Reader Case Study: Earn More, Spend Less, Or Both?
I sort of forgot that sometimes we do Reader Case Studies here on Frugalwoods, but I love them! And fortunately, a loyal reader–we’ll call her Julie for this exercise–hadn’t forgotten. She contacted me last week to ask if I’d be willing to publish her story and I’m delighted to do so.
A bit of background: Reader Case Studies are posts whereby a real person, who is a reader of Frugalwoods, contacts me with a financial dilemma that they’d like Frugalwoods nation to weigh in on. Then Frugalwoods nation (that’d be you), reads through their situation and provides advice, encouragement, insight, and feedback in the comments section. It’s a way for us to support and help one another on our diverse financial journeys. Since many of us don’t discuss money with our friends in a conventional setting, I find that having these conversations here on the internet provides a wonderful resource.
I probably don’t even need to say the following because you all are the kindest, most polite commenters on the internet, but, please note that Frugalwoods is a judgement-free zone where we all endeavor to help one another, not to condemn.
With that, please take a look at Julie’s case!
Julie wrote to me:
I am a single, 33-year-old woman living in a small town on the Connecticut shoreline north of New Haven. I share an apartment with a roommate and don’t have any pets. I’m currently a full-time MBA student (with a focus on Finance/Project Management) on track to graduate in July 2018. I also have an MS in Organizational Leadership, which got me a lot of debt but no job prospects.
I work 40 hours a week as a temp in a Junior Accountant role along with two side hustles: pet sitting and selling on Ebay (I buy high-end men’s clothing from my local Goodwill–at roughly $0.70 an item–and flip it online for a large markup).
In order to save money, I don’t eat at restaurants or go out for drinks , nor do I go to the movies. All of my entertainment comes from reading, Netflix, or DVDs from the library. My hobbies include history, antiquing, collecting old books, trying to learn how to can/fish/knit and building models (mainly of ships and planes).
Where Julie Wants To Be In 10 years:
- Finances: debt-free (perhaps with a reasonable mortgage) and on track to retire by 50 if not earlier.
- Lifestyle: to be happy, healthy, married with 1-3 kids, and living in a home on a decent amount of land. I’d also like to be more involved in my community through coaching youth sports and volunteering at my church.
- Career: I hope to find a job, preferably in finance or as an analyst, that provides a work/life balance that allows me to have a family.
- After my expenses, I have roughly $300-$800 leftover every month (this fluctuates depending on my side hustle income). What should I do with this? Invest or pay down debt faster?
- My students loans for my MBA (currently $19K but this will grow) are at 5.84% interest whereas my other student loans are at 6.8%. Since the MBA will cost less (thanks to a scholarship) would it make sense to take the additional money (student loans for living at 5.84%) and pay off the 6.8% loans? And then try to refinance the lesser amount for a lower interest rate?
- And finally, career advice! Should I continue temping while earning my MBA or try to find a more full-time position before graduation?
- I am also looking for mentors in the field of finance.
|Net Take Home||$1,979.36||From Jr. Accountant temp job|
|Side Hustle Income||$75-$500||Pet sitting and selling on Ebay|
|TOTAL:||$2,054.36-$2,479.36||Fluctuates depending on side hustle income for the month|
|Car Payment||$300.00||$1,980 left 0% interest|
|Credit Card||$200.00||$3,250 left 0% interest|
|Medical||$53.73||$689.53 left 0% interest|
|Medical||$25.00||$2,500 left 0% interest|
|BA and MS||$44,000.00||Deferred until 12/2018. 6.80% interest. Tried to refinance but wasn’t able to through SoFi.|
|MBA||$19,000.00||This will continue to accrue until I graduate. 5.84% interest.|
|Emergency Fund||$6,918.10||I don’t want to wipe this out in order to pay down debt.|
|Roth IRA||$200.00||This makes me depressed to say the least.|
|Groceries||$100.00||I have a gluten intolerance|
|Life Insurance||$73.00||I have some medical conditions and am not sure I would qualify again. This is $1M with a 20 year term. I am open to reducing or eliminating.|
|Cell Phone||$43.05||AT&T Go phone (parents live out of the country so I needed something that would allow me to keep in touch with them).|
|Ebay||$26.00||Membership for my side hustle of selling on Ebay|
|Haircut||$15.00||Every two months|
|Microsoft office||$11.00||Needed for school, but I wonder if I could get it cheaper as a download?|
Mrs. Frugalwoods’ Recommendations
My chief recommendation for Julie is to do everything she can to ensure that her MBA pays off after graduation. I think that finding an excellent, well-paying job post-MBA should be priority #1. With that job, she can quickly wipe out all of her debt and start tackling her student loans. To that end, I’d advise Julie to be at the top of her class, to network like crazy, and to take advantage of every opportunity to meet prospective employers in order to line up an awesome gig once she’s finished with school.
Savings Accounts Side Note
One of the easiest ways to optimize your money is to keep it in a high-interest savings account. With these accounts, interest works in YOUR favor (as opposed to the interest rates on debt, which work against you). Having money in a no (or low) interest savings account is a waste of resources because your money is sitting there doing nothing. Don’t let your money be lazy! Make it work for you! And now, enjoy some explanatory math:
- Let’s say you have $5,000 in a savings account that earns 0% interest. In a year’s time, your $5,000 will still be… $5,000.
- Let’s say you instead put that $5,000 into an American Express Personal Savings account that–as of this writing–earns 1.70% in interest. In one year, your $5,000 will have increased to $5,085.67. That means you earned $85.67 just by having your money in a high-interest account.
And you didn’t have to do anything! I’m a big fan of earning money while doing nothing. I mean, is anybody not a fan of that? Apparently so, because anyone who uses a low (or no) interest savings account is NOT making money while doing nothing. Don’t be that person. Be the person who earns money while sleeping. Rack up the interest and prosper. More about high-interest savings accounts, as well as the ones I recommend, here: The Best High Interest Rate Online Savings Accounts.
Ok, Frugalwoods nation, what advice would you give to Julie? She and I will both reply to comments, so please feel free to ask her any clarifying questions!
Would you like your own case study to appear here on Frugalwoods? Send me your details via email (email@example.com) and we’ll talk.
Updated May 26, 2017 with Julie’s decisions:
I paid off all of my consumer and medical debt. My expenses are roughly $1,060 per month, which allows me to pay for all expenses with just one of my two monthly paychecks. The second check is split evenly between student loans and my Roth IRA. I contribute 20% per month to my Roth 401k. I have an emergency fund of $10k and am actively interviewing for a new job since my MBA in Finance and Project Management is almost finished. Anyone hiring? : ). I’m also starting as a member of the Board of Directors for our local LGBT Pride Board. A massive thank you to everyone who offered their thoughts and advice!!-Julie
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