The Time and Costs of Commuting

Commuting is mostly a necessary evil, something that no one really enjoys, but most of us put up with because it is a necessity to do our jobs. Living close to work to have a short commute just isn’t always an option, whether it is due to affordability, a past real estate purchase, preferring different neighborhoods to live in than to work in, and/or weighing where to live against the locations of your partner’s office and your own.

For the first five years I lived in my current city, I worked at one company, occasionally changing office buildings, but not in a way that ever negatively impacted my commute. My partner also has always worked in office buildings to which my condo is a pretty reasonable (under 2 mile) commute for him as well.

When I started job hunting last summer, I first only looked at jobs a similar distance from my condo. There are many jobs available in this 2-3 mile radius, so that seemed like a reasonable plan. I did in the end apply to one job not in that radius, which I mostly did to investigate how working at that company might be and practice interviewing.

After many months of job hunting, I had two offers in hand. One job offer was a reasonable commute (in that 2-3 mile radius) and the other was not. For a variety of reasons, I took the longer commute job after weighing that versus the cons of the job with the shorter commute.

I haven’t had a commute longer than half an hour or one that required taking public transit or driving since 2007. I’ve been reminded this year how much commuting sucks. I don’t regret choosing this job over the other one, so now I’m left to make the best of this commute. I have a few options:

  1. Take a transit route that doesn’t involve any transfers – it is a direct route. But it involves 53 minutes of walking and about 1 hour and 30 minutes on the bus for a total daily commute time of 2 hours and 23 minutes. This option is free – my employer pays for my bus pass.
  2. Take a transit route that involves one transfer, so two buses total. It involves less walking, about 36 minutes, about 24 minutes round trip on the first bus, and about 70 minutes round trip on the second bus, for a total daily commute of 2 hours and 10 minutes. This can end up increasing though if the two buses don’t line up well and you end up waiting a bit. I usually end up waiting about 5-10 minutes.
  3. Driving. I can leave at the same time that I leave to catch the bus and get to work 20-30 minutes earlier. Traffic can be a bit frustrating sometimes and it can take me about 50 minutes to get home. My total commute is about 1 hour and 10 minutes, plus another 10-20 on a bad traffic day. The catches? The all-in cost of driving is about $10/day at today’s costs. I hate driving. There are only certain time windows during which I can leave work with reasonable traffic and if I’m not going to leave during those windows, transit is a less stressful option.
  4. Move. The problem with this option is that my partner has a good commute now and moving would be complicated to balance our two commutes and who knows how long I’ll keep this job anyway? Plus, the transaction costs of selling my condo are so high that it would be cheaper to drive for 19 years than sell my condo. And then we would end up paying more in rent.

So options 1 and 2 are really about the same expected time and cost since they’re both free. They both have different pros and cons, including one with a shorter or longer walking from my house and one with a transfer.

I was really against driving until I calculated how much time it would gain me back. I could use that extra hour to do homework, go to yoga, or do other fun things. It’s amazing having that hour back. So far, I’ve been experimenting with driving 2-3 days a week and taking transit the other days and that seems to be a reasonable balance.

Readers, how do you commute? What would you do in my situation? Drive? Move? Take transit?

Job Hunting: Financial Considerations

You know you’re a finance nerd when the first thing you wonder about when you’re considering leaving your job is what about contributing the full amount to your 401(k) for the year?!

As some of you may have noticed, my job satisfaction hasn’t been the greatest over the last while. Well, I’ve finally decided that it’s time to look for a new job externally. I’m working on preparing my shortlist of companies to whom I will send my resume (my goal is three) and then I will work on studying for interviews.

I’m not really remotely concerned about finances. In fact, I’m trying to convince my boyfriend that he should scrounge up the vacation days to go traveling for two weeks while I’m between jobs. Maybe that Europe trip we were planning for next fall could happen this fall/summer!

A) 401(k)

As of today, I have contributed ~$8,000 to my 401(k). I decided to leave June’s contribution as is because I’m reasonably confident that I will have a full July paycheck. I can then max out my 401(k) with my July paycheck, leaving me with a paycheck of about $650.

The other question is what I will do with my 401(k) plan after leaving. My current plan charges a fee if you leave your money in the plan, so I will have to evaluate between a) leaving the money there and paying the fee, b) moving the money to a Rollover IRA at Vanguard and having to undo my Roth IRA conversion for 2014 and not be able to do the Backdoor Roth IRA in any future years, and c) moving the money to my new employer’s plan. My hope is that option c) would work out, but option a) might be better than option b).

B) Cash flow

The $650 July paycheck would be concerning if I didn’t have enough vacation days banked to probably get a gross payout of those at around $3,000. Those two amounts together should be enough to cover August spending as normal. I hope to take at least a couple weeks off between jobs, which means that I will probably draw down from savings a bit, but that’s okay because I have about 6 months of expenses squirreled away in a savings account ($20,000) and especially with no 401(k) contributions at the new job for the rest of 2014, I should be able to replace any savings fairly easily. I’m not really concerned about money with this change, but I want to plan out how things are going to happen. I’m also going to stop making extra payments on the mortgage for a few months as the job situation shifts, stockpiling a bit of cash instead.

C) Health insurance

If I leave after the 1st of the month, my health insurance coverage will cover me through the rest of that month (I’m going to double check on this). If my boyfriend and I lived together, he could add me to his policy during the break, but since we don’t yet officially, I would probably pay for COBRA for any otherwise uncovered time necessary. I also have about $1,400 left in my Health Savings Account from the last plan year, which I will probably transfer elsewhere after I leave. Perhaps just to my credit union, where I could get 1% on it since my balance is so low.

My insurance has been so cheap with my current company that I don’t know what to expect with another one! It is the tech industry though, so I could end up paying even less. We’ll see how that falls out!

D) Social Security tax

If I stay with my current company, I will finish paying it in October. I’ll have to adjust my withholdings on my W-4 with the new company so that I don’t end up with a huge refund in April.

E) Future compensation

I don’t expect to replicate last year’s $200,000 gross income anywhere. I do, however, expect that any reasonably sized company would match my current total compensation range of $150,000 to $170,000. With a smaller company, I’m aiming for anything at or around $120,000 with a sane expectation of work hours (40-45 per week), 3 weeks of vacation the first year, and more holidays than I currently get. Obviously this will reduce my savings rate a bit, but that’s totally okay. I should still be able to make the full 401(k) and Roth IRA contributions, cover my normal expenses and have about $30,000/year leftover after tax to save outside of retirement accounts for a total overall savings rate of around 70%, which is not too shabby.

I also plan to ask questions around: base salary, bonuses (cash/stock? vesting schedule?), employee stock purchase plan (do they have one? what does it look like?), 401(k) (matching, plan details, vesting schedule, if they allow after-tax contributions, vesting schedule), health/dental/vision insurance info, fringe benefits, and days off.

F) Overall

All in all, I am really excited about looking for a new job. It has been years since I interviewed and I’m now interviewing as an industry hire rather than a new grad hire. I’ve located several companies that I’m really excited about the prospect of working for and I’m updating my resume.

Readers, what do you consider in terms of financial concerns when you’re contemplating a new job? Have I missed anything?

A New Beginning: New Job

You guys have probably noticed with all my posts about financial independence and why I save that I’ve been a bit bored lately. I definitely haven’t been happy or interested in my work very well over the last half-year or so and before that, I was distracted by my condo buying adventures. I spent about three years in my previous position and feel like I had learned all I was going to learn in it, so it was time for a change.

I am very fortunate to work in an industry where there are (currently) plenty of job opportunities and it is good for your career to change positions. I am also fortunate to work for a company where I can change groups (re: work on a different “product”), without changing my job title or losing any benefits.

2012 has been a year full of new beginnings. I moved (twice!), bought a condo, started a serious relationship, and now, I’m starting a new job. It’s definitely taken me some time to see it as a new job, but that’s really what it is.

Some things are the same:

  1. My job title
  2. Who is providing my paychecks
  3. My direct deposit info
  4. My 401(k) matching
  5. My health insurance
  6. My salary
  7. My stock bonuses

Some things are different:

  1. My office building
  2. My commute
  3. My coworkers and my manager
  4. The “product” that I am working on

The work is completely different from anything I’ve done before, which will be an excellent challenge. There should be great technical challenges, as well as leadership opportunities. Plus, I get to work on a product that I believe in, surrounded by other people who also believe in the product. I’m optimistic that this will be a good change both career-wise and life-wise.

Financially, this doesn’t have any immediate impact, but I have a feeling it will result in better raises and more stock bonuses over the next few years than staying in my previous position would have.

Readers, how long do you normally stay in a particular job in your industry?

Career purpose: money? Nope.

After talking about why we work a couple of weeks ago, I’m going to talk about why I’m not in my career for the money.

I absolutely love saving money. There have been points in my life where saving money was the only interesting thing going on. Putting money into savings or investments or paying down the mortgage and watching my net worth go up has always been really exciting to me. But, I have always put money aside for the future pretty much no matter how much money I made. I’ve always made savings a priority.

Back in high school when I decided I wanted to major in an engineering field, I didn’t have any idea that it was a well-paying career. It was just really interesting to me. I love the “brain work” and the logical/math part of it. I’ve worked in food and retail and both were pretty boring compared to the engineering jobs I’ve had over the years. When I go on vacation and don’t do much “brain work”, I get so bored. I need to have a way to keep my brain active pretty much all the time. No matter what sport I’m playing, I’m always analyzing it. You can’t shut my brain off while playing sports.

When I got my signing bonus for my first job, I never at any point considered spending it; I only ever considered putting it into savings. When I started getting regular bonuses, again, those immediately went to savings without much thought. When I got a pay raise, the money of course went to savings. (And then was eventually eaten up by increased housing expenses, but that should be less of a problem going forward.)

There are, of course, times that I hate my job, but for the most part, I absolutely love the content of what I do. I think that I would be happier if I worked in a less corporate environment (a smaller company) or I could be happy doing projects completely on my own terms (I definitely have in the past). What I do really comes down to throwing technology at life’s problems and making things easier for people. I absolutely love this way of solving problems with code, of thinking through how we do things manually and how we can solve that with software. I don’t always love working with people or working more than 40 hours a week (it’s way too mentally exhausting), but I do mostly always love writing code.

When The Finance Buff linked to my post about why we work, his simple test was:

If the employer cuts your pay in half, do you still show up?

My answer is yes, I would still show up for half my pay. Hopefully I would have the mortgage paid off if that happened and I would never consider working more than 40 hours a week doing this for any less than I’m paid right now. Sure, my RSUs are a nice extra, but even if they disappeared, I would still do okay. One of my life plan ideas actually involves moving to a city with lower pay in another ten years or so. I would estimate that that would be a 50% pay cut, but being able to sell my condo here and use the proceeds to buy something in cash there, plus having a large sum invested would make a huge difference. Then again, maybe at that point, I can just quit completely and live off of my investments.

Then again, I feel like I’m severely overpaid for my level of experience. I’m happily taking the money that they’re giving me and banking it, but I definitely wonder some days why I’m worth so much to my employer.

On pay day: notes on income increases

Watching my income compound with raises is pretty cool.

As of today, I have now grossed as much as I had grossed by:

  • September 30th in 2011 (so two months ahead of last year’s income pace)
  • November 30th in 2010 (so four months ahead of 2010’s income pace)

Assuming that I get a paycheck at the end of August, I will have then grossed as much in 8 months this year as I did in all of 2010. By October, I will have grossed as much in 10 months this year as I did in all of 2011.

Also pretty cool: my net monthly pay is now pretty much what my gross monthly pay was when I first started working full-time. That means that my gross monthly pay has grown approximately by the tax rate or almost 30%.

 

This is why growing your career is so important for your finances. The difference between a 4% raise and a 5% raise for me is now over $1,000 per year.

Growing your career also sucks for your sleep sometimes. After moving this month, I started working 12 hour days, so I haven’t really had some time to rest in a while. We’ve been really good about not working weekends – just working extra hours during the week, so at least I’ve had those two days a week to recuperate.

Readers, have you done the math on how your income has increased throughout your career?

How to Evaluate a Job Offer

Every company has different ways of compensation. Some companies have amazing benefits, but lower pay. Some value equity over base salary. Some don’t offer a 401(k) and some do, but don’t offer matching.

You need to add up the following:

  1. Annual base salary
  2. Cash bonuses
  3. Value of stock options/RSUs (restricted stock units)/ESPP (employee stock purchase plan) based on the current stock price
  4. 401(k) matching (how soon does it vest?)
  5. subtract the cost of your health insurance premiums and your estimate of how much you would spend on co-pays/etc.
  6. subtract any 401(k) matching you would walk away from at your current employer
  7. value of other benefits such as free parking at work, lunch, dinner, life insurance policy, etc.

You should also add up the above over the same time period with your current employer.

How do the two amounts compare? Ideally, the amount with the new employer should be a step up from the amount with your current employer.

The catch whenever I try to play with the numbers is the amount of 401(k) matching that I would walk away from if I took a job with another company. Once my 401(k) matching has vested, that will be no longer a concern.

It’s up to you to decide how much an offer needs to be to switch companies. Personally, I would like to see my overall compensation go up by more than it has in the last few years, so probably around 10-20%. But when it really comes down to it, which product(s) would I prefer to spend my working hours improving?

(No, I am not looking for a new job, but I have been thinking lately about how exactly I would evaluate an offer for a different company.)

Readers, how do you evaluate competing job offers?

Part-time Master’s degree or not?

I’ve been thinking since undergrad on whether or not I should pursue a Master’s degree. There are several concerns here:

  1. Cost – Can I afford it? Will I go broke trying to get a Master’s degree?
  2. Career – Will it help my career to get a Master’s degree?
  3. Time – Will I be able to maintain any semblance of a social life while doing obtaining my Master’s degree? How long will it take?

I found a specific program that interests me and calculated the total costs. It would take me three years of taking about one course per academic timeframe, can be done online or in person, and would cost less than I expect to net in bonuses each year.

I calculated that I can afford it. I would not go broke, even if I was buying a condo. (This is a good reason to buy a condo that I can easily afford!) Pursuing the Master’s degree would use up *most* of my discretionary income (bonuses and non-budgeted monthly cash flow – vacations are budgeted) for the three years the degree would take me (but not quite all – raises and more bonuses would be mine).

Since I would only be taking one course per academic timeframe, I would drop to one night of sports per week and would probably still have 1-2 nights of a social life, which isn’t bad.

So the remaining factor to consider is my career. Would it help my career? From talking to my manager and coworkers, the answer is no. My long-term career goal is senior management and getting a technical Master’s degree will not help me with that – growing my soft skills will. I think it would also hinder my career in the sense that I would have less free time to devote to working extra here and there when necessary and possible.

And honestly, I don’t think that a MBA would help my career growth either since a) I already make six figures with just my Bachelor’s degree, b) they are really expensive, and c) through career development within my current company, I could easily move into the business side of things with significantly less time and financial cost than pursuing a MBA.

Conclusion? I’m not going to pursue a Master’s degree – I’m going to keep playing sports and growing my career without it.

Readers, do you have advanced degrees? Did it help or hinder your career? Or did it have a neutral effect? Obviously it was a requirement to get a TT job, but in other fields (such as industry for my field), it’s different.