Thursday, February 2, 2012

Black is the New Red

It's certainly a happy day today! After 8 and a half months of seeing red each and every time I logged into Quicken, I've finally broken through and into the Black! I only include my checking, savings, and credit card accounts in this total, as this gives me the best picture of the funds I have to work with, but it is certainly an accomplishment! And it happened about 3 months ahead of schedule!

To give a little history, I saw the red storm coming when I was finishing up school. It became particularly worrisome when I accepted the residency position. Now I wrote earlier about how I have a good deal of money left over at the end of each month, but it certainly did not start that way. The most worrisome part about starting the residency was not the lower paycheck as compared to if I had went retail, but the delayed start date. I would be living with no income until July, and my first paycheck would not come in until 7/22. The expenses associated with interviews hit hard, and I was feeling my funds running out when I took the position. I knew it was the right decision, and I would find a way to make the money work.

In the meantime, I had been receiving offers in the mail from my Citibank credit card (with a fairly high credit line) for a balance transfer offer that would offer me 0% interest on the transfer AND new purchases, through May of 2012. Normally I throw these out as soon as they come in the mail, but I saw this as my ticket to financial breathing room. There was a 3% fee associated with the transfer. Well, that was paltry compared to having an unknown amount of money sitting on the cards for an unknown amount of time. I hate paying any more than I have to for anything, and interest charges and fees are the worst expenses I can think to come across. I avoid them as much as possible, but I saw no other way out of this one. I transferred close to $2000 that I had on my primary card and paid the fee - $56.87.

After I received a few paychecks, got a handle on my new monthly expenses, and saw my account balances stabilize, I calculated how much I would have to pay each month on this debt to meet the May 1 deadline. It was close. My initial plan was to take any extra money I could use to pay off the card and throw it into an online savings account to gain at least a little interest. Unfortunately, knowing that interest was most likely accruing on the debt from day one and would hit like a Mack truck if I missed the deadline, I opted to pay off as much of the debt as I could each month. Again, not my first choice, but it would give me some peace of mind.

Then I saw offers online about cards offering 0% on purchases for 21 months. Did I want to get another card? My credit is spotless, and I knew I would have no issues getting approved, but I was not keen on taking that step if I didn't have to. I sat on this one for a while (I certainly had time). After about two weeks I decided to bite. I was given an extra $2300 line of credit. This would suffice, and I was certain I would be able to pay off the original debt, which had topped out at $7400) by May 1. This was the greatest relief I had felt since accepting the original balance transfer offer. I wasn't going to get hit with hundreds of dollars of interest!

Now I have the money to officially pay off the debt that's been revolving on both cards. But I haven't. I still have about $3700 left between the two of them. Last month, I realized that I was going to hit my goal way ahead of schedule, and I have been stashing the money away in an online savings account so I can take advantage of a little interest on the way. Sure, it'll likely amount to a few bucks, at most, but it's more than nothing.

This is quite a milestone, and I never though I would be happy with seeing a 3-digit black number. This experience is sure to be short-lived, though. Sometime this month I'm expecting to get my reimbursement check from work for attending Midyear ($1000), and I will be submitting my taxes when I receive my final W-2, with an anticipated refund of over $2000. Then I will have a big buffer, and no worries about the Red.

It's been a fun experience, and I've learned a lot. Now I can finally start playing around with my money again. I've been following the markets more, and will likely start stashing extra money away for long-term goals outside of retirement (instrument training, trips, a plane?).

Sunday, January 22, 2012

Financing the Future

As residency interviews for my co-residents loom, many are stressing about money (it is horribly expensive to fly out of our local airport), and as graduating 4th year students gear up for the inevitable "omg what do I do after graduation!?" many of them will be concerned about whether a residency will be able to pay the bills and/or leave extra money for fun. Many of my classmates ended up passing on the residency for just that reason. When you're faced with "60+ hrs of work/wk for $40k" vs "40 hrs of work/wk for $100k+" the decision appears easy.

I took a different approach - that $40k (approximate gross base pay of my residency) is a lot more than I have ever made as a student, even with excess loan money. I've lived on much less then, and I felt I could do quite a bit with the extra, even if cost of living were to be higher. This turned out to be true. To give a brief overview of my situation, I currently rent a 3-bedroom house by myself, outright own my car, and have two large dogs. These, along with utilities, are my largest fixed expenses. My rough monthly fixed-expense budget follows:

Cell phone:$80

My biweekly checks have been hovering around $1300, so for the sake of simplicity, I'll estimate net income at $2600/month. This has changed recently with a larger contribution to my 403(b) retirement plan, but is close enough for this assumption to hold true.

$2600 - $1885 = $715 each month of excess. Wow!

Now, this doesn't include any discretionary spending, but $715 after the bills are paid for my base pay is certainly enough to work with. It isn't quite enough to hit my goal of raising $10,000 to fund flight training, though.

Thankfully, I have been blessed with a hard work ethic and moderate bootstrapping skills. My residency program offers plenty of optional extra shifts at pharmacist rate (>$50/hr) but limits us to 2/month. I've been trying to max out on those. Extra income: $600/month

We have a partnership with the local university, and I have been used my tutoring experience to continue in a very well-paid position there for a few additional hours of my time each week. My earnings here will likely go down as I have many more responsibilities in the residency this month, but for the 6-months just ending:
Extra income: ~$400/month

I keep the thermostat at the extremes of my comfort zone, so my electric bill has ALWAYS been below my budgeted value.
Extra savings: $50+/month

I work on my car as much as I can to keep it running. The water pump had a leak a few months ago, so I replaced it. The repair took about 2 hours and cost me approximately $150 for the parts. What would I have paid a mechanic? Likely $400+.

These are just a few of the ways I have been able to make this dream of flight training attainable during a time when I did not think it was possible. My impression of a resident salary was "just enough to get by." That is not true, and I have more time than I thought I would have (as long as I keep my nose to the grindstone). When I first moved I was scared due to all the expenses creeping up around me, but after I bought the lawn mower, dryer, and other incidentals, I was set and started seeing my net worth climb back toward black.

Even beyond those incidentals associated with the cost of moving, I took 2 flights, paid back $1500 in loans, and attended a large conference that cost >$1000 overall. Despite these expenses, I was able to save over $6600 in 6 short months.

Without those incidentals, I would be looking at around $10,000.

In 6 months.

On $23,000 of net income.

I'm going to be a pilot.

Sunday, January 8, 2012

New Year and Some Resolutions

Well, it's been quite a 2011 (even though I did not post once during its entirety, ha!). I've had plenty of adventures, but of a different sort. Residency applications, interviews, The Match, letdown, scrambling, more interviews, and ultimately scoring a 2-year administrative residency in a large hospital system. I'm over 650 miles from where I've called home for the past 7 years, and I am so happy to be here!

Yes, I had to scramble, and don't get me wrong, the process was stressful. That fateful morning in March when the results came out I was shell-shocked. I had interviewed at 7 different sites, and ranked each and every one of them. With my GPA and involvement I was not supposed to be in the scramble group! But there I was. I had two choices - I could sit and sulk, or I could pick myself up and give it my all. After reaching out and weighing my options, I decided to pursue the position at my current site. I am immensely happy that I did - our organization is going through so many changes at the moment, and I will be able to witness all of them!

I've been in the position 6 months but have only gone on one trip in the area. It was a fun rafting excursion with some of my co-residents and it got my blood pumping for some whitewater. At the moment I've almost paid down all of my costs associated with moving and I decided that I will attempt something I've always wanted to do: get my private pilot's license (PPL).

Yup, in addition to hurling myself out of them, I'm now going to learn to fly the planes, too. After receiving a gift of my first lesson as a Christmas present from my girlfriend, I have plans to start lessons in March. I have a goal date of completing my license no later than the end of my residency (June 2013). Is it expensive? Yes. Can I do it? Yes. On a resident salary? Did you not hear me? I said yes!

To any of you reading this who might be turned off by the "low salary" of a resident, listen to this - I have been in the position for 6 months, pay approximately $1200//month in rent and utilities (by myself!), care for two dogs, have flown home twice (@ $350/flight! Expensive!), and I've paid down $7500 in debt. The residency only nets me $40k/year base, and it is certainly less than what I would be making had I gone with retail, but it is more than enough to get by on. To complete my goal of completing flight training, I need to put away $600/month. At my current rate this will be easy.

How on earth do I manage to do it? It's simple - maximize income and minimize expenses. I take a bag lunch to work every day ($1/meal vs. $5/meal) and eat out only on special occasions. My residency offers extra shifts at pharmacist rate (>$50/hr) but limits us to 16 hours/month. In search of other sources of income, I've turned to the local college of pharmacy. They have a tutoring program that pays exceptionally well ($30 or $50/hr, depending on the environment) and I have logged plenty of hours giving lectures and working one-on-one with students. Does it take effort? Yes. Is it easy? Not really, but I thrive on being busy and juggling multiple projects at once. But I'm in a position I love, am getting excellent career experience, and I'm still able to finance something I thought would have to wait until after residency! And did I mention I'm still contributing 5% to my 403(b), and have budgeted in paying down my loans?

So this was supposed to be about resolutions and the plan for 2012. Here they are in a nutshell:

Start flight training
Blog more (it should be easy when I start flying)
Exercise at least 3x/week, and involve the dogs
Finish paying off the debt from moving (should be done by next month)
Set aside $600/month to plan for flight training
Maintain 5% contribution to retirement
Use any remaining funds to pay down student loans

2012 is going to be a fun year, for sure!