I'm hemorrhaging money!

I will have significant educational debt (we're talking six figures) when I graduate. I plan to live like a student another couple of years and pay off my loans within 5 years. The plan is ambitious but possible. When I start work I will earn a lawyer's salary, but work a lawyer's hours, which will mean not a lot of time to go out and spend. So if I can live off less than half of my income (I should be able to, some people raise families on that), I will be able to meet my debt repayment goals.

The big problem will be keeping my focus whilst working among lawyers, who are notorious for consuming. Unlike many of my peers I will not be buying a brand new fancy car upon commencement of my career. My own car is still pretty new (about 5 years) and has been quite reliable. Not dropping 35,000+ on a rapidly depreciating asset that I won't be using much (public transportation is good in my city and will be my method of commuting) is pretty easy. What will be hard is not running into an upscale store and buying a pair of jeans (on sale for only $200!) as a reward for a stressful week, or not spending three times as much on meal because it's just easier to eat out than to cook for myself.

I plan to keep a leash on my spending by putting only a portion of my income into my checking account and the rest into harder to touch savings or investment accounts. I can't trust myself, I need the external enforcement. I'm a little concerned about having a credit card. I wish to build up a credit history, but worry that without close monitoring I will get careless. Perhaps the early payment of my student loans will be enough without having an actual credit card, but I'm not sure.

These concerns are exacerbated by the fact that I've been living a little fast and loose lately (my trip a couple weekends ago was rather expensive). I haven't been thinking too much about the money going out. Last week I ate lunch out every day but one. I would prefer not to burn through my loans so that I can return some of the money at the end of the year. With that in mind I have decided to make two changes:

1. Start using cash. Right now I use a debit check card to pay for everything. It's a whole lot easier to put down a piece of plastic than to count out bills, so this would reign in my spending.
2. Limit meals out to three a week, total. That may sound like a lot, but I am not talking about three dinners. Eating out would include paying for the meal in the school cafeteria, so I will be bringing most of my lunches to school.

It feels good to set up a plan. Now to execute!

Tangent:

I ran across a blog about money issues for GLBT people: Queercents. I've read a couple articles, some of which have a sort of sanctimonious anti-materialistic bent (particularly the article on Board Games), but I am going to poke around to see if there is some useful information.

The Third Thing

Traditionally there are three topics that one doesn't talk about in polite company: sex, politics, and money. I'm pretty candid about politics. A coming out blog involves sexuality, even if I am less forthright about actual sex. But I don't talk much about money (apart from public economics), and I've never brought up personal finances before. I have recently set a few financial goals, and I believe that sharing goals is the first step in achieving them.

1. Upon starting my actual job (should be a little more than a year from now, scary!) I will contribute the maximum to my 401(k). I mix my 401(k) with a U.S. market index fund and an international index fund. Since I am young, I am going to push my risk threshold and also include a growth fund.
2. Furthermore I am going to have a portion of each paycheck automatically deposited into a short term savings vehicle like a money market fund. Why?
3. Within 30 months of starting my job, I want to own my house. The automatic savings will be for my down payment.
4. Although I want to get out from under my student loans, I am not going to stress about them: just make the minimum payments, maybe more. The thing is educational debt usually has the lowest interest rate going, so while I don't want to get behind, I don't have an urgent need to pay it off ASAP.
5. Then presto chango, 30-40 years later I want to be financially secure. By this I mean able to retire and maintain my standard of living. It would be nice to be Bill Gates, but I'll be content just being comfortable. Maybe.

The good news: I am a student and my lifestyle is not exactly enviable. I consider this the "paying my dues" phase of my life. I have a tendency towards thriftiness and although every so often I engage in a little retail therapy, I live like a student. I drive a sensible car (used from my parents); I am an experienced bargain shopper; and I have no dependents other than my dog. Most importantly, I am confident that I can live within my means, and for a few years well below it.

The bad news: My student loans comprise the entirety of my credit history. Speaking of student loans, I have a lot of them. I'm actually afraid to know how much. I have never balanced a checkbook (though to my credit, I have never overdrawn!). Though I living like a student means I live fairly cheaply, it also means I rent and have no assets other than consumer goods.

I think my most ambitious goal is number 3. Thinking about it, I realized I need to improve my credit rating now. I figured the way to do that is to build a positive credit history, so I opened a Banana Republic Card (do you want to save 15% of your purchase today?). I made some purchases and am paying them off in a timely manner (which to me means before the crushing interest rate kicks in). I like Banana, so I'll probably make a few more purchases. Then in a few months, I'll trade up to an actual, can-use-everywhere card. This is scary to me. I grew up listening to Dave Ramsey in the car on the way back from school, so for years I feared credit cards, and only use debit type CheckCards. Or rather I feared how easy it is to abuse credit and create a financial nightmare. Nonetheless, it'll be tough to reach goals 3 and 5 without building a more positive credit history. I'm pretty sure that I can be disciplined enough to use my cards wisely, but they make me nervous nonetheless