A Single's Budget
Day 12. Are you a single person household? Know one? Please share.
Ann Arbor, Michigan.
About a year ago, Ben Shipley turned a 6-year “college experience” into a Bachelor of Arts degree then into a lot of pain when he found little interest among employers who showed up at the U-M career center. That happens to average Philosophy majors.
From among the interviews “Ship” landed, he learned a long-winded, thoughtful conversation doesn’t play well during a job interview. If HR Jim thinks you care less about his opportunity and more about telling him you will always be the smartest man in the room, you have no chance. It doesn’t help when small talk is beyond Ship’s interest. HR Jim: “Pretty exciting around here last year after the national championship. What do you think about Harbaugh bagging his team for his next stint in the NFL?” Ship: “I haven’t thought about that deeply.” Huh?
You might imagine how other job interviews went. At the end of his interview season, he called his parents: “I’m stressed and need to move back home.” Dad wondered, “How did I screw this up,” while Mom was delighted to have Ship return home to help dilute Dad. Back to the Upper Peninsula, Ship went.
It took a few months for Ship to realize after Mom’s unrelenting care (“Why does she iron my shirts?”) and Dad’s annoying rants that he needed to get back to the job boards. He got lucky. Ship found a job in the EV industry in Detroit that raised his self-worth. Single adult life kicked in. Back south, he leased a small apartment near work, an affordable choice with his new $54,000 annual salary.
What’s a Budget?
Ship has his new personal finance story. How he lives, what he does for fun, and how he views his prospects.
"Dad’s parting words of wisdom: “Get on a budget.”
“On budget” are commonly used words, but their meaning is never clear to me. For deep thinkers like Ship, financial prospects and planning are tricky because the language is weird, numbers are involved, and everybody has an opinion.
“What does Dad mean by a budget?
“Will I have to pay taxes?”
“What if I lose my job?”
“Hope Dad doesn’t think I should start saving for retirement,” Ship ponders for a nanosecond. Unpalatable.
Agreed. Why would a 24-year-old seriously contemplate retirement? It is worth a discussion, and the answer could be, “I cannot imagine ever retiring.” That is a valid preference. Ship might take his job win and put a procrastinated life in the trunk, never to be seen again.
“Dollars and sense” might not yet be Ship’s strong suit, but he has his best living standard whether he knows it or not because he has financial resources: an income and desire to work, a bank checking account, a new 401(k) plan with an employer match, and Social Security retirement benefits.
Ship’s budget cap is his highest living standard amount - his magic number
Your household has a magic number, too. And, there is a corollary: more or less savings will be prescribed as part of finding the magic number.
Work must be done before concluding that Ship should save a dollar of his new income. Today’s course notes use Ship’s finances to explain how to find the practical magic number. Chapter 3 of the book will be helpful. And, of course, I am available via your direct messaging to answer your questions about today’s content.