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Can't get ahead
Old 05-09-2012, 09:38 AM   #1
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Can't get ahead

Maybe I'm just looking for validation but I want to see how people see my situation. I am 24,married,no kids yet. I'm in the military right now,plan to separate in a few years. We are single income right now due to a recent move and my wife have a hard time finding work at our new location. My after taxincome right now is about $32K/year or $1350 every 2 weeks. We have student loans (mostly my wife's) at $350/month. I also stupidly took a "career starter loan" that military banks offer to new officers and the payback on that is about $463/month (we used this for a car/honeymoon,I regret taking this loan every 15th of the month). Those are our only debts.

We live on base and therefore pay no rent or utilities other than cable. People back home always say,"you guys must be banking so much money." The reality is that every month, money is so tight we are rarely able to save ANYTHING. We live a pretty bare bones lifestyle. We eat at home for lunch and dinner 6 nights a week. We hardly do anything for entertainment that costs money,we can't even afford a night out to the movies more than every other month. It has caused some stress not being able to have some more breathing room.

I have been a long time member of this forum and truly believe in LBYM and saving everything you can for FIRE. I just feel like I can't even get it started. I have a pretty big raise ($550/month after tax) coming up. I'm hoping this will give us some breathing room and the ability to start socking some money away.

Long story short,I have been very disappointed with our lacking ability to save. Am I crazy or is $32K/year for two people a tight budget? I know in the future,my earnings will only increase and we will minimize lifestyle creep to the maximum,but right now it is tough. Maybe there are some married couples out there on this same salary who make it fine and save. If we didn't have the student/'career' loan we'd be making it fine I guess,seeing that we'd have an extra ~$800/month to save.

I read this forum everyday and am inspired by those who are on the path,very close,or who have FIRE'd. It is just frustrating to not be able to join in.

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Old 05-09-2012, 09:46 AM   #2
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I think some of the military folks may be able to weigh in here, but the critical feature I see of your plan is that your wife needs to make getting a job an enormous priority for y'all right now. That would be a game changer for all this debt.
I would focus all of your attention on that one thing, first, then revisit all this once she's found a job doing something.
Paying back those loans does suck, but with some additional income from her working and your raise, you'll be able to do it in less time and get to enjoy some breathing room.
Good luck to you and thank you for your service.

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Old 05-09-2012, 09:52 AM   #3
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You make $32K net per year, you have about $22K left after paying the loan. You don't have to pay for rent, utilities, or health insurance (I assume). Sounds like a pretty good situation to me for a couple without kids. Have you tried to track your expenses to see where the money goes?
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Old 05-09-2012, 10:04 AM   #4
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Getting started is always tougher. Once you have accumulated enough stuff, saving gets easier. We don't need to buy dishes, silverware, and honeymoons anymore. We also eat out only once a week (and that's KFC) and only go out to an occasional movie, but that's by choice. We can easily afford to go out more often, it's just not worth it to us.

Once your loans are paid off and your wife finds a j*b things will feel much more comfortable. Just a matter of time.
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Old 05-09-2012, 10:42 AM   #5
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Thank you for your service. When I was your age we had two kids and lived in government quarters at Fort Hood. DW, did not have a paying job but somehow we lived pretty well but, we had no debt. Where is the money going? FIREd is right, 32 thousand takehome for a couple with no kids living in government quarters is a LOT of money. You need to track every penny of your spending to see where the money actually is going. You mention cable. Cable is expensive. You can live without it if you really want to save some money. Do you have smart phones? Smart phones are expensive. All that any of us really need is a no contract basic cell phone. I pay around 100 dollars a year for mine. Two cars? If yes, why if only one of you is working? I am going to guess that the interest rate is pretty high on the career starter loan (holy cow, what will the bankers think of next to screw people?) and not so high on the student loans. If that is the case then you should work extra hard to pay the career starter loan off as early as possible.
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Old 05-09-2012, 10:49 AM   #6
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First off, thank you so much for your service to this country!

I faced similar frustrations in my early to mid 20's... I recognized that I wanted to accumulate wealth, but just couldn't see how it was possible for my budget at the time. I received some advice from my parents: "First off, you will have higher income as you age... secondly, if you continue to budget instead of spend it, your rate of accumulation will grow exponentially."

The real key is the second part. So often when people get that raise, like the extra $550 you have coming, they feel euphoric, like a weight being lifted. They loosen their budget just a little bit as a sigh of relief and that $550 quickly gets absorbed into the monthly budget, often without even realizing where it went.

If you prepare ahead for that and decide to bank $500 of that raise (maybe use the other $50 to have a couple date nights each month) that will grow to $6,000 after a year... $60,000 after 10 years (not accounting for other income you might get from wife finding a job or more raises)

After 35 years... and with interest included, that $500 a month can turn into a million. The key is to recognize that you can live on 32K a year, because you have been... so in the future when you're making say 50K a year, try to live on 35K of it... and if someday you and your wife are bringing in closer to 75K, try to live on 50K of it. Then you will really be rolling towards FIRE

Good luck! Hang in there... it just takes time as others have mentioned above.
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Old 05-09-2012, 11:05 AM   #7
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Originally Posted by ATC Guy View Post
My after taxincome right now is about $32K/year or $1350 every 2 weeks. We have student loans (mostly my wife's) at $350/month.
Your take- home pay (without even considering the raise) is $35,100/year which comes to an average $2925/month.

Subtracting out the student loan, your net is $2575/month. You don't have to pay much of anything else out of that - - no need to pay rent, utilities, health care, and you say you eat at home and almost never go out - - the question is, where is your money GOING?

I'd suggest keeping track, accounting for every penny during the next year. Every single penny. That may seem like overkill, but it seems obvious to me that you have no idea where your money is going. Once you have determined that, you can determine where you would like to cut back.
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Old 05-09-2012, 11:26 AM   #8
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The fact that you are aware of your future financial concerns has put you a head of many people your age already. I wouldn't be beating yourself up mentally over not being able to save much with $32k considering your immediate outstanding loans. As a few others mentioned getting your wife employed (even if its not in her area of expertise) would be a tremendous lift in your finances as you mentioned you would not expand your lifestyle. The three things I believe that you should consider now are: 1) wife getting a job even if it isn't in her career area 2) use her income to establish an emergency fund 3) establish a minimum amount of money taken " off the top" out of your check that you cant immediately access. Even if its only $50-100 a month, the power of compounding over 30 years for you will do wonders, and you can always increase the amount later.
It would be simple to say get those loans paid off and invest that money, but realistically I imagine you will eventually move off base, and have to pay for living expenses that you now are not paying. Also if children are in your future, they don't come cheap either! Long term, if your wife gets into her career and you avoid lifestyle creep, you will be fine since this is a goal for you. Good luck!
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Old 05-09-2012, 11:31 AM   #9
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It's tough when you're starting out and it seems like the paycheck runs out before the month does.

I was a few years out of college and still living paycheck to paycheck, despite having a decent salary compared to many of my peers. My dad kept lecturing me with the homily of "Pay yourself first" and "dollar cost average". Yada yada yada. But I knew I needed to build up an emergency fund. Finally I set up an automatic debit into a balanced mutual fund.

I was surprised - it didn't impact my daily cash flow nearly as much as I thought it would. I still was paycheck to paycheck - but off to the side, this fund started growing. Since it was taken off the top, I had to account for it like any other bill. I pretty much forgot about it accept at tax time. In a few years I had a nice 20% down payment on my first house.

EvrClrx311's advice about diverting a portion of raises into savings is also good advice. I've been doing this for decades now. When I get a raise - I divert half of the net difference in my pay, into savings/investment... Figuring I was getting by without the money before the raise, I can get by without it now. But I do let 1/2 go to the family budget. In your case, you can use the portion you don't divert to go towards retiring the debt. Once those bills are gone you'll be sitting pretty.
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Old 05-09-2012, 01:44 PM   #10
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Originally Posted by W2R View Post
Your take- home pay (without even considering the raise) is $35,100/year which comes to an average $2925/month.

Subtracting out the student loan, your net is $2575/month. You don't have to pay much of anything else out of that - - no need to pay rent, utilities, health care, and you say you eat at home and almost never go out - - the question is, where is your money GOING?

I'd suggest keeping track, accounting for every penny during the next year. Every single penny. That may seem like overkill, but it seems obvious to me that you have no idea where your money is going. Once you have determined that, you can determine where you would like to cut back.

+1 on this... that is a good amount of money that seems to be disappearing...

Maybe you are buying fast food to eat? Or you buy beer or other drink that you are not taking into account..

I am assuming that you make no other payments besides the ones you listed... IOW, no car payment, no exotic vacations, etc....

But, I am still amazed at how much money flows out with a wife and two kids... heck, my food bill is probably close to $1,000 per month... (I do not track this separate, but I could go back and look if needed)..
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Old 05-09-2012, 01:51 PM   #11
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+1 on tracking your expenses to see where you are spending money. You have an opportunity right now to begin saving - set up an investment account and have the raise you are expecting deducted from your paycheck and sent directly there. An effective way to save is never let the money get the bank account where you can spend it.
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Old 05-09-2012, 02:01 PM   #12
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Originally Posted by W2R View Post
Your take- home pay (without even considering the raise) is $35,100/year which comes to an average $2925/month.

Subtracting out the student loan, your net is $2575/month.....
He also has a $463/mo "career starter loan" used for a car and a honeymoon so that takes it down some more, to about $2100 a month.

You're only 24 and so smart to be thinking of your financial future, ATC Guy. Besides figuring out where your remaining $2100 is going every month and what you can save from that, as soon as your DW finds employment, sock every penny of that away too.

Don't sweat the "career starter loan"--you probably have wonderful memories of the honeymoon, and you're paying for a car with it too, and you can't go back in time.
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Old 05-09-2012, 02:36 PM   #13
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ATC Guy, thank you for your service.

I remember us struggling as a young couple as well even though we were making good money. The past is past so there is no sense beating yourself up about it. A few suggestions similar to those others have suggested.

I have to admit, at first blush I am thinking that $22,600 a year (your net earnings after debt payments) seemed like plenty for a young couple who don't have rent, utilities and health insurance to pay for. So first, keep good track of your spending for a few months to get a good sense of where your money is going. DW and I tend to put any spending over $25 on a credit card (that we pay off each month) so I can easily have a record of where the money goes. I actually use Quicken for all my finances, but I'll admit I am a bit anal about keeping track of things. Anyway, after a few months you should have a good feel for where the money is going and see if there are any obvious areas to tighten your belts.

I made it a habit to increase my savings for a substantial percentage of my raises (50% or more). Consider saving and investing a substantial portion of your upcoming raise. Also, when I was your age I noticed that if money came into my bank account, it somehow seemed to get spent, so I had savings taken out of my paycheck so I never "saw" the money to begin with. That seemed to make it a lot easier to save.

Have your DW look for work that she can enjoy, even if it is only part time work, and those earnings should make things much easier for the both of you.

Finally, you're only 24. At this point enjoy life, get the best work experience that you can get and save a little for the future. If you regularly save and invest wisely in no-load, low cost index funds you will be amazed how your wealth will grow.
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Old 05-09-2012, 03:03 PM   #14
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Thanks for your service also.

It's tough starting out for almost everyone, don't be discouraged. You've already heard several good ideas.
  • Income from spouse (you're getting by without now, so you could save all of it)
  • Save all or part of your raises as they come (good advice for every worker)
  • Track your expenses to see if you're overlooking a "spending leak" somewhere, might help
And as you correctly point out, you already have about $813/mo savings set aside in your spending, it's just not accessible yet. I didn't catch how long you're going to be paying on your two loans, but when they are paid off if you keep your spending under control you're going to have about 30% of your income available to save and invest. That's way more than most people at any age.

I'd say you're doing great so far...
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Old 05-09-2012, 03:09 PM   #15
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Gotta track your expenses to know exactly where the money's going, or this thread is of little use.

You're also getting a return of the interest rate on your loans, and raising your net worth by the speed at which you're paying them down.

But I can understand your frustration at paying a loan on an asset (your spouse's degree) that's not being used because the military has moved her into a different job market. Linkedin and (really for all the services) might have some suggestions on how she'd want to approach employment, whether part-time or full-time.

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Old 05-09-2012, 07:32 PM   #16
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When the young wife and I were first married, I was in the Navy. The frequent moves made it difficult for her to get any type of real employment in her field. But since she had a college degree, she signed up with the local schools to be a substitute teacher. It's not fantastic pay, but it was above the minimum wage retail jobs that were the only alternative. Every little bit helped in those days.

She found that she enjoyed it so much that, when I left the Navy, she went back to school and got her masters and a teaching certficate. She is just completing her 23rd year as a high school teacher.
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Old 05-10-2012, 02:54 PM   #17
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32k isn't a lot of money even if you don't have to pay rent, but your debt is really stopping you from making progress. Many young Americans carry a lot of debt and are having trouble making payments so if you are able to keep your head above water you are doing better than many. Make a commitment to get an emergency fund and then use all your pay increases to pay off high interest debt and then start investing and saving. Economize where you can and encourage your spouse in the job search.
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Old 05-10-2012, 03:19 PM   #18
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I think you are doing marvelous to be even thinking about all these issues. The key of course is getting rid of the extra debt, and then everything will flow. Pay yourself first, if you put some money in the tsp now, you will be in great shape later. watch that you don't accumulate debt in the future. whenever possible pay cash, and pay your credit card bill in full.

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