Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.
Anonymous S is a 24-year-old engineer earning $67,000 a year plus bonus. He also builds websites on the side for an hourly fee of $20 to $35. Read his bio here. Anonymous S is on Team Roger, with Certified Financial Planner Roger Wohlner.
Keep reading to see how Anonymous S progressed throughout the month of April. Following his net worth report own analysis, Anonymous S will be able to read feedback from Roger and from budgeting expert Jacob Wade from iHeartBudgets.
Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.
Anonymous S’s comments and analysis
April was definitely a transitional month. I moved in with my girlfriend and started my new job, and both are definitely steps in the right direction. We just signed a lease for a new place that starts in June. With upfront costs equivalent to three months’ rent, that will take a substantial bite out of my liquid assets. I planned for this, and my checking account was able to survive.
Once expenses normalize, I plan to decrease the size of my checking account. The apartment’s rent is $2,750 a month, but split over two people this is actually a very good deal for what we are getting. Plus, it’s right in the center of Manhattan, under ten minutes to almost every subway line, and a ten minute walk to work. It includes a gym (saving $50 to $100 per month per person), as well as washer and dryer in the unit, saving time and money. The kitchen is also very nice, which will give us an incentive to cook.
My credit card bill was much higher this month due to some flights and travel-related expenses. I’ve also had to eat out a lot more, since using my current kitchen is impractical.
In May, I hope to keep expenses relatively low while exploring New York City. I still won’t have access to my new place until June, so eating out will continue to be a relatively large expense. I’m looking into tax-efficient placement of my assets, and I may want to roll my previous 401(k) into my current IRA to simplify my assets. Once that is completed, I would work to put tax-inefficient holdings in my IRA, while moving anything tax-efficient to my standard Vanguard account.
Since I’ll no longer have access to a 401(k), I need to figure out a new plan for investments. I’ll probably aim for a similar timeline, but would like to have some reduced risk so I can take out money for a house in the future. However, I don’t plan on buying a house for at least five years.
Feedback from Roger Wohlner, CFP
Congratulations on the move to New York City and the new job. You seem to do a good job with your overall finances. The one tip that I would provide is that you need to ensure that you continue to sock away money for your retirement even though your new employer does not offer a retirement plan. At this point a combination of an IRA and probably some taxable investing is the way to go. I’m not a fan of co-mingling any savings for a home down the road with your retirement savings, especially the IRA. Just because you can do something, like use an IRA for short-term savings, doesn’t always mean that you should.
Feedback from Jacob Wade
Congrats on the transition, and it seems like your finances remain unscathed (even jumped up a few grand!). And living within walking distance of work is going to be extremely beneficial, and a huge cost savings. Just be wary of creating a habit out of eating out, especially in New York City. As you probably know, the food is crazy expensive, and since the food category is the most volatile part of the budget, I recommend at least having some basic meal plan in place to save yourself a few hundred dollars a month.
As for buying a house, since you’re at least five years out, I’d so go ahead and invest, but if you were on a shorter timeline, I would say maybe invest 50% – 70% in some funds, and the rest in a money market account, so you don’t end up on the downside of the market with all of your house savings. But five years is enough time that investing well will net you some decent growth to add to your down payment.