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Wednesday, September 12, 2012

Two Years of TCHOW (financials)

In this post, I'm going to describe the financial plan for my next two years. In short, I plan to live off of my savings while writing video games, and this article describes how I think the spending of said savings is going to break down. I've tried to allocate a reasonable amount of money -- and keep some flexibility for various additional expenses -- without being too optimistic or pessimistic.

Overall Allocation

Broadly, I've planned for $4k for moving expenses, $24k/year in Pittsburgh, and an "exit cushion" of $15k. The $4k looks like it should cover (with a bit of headroom) the moving company I've arranged, so I shall speak no more about it. I chose $24k/year because $2k/month is a nice round number -- and it seems to slightly over-estimate my monthly breakdown. As to the exit cushion, I basically pulled the $15k figure out of a hat -- though, in a pinch, it means I could cover my Pittsburgh rent and minimal foodstuffs for up to a year while looking for a real job.

This sums to the not-quite-round figure of $67k; which -- despite being more than a third of my net worth -- was pretty darn effortless to save over my two years at Adobe (thanks to industry pay rates and my frugal(-ish) lifestyle).

Up until the beginning of this year, a fair chunk of these savings was in various stocks. However, I'm not one to gamble over-much on something like this so now $35k of the total is parked with my parents (I wanted to make absolutely sure it was out of my reach, and it helps them avoid dipping into their retirement portfolio when the market is down), and $32k is in my bank account.

As an aside, it's strange how one's perception of money changes. Living around Boston, I'm now used to lunch costing about $10, and dinner $20, just about anywhere. Yet, in Pittsburgh one can get a decent lunch for $6 and a dinner for $10. (Similarly, my rent in Somerville is $1075/month, while my rent in Pittsburgh is $700/month.)

When I was in high school, my bank account probably had at most ~$100 in it. When I was an undergrad, I maybe had ~$1000 at particularly rich times (privilege alert: my parents + scholarships paid for my [in-state] tuition at UMich). Once I became financially independent (grad school), I had maybe $5k kicking around. With a real job, I generally have $10k-$20k sloshing (slushing?) 'round. I wonder, if I were to continue on this course of gainful employment, would there be a time when I'd have $100k or more floating unallocated?

The Monthly Breakdown

Here's how I break down my $2k/month budget.

Monthly Costs

  • $700/month Rent (includes heat, water); I have a two-year lease so I shouldn't have to worry about increases.
  • $50/month electric; this is an estimate based on my usage last time I lived in Pittsburgh.
  • $60.06/month health insurance.
  • $40/month internet; estimate based on splitting with neighboring apartments.
  • $70/month cell phone; though I'm considering going cheaper.
  • $10/month laundry.
  • $10/month spotify; optional expense, but I enjoy it.
  • $5/month tchow.com VPS; digital ocean is cheap!
  • $20/day pocket money; this includes food.

This comes to just under $1570/month .

I went with the $20/day figure for pocket money because it makes it really easy to budget. My notion is that I can keep a pile of twenties on my desk, and slip a fresh one into my wallet every morning. That's all I get to spend each day, and any change rolls over to the next day. Based on my current food costs, slightly over $10/day is more reasonable, but this is one of the areas where I built in slack for overages.

Yearly Costs

  • $375/year climbing gym membership; already paid, might increase to $400 for the second year if I don't catch it on special again.
  • $200/year clothing; no idea how accurate this is -- I basically buy clothing when my old stuff begins to develop holes.
  • $800/year travel to visit friends and family; this at least covers a midwinter visit to my parents.
  • $2000/year conferences (GDC?); I think I can do this on budget if I'm frugal.
  • $300/year skiing; this is 3-4 local trips.
  • $100/year renter’s insurance; estimate based on asking friends in PGH.
  • $200/year dentist appointments.
  • $100/year bike stuff.

However, summing and dividing by twelve I arrive at just about $340/month, which brings the monthly total to $1920. To be honest, this is closer than I'd like to $2k/month, so I'm going to be watching my expenses closely. If I do extract some shortfall, I expect I can easily spend more on travel, or maybe I'll end up wanting a new computer.

Going Forward

This is a topic I expect to revisit in future posts, once TCHOW kicks off in October. I'm looking forward to finding out how comfortable (or frugal) a life this budget allows, how much I end up under- or over-spending, and how I need to adapt so I can still hit my yearly targets.