Thankful

Happy Thanksgiving, void. I am so grateful for the financial changes of this year; thankful that I realized what mistakes I was making, and thankful that the knowledge I needed to right those wrongs could be found in the personal finance blogs of others. And of course, I am thankful for the windfall that made so many of my financial dreams come true and accelerated my progress beyond my wildest dreams. But windfalls cannot be counted on, and should never be expected. Thus, I look to the future knowing that only hard work, sacrifice, and dedication will bring my financial goals to fruition. No one can fix this but me. And I have to say, I am thoroughly enjoying the journey!

A more concrete breakdown of the finances

As noted in my previous post, I bring home $2,548 each month. My exorbitant rent is my biggest expense. Here is the more specific breakdown of my monthly budget.

Rent: $1,150.00
Car Insurance: $118.82
Student Loan #1: $93.64
Student Loan #2: $87.18
Cell phone: $66.76
Internet: $52.31
Water/Trash: $25.00
BoA: $19.00
Gas: $15.00
Netflix: $9.87

Total invariable expenses: $1,637.58

Subtotal remaining funds: $910.42

Ally Emergency Fund: $100.00
Smarty Pig IRA Fund: $100.00
Smarty Pig Electric Bill Fund: $30.00
Smarty Pig Car/Renter's Insurance Fund: $25.00

Total savings payments: $255.00

Subtotal remaining funds: $655.42

Variable expenses:
Groceries: ~$250.00
Car Gasoline: ~$75.00
Socializing: ~$75.00
Swimming: ~$30.00

Total variable expenses: ~$430.00

Remaining funds: ~$225.42

Somehow, though, I never have this leftover. In the past, it's because I've been diminishing my checking account cushion, either through extra credit card payments or infusions to my savings accounts (such as preparation for my Ireland trip).

Now that I don't have CC debt to pay down or international travel to save for, I will be curious to see if I actually have remaining funds each month. With Christmas coming up, including both air travel home and gift purchases, I doubt I'll be padding the checking account with remaining funds any time soon. But come 2011, when things settle down, I look forward to seeing monthly variances in my budget settle down as well.

(My electricity costs go into a savings account each month. This is due to a mixup with the electric company; I haven't seen a bill in over a year. They are trying to get the paperwork straight, but in the meantime, I am saving for the very large bill I know will eventually be coming. From past experience, I know my electricity costs run about $15 a month, but I am saving double that as a safety net.)

I look forward to putting that ~$225.42 to good use in my savings accounts in the upcoming year!

The living situation

Is this revealing too much about myself?

I make a $40,500 annual salary, before taxes. After taxes and health insurance, I take home $2,548 a month. This is a very fair sum and easily lived on by a single person. That is, IF that person doesn't live in Los Angeles. In this city, my rent is $1,150 a month, or 45% of my take-home pay. Appalling, I know. This is not something I am proud of. I don't live an extravagant life. I live in a one-bedroom apartment with just under 500 square feet, a small balcony, and a parking space (important in LA). My building is safe, quiet, and comfortable. My apartment has a dishwasher and a garbage disposal. The laundry room is across the hall. I have central A/C and heat.

It is possible to live in Los Angeles for less than this. I did it for 15 months. Three months with a roommate when I first arrived in LA. That was $975/month for a nice apartment in a safe neighborhood with no dishwasher, no A/C or heat, no garbage disposal, and no parking space. However, I honestly prefer living alone. And I'm 30, which is a bit too old for a roommate, in my personal opinion.

Then I lived alone in a slum. $995/month for a 400-square-foot studio with no parking in a shady neighborhood. No dishwasher, no A/C (but a small space heater), no garbage disposal, no security in the building (front door didn't even lock), no laundry on premises, and a rowdy bar out back. Cockroaches, loud neighbors, overflowing dumpster, and, at the very end, mice. MICE!

Thus, I am more than willing to pay an extra $150/month to live in peaceful, quiet, safe, and sanitary conditions. We all have our priorities, and my home being a haven is mine. I pay for it, but it is money well-spent, in my opinion. I could save myself $200 a month and move in with a roommate. I could save $100 a month and live alone somewhere that I'm unhappy. However, it's not worth it to me. It's just that simple.

I hate that 45% of my income goes to the roof over my head. I am a house-poor renter. LA isn't easy. I pay a premium for the diversity of people, thriving art scene, and beautiful weather I enjoy year round. This is a choice I have made, and I am happy with it. There are those who cannot endorse my lifestyle. I don't blame them. But I have never been happier than here in LA, and I am over the moon about my apartment. This is my home, and it puts me at peace.

Sunset over the Pacific Ocean

Nonetheless, this makes saving and building a retirement fund on my modest salary a challenge. Hence, I don't go out much. I don't shop much. I cook at home and rarely eat meat. I buy generic whenever possible. I make coffee at home and don't buy Pumpkin Spice Lattes from Starbucks, despite how much I love them. And in return, I go for bike rides on the beach. I keep my windows open ten months out of the year. I hike at Griffith Park and look down on the city I call home. And other than a larger salary, I wouldn't have it any other way.

(Not my house)

Goals revisited

I'm feeling grateful for the change in my financial picture, and I think it's a good time to revisit the goals laid out back in August:


Short term goals
Enjoy Ireland without creating new debt (October 2010): ACCOMPLISHED
Pay off my AMEX card (March 2011): ACCOMPLISHED

Long term goals
Pay off BoA card (before 0% APR ends in June 2011, or ASAP after that): ACCOMPLISHED *in spirit*
Build E-fund to $1,500 (August of 2011): currently at $608. At $100/month, I am on schedule to meet this goal.
Create SmartyPig sub-account to grow the $3,000 required to open my Vanguard Roth IRA (end of 2011): currently at $1,525. At $100/month, I am just shy of meeting this goal. Leftover funds each month will be added to make it happen.

Long, long term goals
Build E-fund to $7,000: still a long, long term endeavor
Fund Roth IRA to max of $5,000 each year: ditto the above
Aggressively attack student loans: ditto, but on track to prioritize this


I am feeling good about my progress and have renewed energy to make the sacrifices required to accomplish my long term goals. However, I cannot deny that windfalls like my holiday bonus make all the difference in the world.

Net worth update

Alright, let's do this.

Liabilities
Student Loan #1: $10,382.79
Student Loan #2: $5,646.58
AMEX: $0.00 (yippie!!!!)
BoA: $1,862.00

Total debt: $17,891.37

Savings
Ally E-fund: $608.65
SP BoA payoff: $1,748.00
SP Roth IRA: $1,525.00
SP Car/Insurance: $300.00
SP Electric Bill (oops, haven't mentioned this one yet; next time): $155.59
SP Christmas fund: $100.00

Total savings: $4,437.24

Overall net worth: $-13,454.13

Positive change since last update: $4,900.94

Wow, I can't quite believe so much has changed since August 25th. As previously mentioned, I am a lucky gal.

Now that I'm not funneling hundreds of dollars a month toward my most toxic debt, I am refocusing my funds to tackle the goals laid out in my August 26th post. To that end, I have upped by Ally e-fund automatic transfer amount from $45.81 each month to an even $100. I also have an automatic debit of $100 a month into my SP Roth IRA account and $30/month into my SP Electric Bill account (again, more on this later).

Next, I'm going to figure out my student loans. I don't have plans to eradicate this debt any time soon, but I would like to see my monthly payments going primarily toward my principal, rather than interest. I need to contact my loan provider to discuss this. I will report back.

With the burden of my credit card debt lifted, I feel lighter. Everything is easier. Saving is more feasible. Using my paychecks to benefit my future has never felt simpler. I will never go back. Never. Next thing I want is a Dyson vacuum; I will save for one, and it will never gather interest on a credit card. Barring some horrible, unforeseen circumstance (which I am trying to prepare for with my e-fund) I will not incur any new debt. Come to think of it, my current car should last me at least five more years. I should start saving for the next one now, shouldn't I? Honestly, just imagining setting up a savings account for an expense years and years away makes me really happy. Into the future!

P.S. I forgot to mention, I went to Ireland and paid off every dime immediately! Brilliant. And one of the best weeks of my life.

Windfall

So, I have been hesitant to post, as something lovely and unexpected happened to completely alter my financial landscape: a very generous holiday bonus. How much? $5,000. More than 10% of my annual salary. This was wildly unexpected and, while of course certainly appreciated and joy-inducing, not in the spirit of this blog, which was designed to track my progress slogging toward the goal of fiscal fitness slowly, methodically, and through great sacrifice and dedication.

I started this blog because I knew I could count on no one but myself to solve my problems. I wanted to put it all in writing and hold myself accountable. Laying out the financial picture for no one but me to read was designed to encourage me, provoke me, and, in the case of progress, elate me.

And now, suddenly, someone else has solved a huge portion of my financial difficulties in one fell swoop. I will have to elaborate on how this affects my fiscal worldview in another post; I can't quite wrap my mind around it at this moment. But for the time being, I will lay out how I have used my miraculous bonus to tackle my debt.

$1,139.56 to end my AMEX debt
$1,547.00 to fulfill my Smarty Pig LASIK savings goal
$1,525 to start a Vanguard Roth IRA Smarty Pig savings goal
$300 to start a registration/insurance Smarty Pig savings goal
$100 to start a Christmas shopping Smarty Pig savings goal

Total spent: $4,611.56
Leftover: $388.44

Thus, my credit card debt is *essentially* erased. As previously mentioned, my LASIK costs incur 0% APR on my BoA credit card until June 8, 2011. Thus, I have saved enough to pay off the debt once my 0% APR runs out, excepting my $19.00 a month in minimum payments. Rather than pay off the debt right now, I am letting the $1,748.00 earn 8.5 cents a day in interest in my Smarty Pig savings account. It's free money, why pass it up?

The $300 Smarty Pig account is actually designed to cover an onslaught of May 2011 expenses: car registration, AAA membership renewal, and renter's insurance. Last year these totaled $375. Thus, I plan to save at least that much before all these costs come due again in May.

The $100 Christmas account will earn a bit of interest until December (less than a penny a day, at this time) until I load it onto an Amazon e-gift card, which at Smarty Pig comes with a 3% cash boost, meaning if I load $100, I actually get a gift card with $103 on it. Again, free money. And because I don't get to fly home for Christmas until Christmas Eve, I usually do most of my shopping on Amazon and have it shipped to my parent's house, where it waits for me to arrive. Super convenient.

Smarty Pig rules. I cannot recommend it enough. (I am not compensated in any way for saying this.)

I will do a net worth update next post. But for now, know that the bonus has been put to good use. And I did allow myself  a few indulgences: drinks out with friends twice this month, buying lunch for a colleague, new curtains for the living room, and a charitable contribution. I am a very lucky girl.