Analyze monthly expenses - know where your money goes!

This post belongs the series I am going to write for engineers who are just about to start their careers and/or have just started their career. The ideas discussed here are useful for others who are in their beginning years of investing and gaining hold of their finances.

To get hold of your financial life, you must first understand how your current spending habits are. Here I broke down expenses of a typical engineer. By typical I mean:

·        single

·        works full time (and often times, overtime)

·        not much partying on weekdays

·        eats lunch outside most of the days

·        weekends are for enjoyment

·        shares an apartment with one or two apartments

·        has a smartphone and a cable connection

·        drives to work about 10 miles roundtrip every workday

A typical monthly expense is shown in the table below. All numbers are in USD.

Food	310
Gas	134
Housing	675
Connectivity	120
Entertainment	89
Shopping	167
Travel	250
Insurance	69
Car loan	365
Total	2179

A pie chart of the expenses is given below:

Before we start talking about the numbers, let’s look at how I got them. 

I gathered the data from my own expenses during the first couple of years after joining my first job and also by talking to my friends who were in similar situations.  Your expenses might be different, but I think the percentages will come about the same. There are a couple of my friends who had student loans, which I didn’t include here. I need to gather more data before I can do that.

Now let’s look at the data in more details.

Housing (31%)

It is no surprise that housing is the biggest chunk of our expenses. No matter whether we own a car or not, no matter whether we party or not, we need to pay rent every month. Since most of my friends live in Bay Area, San Diego or Seattle, I only considered the housing prices in these areas. Since most of the engineering companies are in or around these cities (apart from Austin and Dallas) I suppose we can agree that this is a true representation of the housing expenses. A two bedroom apartment in these cities run anywhere between $1300 and $2000. Assuming you share the apartment with at least one person, the rent would come about $650. I have also added basic utilities into housing expenses.

Transportation (23%)

Car loan: Most of my friends bought a new accord, civic or Mazda when they started their careers. Some of them bought 1 or 2 year old cars. These used to cost just around $20,000. The loan amount I calculated is on $20000 loan with 4.75% interest rate. The monthly payment comes about $375. Currently I pay $365 towards my car loan. This puts car loan at 16% at the second place.

Gas: Assuming you drive about 10 miles per weekday and about 100 miles per weekend, you would be driving about 10000 miles an year. With an average mileage of 25mpg, it would need 400 gallons. With the current gas prices ~$4/gal it would be $1600 / year or ~$164/ month.

Food (14%)

Most engineers eat out almost every day at lunch time. Assuming each meal costs about $7 (almost the cheapest you could probably find in a food court, not counting for McDonald’s type fast foods), that’s at least $140 for lunches. Add your dinners, breakfasts and those weekend party dinners we go to, the bill came up to be $310 for me during the last year. My eating habits haven’t changed in years; so I assume I was spending more or less the same during my first couple of years in my career.

Travel (11%)

I am an Indian. I go visit my family once in a year mostly during Christmas and New Year given that we have about 15 days of vacation at office. This is typical of most Indian engineers. Each trip now a days cost about $1500. Add on the top of this the long road trips we make during all the long weekends, the hotel, car rental, gas for the car, food, etc and you would end up raking about $3000 a year just for the travel. I haven’t included the gifts we buy for our family and friends back home, but I figure $3000 for travel is a very good representative.

Connectivity (6%)

Everyone nowadays has a smartphone. In fact we are forced to buy a smartphone even if you want a decent looking phone. And it costs us a whopping $90 or so. Add your internet/cable bill split amongst your roommates and you are close to $120 per month on the connectivity. If you have ipad/kindle or such devices with 3G/4G on them, add $30 at least extra on it.

Shopping (7%):

I just pulled my last year’s shopping expenses to arrive at this number. You should know that I hate shopping. I probably go shopping 4 or 5 times a year. Please check your shopping habits to find out the number.

Entertainment (4%)

How about shooting some pool or going for bowling? These two used to be my favorite pastimes with friends when I was single and working late hours. Now I was not much into drinking and hence I should say my entertainment expenses are lower than most others.

Insurance (3%)

If you own a car, then you pay car insurance. If you don’t have employee provided health insurance, then you pay health insurance premiums. Some employers only pay partial premiums and employees need to pay the rest. I paid car insurance and also my health insurance premiums for 3 months. Your number might differ.

Now you might be asking yourself: “What is the point of all this analysis?” There is, in fact, a point to it my friend.

• It gives an insight into where your expenses go. 
• It shows how much money you need to be making, bare minimum, to keep up with your lifestyle. (psst… don’t forget taxes, but we will defer to another day).
• You can make an informed decision on setting your monthly budgets
• Check whether your intuition on your expenditure tallies with the reality of the numbers

We will look at ways to cut down these expenditure in another post. But for now, I encourage everyone to pull out one’s credit card and bank statements and construct your own monthly expense pie chart. Happy analysis! Leave a comment if your percentages differ significantly from what I showed here. Leave a comment if you have suggestions on reducing any costs.

Dos and Donts for newly joined employees

It is the time of the year when after years of toiling people graduate and are eager to join their jobs. First off, congratulations to all the graduates; you worked to hard to earn your degree; enjoy the moment.

Joining in a job has its challenges. New place, new people, no matter how talented you were in school, you would have to reestablish your identity. This post talks about a few DOs and DONTs to smooth your transition into a new company. Here we go..

Your job is NOT your life 

One of the most common mistakes new graduates do is to think job is their life. I've seen a many new employees working overtime, putting in extra hours to impress their bosses. This is a huge mistake. You raise the expectations from your boss. Your boss will expect the same commitment every time from you. You are now stuck for your career. If you cut back, it can be construed as slack. So think before you work too much on your job.

Your job is at most a part of your life. Job is your vehicle to get your life where you want it to be. Read this article to know how much your extra hours will be worth financially.

Don't be afraid to say NO to deadline

When your boss assigns you a task, don't jump right into it. First thing you need to negotiate is the deadline for the task. This is the first time your boss is working with you, hence he/she may not be the best judge of how much time you take on the task. When your boss sets a target date it is an estimate. He/she would really appreciate you if you are upfront and talk about the deadline, rather than come the day before deadline and say you cannot finish it. Negotiate the time, and once you do it, own the task and see to its completion.

Don't eat lunch alone

You are new to the company and the place. You need to make friends and learn about the place. What better way to do it than make friends with the folks already working there. Invite your colleagues to join you for lunch. Everyone has to eat, and they would welcome an invitation from a newcomer. They will be more willing to talk about their experiences. Take the opportunity to know about the team, its members, duties, tips on how to get more work done. Ask about the place, things to do, best places to eat, anything that comes to your mind. Bottom line : make friends, quickly

Learn or Perish
As a new employee your primary focus should be on learning the company culture and to enhance yourself with the toolset used and the technology used. I bet that not more than 30% of what you learned at school will be applicable at your job. A new job equals opportunity to learn new technology, new methods of analysis, new approaches to problems. Take the opportunity and learn or soon you will find yourself ignored by others. As a new comer you have an advantage of asking help from others. Since you just joined everyone will be willing to help you and teach you. As the time goes by, you would be stranded with less people willing to answer your questions. Moreover they would start judging you. The best time to learn as much as possible is right after you join. Do not procrastinate.

Take ownership of your work
This is very important. When you accept a task from your boss, own it. If you need other folks to help you, go ask for the help. Don't sit around and wait for others to fix things for you. You would face a situation where you would find a problem that is not directly under your responsibilities, but if not solved would direct affect your project. These are golden opportunities to shine in a company. It is how you handle these situations that determine how others perceive you. Own up, roll up your sleeves, tackle them and grab such opportunities by horns.

Be honest to yourself
Many a people tend to work only to impress their bosses and/or when it is time for a review. This is absurd. Don't fool yourself. Be honest. Don't slack off just because your boss isn't watching or it is not review time. A good boss will constantly monitor your progress. Don't worry about ratings, don't worry about hikes. Don't get caught in the rat-race of promotions. Do your best, learn as much as you can from your job and just be a better professional. Don't ever become complacent. The day you become complacent is the day you are done in a company.

Accept your mistakes
Don't ever make excuses for the mistakes you committed. Just admit you made a mistake and make a point not to repeat it. Do not open your statement with an excuse or an explanation. I would say even explanation at that moment will sound like an excuse. And for god sake, never say "oh! I dont know what happened, it used to work." Your boss will immediately know when you are making excuses and will sure remember to mention that during your performance review. And when your colleagues critique your work and give feedback, be open and accept it. Later sort through and figure out what is useful to you and what is not.

Follow office culture
Try to fit into the office culture. If the company culture is to dress up formally, then do dress formal. If it is casual, then wear casual clothes. If the office hours are flexible, then go at your own time. If the culture is to come and leave on time, stick to it. If your company frowns on using instant messengers and social networking sites, don't do it at office. In fact, reduce the amount of time spend on personal browsing, especially social sites like facebook and twitter.


I am sure there are other dos and donts, but I hope this list will get you thinking in the right direction. If you have any that you would like to share with others, please leave a comment.
Good luck with your new job!

Acknowledgements: Thanks to my friends who shared their experiences and advices especially to Kotesh Bandhamravuri & Suresh Sistla.