Caveat: I am NOT a financial expert in any way, shape, or form. I am however a habitual HR brown bag attendee and question asker and the lucky recipient of a lot of sound financial advice during my time in the foreign service thus far, which I will now impart to you.
Take advantage of loan forgiveness programs
If your employer offers these programs and you have qualifying student loans, participate in them. Why pay your own student loan debt when someone else will do it for you? Alternatively, you could use this student loan payoff calculator to find out your pay off date. The State Department offers the Student Loan Repayment Program (SLRP), for those who qualify under the parameters of the program. If you are like most newly minted Foreign Service officers, you have moderate to significant to so big you don’t want to think about them loans and the SLRP is an easy way to knock out your loans. For those who may not qualify for the SLRP or are not in a position to serve in a service needs differential post, do a little research and see if you qualify for the Public Service Loan Forgiveness (PSLF) program and if so apply for it. The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.
Max out your Thrift Savings Program (TSP) or contribute enough to get the agency match
If you remember nothing else from this section, remember this, “compound interest is your friend.” The TSP.gov website says this about compound interest, “Compounding is powerful because it allows you to make money not just on the money you contribute to your TSP account every year, but also on the money that it earns. The power of compounding can work for you whether you contribute $10 to your TSP account or $10,000. The most important thing you can do is to start saving as soon as you can and be consistent.” I know it can be a challenge to “survive” in the DC-area as a federal employee, especially as an entry-level officer, but to the extent you can maximize your TSP you should do it. For 2015, the maximum contribution limit is $18,000. If you cannot commit this much to your TSP, contribute enough to get the employer match, otherwise you are throwing away free money. Note: You need to make a contribution equivalent to 5 percent of your basic pay to receive the full 5 percent agency match. The agency match breaks down as 1 percent automatic agency contribution and an additional 4 percent to match your contribution.
Live within your means
If you are like many Americans, you may find that you spend more than you save, an easy and common pattern to fall into in the DC-area. In order to reverse this trend it is essential to employ planning and discipline. Here are some steps (paraphrased from practicalmoneyskills.com) that can help:
1.) Create a budget
2.) Question your needs and wants
3.) Track, Trim and Target
Creating a budget can be a painful and tedious process, however the process will let you know in painstaking detail how much money you have coming in and where your money is going. Once you understand your money flows, you can evaluate your larger financial picture, figure out ways to spend less or conversely earn more, establish realistic financial goals, and identify the steps you need to take to achieve those goals. When budgeting it is a great opportunity for you to look into ways that you could make more money. Looking into free paypal money is always an option.
Take advantage of where you live
I keep alluding to living in DC in other parts of this piece because it actually does make a difference in terms of how far your money can stretch and in this case, “location” directly dictates the terms of what it is to “live within your means.” DC is currently in the top 10 most expensive American cities according to the most recent CBS Money Watch report. Some interesting stats from that report are below; I have cross referenced their findings with the national and/or median average cost for comparisons sake:
WASHINGTON, DC NATION
Can of coffee: $4.93 $2.38
Average rent: $1960 $769
Price of a home: $767,000 $188,900
T-bone steak: $10.52 $3.89
Trip to the beauty parlor: $51 $24
Dozen eggs: $2.36 $2.27
*I guess we’re kind of okay with egg prices.
However, unlike everywhere else in the country, we live in our nation’s capital and with that privilege comes A LOT of free stuff. There are many sites out there about things to do in DC for free, one of the best and most comprehensive is below:
Take advantage of the: Smithsonian Museums, National Zoo, Screen on the Green, the National Gallery of Art, the Kennedy Center, the Baltimore Inner Harbor, miles of amazing biking/running trails and parks, DC Restaurant Week, free tickets to sporting events, concerts, and more at the Verizon center, and programming at the DC Convention Center. With all of the Universities, think tanks, non-profits, and consulting firms in this area, there is no shortage of festivals, conferences, and fairs etc. that are often free and open to the public. There are so many free opportunities and things to do in this area that if you are paying a lot to be social, you are doing something wrong.