Tuesday, April 24, 2007

Savings Projections

By my calculations, I should have 3 months' worth of expenses (which I estimate at $1500/month) in my ING Freedom Fund by the end of this calendar year.

The current balance is $1,300.
I also have a CD at Bank of America, which will be rolled into the Freedom Fund when it matures at the end of August. By then, it will be worth about $1,030. (Running total: $2,330)
I have two "extra paycheck" months still to come. Each will allow me to save $300 above what I usually do, for a total of $600. (Running total: $2,930)
I have 18 paychecks left this year. If I save $50 from each of them in the Freedom Fund, that adds $900. (Running total: $3,830)
Hopefully, my beloved and generous aunt continues the tradition of $500 gifts to her nieces and nephew at Christmas. (Running total: $4,330)
I can definitely find $170 over the course of the year above and beyond my normal savings. I'm pretty sure I can't come up with $670, so if my aunt's gift changes this year, I may fall just short of the mark, but I should be able to make it to $4,000.

That's pretty serious savings, actually. $3,000 (the amount I'd be saving out of this year's earned income) is about 9.7% of my projected pre-tax W-2 income for this year. Disregarding my Roth (which, in this scenario we should, since it's mostly money I didn't earn and it's all money I didn't earn this year), consider that I also save 8% of my (pre-tax) salary in my 401(k). A 17.7% savings rate? I'm no slouch.

My newfound enthusiasm for the Freedom Fund leaves me neglecting my travel fund, though. Its current allotment of $25 per pay period will bring it to $1,500 at the end of the year, substantially short of the $2,000 goal. I'll either have to resign myself to prioritizing the Freedom Fund to the detriment of the travel fund, or find some way to step it up a little.


Anonymous said...

I wanted to write, and at the risk of sounding cheesy, let you know how much of an impact you've made on me over the past few months. Without getting into all the gory details, suffice it to say that money mistakes with respect to credit cards, late payments, living beyond my means, etc. I made in my early 20's resulted in me having nothing to show for it by 31 (my current age). I was able to pay my debt off at 26 but haven't had a credit card since, which of course has come back to bite me in the butt now that I need one for work. I have no established credit history, etc. so I'm unable to get a card. Things are beginning to change though, thanks in large part to your blog. After reading through your posts and heeding your advice, three months ago I opened a Roth IRA with $1,000 and have opened an ING savings account with $500. I was able to approach my live-in boyfriend about adding me as an authorized signer on his credit card ($5,000 credit limit) and where did I get that idea? From you of course :) Speaking of which, do you have a rough estimiation how soon I'll be able to get my own card after being on his?

Thanks again for the inspiration, please keep posting :) xoxo

Tired of being broke said...

The amount of savings you have is definitely great, nothing to sneeze at.

3 Things About Money said...

I have to add to the love and gratitude expressed above, you inspire me on a daily basis. Your savings rate rocks. Anyway, thank you.

M said...

May I ask how you are able to save so much living in New York on a recent college grad salary?

I live in an pretty expensive city, too, with a high cost of housing, and have always found it very difficult to save on a low salary and high expenses. (Where I live, housing is definitely pricey, but though buying is more expensive here than even in New York, rents are no so bad in comparison.)

I've just started reading your blog so I'm not familiar with your housing situation. I think in New York, it's pretty standard to have several roommates. Is there a secret to living in an expensive city as a recent grad and still managing to save? For me, after rent and other bills, there's rarely been anything left. How do you do it in New York?

English Major said...

M, I live with two other people in a two-bedroom apartment. My boyfriend and I share one bedroom, and our roommate has the other. I pay $600/month (though that's going up in July), which includes everything but electricity and internet service.

I currently make $32,000/year (which means that for this calendar year I'll have clocked $31,000 in taxable income, because I got a $2,000 raise six months in). After 401(k) and FSA deductions, my take-home pay is around $850.

My cell phone is still on my parents' family plan. I don't have a land line or a television.

Given that I live in Manhattan, I also don't have a car.

That's all just for comparison.

Is there a secret? Not really--the only thing I notice in your comment is the phrase "left over." I don't know if that means that you do the "save whatever's left" plan or not--if so, I'd try changing it up and setting up auto-drafts to a savings account. A written budget helps you figure out what amount that auto-draft can be for.

I think big cities offer a lot of opportunities to save (ESPECIALLY in the summer): museums with suggested donations, free outdoor movies and concerts, cheap hole-in-the-wall restaurants and grocery stores in off-the-beaten-path neighborhoods, &c. My assumption is that you're living in San Francisco, so you should be able to take advantage of these things even more than I can, with the Bay Area's great weather. It helps me that my friends are always up for taking a walk, or buying a bottle of cheap wine and going to the park, or playing Scrabble--creative socializing is a big part of how I save money.

But the auto-draft thing is pretty crucial. If there's a secret, that's it: reduce the size of your available money pool, and live on that.

English Major said...

anonymous, I can't believe I didn't respond to this--I hope you read this. Your comment really means a lot to me. I'm so glad that what I'm doing is useful, and not just blather I'm pouring out into the ether. Congratulations on paying off your debt, and opening your Roth and your ING accounts! I'm glad you found the authorized-signer idea useful, too--I wish I had some idea on what the subsequent timeframe would be, but I don't. I'll make my boyfriend apply for credit cards in a couple of months and update you on the results. ;)

Anyway, thanks a ton. It means a lot.

(You too, 3things! You inspire me, too.)

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