Updated Millionaire Plan August 2014

This month we increased our retirement savings from $625 per month to $722/ month by decreasing our costs.  We changed daycares on July 21st and our daughter is now a toddler, both of which saved us some money.  We also, if you remember, called and asked for a discount on our internet (saving $5).  I also reviewed the budget and noticed that I was spending less in school costs so moved that savings ($18) to our retirement savings.  We also had $67 sent from our credit card rewards into my Roth IRA.  Yet, all that only ended up raising our savings $215 because the market dropped.  We have $20971 in retirement.  So close to $21000, but not there.  I really just wanted to call up Fidelity and add in the $29.  :)
Honestly, though, a little drop in not an issue for a young investor because all that means is that you are able to buy more shares, cheaper.  Since our daughter will be in the cheaper daycare all month, our retirement savings amount is going to be higher in August ($793) so I am sure we will break the $21000 mark.  What I am not sure about, is if we will break $25,000 this year.  I am very hopeful that we will by December but I am not sure.  Hopefully the market will be nice to me in the end.

Third Guest Post

My third guest post is up at Trendy Cheapo http://www.trendycheapo.com/budgetliving/phd-student-saving-half-income/ and for once, my guest post had nothing to do with real estate!  The author of Trendy Cheapo is a fellow blogger in the Save 50 group and my post is about my efforts at achieving that goal.  I am not even close but getting there will be an amazing journey.  So, head over and let me know what you think of my progress so far!

It's that time of year! Scholarship Time!

Sorry folks, I know you wanted me to say it was Spring Break Time, which it is but for your college career, scholarships are more important than spring break.  When I was in undergrad it was hard for me to apply for scholarships.  I felt that time could be used making money at my part-time job or studying.  Why work so hard to find these scholarships when chances were, I would not get them.  I did get pushed into apply for a few and I did not get them.  But, I am still applying now.  You may be asking why?  And why would I be tell you folks to do so?

There are a ton of scholarships out there and yes the chances are not great but the more you do, and the better you do, the better chance of landing AT LEAST one.  And, winning $500 is worth a lot of time, about 50 hours for a student.  So, tell me, have you spent 50 hours working on scholarships?  I know I have not.  I have two that I will be working on, one due in April and one due in December.  I have spent about seven hours on the one due in April and it is almost done.  Once it is done, I plan to find one more.

It is hard to get excited about scholarship because the reward does not often come through.  But it can.  I know of many people, my husband included who received them.  People are not tricking students, and they want students to apply.  So, I give you this challenge during Spring Break give yourself a 3-5 hours and find and work on a scholarship application.  Five hours will mean my scholarship application will done and I will have found a second.  Let me know in the comment if you plan to try for this challenge.

Updated Millionaire plan March 2014

This is my first update after starting my $625 per month retirement savings.  We did very well this month, with a bit of help from the market.  We now are at $17834.  Our next goal is $21,000 which includes all of our expenses for six months plus COBRA.  We are still $3,166 short but are getting close very quickly.  If the market cooperates with us we will be there in about five to six months, well within our goal of having six months by the end of 2014.  

Our goal after $21,000 is $25,000, the amount of my gross income, as well as the amount we need to stop using target date funds, and diversify on our own.  That will lower our investment costs, increasing the money we keep to invest.  If the market does not crash, it looks like we may be able to get up to that goal in eleven to twelve month (March 2015).  But who knows, maybe the market will help us more, and we will beat both of these goals in 2014.

But, right now we are not looking for extra money to up our retirement savings.  I am happy with 15% while I focus on other money goals, like building up an emergency fund.  Within this year my husband graduates with his PhD.  That means our very secure income, won’t be as secure.  Once you graduate, be ready for turbulence.  That is why I am saving a bare minimum for retirement and focusing on here and now.  We are building an emergency fund and paying off debt.  Once those are done, we will start pushing up our retirement savings again.

Saving for Retirement/Financial Independence as a Young Person

I read a great article (http://the-military-guide.com/2011/01/03/how-many-years-does-it-take-to-become-financially-independent-2/) which basically showed that as increase your savings you also decrease your expenses which means you end up needing even less time to become financial independent. As a concept, it is hard to argue but it brings up some ideas specifically for this generation. Though my DH and I are only saving 14%-15% of our net income towards retirement we are spending about 14-15% towards paying off debt and an additional 4% towards our next move and our EF.

So does that mean it will take 39 or 26 years (or some where in between) for us to be financial independent? Do we say it will take 39 years until we pay off the debt and then we can claim the 26 years? What about the fact that we will likely need health insurance? To COBRA my husband's health insurance it costs more than $500/month. Once my husband graduates some of his student loans will be 6.55%. I would like to pay those off quickly but the loans at 5.75% and 3.75%(both mine and his) and the mortgage (4.75%) I would keep until the end. I won't need to pay those every month until I die (just 10-30 years) so how do I decide how much I need to be financially independent?

These are tough questions and because of the amount of debt most people our age have, valid ones. I see many bloggers either ignoring retirement, for our age range, or geared towards 40-50 year age range and ignoring the debt load. Our generation needs to save for retirement and we need to start younger than most of our parents because we won't have pensions yet we start in hole because of both student loans and the need for higher education. So how do you start?

There is no way I am saving 80% of my income but I don't want to wait 30 years for financial independence. I started by saving 10% of my income and as time passed and we increased our income we increased our savings. We now save 14-15% into our Roths but I don't want to stop there. I want to get up to 20% but for me, I'll wait until we have paid off the 6.55% student loans. This could take another 8-10 years but I am fine inching towards financial independence while still living well. Twenty-eight from now I'll be able to be saving over 30% but by then I'll be 55. I want to be able to retire at 60. But even with just saving 15% I could retire by 66. Do you think I can retire at 60 with my plan? What would you do different? What are you doing to save/invest towards financial independence?

Update on grocery savings plan July

I've reposting this post, it got deleted accidentally. I missed posting this at the beginning of last month (July). I spent $148.20 for the month of June which averaged out to $37.05 per week. That was an amazingly low amount and I'm still not sure how I achieved it. I bought using sales and coupon and ate out our garden but still, it is much lower than I expected. I still ate well, with vegetables and whole grains and even had some treats. I am very happy with this month. This has helped get my grocery spending down to under $50/week as an average over the last 30 weeks.

Let us so how low we can go together. Anyone else have great ideas on keeping grocery expenses low while still eating well?

Update on grocery savings plan August

This update is sad. Last month I was so good, I actually got my spending below $50/week for the year and this month I spent $292.35 which added up to $58.47/week. That sadly has brought me back over my goal of $50 per week, up to $51.06/week for the 35 weeks we have so far this year. I only have 17 weeks left in this year and it would take me spending less than $47.82/week to get back under my goal. I'm not sure if I will be able to do this, honestly.

I guess I am going to have to continue to try and find out where I will be by the end of the year. If I average $50/week for the next 17 weeks I will be $36.95 over budget.

Update on grocery savings plan June

I averaged $48.08/week last month on groceries. That was below my weekly allowance for groceries and I am quite please with it. I even was able to spend lower then the amount I need to bring my year to date grocery spending closer to my annual goal.
I am now averaging $51.78/week. I am at exactly halfway though the year and I am $46.22 over my goal. I am still within budget but by achieving this goal I will have more money for savings and invest or even more fun. I think I can cut $46.22 from 26 weeks even with Christmas dinner. If I am to achieve my goal of $50/week, I will have to spend average less than $48.22/week for the rest of year. This is more then I spent last month, on average and I think I can do it.

Anyone have any advice for keeping my totals low while eating well?

Financial Independence

My definition of financial independence is enough income producing assets to pay my bills without having a job. Right now the net income I need is about $24,000 per year but that would increase if my fiance lost his job, because we get health insurance through his job. The additional cost of insurance would be about $500 per month so $6000 per year. This means my goal, at this time, is to get enough income producing assets to make $30,000 per year.

So far my investment income from 401ks, Roth IRAs, Traditional IRA and taxable accounts give me less than $300 per year. This assume about a three percent withdrawal which should last me indefinitely. My rental should bring me $525 per month, which is about $6300 per year at best, more likely to be about $5250 because of vacancies. Obviously I am no where near financially independent.

But what could make me financially independent? I could buy more duplexs/rentals or I could put more in my investment accounts, or I could pay down the debt we owe. I should do all of them, but I do not have the money currently to do so.

This is when one must decide what minigoal will help achieve the goal the best. In my case, we were looking at buying a second duplex but with my other, nonfinancial goals, that did not seem to be a good idea at this time. Paying down debt, at this time would not change my monthly payments for quite sometime therefore I decided against prepaying my loans. However, in the end getting rid of my debts will remove $4595.76 of expenses from my annual budget. This amounts to 15% of the budget. That is major and I think I should pay down the debt but I do not think it will be as immediately helpful as my other option. Therefore I will be putting more in my investment accounts. As of next month I will be increasing our contributions to our Roth IRAs. I am still deciding how much to increase by, but it will be increased by at least $150/month.

Goals

Goal, true goals, not wishes, are a great thing to have. Goals help us achieve what we truly want and stop life from passing us by. But what are goals? Are goals wants? Yes they can be, but not entirely. Goals are defined wants. I want to be able to retire, my goal is to have four million dollars in investments and 10 duplexes. I want to be debt free but if I want to get through graduate school, I need to take student loans out for a couple years. Which is more important? By defining your goals you determine what is possible, what is most important and most importantly, how you are going to reach your goal.

The first part of having goals if defining them. Goals are not just financial, I have personal and professional goals as well. Professionally my goal is to get a professorship and get paid to do research in my own lab. Personally, my goals include such things as getting married, having children and making connections in the community. And, of course, financially, I plan to become financially independent.

But I cannot just jump from this point to my goals. I need minigoals along the path to help me stay focused and to continue getting me toward the main goal. For example, to reach my main professional goal to become a professor and get my own lab I need to get into the master's program and then into a PhD program. Along the way I need to publish at least two papers and get one grant that I can use as a post-doctoral fellow. During, my post-doctoral fellowship I need to publish at least one more article and get one more grant. This path, should get me a professor position at a university. However, determining this path does not mean there will not be detours but by having goals and minigoals I increase my chances to achieve my goals. I must note that my goal of becoming a professor will require many years and some money to pay for tuition which will affect my other goals. It may even make it harder to achieve my other goals.

Next post I will go in depth regarding my goal of financial independence. I'll talk about where I compromised on that goal for other goals and where I made the choices to make myself be independent in the future.