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3 Vital Decisions for Financial Fitness

By Frugaling 10 Comments

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Winter in Iowa

Winter is here in the Midwest. A breezy, 20-mph wind cuts through everything. The roads have an icy sheen. My breath is eviscerated as I walk out the door. I choke. My commute — a brisk jog — is bone-chilling. With my backpack rustling back and forth, I gingerly move from foot to foot. Frankly, despite the cold and madness of running in work clothes, I’m going to miss these days. I’m going to miss the toughness of this work and school routine.

I can feel my time in Iowa City is winding down. Over the next year and a half, I’ll move on to my internship (similar to a medical doctor’s residency). That internship will be in a new location — new peers, new streets, new names, and… new weather. As one chapter closes, another opens, right?

The decisions I make today will greatly affect where I end up — physically, emotionally, and financially. The next couple years include challenging financial concerns and I want to openly process them with you. There are three domains of my life that I’d like to consider: possibly buying a car, planning for travel/lodging costs associated with internships, and potentially moving three times in three years.

To buy, or not to buy… a car

One and a half years ago, I said sayonara to a hefty car loan and excess liability. The 2006 Honda Civic coupe was cool, efficient, and reliable. But paying off an $11,000 car loan with little money leftover to save or afford repairs felt dangerous. So, I sold it.

Since then, I’ve used my bike and feet to travel nearly everywhere. While I didn’t need to lose weight, the decision has kept me svelte and fit. When all you have is your physical health to get around, you tend to take better care of yourself. Simply put, I’ve enjoyed being car-less — it’s freeing.

I don’t lavish browsing Craigslist and other used car websites, but I’m increasingly sneaking peeks. In the next couple semesters and moves, a car could help me immensely. I’ll use it to go grocery shopping, visit my girlfriend, and potentially move into a more affordable housing complex. Without a car, these tasks become exceedingly difficult.

Now more than ever, I’m conscious I might be trying rationalize buying a car. That can be financially disastrous. Thankfully, I’m engaged in a careful consideration — unlike my first car purchase, which includes:

  1. Talking openly with family and friends
  2. Browsing used car sites patiently
  3. Scoping out values, which will hold resale and reliability
  4. Considering two price points: dirt cheap and car loan levels
  5. Reviewing how I could potentially get by without a car

I’m motivated to try and buy a car in cash, but heavily limited by my bank account, the stock market’s recent decline, and the two following tasks: internship applications and two apartment moves in the interim.

When I look at my bank accounts, I’m seeing a tiny number: $3487.93. While I’m happy and privileged to have a positive number between my checking and savings accounts, I’m concerned. I make little net income each month as a graduate student. Buying a car would drain nearly all of my liquidity. It’s forcing me to be careful — along with the reminder that I hate debt. I desperately want to stay positive in my net worth. If you’ve got some special advice about car buying or an offer I can’t refuse, hit me up!

Let’s talk about your future, young man

My time in Iowa City always had an expiration date. Graduate school is a relatively fixed duration of 5 years here and then a year-long internship — 6 years total. Afterwards, it’s time to finish up the requirements and look for professional opportunities. And this final transition can be painfully expensive.

In 2011, the average out-of-pocket expenses for applying and traveling to internships cost doctoral students $1,800. When asking classmates, they’ve cited costs around $2,000-$2,500 nowadays. With this financial burden in mind, and aforementioned funds, I’m in a bind. In the best case scenarios, it seems I either use a major portion of savings towards a car — with little remaining for internships — or dedicate it towards internships and remain without a car. At this point in my life, neither sounds smart.

Worse, I might have to take out a car loan to afford the internship experiences or a student loan to afford everything else. Those are both worst case scenarios for my financial present and future. I loath loans and cannot envision them being part of a healthy budget right now. These aren’t home mortgages; rather, complicated instruments that encourage spending, manipulate critical thinking, and have led me into deeper holes.

One thing I can do is redirect some poorly performing investments into internship savings, follow a close food budget for the next year and a half, and pour every extra penny into internship savings. With this drastic action, I might be able to buy a car in cash right now, while continuing to save for this decision. This version is an ideal, though. I’ve learned that financial decisions are often controlled by unexpected and unpredicted events, but I can try.

Moving out, moving on

After four years of easy living in graduate student housing at the University of Iowa, I’m dealing with one of the sadder moments of my time here: being forced to move. Financially, the current apartments I live in have become financially burdensome. When I moved to Iowa City, rent was a competitive, amazing $435 per month for a one-bedroom apartment. Compared to the greater community, rent was dirt cheap and offered month-to-month leases.

Two years after I moved here, a private company built new buildings and prices skyrocketed. Next fall, rents will be $999 for a one-bedroom apartment. That’s $564 in rent increases. I can’t afford this place anymore. It went from graduate housing to luxury living for staffers and University of Iowa faculty making far more than fixed-income students. While complicated, it’s a symptom of the privatization of public resources and universities.

Despite the previous increases, I’ve stayed for consistency and friends. Now, it’s time to move out and on. I’m looking further out from the city center. Prices would be lower and I’d be closer to grocery stores. With my final year in Iowa right around the corner, this is an inevitable and financially necessary decision.

Although, despite savings in rent prices each month, I’ll need to afford moving costs and rental deposits. Even in an effort to save money, I’ll need to spend some. Oh, the irony! And the situation becomes even more challenging: over the next three years, I’ll need to move three times. Moving costs and new rental deposits will be a theme for my life temporarily.

In short, money is tight. Three domains necessitate savings, planning, and careful consideration. Purchasing a car, financing internship applications, and moving will drain my savings, but I’m dedicated to avoiding debt and making smarter financial decisions. Previously, I would’ve made rash judgments and rationalized them as “completely necessary.” I would’ve said “I need to buy this [insert expensive item here].” Today, my financial state of the union is better than ever, but precarious. I have to be careful and decisive — rational and reasonable.

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Filed Under: Loans, Save Money Tagged With: car, financial planning, future, graduate school, internships, iowa, loans, moving, school, Winter

Comments

  1. Gwen says

    January 10, 2016 at 4:19 pm

    Let me know if you need help moving your stuff. I’ve got a spacious Vibe (that you’ve seen crammed with stuff before haha) and I’ll be traveling back and forth to the Quad Cities often this spring.

    Reply
    • Sam Lustgarten says

      January 10, 2016 at 4:35 pm

      Aww, thanks so much, Gwen! That’s very sweet of you! Hope all is well in the Des Moines area. Should be pretty well covered for the move surprisingly. I’ve been minimizing for many years now, so there’s actually not that much stuff. 🙂

      Reply
  2. Ann says

    January 10, 2016 at 4:59 pm

    Having matched last year, I recommend waiting on the car until you know where you get interviews. I applied within a 4-hour radius and having a (cheap, older) car paid for itself compared to flights/trains/rental cars. Your friends’ cost estimates are on the low end for what I’ve seen. Most of my classmates had about 12 interviews (most in person) and 18-20+ applications, so spent several thousand, particularly when airfare was included.

    Reply
  3. Cassie says

    January 10, 2016 at 6:33 pm

    If it was me, I would plan on getting a car again. Not a luxury vehicle and not a clunker. Just something that is economical, gets good mileage and will keep you safe in bad weather. The reason is that it gives you the ability to live where you need to live to keep cost of living in your means without relying on being close to work or public transit that may not exist. Don’t get something over 100K miles that won’t last the full length of the internships because of expensive maintenance or repairs. I think if you can stabilize your budget to cover costs of moving, eating and a car payment, then getting your car paid off when you’re done and have a good paying career will be trivial. I’d get a longer loan where I could make minimum payments during your internship years with the intent to pay off as soon as I had the money later. I think this way you’d put a well known cap on how much debt you’d take out, and have the peace of mind of reliable transportation to help you move around.

    Reply
  4. Maggie says

    January 10, 2016 at 6:35 pm

    Great perspective! It’s hard to look at all the actual costs of something and see if that cost is actually providing the equivalent or more value in your life. That’s what we’re trying to actively do. And sometimes, honestly (like us having two cars) the answer is “yes, it’s worth it for us right now.” But a lot of times, we just talk ourselves into thinking it is. Moving into a bigger house is that for us. Everyone comes over and says “you have three kids, you’re growing out of this house!” That’s the way it is. Good luck with the upcoming changes. If you end up in Alaska, let me know. 🙂

    Reply
  5. Sonja says

    January 10, 2016 at 7:31 pm

    Have you considered Zipcar or similar carsharing services? Depending where you are and what your needs are, it might be a good financial choice.

    Reply
  6. Bette says

    January 10, 2016 at 8:31 pm

    Can you wait on the car until you know where you’ll be living? I live in the DC area and truly do not need a car. In fact, a car is a liability in the city.

    Reply
  7. Mike @ Tip Yourself says

    January 11, 2016 at 12:09 pm

    Have you looked into what I’ve seen called going “full uber”. The math is interesting when you factor in all other car expenses outside of just the purchase price and gas. When depreciation is included, the cost of taking an uber every time you would use your car can come out to be quite a bit lower than the cost of car ownership.

    Also, hat tip to biking and walking during Iowa winters. That can’t always be easy!

    Reply
    • Claire says

      January 17, 2016 at 3:33 pm

      I’m considering going full uber myself. From your research, do you have any resources/analyses/links you can recommend? Thanks in advance!

      Reply
  8. SixFeetUnderBlog says

    February 15, 2016 at 7:07 am

    Hey, I’m so happy to see someone running a blog so close to me. I live in the Quad Cities! Great blog!

    Reply

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