Puck works as a librarian and recently settled into a new job and new apartment in Boston, MA. Ve is also a writer and recently had vis first work of fiction published! Vis family immigrated to New York City from Ukraine in the early 90s and vis parents still live there. Today, Puck would like our help determining how to create a sustainable, mindful spending and savings pattern going forward. Ve is deeply generous and connected to a wide range of artists and creators, whom ve loves to support. However, now that Puck has student loan debt from vis master’s in library science degree, ve feels the need to rein in this generosity a bit in order to get vis finances into shape.
And a note: Puck’s pronouns are ve/ver/vis/verself (example sentences here) which are new to me as a writer, so please bear with me as I get this format under my belt. Please feel free to correct me in the comments section. I love a day when I get to learn something new! Thank you for that opportunity, Puck!
What’s a Reader Case Study?
Case Studies address financial and life dilemmas that readers of Frugalwoods send in requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight and feedback in the comment section.
For an example, check out the last case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.
The Goal Of Reader Case Studies
Reader Case Studies intend to highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!
The Case Study series began in 2016 and, to date, there’ve been 70 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.
I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight and trans people. I’ve featured men, women and non-binary folks. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland and France.
I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.
The goal is diversity and only YOU can help me achieve that by emailing me your story! If you haven’t seen your circumstances reflected in a Case Study, I encourage you to apply to be a Case Study participant by emailing firstname.lastname@example.org.
Join the UBER FRUGAL MONTH!!!
I’m hosting an Uber Frugal Month Group Challenge in January: a free and fabulous way to tackle and tame your finances. It’s kind of like doing a Reader Case Study on yourself! Sign up in the box below to join me starting January 1.
Reader Case Study Guidelines
I probably don’t need to say the following because you folks are the kindest, most polite commenters on the internet, but please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not condemn.
There’s no room for rudeness here. The goal is to create a supportive environment where we all acknowledge we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.
A disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises.
I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.
With that I’ll let Puck, today’s Case Study subject, take it from here!
Hi, Frugalwoods! My name is Puck and I work as a librarian in Boston. I’m 31 years old and my pronouns are ve/ver/vis/verself, although “they/them” pronouns are also fine if neopronouns are hard. I am a writer, librarian, and all-around nerd with particular passions for tabletop roleplaying games, languages and linguistics, and all things sci-fi/fantasy.
I’ve also done a bit of voice acting in a fiction podcast, something I enjoyed immensely and hope to do more of. I live with two roommates who are my close friends, as well as being a romantic couple (with each other, not with me). I myself am polyamorous and have a few serious partners but nobody I live entwined with, and all of my romantic relationships are long distance for the moment.
My hobbies include doing watch parties of various films and shows with friends and loved ones (I have something nearly every night of the week, most of them virtual), playing tabletop roleplaying games (currently I participate in ongoing games of Monster of the Week, Star Wars: Edge of the Empire, and Ars Magica), learning new languages (currently Mandarin and Korean are at the top of the docket), and creative writing (fanfiction, poetry, and original fiction). I tend to have fairly eclectic interests and love trying new things.
It’s hard to remember what things were like before the pandemic, but other things I used to do: Traveling! I’ve done a very small amount of travel since my grad program, mainly with family, but no international travel in a while, and I miss that. Dance! I really love social dancing, especially Argentine tango, and I was also briefly in a contemporary dance company. I’d like to start going to social dancing events once it feels safer to do so, but I’m definitely not ready to touch strangers or even friendly acquaintances like that just yet.
My parents, sisters, grandparents (now deceased), and I immigrated to the United States from Ukraine in the early 90s after the Soviet Union fell apart. I grew up in New York City, where my parents still live, but my two sisters and I all ended up living in New England.
I really like Boston and I am hoping very hard not to have to move anymore, because I’ve moved apartments at the rate of about once a year or so and it’s extremely draining, both to the spirit and to the finances. There’s a Russian saying that two moves is equivalent to one house fire in terms of disruption to one’s life, and I really feel that.
To give a little background on my current professional and financial situation: I moved states in 2017 to move in with some (different) close friends and in the summer of that year, decided to enroll in a Master’s program in Library and Information Science, changing careers from linguistics annotation. It’s hard to explain just what linguistics annotation is, but long story short, I was freelancing and there wasn’t really a way to survive long term doing it, so the only reasonable next steps were to either go into academia for linguistics or learn to code and go into industry, neither of which appealed to me.
However, I’d been kicking around the idea of becoming a librarian for a few years at that point, and with my finances getting sticky, my health going down the drain due to untreated Lyme disease misdiagnosed as fibromyalgia, and no desire to do the other kind of grad school, I took the leap and started studying for my MLIS.
When I’ve done info sessions for my grad program, I’ve always told people not to do what I did — go into the program without any prior experience working in libraries and then study full time while living on student loans. It’s a really risky way to go about it, and there’s no guarantee you’ll find a job that’ll help you recoup that kind of debt. That said, it worked out very well for me. In addition to this just being the way my brain works, I was also being treated for chronic Lyme disease at the time, so living on student loans full time was the only way I could really function. If I had to both study and work to support myself, I wouldn’t have managed it.
Puck’s Current Job as an Assistant Librarian
In 2020, I began working for the city library and moved in with strangers in a relatively cheap apartment to fulfill the residency requirement. This is the job I currently have. The benefits are good and it’s a union position.
I started working here in April 2020 when the library was actually closed, and I was paid my full salary to do no work for several months before I was given things that were possible to do from home. This was helpful to begin to build my funds back up after spending a lot on the move.
In addition, that same month, I got really into a new show with a bunch of friends and started writing extremely prolific amounts of fanfiction, which led to me having an original story accepted into an anthology! This is my first time getting paid for creative writing and it is a huge milestone. I’ve hung the check up on my cork-board to remind myself what I’m capable of. I fully intend to continue working to get my original writing published, both poetry and prose, although I haven’t had the bandwidth recently to work on submissions.
This past September, I moved once more, this time to live with close friends in a more intentional household. We share a lot of expenses and have dinners together most nights. We watch shows and movies together and cuddle on the couch, something I would never want to give up after being so completely touch-starved for a year during the pandemic. I was friendly enough with my former roommates, but we were never super close, and a co-op-y style household is very important to me, so even though this apartment is significantly more expensive (I was paying $550/month when I moved out and that was AFTER a rent increase!), I think it’s worth it. So that’s my life now!
What feels most pressing right now? What brings you to submit a Case Study?
As I mentioned above, I moved recently and it’s my second move in about a year and a half, and both moves ate up my savings. I was lucky enough to graduate my undergrad with no debt–thanks to a good amount of scholarships and my parents being able to pay the rest–so my current student loans (all of which are federal) are a very new thing for me.
I’d like to find a way not to wipe myself out with my moves, to be more intentional with my spending and saving, and to create a plan to handle my student loans.
For awhile I was attempting to at least knock a hole in my interest so the loans don’t increase. When all my loans went into forbearance and the interest dropped to zero due to the pandemic, I was excited to start paying down the principal, but I looked into Public Service Loan Forgiveness (PSLF) once I started at my current job and it appeared that payments paid during forbearance didn’t count toward the 120 required payments, so I stopped paying the $400 a month that I’d initially been throwing at them. Since then, this appears to have changed.
I’ve sent in the paperwork to be certified towards PSLF, but it’s going to take some time. In the meantime, I’m not quite sure what to do. Eventually forbearance will end, and I’ll definitely want to start making payments, but until then, do I continue to hold off on making payments?
When it comes to my spending, I have a tendency to, er, patronize the arts, so to speak. I get excited about people creating things on Kickstarter and Youtube, and artists on Tumblr and twitter, and I’ll fund Kickstarters, subscribe to Patreons, commission works of art from friends and strangers both. And then because I get glorious art or books or games or video essays as a result, the joy of having art outweighs the pain of spending money, so I don’t really learn my lesson until I start looking at my funds and going “oooh, oh no, that is extremely low.” You know?
For now I’ve unsubscribed from all my Patreons and a bunch of my software subscriptions (many are annual so I won’t renew when the time comes), and have put a moratorium on kickstarters and art commissions, but I don’t want that to be a permanent thing, because, well, I really like being able to support creators in creating! And I have a few extremely specific art desires and I know exactly whom I’d like to commission to make them, once I have money again…
My other biggest pain points are food expenditures, both groceries and eating out. This is kind of in flux because I have new roommates and we share a lot (though not all) of our food expenses, so what this will look like in the future, I’m not 100% sure. Right now I have maybe a month and a half of data? I don’t want to count September because that was the month I moved and everything was so messy then. But I do know I can do better in that whole, “Oops I forgot to make lunch again, time to go buy a sandwich at B. Good” vein, and that has nothing to do with my roommates and everything to do with me.
When it comes to assets, I have a Roth IRA I’ve had since undergrad, but which I’ve never funded to the maximum (which is $6,000 a year, I think). My current job also has this pension plan, but I don’t fully understand what that entails. From my research, it looks like in addition to the pension, I can apply for a 457 SMART Plan, but there doesn’t seem to be any kind of matching, so it doesn’t seem worth it?
The CD is from when I very briefly had an investment account with a company that closed and rather than trying to roll that money over into other investments, I threw it in a CD. That may not have been the wisest move ever, but it’s done now.
I’m looking for full librarian positions at the moment, both because they require an MLIS (and I’d like not to have gotten my degree in vain) and because most librarian positions pay more than my current library assistant position. But it’s relatively slow-going, in part because I’m not willing to move so I’m only looking at jobs in the area, and in part because libraries are only just now beginning to hire again after most of them having hiring freezes during the pandemic.
What’s the best part of your current lifestyle/routine?
1) Living with my roommates! I love sharing chores and cooking with them, eating together, cuddles and hugs, showing each other movies and shows we like! They’re really good friends, and although they are a couple with each other, I never feel left out or third-wheeling or anything like that.
2) My online fandom communities. I have several Discord and Slack servers that I’m in and I really love yelling about shows/books/fics/art we like with friends, sharing works in progress, cheering each other on in our creative endeavors, and recommending new works. I do not exaggerate when I say that my online communities got me through the pandemic and, although this is less important than the social/emotional aspect, did I mention that I got original fiction published because of my fanfic?! I never in a million years would have put that on my 2020-21 bingo card.
What’s the worst part of your current lifestyle/routine?
I’m not super great at doing things that have long term benefits but involve short term discomfort or boredom (keeping up with my physical therapy exercises, saving up for emergencies rather than spending money on shiny new things). I’ve repeatedly failed to rearrange my schedule such that it includes daily PT, making sure I have a preprepared lunch ready to go on workdays, and a reasonable bedtime routine.
Also, naturally, the pandemic is a constant source of stress and it’s very much not over. I find navigating conflicting information about what is safe and what isn’t extremely stressful. And I’ve got some major dental stuff that’s come up recently, so getting those procedures done is going to be both stressful and expensive (although my insurance is pretty good so it should cover a fair chunk of it, and the rest can be paid with the FSA).
Where Puck Wants to be in Ten Years:
- Student loans either forgiven or on their way to being paid off;
- Emergency fund built up to withstand shocks;
- A good sense of where I’m going in terms of retirement.
- Still living in a co-op-style intentional house with people I care about, although possibly not the exact people I’m currently living with;
- Visiting family and long-distance partners somewhat regularly;
- Some international travel, particularly to places whose languages I’ve learned or am going to learn;
- Still participating in some form of fandom, doing tabletop roleplaying, and dancing regularly;
- I’d also like to learn stage combat at some point in the intervening years.
- I’d like to have a librarian position that includes both back-of-house cataloging/classification work and public-facing duties. This would probably require getting a job in a smaller library system than the one I’m currently in, since larger systems tend to silo different duties across departments.
- I’d also like to have more voice acting credits under my belt and be publishing poetry and short fiction for pay, although I’m not interested in either of those as a primary career.
|Library salary||$2,743||My net salary from the library minus the following deductions: health & life insurance, pension contribution, union dues, and taxes.|
|Short story sale||$33||This was a single payment for a short story divided by 12; I’m very proud of this|
|Item||Outstanding loan balance||Interest Rate||Loan Period/Payoff Terms|
|Student Loan 4: Direct Grad PLUS||$26,072||0% interest||Currently in forbearance.|
|Student Loan 2: Direct Grad PLUS||$25,526||0% interest||Currently in forbearance.|
|Student Loan 1: Direct Loan – Unsubsidized||$22,933||0% interest||Currently in forbearance.|
|Student Loan 3: Direct Loan – Unsubsidized||$16,021||0% interest||Currently in forbearance.|
Note: all of my student loans are federal and so should qualify for PSLF.
|Item||Amount||Notes||Interest/type of securities held/Stock ticker||Name of bank/brokerage|
|Roth IRA||$18,620||Roth IRA I’ve had since just before I finished undergrad.||Large mix of ETFs||Wealthfront|
|High Yield 5-Year CD||$1,352||Matures Aug 9, 2024.||Earns 2.65% interest||Ally Bank|
|Savings Account||$1,092||This is where my money lives unless I need it immediately, since it’s got the higher percentage. It used to be over 1% interest when I first opened it, but alas.||Earns 0.5% interest||Ally Bank|
|Checking Account||$756||This is the money that’s going to be used imminently||Earns 0.1% interest||Ally Bank|
|Moving Costs||$484||Average for 2021 according to YNAB. I am hoping this number stays at 0 for the foreseeable future.|
|Groceries||$378||This is the average for 2021 so far according to YNAB.|
|Kickstarters||$206||Average for 2021 according to YNAB. I have committed myself to not contributing to any more Kickstarters for the foreseeable future.|
|Daily Dining Out||$204||Average for 2021 according to YNAB. I separate out daily dining out from social dining out because going out/ordering in with friends happens way less frequently and this—buying lunch out for myself—is definitely an area I can improve.|
|Monthly IRA contribution||$100|
|Home supplies/expenses||$93||Average for 2021 according to YNAB.|
|Fitness||$86||Average for 2021 according to YNAB. This includes ballet classes I took over Zoom while at my old place, and a personal training package that I expect to get reimbursed by my FSA once I’ve completed all the sessions.|
|Patreons||$80||Average for 2021 according to YNAB. I have unsubscribed from all of these for now, but I would like to go back to supporting some of my favorite Patreons when I’m more stable, but probably not all of them because it does add up.|
|Art purchases/commissions||$73||Average of individual purchases in 2021. I’m not going to do any more of these for a while, although I do have a few specific art pieces I’d like to commission at some point when I’m more stable.|
|Clothing/shoes/accessories||$70||Most years this is a lot less, but I needed to buy a lot of clothes that I hadn’t bought replacements for in years in the last three months.|
|Books||$67||Average for 2021 according to YNAB.|
|Gifts||$64||Average for 2021 according to YNAB.|
|Gaming||$61||Average for 2021 according to YNAB. I bought a Nintendo Switch over the summer and a bunch of games for it. I also recently bought several reference books for a tabletop RPG I am participating in. This is another place where I intend the number to go down to $0 going forward.|
|Donations||$59||Average for 2021 according to YNAB. Includes monthly contributions to the organizations that matter to me, as well as spur of the moment donations to beggars and people experiencing emergencies.|
|Utilities||$56||Includes gas, electric, internet, and compost pickup|
|Medical||$52||Average for 2021 according to YNAB. Not reimbursed by FSA.|
|Social Dining Out||$52||Average for 2021 according to YNAB. This one varies a lot, there’s some months where it’s $0 and some months where it’s nearly $200.|
|Other entertainment||$50||Average for 2021 according to YNAB. This includes purchases of music albums and movie rentals, paying buskers, virtually attending events, & the one and only movie theatre experience I’ve done this year.|
|Travel||$41||Average for 2021 according to YNAB.|
|Tea stuff||$41||Average for 2021 according to YNAB. I’ve pledged myself to buy no more tea or tea accessories until I have at least put a dent in my current supplies.|
|Renter’s Insurance||$21||$247 paid annually|
|Software Subscription||$19||This used to be a lot more but I’ve cancelled a lot of my software subscriptions since I moved, so this is going forward: LastPass (my password manager), YNAB (my preferred budgeting software), and two supportive things for software I use for free and appreciate: Signal and XKit|
|Streaming Services||$9||My share of a Netflix subscription I’m sharing with my former roommates & an annual subscription to Viki divided by 12|
|Totals minus the things I’ve recently cut out:|
Credit Card Strategy
|Card Name||Rewards Type?||Bank/card company|
|Citi Double Cash||1% back on purchase, 1% back on payment||Citi|
|Amazon Store Card||Some % back depending on whether I have Amazon Prime or not at any given time||Synchrony Bank|
Puck’s Questions for You:
1) How do I balance my desire to support cool creative endeavors and my need to remain financially solvent?
2) I find the experience of having nearly $100k in debt new and frightening, and I don’t have a concrete plan apart from ‘hope PSLF works out.’ I’d love to hear advice from people who are more familiar with the PSLF process and advice about managing student loans in general, especially in a time of pandemic.
3) How can I plan for future moves without wiping my savings out?
4) How can I become more intentional with my spending and saving?
Thanks, Frugalwoods and the commentariat! I’m a huge fan of the blog in general and the Reader Case Studies in particular. I’m both excited and trepidatious about being a case study myself.
Liz Frugalwoods’ Recommendations
I am thrilled Puck came to us for Case Study because I think ve’s at an important juncture: finished with grad school, gainfully employed in ver’s long-term profession and settled in a new city. Puck’s made a lot of excellent decisions to get to this point and I very much see the financial piece as the “what’s next” on ver life plan. With that, let’s dive in!
Puck’s Question #1: How do I balance my desire to support cool creative endeavors and my need to remain financially solvent?
Puck, before you can help/support others, you’ve got to first take care of yourself. Puck is already aware that spending more than ver income isn’t sustainable and I’m delighted at the changes ve’s already made to get ver spending down below ver net income.
But, even at the new spending level of $27,708 per year–with an annual income of $33,307.08–that only leaves $5,599.08 for savings every year. This is not bad, but it’s also not sustainable for the longterm.
The biggest challenge we’re going to continually bump up against today is Puck’s income. Yes, we will devise a budget and plan at ver current income level; however, I don’t want to gloss over the fact of the dollar amount: $33k in a high cost of living city like Boston is tough.
I heard two notes in Puck’s write-up that indicated a higher salary might be on the horizon:
- Ve mentioned ve’s looking for a full librarian position, which I assume would pay more than ver current assistant librarian role.
- Ve articulated the enjoyment and pride at publishing ver first piece of writing and so I wonder if that could be a viable and continuous side hustle?
At the end of the day, we can frugalize everything in Puck’s life, but the biggest change will come from an increased income. I think tackling this from both ends–income and expenses–will be a good way for Puck to think about ver finances going forward. Since expenses are the thing we can address today, let’s go for it!!!
Puck’s Uber Frugal Budget
I’ve done one of the first exercises in the Uber Frugal Month: I’ve identified Puck’s fixed expenses. Fixed costs are things you can’t (easily) change and are required for survival: rent/mortgage, utilities, medical care, food. Discretionary costs are…. everything else! When you boil it down to what you NEED to survive, the list is pretty short.
I’m not saying this is how most of us want or choose to live, but I find it instructive to identify one’s bare bones budget. That’s one of the primary goals of the Uber Frugal Month: to help you discern your base cost of survival. From there, you’re enfranchised to add back in the luxuries (aka Discretionary costs) that mean the most to you.
Here are Puck’s Fixed/Mandatory Expenses for Survival:
|Item||Amount||Puck’s Notes||Liz’s Notes|
|Rent||$850||This is super low for Boston. Nicely done!|
|Groceries||$378||This is the average for 2021 so far according to YNAB.||Very reasonable and impressively low. Strictly speaking, groceries fall under ‘discretionary,’ since you have control over how much you spend.
But, since Puck’s groceries are so low already, we’ll assume there’s not room for additional frugalization in this category.
|Utilities||$56||Includes gas, electric, internet, and compost pickup||This is so low! Nice!|
|Medical||$52||Average for 2021 according to YNAB. Not reimbursed by FSA.|
|Renter’s Insurance||$21||$247 paid annually|
Puck’s baseline for survival is very inexpensive! Again, I’m not saying this is an ideal lifestyle, but I am illuminating what’s possible with an uber frugal mindset. An annual expenditure of $16,284 would enable Puck to save $17,023 annually.
Much of this boils down to embracing a mindset of values-based spending.
Put resources–money and time–towards the things that matter most to you and siphon resources from less important, lower ROI activities/people/experiences. Puck stated that the two best things in ver life are:
1) Living with my roommates!
2) My online fandom communities.
The good news is that this Uber Frugal budget allows Puck to keep both of those things. Roommates and internet included above!
Since ve doesn’t own a car or pay to commute, transportation isn’t factored in here. Obviously for people who do need a car/metro pass, that item would be included.
I encourage Puck to join the Uber Frugal Month in January and complete all the exercises on how to craft this lifestyle. Again, this isn’t intended to be a forever option–although some people choose to make it so. It’s intended to be a detox from spending, a realignment of priorities, and an illustration of the options you have with your money.
Why Save All This Money?
Two reasons: student loan repayments and an emergency fund.
Student Loan Repayments
Once Puck’s student loans are no longer in forbearance (more on that in a moment), ve will be on the hook for making monthly minimum payments. I don’t know what that dollar amount will be but, based on the overall size of Puck’s loans, it could be substantial. By living at the uber frugal rate above, Puck will have $1,418 per month available to funnel into loan payments and ve might need that entire amount.
Puck’s cash-on-hand stands at $1,848, which wouldn’t cover even one month of expenses at ver current spending rate. Yikes bikes! An emergency fund is the bulwark between you and debt. When I see Puck’s assets and expenses, what I fear for ver is a future of credit card debt. Because one cannot spend more than one makes and, if you don’t have any savings, you will eventually have some sort of emergency that plummets you into debt.
The emergency could be a lay-off from a seemingly stable job, a health crisis, a sudden increase in your rent/utilities, etc. An emergency fund is what ensures you don’t plunge into debt when one of those terrible (but kinda inevitable) things happen. See my epic car repair expenses last month for a great example…. And unfortunately, in a unionized profession, lay-offs are often first-in, first-out. Meaning, the most recently hired people (such as Puck) are the first to be laid off in the environment of lay-offs.
In an ideal world, you want an emergency fund totaling three to six months worth of your expenses. The less you spend, the less you need to save. The more you spend, the bigger your emergency fund needs to be. This is another area where knowing your uber frugal baseline is tremendously helpful!
At Puck’s current rate of spending $2,309 per month, ve would need an emergency fund in the range of $6,927 (three months worth) to $13,854 (six months worth). At the above uber frugal spending rate of $1,357, ve’d need $4,071 to $8,142.
Short-Term Goal: Do It for Six Months
If Puck is game to try out this uber frugal budget for, let’s say six months, ve would save $8,511.54. IN ONLY SIX MONTHS!!! AT VER CURRENT SALARY! If ve did if for a year? $17,023 saved. IN ONE YEAR. That would be a really substantial change to Puck’s overall financial picture in a very short period of time! I’m not saying Puck HAS to do this, but I think it merits serious consideration. It also might be absolutely necessary depending on what ver student loan repayment totals are each month.
Ok now we’ve got to talk about the other two elephants here:
- Student loan debt
Puck’s Student Loan Debt
The pandemic pause on student loan repayments ends January 31, 2022 (aka the end of next month). After that, Puck will need to resume paying off ver loans, which will add another line item to their uber frugal month mandatory expenses.
Now is the time to follow the steps outlined under “Preparing for Repayment to Resume” on the Federal Student Aid website. Puck needs to figure out what vis minimum required payments are and then make them starting in February.
Public Service Loan Forgiveness (PSLF)
Since Puck’s loans are federal and since ve works for a city government, ver loans should be eligible for the PSLF program. Under this program, the balance of the loans are forgiven following 120 months (ten years) of qualifying payments. Puck should do the research and application now to ensure vis enrolled in PSLF and ready to go starting February 1, 2022.
Additionally, once ve knows the monthly minimum required payment AND the interest rates on all of ver loans, ve should do the math to see how quickly ve could pay the loans off verself as opposed to waiting the ten years for PSLF. I doubt it’ll make sense for Puck to do this and it’ll probably be wiser to take advantage of PSLF, but a calculation is merited.
At the above uber frugal budget, Puck could put $17,023 towards the loans each year. At that rate (and not accounting for interest since I don’t know what the interest rates are), Puck could pay off ver $90,552 in loans in 5.4 years. That’s pretty fast!!!! It would necessitate that gruelingly low spending rate, but it would get Puck out from under those loans in half the time as PSLF. Plus, it would save ver five years worth of interest. Again, worth doing the calculations once Puck knows the interest rate on ver loans as well as the required monthly payments.
Once Puck does these calculations, ve needs to make a determination and stick with it. Once you are in PSLF, you’re making a longterm commitment to work only for PSLF-qualified organizations until your loans are forgiven. The bad choice here would be to enroll in PSLF, make minimum payments and then at say, eight years in, transfer to a non-PSLF-qualified organization. Once you’re in it, stick with it until the loans are forgiven.
Puck’s government job comes with a pension, which is great! However, according to the city of Boston retirement plan website:
You’ll become vested after you’ve worked in your public service job for 10 years. That entitles you to your benefits when you retire.
This means Puck needs to work for the city for at least 10 years. If ve feels this is reasonable and within ver life plan, then great! If not, then the pension is essentially meaningless for Puck, although the city will refund as follows:” “You will receive your total amount of retirement deductions paid into the retirement system plus interest.” I encourage Puck to poke around on this website and discern which group ve falls into under the “Retirement Formula Chart.”
Puck might qualify for social security, but also might not due to the pension offered by the city of Boston. Ve should research this to determine the answer. If ve is disqualified from social security, the most financially viable option will be to continue working for the city government to ensure full pension benefits.
457 SMART Plan for Public Employees
Puck noted ve is eligible for the Massachusetts 457 SMART plan, which is a tax-advantaged retirement investment account that employees can contribute to via deferred compensation (aka money coming out of every paycheck). You put money into a 457 pre-tax, which means you pay taxes on the money when you take it out in retirement. The advantage of this is that it’s assumed your income will be lower in retirement and thus, your tax rate will be lower as well.
Puck also has a Roth IRA, which is an Individual Retirement Account. Here’s what that means:
- A Roth IRA is a retirement account that’s post taxes.
- This means you pay taxes on the money you put into a Roth IRA, but you don’t pay taxes when you withdraw the money in retirement. In that respect, a Roth is the opposite of a 457, which makes it a nice way to diversify your retirement investments.
- A Roth IRA grows tax free.
- You must be age 59.5 before you can withdraw money penalty-free (although there are exceptions).
- Your eligibility to contribute to a Roth IRA depends on your income and your particular tax situation.
- I like this Nerd Wallet article on Roth IRAs if you want to read more.
The wonderful and beautiful thing is that Puck started ver Roth IRA about a decade ago, which means it’s been growing and compounding since then!!! One of the very best (and very easiest) ways to ensure you have enough for retirement is to START EARLY. I have this entire post on the math behind why starting early with a small amount will yield better results than starting later with a larger amount. Kudos, Puck!!!!! Let this Roth IRA keep on keeping on!
Since Puck’s income is so low, the tax deduction from a 457 isn’t all that useful. I’d say that at ver current income level, it’ll make the most sense to continue investing into the Roth IRA and not open a 457 at this time.
Puck should investigate what ver Roth IRA is invested in and what the fees are. I’m not familiar with Wealthfront and don’t know their investment options or fees, so I encourage Puck to do ver research. I did a deep dive in the last Reader Case Study on how I invest and on how to check the fees and expense ratios on your investments. Puck should follow those steps.
Once Puck has an emergency fund saved up and a tenable monthly budget that enables ver to save, ve can explore investing more money for retirement. Puck’s priorities going forward are three-fold:
- Saving up an emergency fund.
- Paying off the student loans.
- Investing for retirement.
These can’t really be tackled in isolation, so Puck will need to balance addressing all three simultaneously. The good news is that most of this can be automated every month.
- Sign up to take the January Uber Frugal Month Group Challenge. I think this’ll help Puck with the overall task of creating a values-based, sustainable and mindful spending and savings regimen.
Consider living on the above outlined uber frugal budget for at least six months in order to save up an emergency fund.
- Research and follow the steps needed to ensure ve is ready to make PSLF-qualifying student loan payments once forbearance ends on January 31st.
- Enroll in the PSLF program (if not already done).
- Do the math on paying off the loans verself versus waiting for PSLF to forgive the balance. Ten years worth of interest isn’t nothing.
- Investigate the investments and the expense ratios (fees) of the Roth IRA. Refer to this post for help. Read this book for further investment how-to info: The Simple Path To Wealth by JL Collins, a version of which is in his blog’s “Stock Series” (affiliate link).
- Continue investing into the Roth IRA.
- I’ll be honest, there is very little room for error in the next few years–Puck needs to reduce expenses, increase income, pay off the student loans, invest for retirement, and build up an emergency fund. But the wonderful news is that, long-term, I think Puck will be in fantastic shape!
- Ve has a wonderful career, great friends, engaging hobbies and is living in a city FILLED to the BRIM with free/cheap entertainment as well as ample barter and trade opportunities.
- Once Puck gets these financial action items under wraps, ve can look forward to a long and fulfilling career with a stable retirement.
- Crucially, once Puck stabilizes ver finances, ve can once again support the artists and creators who make ver life so rich and beautiful.
Ok Frugalwoods nation, what advice would you give to Puck? We’ll both reply to comments, so please feel free to ask questions!
Would you like your own case study to appear here on Frugalwoods? Email me (email@example.com) your brief story and we’ll talk.