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Am I sinking, swimming, or above it all?
Old 09-08-2010, 07:38 PM   #1
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Am I sinking, swimming, or above it all?

33 years old, recently divorced and here's my deal...

Residing in Northeast Ohio, I plan to move South to the Carolinas in the next few years. I own a home that's current value is $230,000. I have a note on it for $167,000 that I am paying interest only on. Suffice it to say that, if sold today, I will make the difference b/t $230k and $167k. I plan to be here for not more than 5 years. So, I am not paying principal on it.

I have $50k in mutual funds earning, on average, 6%. I have $7k in a money market account, I have $3k in a checking account. I have $35k in a 401k, another $61k in another 401k account, $28k in a traditional IRA and $8k in a ROTH IRA. I have $8k in my company stock. I also own a car that has a value of about $15k and is paid for.

I make $87k in salary, $7-10k in bonuses and I have a company car/phone/internet that gives me about a $12k/year benefit. So, I realize about $107k in income each year. I have full health care with a $1,500k deductible and an HSA that the company contributes $500 to each year. I have no pension, but do have a matched 401k, up to 6%. I contribute 6% to it each month.

My expenses are $627/month for the house, $300 in utilities, $300 in property taxed, $200 in groceries and that's about the end of it. Don't get me wrong, my Visa bill ends up around $1,500 every month for travel, clothes, "things," groceries, etc. I have no consumer debt other than the house. I pay my credit card, in full every month.

Recently divorced, I split everything we had. It was a very easy divorce and we both ended well -- i.e., we didn't give the attorney everything.

My concern: I feel like I walked into a meeting with my pants down. Everything I did for 10 years (while married) feels like for not. I am concerned I don't make enough, that I don't have enough saved and that I will not make it to my goal of retiring by/before 60. Deep down, I don't think that's the case -- having what I do in savings (never mind the equity in the house) is a good spot for a divorced individual at 33.

I guess what I am looking for is some general guidance and some direction that I'm on the right track at 33.

Thanks for considering and your thoughts.
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Old 09-08-2010, 07:56 PM   #2
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33 years old, recently divorced and here's my deal...
Congratulations on getting your divorce behind you early. You can easily recover from it and get back on track.

Pretty expensive house for NE OH- must be a really nice place.

Ha
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Old 09-08-2010, 07:59 PM   #3
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I think you are doing great. You have a good income, low expenses and most importantly, you are actively managing your investments and planning your future. And you have 20 years to invest and still retire early.

I've been where you are and know the financial and psychic costs of a divorce. Given that a lot of guys end up in some crappy apartment with zero left in the bank, you've done a bang up job of damage control.

It is always easy to feel inadequate when you benchmark yourself against your top peers, but statistically speaking you are still in the top of the heap nationally and in the ether globally.
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Old 09-08-2010, 08:08 PM   #4
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Sounds to me like you have your head on straight. Just keep doing what you are doing and you will be fine.

You are lucky that there are no other problems with the divorce. That could have put a fly in the ointment.
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Old 09-08-2010, 08:08 PM   #5
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Welcome to the boards. You do seem to be in good shape! Will you still move if your house sells closer to the amount left on the mortgage and not the appraised value?
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Old 09-08-2010, 08:08 PM   #6
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lets see if I add up the assets I get ~$200k in funds/stock. After you sell the house you (may) get around ~$40-50k after fees.

So lets ballpark your net worth at $250k. The little chart I have suggest that savings-wise you are ahead of the game for a 37 year old planning to retire at 65 (or perhaps a little sooner).

Are you on track ? It seems that way. Your chosen lifestyle will dictate that though.

Check out the ballpark estimator at www.choosetosave.org for another little "how am I doing" estimate.

The little chart below shows that you are worth what a 40-45 year old retiring at 65 should be worth. The debt they refer to though is mortgage debt. Avoid consumer debt like the plague. The usual model for a retiree is a paid for dwelling upon retirement and SS and the income that your stash would generate. For the ubiquitous 80% income replacement ratio target for a retiree the chart below is a guide. That 80% target is (ad-nauseum) debatable if your expenses are low and/or if your income was high.
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Old 09-08-2010, 08:23 PM   #7
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Originally Posted by Bestwifeever View Post
Welcome to the boards. You do seem to be in good shape! Will you still move if your house sells closer to the amount left on the mortgage and not the appraised value?
I would likely consider it, yes. I wouldn't move if I can't sell it for $167k; however, the values in my area are depressed at $230k. While possible, I don't see them to go down a lot more in the next few years.

The divorce is not something either of us really wanted in life, but we knew it wasn't going to work out, sadly. So, splitting up wasn't tough from a financial perspective. Emotionally, it was difficult. I am fortunate that it wasn't worse - I could be "that person" stuck in an apartment with nothing to show for. I am glad that is not that case.

My life style is one that will dictate so much of what I do, I agree. I don't like to penny pinch to the point I squeak, but you aren't going to find me eating filet, living in a 5,000 sq.ft. house and spending thousands at the bar every weekend. I just don't do that. I live in a modest/nice home, I buy my clothes at the outlet malls, I go on vacations where I can find a good value and I eat at chain restaurants, or at home. Sure, I splurge and buy something nice from time to time, but I don't make that a habit and I always pay it off. If i don't have it to spend, I don't buy what I am looking at.

I appreciate the perspective here and invite more as it helps lift some of the fog that has been there for a while.
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Old 09-08-2010, 08:27 PM   #8
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Originally Posted by MasterBlaster View Post
lets see if I add up the assets I get ~$200k in funds/stock. After you sell the house you (may) get around ~$40-50k after fees.

So lets ballpark your net worth at $250k. The little chart I have suggest that savings-wise you are ahead of the game for a 37 year old planning to retire at 65 (or perhaps a little sooner).

Are you on track ? It seems that way. Your chosen lifestyle will dictate that though.

Check out the ballpark estimator at www.choosetosave.org for another little "how am I doing" estimate.

The little chart below shows that you are worth what a 40-45 year old retiring at 65 should be worth. The debt they refer to though is mortgage debt. Avoid consumer debt like the plague. The usual model for a retiree is a paid for dwelling upon retirement and SS and the income that your stash would generate. For the ubiquitous 80% income replacement ratio target for a retiree the chart below is a guide. That 80% target is (ad-nauseum) debatable if your expenses are low and/or if your income was high.

Easy there - I'm 33, not 37! Haha! Thanks for the input here, it's very helpful!
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Old 09-08-2010, 08:48 PM   #9
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Congratulations on getting your divorce behind you early. You can easily recover from it and get back on track.
I agree.

It sounds as if you are doing well. You may have lost some traction but are regaining you footing.

Be careful of those southern girls - soft on the outside, steel (some) on the inside.
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Old 09-08-2010, 08:58 PM   #10
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Be careful of those southern girls - soft on the outside, steel (some) on the inside.
Best to consider all women as bombs, and you as the bomb squad. But try not to communicate this.

Ha
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Old 09-08-2010, 09:00 PM   #11
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Oh boy Ha, you are ballzy!
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Old 09-08-2010, 09:03 PM   #12
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Welcome at 33 I was also newly divorced and had a net worth of not much but life got better and I got smarter so you are doing great ! Congratulations !
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Old 09-08-2010, 10:47 PM   #13
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Just want to say welcome from another NE Ohioan. I'm just north of Akron.

Sorry about the divorce but you're doing better than a lot of people in the area.
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Old 09-09-2010, 07:08 AM   #14
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You appear to be in pretty good shape but it also appears you are only saving 6% of your salary?

With no pension and early retirement a goal I would be ratcheting the savings up as much as possible.

Also if "60" is the majic number for you then consider getting a 25 year or less mortgage when you move and always keep a future mortgage such that your home will be paid for around 60 or less.
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Old 09-09-2010, 07:38 AM   #15
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Welcome. I live in SW Ohio and think home prices will keep going down, but it should not be a factor while increasing your net worth on the asset side. Start tracking your net worth via microsoft money or other software. I think it helps with the goals seeing the numbers go up each month and also helps spot the red flags when the number is declining. You can use this time to lick your wounds, lay low, increase your savings rate and reduce spending. Your income is very good for this area and should provide enough leeway to ramp up savings. My only advice is 'Don't keep splitting the pot every 10 years'.
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Old 09-09-2010, 08:48 AM   #16
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I am sure you're well ahead of the curve for your age, recently divorced. I wouldn't include your home, car or checking account in your calculations - you will presumably always have to have one of each. While you may have some equity in your home, by the time you reach retirement age, the amount of home equity you can cash in by downsizing your home will probably be relatively small vs your nest egg.

But your investments, contributions, etc. look great. Shoot for a target nest egg a little higher than you think you'll need. If your finances go a little south or govt benefits change (likely IMO), you'll still be on track. If things go as expected or better, you have the option to retire earlier or better.

May go without sayinng, but make sure you live life in the present from now on. Focusing too much on retirement at this early stage is no way to live IMO. I know a few people who let retirement dominant their thoughts, and are pretty much miserable now...
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Old 09-09-2010, 11:12 AM   #17
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I too would not include the value of a car, unless it is some sort of antique with an inflated investment value (like I would ever tie up money in something like that!). But I don't see any reason not to include money in one's net worth, simply because it is in a chequing account. Cash is cash.

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Originally Posted by startingover View Post
My concern: I feel like I walked into a meeting with my pants down. Everything I did for 10 years (while married) feels like for not naught. I am concerned I don't make enough, that I don't have enough saved and that I will not make it to my goal of retiring by/before 60.
Fixed for you! Seriously though, it seems to me that you are not doing too badly, all things considered. Focus on the positives, e.g.:

(1) you are employed and earn a decent wage;

(2) you are (presumably) in good health;

(3) notwithstanding a recent divorce, you have been left with significant assets and a positive net worth;

(4) you have no children and thus no custody issues to worry about;

(5) doesn't sound like you have any support obligations to your ex-spouse;

(6) you are still relatively young and have many years ahead, during which compounding can work its usual miracle;

(7) you live in a country that is essentially untroubled by war, famine, widespread corruption, etc.;

(8) presumably your marriage provided some good times and learning opportunities. No one can take those away from you.

So, no pity party!

If you sincerely want to cut back on expenses and ramp up your savings, it sounds like there is some fat in your current budget ($1,500/month for travel, clothes, "things," groceries, etc.). And as you are supplied with a company car, you might as well sell the one that is worth ~$15,000 ... that's just dead money and unnecessary costs (insurance and maintenance).
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Old 09-09-2010, 11:47 AM   #18
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Welcome to the board.

Like the others have said, you're in good shape today. Time to create and follow a plan that gets you financially independent by your target date.

When I started out, I used the simple tool in Quicken to project the amount of money I would need. It makes very simplistic assumptions, but even so, it was very helpful to have a goal in mind & a savings & investment plan to get there. FIRECalc (see link at bottom of the page) is a great tool with more sophisticated investment return projections.

There are good investment books recommended in the FAQ section. Nothing like being your own financial adviser - saves you money and you know exactly where your interests lie.

All the best. Welcome again.
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Old 09-09-2010, 12:16 PM   #19
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You're doing great financially, though you could do even better going forward, IMO.
You mentioned wanting to retire before 60, so if I were you I would max out 401k contributions unless investments options are awful in it and (Roth)IRA. Also I'd do this because you can afford it now. If or when you get married again, maybe you'll have kids and a wife staying at home, so it won't be as easy to save for retirement as right now.
How secure is your job? If pretty secure, the $10k in MMA and checking account seems sufficient. If not as secure, I'd increase by a few thousand...but it's just me being very conservative/frugal.
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Old 09-09-2010, 12:37 PM   #20
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I too would not include the value of a car, unless it is some sort of antique with an inflated investment value (like I would ever tie up money in something like that!). But I don't see any reason not to include money in one's net worth, simply because it is in a chequing account. Cash is cash.

Fixed for you! Thanks for the grammar lesson Seriously though, it seems to me that you are not doing too badly, all things considered. Focus on the positives, e.g.:

(1) you are employed and earn a decent wage; Agreed.

(2) you are (presumably) in good health; Yes.

(3) notwithstanding a recent divorce, you have been left with significant assets and a positive net worth; I guess so.

(4) you have no children and thus no custody issues to worry about; True.

(5) doesn't sound like you have any support obligations to your ex-spouse; True.

(6) you are still relatively young and have many years ahead, during which compounding can work its usual miracle; True.

(7) you live in a country that is essentially untroubled by war, famine, widespread corruption, etc.; Obviously, very true.

(8) presumably your marriage provided some good times and learning opportunities. No one can take those away from you. Yup.

So, no pity party! Never suggested I was.

If you sincerely want to cut back on expenses and ramp up your savings, it sounds like there is some fat in your current budget ($1,500/month for travel, clothes, "things," groceries, etc.). And as you are supplied with a company car, you might as well sell the one that is worth ~$15,000 ... that's just dead money and unnecessary costs (insurance and maintenance).
I am not selling the car. It's paid for, is 10 years old, has 9,000 miles on it and is driven very rarely. While I see what you would be getting at, it's a toy I earned, paid for and costs me nothing more than two tanks a gas a year and the insurance. If it were other than that, it would be gone.

I put 6% into my 401k to get the company match, I then have about $1,500 a month to save in other areas - 401k, ROTH IRA, Mutual Funds, etc. I struggle there with what to do what that $1,500 each month. So, in total, I am saving about $2,100-$2,300 every month. I think that's decent, if not great given it's based on one income; however, I agree I could try to spend less. I need to work on that, I guess. The $1,500/month visa bill has -- dinner out, hotel/travel expenses, clothes, groceries, personal care items, things around the house, etc. Basically, I put everything on it for the cash rewards and I pay it off every month.
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