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28 y/o interested in RE!
Old 12-06-2009, 08:30 AM   #1
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28 y/o interested in RE!

Good morning.
I am new to the board and interested in retiring early (of course!).
My husband and I were married 2 1/2 years ago, and have quite a bit of debt to get rid of. We are on schedule with the help of Dave Ramsey's Total Money Makeover to pay off our debts (except the mortgage) by December 2010.

Currently, my husband and I bring home a combined income of $68,000/year. We live in a modest house that we are fixing up little by little. We bought it at auction for $35,000; however, took out a mortgage for $60,000 (20 year) because we had to put in a new septic and pay for a new roof among other things. We owe $56,000 on the house, and according to Mint.com, it is worth over $90,000. We are very frugal. Hubby does it all from car repairs to plumbing. We enjoy going to the dollar theater to watch movies versus $7/matinee ticket. We also like to go out to eat once ever two weeks with coupons we get from restaurant.com or from our Entertainment book.

I do not necessarily want to have millions in the bank before retiring. I dont think either of us really wants to completely retire. We have dreams of opening a wine business one day as it is our hobby and passion. But even if that never comes to fruition, I would like for us to be able to find jobs that we love and enjoy...even if they dont pay much. I would like to be comfortable enough with how much money we have saved to be able to make this move in the next few years.

Currently, we have the following debts:
Mortgage ($55,921)
Hubby's Credit Card from before we were married ($9800)
Personal Loan ($7085)
Hubby's Vehicle Loan ($8651)

I have a 401K at work with just over $20,000 in it and contributing 6% of my income of $38,000 with a company contribution of 2.5 - 3% of my income in a profit-sharing plan.

I just enrolled for hubby's 401k from work a few months ago contributing 5% of his income. He has a little over $1,000 in the account.

Hubby is 38 years old, so I think it is really important for him to get on track with retirement savings. Right now, with our debt payment plan, it is hard to put away any more money toward his retirement right now. As of 2011 when all our debts SHOULD be paid off, I would like to start putting $5,000/year into Roth IRA's for the both of us and up our contributions to 401k to 15-20%.

I would really like for us to be able to find jobs we enjoy by 2015 with $250,000 in the bank and the mortgage nearly paid off. Hopefully, hubby will be able to find a job he enjoys sooner than that and hopefully we could live off of our income as well as still save up for our dreams to own a wine business in the meantime.

So, there is my novel.

I would love to hear any suggestions/comments anyone has for us to meet our goals.

Oh, and I forgot to mention. We have no children and no plans on having children.

~M
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Old 12-06-2009, 08:36 AM   #2
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Welcome to ER.org. You would probably enjoy/benefit from reading:

Your Money or Your Life (dated but all still applicable) - Dominguez & Robin,
Work Less, Live More - Clyatt, and/or
How to Retire Happy, Wild and Free - Zelinski.

All of them speak to 1) enjoying life instead of seeking happiness in pursuing money/possessions and 2) how to get there financially. Since you're frugal, you can probably get them at your local library. Best of luck...
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Old 12-06-2009, 09:07 AM   #3
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Hi Meg, and welcome aboard!

It sounds to me like you're doing everything just right. I admire your commitment to being debt free, living below your means and saving for retirement. I think you are on the right path to fulfill your goals. My best wishes to both of you!

Coach
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Old 12-06-2009, 11:05 AM   #4
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Midpack - thank you!
I am always up for a new financial book to read!
I have yet to read:
How to Retire Happy, Wild and Free - Zelinski.

I will have to check that out from the library. You are right, we get all of our books and DVD's from the library. If we like them enough, we will buy them. Over the past 3 years, I have bought only 2 books that I felt was a "must have" in our library. One of them is "Life or Debt" and the other one is a different book I loved for our marriage. If I want to read "Your Money or Your Life" again (and I have already read it twice), I'll get it out again. :-) I may just do that after reading the books I have from the library.

Dave Ramsey's Book, "Total Money Makeover" is an audio book I got from the library. I try to listen to it every quarter to keep me motivated toward our goals.

Coach - thank you for the kind words!

~M
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Old 12-06-2009, 01:33 PM   #5
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Welcome Meg. Sounds like you have your head screwed on right! I see all the debt, other than the mortgage, was undertaken by your DH. He is lucky to have such a good CFO (YOU!). Presumably the credit card debt carries the highest interest and that's what I would focus on eliminating first. You are on your way!
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Old 12-06-2009, 03:38 PM   #6
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Welcome Meg. Sounds like you are on the right track. Be sure not to miss our ER FAQs subforum. It has many useful discussions about various ER related topics that are of perennial interest.
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Old 12-06-2009, 03:51 PM   #7
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Meadbh -
Actually, hubby's credit card is at the lowest rate of everything. He locked it in at 2.99 for the life of the balance a couple of years ago (thank goodness!).

Right now, we are paying things off in the follwing sequence:

1.) Personal Loan (this is at 7.99% for 2 years. We bought the property next door to our house that was a foreclosure. It was $7,900 with a delapitated house on it. We plan on tearing it down eventually when we have enough money saved up to do so. Purchasing this house doubled our property size from 1/2 acre to a full acre. An acre around here goes for $25,000. We couldnt NOT buy the house.)
2.) Hubby's Car Loan - Even though the interest rate on this is 3.99% for 4 years, I feel that this is something that depreciates and needs to be paid off as soon as possible. I'd rather pay this off and then live without car payments for several years. We love both of our vehicles with no plans on "upgrading." We plan on driving our vehicles until they drive no more! :-)
3.) Hubby's credit card - with the snowball effect, this should only take a few months after the first two items are paid off.
4.) Emergency Fund of $12,000
5.) Mortgage - 5.99% for 20 years. It is not actually a mortgage, but a home equity line of credit. We are 2 1/2 years into the mortgage. After the EF is taken care of, I'd like to put an additional $750/month on our mortgage (would pay it off in 5 years) and then invest $750/month in our Roth IRA's and up our 401K contributions at work and save the rest.

Right now, we have an additional $1300 we are paying toward our debts to speed up the payment process. We have a really tight budget with groceries ($200/month), entertainment, etc. I mentioned that we SHOULD be able to get our debts paid off (except mortgage) by the end of 2010, but I'm not sure. On paper, it works out fine, but I just got out of the hospital a month ago. I am waiting to see what the bills will be for that (if any). Luckily I have really good health insurance with my employer, but I guess we'll find out when the bills come in.

I had the H1N1, viral pneumonia in both lungs, my lungs failed while I was in ICU for 5 days, and then they found a blood clot in my lung. Apparently, 50% of people who get the H1N1 get a blood clot in their lung(s). Luckily, I dont remember the first 10 days in ICU, as they put me in a self-induced coma. After 17 days in the hospital, I was released and so happy to be alive and home.

This was definitely a Thanksgiving to be thankful for this year.

OK... another novel was written.
I'm sorry.

~M
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Old 12-06-2009, 03:52 PM   #8
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Welcome! Great start!

All the best & hope you get back to normal quickly.
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Old 12-06-2009, 04:23 PM   #9
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I think you're on the right track. If I were in your shoes I would consider the following risks:

1. Hubby. Is he on board? If there's resentment, spoken or not, it will eventually bite you.
2. Health care. Usually a biggie for folks on this board, and with your H1N1 scare, you can see what I mean.
3. Tax planning. You're probably not paying much in taxes, but it wouldn't hurt to look and see how to minimize them over the next 5-10 years.

Good luck,

2Cor521
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Old 12-06-2009, 05:21 PM   #10
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Girlfriend, I wish I had my program as together at age 28 as your is. Good job. Glad to hear that you are on the mend. I used Mary Hunt's book The Everyday Chesapeake
http://www.debtproofliving.com/Help/ManageMyAccount/EverydayCheapskate/tabid/210/Default.aspx and Elizabeth Warren's The Two income trap Amazon.com: The Two-Income Trap: Why Middle-Class Parents are Going Broke: Elizabeth Warren, Amelia Warren Tyagi: Books

to start me on the road to getting my finances in shape. It was the best thing i have ever done for my family. After that I read what ever I could get my hands on. You are off to a great start. Keep reading,and keep learning and stick to your plan.
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Old 12-13-2009, 12:08 PM   #11
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Quote:
Originally Posted by SecondCor521 View Post

1. Hubby. Is he on board? If there's resentment, spoken or not, it will eventually bite you.
2. Health care. Usually a biggie for folks on this board, and with your H1N1 scare, you can see what I mean.
3. Tax planning. You're probably not paying much in taxes, but it wouldn't hurt to look and see how to minimize them over the next 5-10 years.
Good afternoon.
Thank you, everyone, for the input and helpful books and links.
I appreciate it.

It was asked if hubby is on board. He is on board 100%. I am so thankful that I have someone who wants the same thing as I do.

As for Health Insurance, I know that is going to be a big one for me. Health insurance is a MUST in our household. I'm not sure if I'm even insurable due to my past (and I'm only 28!)
Severe pneumonia where I was hospitalized for a few days about 8 years ago. A minor stroke 4 years ago. And the H1N1 a few months ago.
And I consider myself pretty healthy! :-) I rarely ever get sick. But when I do, I get the works!!!

As for tax planning...
I have not done a single thing for tax planning.
What should I be looking into? Any suggestions?

Based on our income, and our mortgage, we no longer itemize (which is fine by me!) We get a little return every year from the IRS. Once our debts are paid off, I plan on contributing $10,000/year (for the both of us) into a Roth IRA. I'm not sure what other tax advantage vehicles there are to invest in.

Any information would be greatly appreciated.

Thanks again for everything.

~M
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Old 12-13-2009, 01:33 PM   #12
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The other two (non-self employed or partnership) tax saving accounts are 401ks (but only if your employer offers one), HSAs (requires you get an HSA eligible high-deductible policy), and the counterparts to Roths IRAs, IRAs (which are useful if your income is high and/or you expect to spend about 45k or less in today's dollars each year during retirement).

I think that anyone who only needs high-deductible insurance, and has taxable income, should have a HSA (you need to show receipts of medical related costs, but, income put in is untaxed, gains are untaxed, and withdrawals are untaxed, need to choose the right plan though, some have stupidly high administration costs/lack of options).
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Old 12-13-2009, 02:19 PM   #13
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Thank you, Plex.
I am contributing to the company 401K at work already.
And I have health insurance already through work.

~M
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Old 12-13-2009, 06:53 PM   #14
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Quote:
Originally Posted by megcrispin View Post
Good afternoon.
I have not done a single thing for tax planning.
What should I be looking into? Any suggestions?

Based on our income, and our mortgage, we no longer itemize (which is fine by me!) We get a little return every year from the IRS. Once our debts are paid off, I plan on contributing $10,000/year (for the both of us) into a Roth IRA. I'm not sure what other tax advantage vehicles there are to invest in.

Any information would be greatly appreciated.

Thanks again for everything.

~M
Well, I think it's good for everyone who is interested in RE to learn about how their taxes are calculated and what makes them higher or lower. For me, income taxes are my number 1 expense and represent about 1/3 of my spending.

I'd suggest starting at your local library and checking out a few books on taxes and personal finance for a general overview. If you're bold, you might also take a look at Pub 17 by the IRS. I find the IRS pubs reasonably straightforward if I can find the patience to go through all the "and"s, "if"s, and "go to"s.

Roth IRAs are great and the 401k's are great also. One thing that helps a lot of people is upping their 401k contributions whenever they get a raise. At your current income level and filing status it's possible that you might qualify for the Saver's Tax Credit, so I'd suggest looking into that.

2Cor521
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Old 12-14-2009, 05:14 AM   #15
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Perfect, thank you.
And I completely forgot about the Pub 17.
I used to work at H&R Block. That sucker is HUGE.
But hey, if it helps us to save money, I'm all for looking into it.

THANK YOU!!!

~M
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