23, 2014


Get an automatic transfer of a small amount to a savings account at a low tech institution, a small bank or credit union. Don't get a card, set it up so you'll at least need to take a walk to do a withdrawal. Then forget about it.

Automatic savings is a great idea (and putting savings in a place where it takes a little effort to access is another great idea!) - but most savings accounts earn very, very little in interest, and you have a lot of money saved at the moment given your divorce settlement. I recommend you first do your basic personal finance research and learn about low risk places to stash savings (like CDs, bond funds, etc) and then allocate your money accordingly. Hopefully, your $60K is not sitting in a savings account earning less than the rate of inflation - if it is, you're essentially losing value rather than gaining it over time.

I'd suggest the following timeline:
1) Do basic research on personal finance. This is just one idea, but one of the personal finance blogs I have enjoyed, Get Rich Slowly, has a course now you can take that might be a good intro. I haven't taken the course but I have liked the blog a lot.
2) Put an emergency fund worth of money away in a place you can access it more quickly if needed. I have used a rewards checking account for this in the past, if you fulfill a few requirements on it then it yields a decent interest rate, and it usually has a limit on the amount you can earn the good interest rate on anyway so it isn't a great place to stash a large amount.
3) Distribute the remainder of your savings into retirement savings as follows - likely the first thing you'd want to do is max out any employer-matched 401k contribution (as noted above), then max out a Roth IRA. After that, you could consider things like maxing out the 401k beyond the match or something else.
4) Figure out what goals you're saving towards aside from retirement - you know it's not a house and a car. Maybe a trip somewhere, maybe some other thing you need to save up for, whatever your personal priorities are. Put any remaining savings in the highest interest location you can find given your saving timeframe (i.e. if you need the money soon, your options would be more limited than if you are planning to save for at least a few years before using it). Set up your automatic savings deduction from your paycheck to go to this location/s, or at least to an account where you can then transfer/deposit to those location/s.

Either after you've done these steps, or concurrently if you have a good amount of time on your hands generally, you can work on making a personal budget and tracking your spending - folks have already noted strategies for this above. Once you have goals and you know what you're spending your money on, you can decide how much you're willing/able to sacrifice to meet your financial goals, and the remainder of your personal finance strategy will fall into place.
posted by treehorn+bunny at 9:17 PM on December 23, 2014


I agree that getting a credit card and using this in place of your debit card can be a good idea and will help build your credit score. However, I have some trouble with saving money while using my credit card for everything (my credit limit is close to my income though). I have found that activating a feature with my debit card that automatically transfers 1 dollar from my checking account to a savings account for each transaction allows me to save a little easier.
posted by This is the decision I made. at 9:37 PM on December 23, 2014


I understand where you're coming from. When you're treading water, it's hard to commit to a budget. If you're comfortable financially, you can probably squeeze $100 or $200 out a month to go into a savings of some sort. I agree - you should definitely max out your IRA's and any pre-tax retirement, especially if your company matches.

Talk to a retirement planner, and get that $60k invested if it's not already. Let that make some money for you. That's enough to start a good retirement account. You're young enough that you can put some of it into higher-risk accounts.

Find an online bank that pays better interest than your regular checking/savings account. I use ING, now called Capital One 360. (I'm sure there are others, but I'm happy enough with this). It makes nice interest, and your money can be transferred to/from your regular bank account within a few days. It lets you set up multiple accounts easily - one for 'house'; one for 'emergency'; one for 'vacation'. Transfer money over and watch it grow.

I cannot for the life of me, stick to a budget, but I can live within my means/under my means. Every 6-12 months, I reassess my income vs. expenses, to figure out what I should be able to save on a monthly basis. I then know that I can move that amount over to my online bank account and let it earn interest. I live off the rest, and if one month is off, that online money is just a couple days/clicks away.

Good luck. Baby steps - figure out your goals - do you want a house? Big vacations with no debt when you get back? Able to give lots to charity? Goals may help you motivate.
posted by hydra77 at 11:45 PM on December 23, 2014


There are several different approaches to spending less money, and different things work for different people.

#1. If you love data and spreadsheets, then finding a way to get all your spending written down and treating it like a data problem can work. Some people use Mint, various money software (some of it can talk to your bank and download the transactions), or just a spreadsheet. Make a budget, start comparing your expenditure with your budget.

This doesn't work for everybody! I mean, I even like spreadsheets but I do not like them THAT much.

#2. If you are good at spending to a limit, then find a way to allocate your spending money when you get paid and then to only spend that money. For example, a separate bank account for groceries, dining out, clothes and frivolous randomness. Or you can use envelopes with cash in. Some people find that being able to see easily how much money they are "allowed" to spend before payday forces them to plan to their budget.

This doesn't work for everybody! It works for me though.

#3. If you are well motivated by the idea of improving your habits, then find some fun activities that will replace "spending money" and make it your business to get in those habits. In your case maybe it's Slow Cooker Sunday, or moving to a place that forces you to pass the supermarket on the way home from work. In my case maybe I go hiking with my friends more than I go clubbing with them.

Doesn't work for everybody! But I bet there's something that will work for you, you just have to find it.
posted by emilyw at 3:19 AM on December 24, 2014


"Rent is, by contrast, money that is 100% down the drain. (Not to say real estate doesn't have risks, but while rent is no-risk, well, that's because you know ahead of time that it is a 100% loss.)"

At this stage in your financial life PLEASE don't fall so quickly into this line of thinking. Renting is not a 100% loss -- you are paying for a roof over your head, the ability to relocate fairly easily and cheaply if needed, and freedom from paying hefty maintenance costs if an appliance breaks or something else goes pear-shaped.


This, and also depending on where you live the price of housing may currently be in an echo bubble. So if you were to buy in one of these markets, you might run the risk of incurring negative equity and being "underwater" in your mortgage when that bubble pops. Plus of course, bubbles and echo bubbles are not the only scenarios where declining property values can result in negative equity.
posted by jazzbaby at 6:26 AM on December 24, 2014


I just wanted to add that you are actually doing really well with your finances. Everyone has places they can improve, but you're starting from a really healthy place with a stable salary, no debt, and $60k in the bank. I know anxiety can play a big role in stressing out about and ignoring money issues, and you should know that you're doing awesome, and spending some time going over your finances will most likely result in positive things, like freeing up money to go on a vacation, or build an emergency fund so you have even less to worry about.
posted by fermezporte at 6:42 AM on December 24, 2014 [1 favorite]


Since there's been back and forth about buying a house/not buying a house (and since I'm taking a shot in the dark about exactly what kind of attorney you may be, what with the hints you've given), you may want to think about whether your position runs on a contract or grant or open-ended/permanent or open-ended/temp. Also, is there a big pool of legal jobs of the kind you want in your area? (i.e., if you leave your current position, are you likely to find something in your geographical area?)

I think that matters in the rent v. own debate, especially if you aren't inclined to buy a house anyways.
posted by joyceanmachine at 8:00 AM on December 24, 2014 [1 favorite]


Reading All Your Worth by Elizabeth Warren and her daughter Amelia helped me get a handle on personal finance. I really liked how they broke up where the money should go and recognizing needs versus wants.
posted by cadge at 9:02 AM on December 24, 2014 [1 favorite]


For an easy first step, you should commit to spending one hour per week to improve your life in 2 areas: Meal Planning, and Financial Planning.

Set up an appointment with yourself at a specific day and time, and then sit down to do it. Either do them both in the same hour, or schedule 2 separate half hour appointments.

For financial: Use the advice in this thread to start writing down everything you spend, and then use your appointment to review it. See how much you spend in each category and figure out which ones you can reduce. Work on that for the next week, and then use your appointment to see how you did. Build up gradually to retirement accounts and investments. Spend your appointment reading books or blogs if you don't feel comfortable yet. Each week, decide what you want to focus on for the next week.

For meal planning: Spend your appointment time reviewing the ad for your local store, decide what to cook for each day of the week (hint: if you can deal with leftovers, you don't have to cook so often, but everyone has a different tolerance for leftovers). Plan a menu, plan the grocery list, and then go.
posted by CathyG at 2:57 PM on December 24, 2014


Seconding I Will Teach You to Be Rich. It's intended for people just like you, young professionals spending too much on coffee and takeout who need to get on top of their finances. His advice is terrific.
posted by islandeady at 6:21 PM on December 24, 2014


Some places, rent can be almost as much as a mortgage payment. For example, I was paying around $800 a month for a 800 sqft 1 bedroom apartment in 2006, and bought a 3100 sqft house (with big down payment) and my mortgage is around $1k/month -- comparable to rent. Now I am about to sell that house, and get a big chunk of that money back. Rent is, by contrast, money that is 100% down the drain. (Not to say real estate doesn't have risks, but while rent is no-risk, well, that's because you know ahead of time that it is a 100% loss.)

Your numbers are misleading because you have left out the other costs! First rent is close to a total cost of housing. Your mortgage is only partial - you also have taxes and maintenance/repairs both of which are only partially predictable but certainly a considerable amount more. So in your case you went from $800 all in to $1000+taxes+homeowners insurance + maintenance + risk + heat. The rough guide is $1 per sq ft for maintenance. So in your case add $3100 per year - so we will round down to plus $250 a month. Heat is included in most city apartment rents and not in homes so add a couple hundred more for winters (depending on where you are). Suddenly rent and home ownership are not comparable financial situations.

Home ownership is also not necessarily a great investment (ask my brother who is trapped in his current location because he can't afford to sell and move in the current market. I on the hand am free as a bird and am living in my third country and something like my 11th city - not that i am in great financial shape though!). Historically you can expect just a 4% return on your home. You may actually be better off renting, having freedom of movement and concern and investing the difference to get a higher yield.

Plus you don't have mow or water the lawn or live in the burbs.
posted by srboisvert at 4:39 PM on December 25, 2014


Use something like Mint.com to see where your money goes; in this case, it sounds like "food". Take a cooking class, probably.

Consider what your next biggest expenses are as well; rent, likely. If that's super high, make sure it's worth it to you, or eventually move to a place that's worth it.

If work has retirement, they often match retirement funds up to a certain level. Make sure to put in enough that you get the maximum match.

The historically most reliable investment that still makes significant money via interest - long term - is likely an Index Fund, probably a fund indexed to the S&P 500. The S&P 500 index funds traditionally get something around 7% returns.

Owning a house tends to get a 3% return; it's not actually worth it, unless you're in an edge-case scenario (a city where buying is unusually cheap or renting is ferociously expensive compared to the cost of ownership.)


On rent vs own, the NY Times ran a great article on this, complete with a financial calculator.

In my case, I live in a $2500/month 2BR south of San Francisco. My investments average 7%, so I raise that number. An identical condo (within 1/4 mile, same size, same condition) runs $750k here. That condo has a $300/month fee. (I add that in.) Last up, I grab the slider for "How Long Do You Plan to Stay?"... and see that, even if I plan to stay 40 years or more... it's still far, far cheaper to rent than to buy in this location.

Where I used to live - Pittsburgh, PA - the house I bought became "a good idea" based on that calculator... in year #2. Houses there are relatively cheap; rents are relatively high. The hard part was simply having the 20% down payment and closing costs.
posted by talldean at 3:49 PM on December 26, 2014


That NYT rent v own financial calculator is great because it lets you put in so many variables.

The only caveat (which that article covers, sort of) is whether you think housing prices are going to keep going up or not. EVERYONE thinks housing prices will keep going up. There are entire industries based on this assumption. But as we know, it's not always true, at least in the timeline that you, an individual, actually care about. Sure- houses went up on average of 2.1% since 1943 (nationally) but when you look at 5-10-15 year spans, it's all over the place, and you can really get trapped in one place by a house you can't sell for as much as you owe on it. And, typically, you're trapped someplace with not enough jobs, which is partly why it's not worth as much.

I like the idea of tracking every penny once or twice a year just for your own data, but personally, as far as figuring out how to save, I like hydra77's technique. Figure out what you should be able to save and then set it up so it automatically goes into your savings account right after you're paid (or as you're paid, if it turns out your company's retirement plans are the way to go.)

As for food planning- do you LIKE to cook? Because if you don't, don't worry about it unless you have to. Just realize you're paying extra to avoid something you aren't going to enjoy and cut back elsewhere instead. Or, try it for a month and then give yourself permission to stop if you hate it. There is a morality wrapped up in not eating out that I don't understand. If you're doing it to save money or cut back on salt, do it for those reasons, but don't do it just because you think you Should.

As a more general suggestion, you can pay a fee-only financial planner for an hour of their time and they'll give you a to-do list to help get you on the right track. They can also help you set up IRAs and teach you how to research the mutual funds/index funds to buy in them.
posted by small_ruminant at 12:09 PM on December 27, 2014


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