Planning Ahead for New Start

[mizbear]

As many of you know, I am currently taking classes to go back into the workforce. I live on $880/month- $10560/yr.
My income will go up once I start working and I am trying to get a plan together so that I have my bills and savings all set up- at least a skeleton plan- ahead of time.
THe only debt I have is my car payment $269.86/month (I just made payment #6) and starting 1/1/11 I started paying $300/month & my school loan which is interest free. It is $55/month and $2745 (I have paid $110 of the $2745 balance off already).
I don't know where to start with planning ahead, but I know that without a plan- the money will go bye-bye. I don't know what current percentages are, where to look for health insurance... I know that my bank has excellent 401Ks, IRAs, etc.
HELP! I am now over a third of the way through my course.

[mizbear]

I know this seems very vague and general and worrying about things way too far ahead, but there is an income limit where I currently live and my plan, with housing being what it currently is would be to buy when I have to move if at all possible.
My current monthly budget looks like this on paper:

880 Pay
168 Rent
300 Car
89 Insurances
17 Meds (co-pays)
55 Tuition
45 Phone
125 Utilities
30 Fuel
10 Starbucks
41 Leftover
I get a $42 grocery allowance that I stay in every month easily by buying with coupons and shopping sales. I very rarely have extra "needs" because I stock up using GCs I get for Christmas or money I have squirreled throughout the year to stock supplies.
Anyway, I need some ideas if anyone has any.

[Sam_2.0]

With any extra, I would start stashing it away in savings. You have been so used to living on a minimum budget - if you can continue that course as long as possible, it will allow you to save a lot of money. Once you have a good EF funded, I would start paying down the car loan, just because its is one of your biggest expenses each month. Then start in on the SL - its not a big expense, but it would be nice to have it gone

[blackcard]

The so-called secret to our success, was advise I followed from posters on the old MSN Market Talk board, which was:
1. Do not increase your spending when your income rises
2. If it is free do not pay for it. Cable, Satellite radio etc
3. Cut other expenses, -Starbucks make coffee at home, get a pre-paid cell
4. Pay yourself every month 1st in savings, then spend some on yourself.

[mizbear]

blackcard- I understand about the Starbucks- but I already gave up karaoke night, going to see bands, going out with adult friends, buying from Schwan's, and going to my 2 favorite Chinese places. $10 on my Starbucks reloadable gets me 3 Venti Hot chocolates a month (which I usually save for a large shopping trip when I have my nieces in tow). I make my coffee and hot chocolate at home otherwise. I don't have cable or satellite- I do pay for internet, but I have needed it for school, so it has been an investment. I get my cell phone cheaper by splitting a plan with my mother. I am also locked into a 2 year contract on my phone.
I like the idea of paying my savings first- I could do that on payday- the same way I write all of my other bills out (yes, I am one of these people that still writes checks for some things). If I just budget it like my bills, then it will be second nature and if I do it from paycheck one, I won't miss it- as both of you have pointed out- not to increase my spending since I am used to not living on a lot- I know my rent will go up, but that is expected and something I am planning for.
I know it sounds irresponsible to insist on that $10 for hot cocoa- but I very rarely drink, I don't smoke, I don't go out, I care for my mother and grandmother, I am working on my studies as quickly as possible- that $10 a month in hot chocolate is my pick me up. By the same token- if there is something else in my budget that needs to be done- well, no cocoa.

[Sam_2.0]

I think its reasonable to budget in some more fun things for yourself. You definitely have earned it! Most budgets set an amount for fun $$ at 10%. Looking at your new budget, could you do 10% for whatever you want, and plan out the rest to savings, etc? For your income right now, that $10 sounds about right. But as the income goes up, it is ok to increase your fun money. Just keep it in check, and make sure the other obligations are taken care of first.

[Sam_2.0]

Also, to save some money, can you do bill-pay for free through your bank? Mine is set up to where my bank will send out the checks for me - but I have to be the one to initiate the payment each month. It will save the cost of postage as long as its a free service through your bank (and if its not free, I would look for a new bank. Its a pretty standard service now & should be 100% free). Just looking at the bills you listed, that would save another $3-4 per month. That could be funneled over to fun money too

[mizbear]

My major bills I have set up as direct debit, I write a check to DM for the phone bill every month (for my records- that way if she spends it on something else, I already paid her), rent must be paid by check or MO- rental policy, and my utilities are getting ready to go to auto pay in the spring. The utility bill will be the only thing that I won't know the exact date it comes out. The only bill I have to mail is when I have layaways because I usually mail the payments to save on gas (although browsing the store is fun). I have gotten to where I even use my debit card for my Rxs so I don't have to worry about if I have the checkbook with me when I get my stuff filled. Of course, my utilities and pharmacy are in town so there is no stamp- I have a neat local pharmacy where I can set up a tab and pay it by the month or quarter if I want. Unfortunately, I just bought a box of checks at the beginning of the year.
Even though I use a local bank, mine is pretty cool- for instance, I have no fee checking because I use direct deposit- and no minimum balance requirement. They also usually have pretty good rates on everything.

[Peace77]

My suggestions:

1. Put $1,000 into savings. Continue to add to savings each month.

2. Take care of anything that you put off/postponed because you did not have the funds.
This means seeing the doctor, dentist, or eye doctor, etc. It also includes car maintenance such as oil change and regular maintenance due every 15,000 and 30,000 miles, etc..

3. Fill up. Fill up the car with gas and stock the pantry.

4. Continue to add to savings (emergency fund) until you have at least 6 months worth of expenses.

5. Pay off the car loan.

6. Pay off the student loan.

7. Increase the emergency fund to 9 months worth of expenses.

8. At the same time that you are adding to savings, start to contribute to a retirement plan. Do not set up a retirement plan at your bank. Banks are known to have high fees and not very good rates. Best is to set up with your employer if a 401(k) or similar plan is offered. If not, use an investment company such as Fidelity or Vanguard.

9. Save for future needs such as replacement car (to pay with cash and not a loan).

10. Save for vacation.

11. Save for a down payment on a house.


I think that blackcard didn't realize that you are making future plans and not adjusting your current budget. I think you're doing great!

[gsbrq]

"I know this seems very vague and general and worrying about things way too far ahead, but there is an income limit where I currently live and my plan, with housing being what it currently is would be to buy when I have to move if at all possible."

I'm not exactly sure what you mean by this, but speaking as a homeowner, I would strongly recommend you not rush into buying. Right now, you are ideally positioned to live frugally when you get your job--you can rent a cheap place for a year (possibly with a roommate) while you focus on paying off your car & student loans and building your savings.

The trick that will really help you succeed is to keep your total bills (housing, utilities, phone, loan pmts) to no more than 50% of your income (less is even better, but I don't know what your income range will be). Rent a room from someone, live in a smaller apartment...do whatever you can to keep housing costs down when you move out. This will give you the breathing room you need to get yourself on a strong financial footing.

I suggest that, starting with your very first check, you budget 15% of your gross pay for retirement and another 10% for savings. Health insurance costs vary widely depending on your situation; be prepared for it to take a big chunk of your paycheck--if it is cheaper than expected, you can always re-allocate that money to debt repayment. If your job has a waiting period for joining the 401k plan, open a Roth with Vanguard or Fidelity. I have my Roth with Vanguard set up to take automatic weekly withdrawals from my checking account.

Good luck, and kudos for planning ahead!

[mizbear]

peace- Dentist and eye doctor are definitely on my list. My maintenance is included in my car loan- oil changes, and the standard 15,000; 30,000; etc.
I will be self-employed when I start working again. So, everything as far as retirement, etc will be my responsibility. That is why I am trying to get prepared in advance.
gsbrq- I live in subsidized housing- rent won't get any cheaper than what I am paying now and it will go up and then eventually cap off based on income and guidelines. I have a limit as to what I can make and stay here. You won't get any smaller a place than this- it's a 1 br apt and they don't make studios around here- and efficiencies are not affordable (or safe). If my unemployed, non-rent paying brother were not living at home, I could move back there, however, he is still living at home and that makes that not an option. Rent in this area is just as high or higher than a mortgage payment- that's why I am looking for a house. As far as roommates- I have been burned more than once on that front and am not willing to lose money on that gamble again.
Again, I appreciate everyone's advice, but I guess maybe I am being too vague about my situation, but I also don't want to put too much out there and have anyone get the wrong idea. I don't sit on my butt in a LazyBoy recliner eating bon-bons, watching soaps all day, with my hair curlers and my bunny slippers on. I do all the running for my mother and grandmother- appointments, shopping, prescriptions, etc; I do my appointments, shopping, schoolwork (computer mostly), cooking, pick up and watch my brother's kids, and the list goes on.
I appreciate th advice about the Vanguard and Fidelity. Again, that is something I will have to do on my own.

[CaptainDuck]

I really like Peace 77 list of suggestions.

Mizbear I only wish I had asked questions like this when I started making more money, so I wouldn't be in the hole I am in today. Way to go for thinking ahead like this!

[mizbear]

CaptainDuck- Before I got sick, when I worked "straight" jobs, I let my employers or HR tell me what to put in 401Ks and how to do my insurance and all of that. Now that I am going into medical transcription, I will be working from home for myself. When my mother had her own business, she didn't do any of this- and neither did my father when he had a business- we never had any money. The only person I ever really trusted about that kind of information growing up was my grandfather and he isn't around for me to ask now. I don't ever want to go through what I went through when I got sick the last time again. I know it wasn't all me, but I want to do everything I can to protect me and what's mine. I'm not so much out to get rich as to make sure I never come home with my tail tucked between my legs over the fact I'm bipolar again. Proper investments can protect me from me- I will have savings that I can't touch.

[phil5185]

I know that my bank has excellent 401Ks, IRAs, etc.

No, you have that one wrong - banks are for banking (checking & saving) but not for your investments. Use no-load companies such as Vanguard, Fidelity, TR price.

I can't believe that you traded a 6-yr-old vehicle that had only 35,000 miles. My truck is a 2001 with 90,000 miles and I consider that to be its half-life. Have you noticed that millionaires often drive old cars? - there is a reason for that, LOL.

[mizbear]

phil- I traded the truck because I was driving a 6 yr old truck that had a 40/60 bench seat. I had no room to put my DGMs wheelchair or walker in it (she also had some difficulty getting in it) and could not safely and/or comfortably transport myself and my nieces in it. I could not always borrow my DMs vehicle. I can not borrow my brother's vehicle because he smokes cigars (can't pay rent or child support but smokes stogeys, grrr) and I have asthma. I traded the truck while I could still get a decent trade on it, since I had front end work done on it after a deer decided to tango with me. Trust me- I liked my truck and would have rather put a tonneau on it if it was just me.
I am definitely following everyone's advice to look into Vanguard and Fidelity when I set up my Roth and 401K plans. I think Fidelity actually handled the 401Ks for one of my former employers at one time- but they changed investments like we women change purses...

[Peace77]

Mizbear,

401(k) plans can only be used if your employer offers them. Having a 401(k) might work for you if you have an employer that allows flextime or pays by the amount of work you do. If you plan to be self-employed, a 401(k) is not an option but there are other retirement plans that you can use.

[mizbear]

peace- That's good to know. Unless I can find someone that hires off site with benefits (ha-ha), I will be contracting out- so it's all me.

[gsbrq]

Mizbear,

Even in areas where average rent is about the same as average mortgage, I have found that you can usually find a move-in special or a cheaper rental option that makes renting less expensive.

Even if they are exactly the same, owning carries quite a bit more costs than renting...I am speaking from experience here. I really would advise renting at least until you have paid off your car loan, saved enough for a downpayment, and built an emergency fund.

A couple of other points:

Taxes for the self-employed are quite a bit different from w-2 wage-earners; be sure you read up on the requirements before you start so that you are in compliance with all IRS regulations. You'll probably want to set up a savings account that is strictly for taxes, so that you can put a portion of all your earnings in that account (Seems I've heard that people who do this usually put aside 25%, but you should double-check).

Individual insurance policies can be pricey and difficult to come by. I'd start researching the options now. Maybe see if there are any professional organizations you could join that might qualify you for their group policy. One tip I saw in a recent article is instead of applying to one insurance company and waiting for their response, apply to a lot of them at once so that you can compare policies/costs, and so that if one denies you, you won't have to answer "yes" to the question "Have you been denied coverage in the last year".

[blackcard]

mizbear, sorry, I did not realize how much you had already given up. I hope your new career gives you a lot of extra money

As you said yourself <<"I know that without a plan- the money will go bye- bye">>
Which is why I added my input. The biggest problem that I have seen, is that when people get more income they seem to have a propensity to spend it.

We changed our cell plans at $80.00 a month, to pre-paid wireless. 1 year contract for $99.00. It has worked out well for DH and I. Magic jacked our internet and got rid of the phone at home bill. Went from $30.00 a month to about $3.00 a month.
Think about this when your contract runs out in 2 years.
We use our Cells only in emergency, or for urgent information, mostly in the car. We have the home phone, and phones at work.

Just some thoughts, on how to get ahead, and stay ahead, with money.

mizbear some karna 4 U. Hope it all works out well.

[mizbear]

Rentals here are subsidized or age restricted with the exception of one high end complex. Private rentals have to be closely inspected and the contracts closely watched as they are often seasonal or attempts at stopping foreclosure. Sometimes when the "landlord" bails themselves out- you get an eviction notice- the minimum allowed by law. Or the bank kicks you out.
I appreciate your concern over this- I understand what everyone is saying- I owned a house before- it was a money pit. If anyone has paid attention to what I am saying, there are no cheaper rental options when I leave here. The only way there would be a cheaper rental option would be if my deadbeat brother got a job and moved out of my grandmother's house and I moved back in there. I live in subsidized housing- everyone here has to play by the same rules of income and whatnot with that. When I top out of the income bracket, that's that. I am very leery of private rentals because they are not very well regulated. Some are very well cared for and others are not- and they all still want mortgage payment prices.
I have been checking into the tax issue- I was already planning on setting up a tax account- and earmarking it as such- I need to find out if I should do my taxes quarterly or just yearly. Luckily I know a couple of really good accountants.
I will look into the professional organization option as I look for health insurance (I will lose what I currently have as my income increases)- I am hoping these changes in federal health care law will help me.

[phil5185]

I traded the truck because I was driving a 6 yr old truck that had a 40/60 bench seat. I had no room to put my DGMs wheelchair or walker in it (she also had some difficulty getting in it) and could not safely and/or comfortably transport myself and my nieces in it. I could not always borrow my DMs vehicle. I can not borrow my brother's vehicle because he smokes cigars (can't pay rent or child support but smokes stogeys, grrr) and I have asthma. I traded the truck while I could still get a decent trade on it,

LOL - your new car payment is $3240/yr, for that much money I would have looked for ways to keep using that low-mileage truck for another 10 yrs. (I put my niece's wheelchair in the back of my pickup and bungee it into a corner. And I carry a little plastic stool for climbing in).

[mizbear]

Phil- I wish it had been that simple, but I pick up my nieces from school almost everyday. One of them is still in a booster because of her size. My truck had one of those lap belts with the slide adjustment- meaning she had to ride on the outside. Not a problem, except that her older sister is as tall as I am. It was not a safe ride if I couldn't borrow a vehicle. And putting my grandmote in that truck has resulted in my getting injured a few times- she's almost 80, a brittle diabetic, with neuropathy and limited mobility. I had to use my old aerobics step to get her in the truck. She couldn't reach the grab bar and climb in.
I may go to a prepaid phone once this contract is up because I will have a home phone (2 years)- but I will have to have a cell phone that I can depend on at all times with my mother and grandmother's health- I am their caregiver and emergency contact. I have to be able to be reached wherever, whenever.

[mizbear]

blackcard- THank you.

[mizbear]

Several have suggested a roommate, which because of bad experiences with traditional roommates, I would not consider that- however, my DM brought up (not even thinking about the fact I will eventually have to move) she and I becoming roommates again- a situation that worked out fairly well before- we have been house-mates several times since I have been an adult with good results. It would also take some of the caretaker stress off of me. My DGM has also told me that if I will have the electrical work done to make it feasible, I can have my old room back upstairs and move in there again- won't really change my money situation, but I get along with DGM and DM. It works out to be roughly same as rent and utilities at apartment now. However, car insurance would go down since we all have the same carrier. Looking into feasibility of this.

[sheilaincali]

mizbear: living back with your DM and DGM sounds like an interesting idea, especially if it lowers your expenses. You should be able to save on fuel some since you won't have to travel from their place to yours when you have to help DGM out.

Plus I am a big fan of options that will lower your stress level. Since you have lived with them before as an adult you are familiar with each other's habits. Just make the time to discuss everything so there is no room for miscommunication down the road.

[mizbear]

LOL- sheila- with my family- There is ALWAYS miscommunication at some point or another- that's why I make sure I own at least one backup set of headphones at all times when living at home and they are good quality noise-cancelling.

[herekittykitty]

mizbear: if you don't mind sharing, what are you in school for/what profession will you be entering?

[mizbear]

I am going to school for medical transcription. I am finishing section (course) 3 and getting ready to start section 4 and after that have 1 more to go. There are 2 certifications I want to get- luckily my course prepares me for that. It will allow me to work from home.

[mtshastawriter]

Medical transcription is a dying field due to the new technologies. Have you considered working from home doing customer service or even writing articles for generating passive income?

[mizbear]

medical transcription is actually growing due to the new technologies. Due to the laws and everything having to go paperless, medical transcriptionists and editors are in a higher demand than ever. I made sure I researched it out first. The medical field is exploding- including support positions. And more and more medical facilities are sending their transcription work out.
Even when a doctor uses voice recognition software, a medical transcriptionist-editor still has to go over the report, type it out and edit and research everything. If there is noise in the background or the software doesn't pick up an entire phrase it could have the same deadly effects as a mispelled word, transposed letters, or mixing up mg and mcg in a prescription dosing.
I appreciate your concern though.