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i stare out the window and dream of ER...at age 27!
Old 04-26-2010, 04:19 PM   #1
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i stare out the window and dream of ER...at age 27!

Most the guys I work with think I am off my rocker, as they have been working for...30 + years.

I'm 27 and a lifetime nerd (read: engineer). I just hit the 5 year mark with my company, which means I not only get an extra week of vacation, but I am now vested in my company's pension. For whatever that is worth. I try to understand...but they change the rules all the time and I really don't have the time to keep up. And I look forward to another 20 years of pure working joy...

Anywho, I just hit a couple of big financial milestones in my life. The 1st being my "net worth" is out of the red (401k, savings, IRA, home equity>my mortgage balance) and 2, I am a hundred-thousandaire. My 401k went over $100k, which was exciting for me. My 401k is worth about $120k today, about 40% was contributed as Roth money. And I have $18k in a roth IRA (need get back into contributing to that...). In addition to another $30k sitting in savings (emergency fund, "new" car fund, etc) and about 6 months food storage.

A year ago I paid off all $42k of my student loans and I never have had a car payment (thanks to generous parents, riding a bike and caring less about my "ride" - I used to drive a '93 Olds, but the lack of AC and Houston got to me). My wife and I have no CC debt. We still owe $220k on our house, as we are proud home owners for 1 solid year (well, my wife owned a house for 12 years or so before we married). We have over $100k in equity in the house.

I know all this may seem naive and childish, but I look forward to retirement somewhere in the northern rockies (e.g. Montanta). With kids still in front of us (we've haven't had any yet and we have at least another 9 months before one shows up), I'm really interested in understanding the costs, 529's, accounts for emergency funds, etc. I've been poking around here and just trying to soak up the information.

Thanks for having me and I look forward to learning from ya'll (I had to throw that in there).
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Old 04-26-2010, 04:28 PM   #2
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Congratulations:

You seem to be on track financially for eventual retirement - wherever it suits you. You may find though that your dreams and plans may change after a decade or three.

I have to hand it to you also. Anyone who can drive a car without air conditioning in Houston has some inner fortitude... 2 cheers for that.
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Old 04-26-2010, 07:36 PM   #3
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You think you are off your rockers? I once mentioned to a 40+-year-old co-worker about 401(k), Roth IRA, and tax-efficient investments because he was starting to think about retirement, and he looked at me as I was a green alien with antennae for ears. I was 34 at the time, and I thought, "Great, finally someone who speaks my language. Perhaps we can trade a few ideas." I guess I was wrong.
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Old 04-26-2010, 10:06 PM   #4
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Don't get me started on co-workers. I have only met one who was interested in financial stuff at all, and these are all people with engineering backgrounds. And even that one seemed pretty skeptical about retiring on $2M (in today's dollars), which is the most conservative scenario I would ever possibly do.
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Old 04-26-2010, 10:22 PM   #5
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Congrats, I am around you age and in the same field.

I have some good news for you - I think you are calculating net worth incorrectly. You said it was finally out of the red because your accounts plus home equity was greater than the amount of your mortgage. You are forgetting that your home is worth something, too. In other words if your mortgage is $100k and your equity is $100k, your net worth would be $100k (not zero).

Equity is the difference between what you owe, and what the house is worth. If you have $100k in equity and $168k in other accounts (IRA, Roth, savings), you have a net worth of $268k. (ok, some people don't count their primary residence in their net worth, but it sounds like you wanted to)

While I have the attention of a fellow engineer, let me ask... I just registered for this site (after a few years of lurking) and the registration question was as follows:
What is the sum of two plus two multiplied by 3?

I answered 8 (2+2*3), and it told me I was wrong. Am I missing something or do the site creators not understand order of operation? Maybe they wanted me to type "eight"?
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Old 04-26-2010, 10:29 PM   #6
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Welcome! You are a lot further along than we were at your age. ...and, no, you are not off your rocker. I developed a spreadsheet when I was in college (a long, long time ago, in a galaxy very far away) to try and figure out how to get to a point that I could retire by age 45 if I wanted. Back then, there were no resources like this forum, or even computerized spreadsheets like Excel or Lotus 1-2-3...so I did it manually. Well, I am 48 now, and not retired (although I could if I were to make that choice). At 45, we were "entry level" FI, meaning we could have retired had we sold the McMansion and lived a little smaller. But we wanted to keep it, there are a few toys we want to buy and have in retirement (RV and peripherals), two kids in college, and some succession planning yet to do, so I have about two and a half years to go.

I think it is never too early to think about, plan for, and save for retirement, whether or not you "intend" to retire, simply because we never know what is going to happen, and when we may no longer want to or be able to work.

You mention an interesting point: 6 months of food storage. Not many people have done this. We have about a year or more worth of staple foods (grains, beans, oil, salt, sugars, milk powder). However, we would not have done this had it not been for our faith. What led you to do this?

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Old 04-26-2010, 10:37 PM   #7
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Quote:
=mchas;930352... I just registered for this site (after a few years of lurking) and the registration question was as follows:
What is the sum of two plus two multiplied by 3?

I answered 8 (2+2*3), and it told me I was wrong. Am I missing something or do the site creators not understand order of operation? Maybe they wanted me to type "eight"?
I think they changed the system recently, wasn't that complicated when I joined. Didn't have to know 2+2 or 2X3. Anyhoo, welcome to the forum.
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Old 04-27-2010, 08:08 AM   #8
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thanks everyone for the warm welcome.

Quote:
Originally Posted by MasterBlaster View Post
Congratulations:

You seem to be on track financially for eventual retirement - wherever it suits you. You may find though that your dreams and plans may change after a decade or three.

I have to hand it to you also. Anyone who can drive a car without air conditioning in Houston has some inner fortitude... 2 cheers for that.
when it comes to the mandatory career planning my employer makes me do, i joke to write down what you don't want, that way you surely won't get it. I also told my FIL about retiring in montana and he told me I'd retire where ever my grand kids are .

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Originally Posted by Rambler View Post
You mention an interesting point: 6 months of food storage. Not many people have done this. We have about a year or more worth of staple foods (grains, beans, oil, salt, sugars, milk powder). However, we would not have done this had it not been for our faith. What led you to do this?
I guess we both have food storage for the same reason. We're trying to build up to a year, but our house is busting at the seams. We've been getting quite creative on where to store things. Although, I have yet to rip the guts of my couches out and replace with rice and grain for people to sit on...probably never will. But, it is an important thing...as we wouldn't have to spend as much on food come a financial crisis. now cooking with it...that something I'm trying to get better at doing.

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I have some good news for you - I think you are calculating net worth incorrectly. You said it was finally out of the red because your accounts plus home equity was greater than the amount of your mortgage. You are forgetting that your home is worth something, too. In other words if your mortgage is $100k and your equity is $100k, your net worth would be $100k (not zero).

Equity is the difference between what you owe, and what the house is worth. If you have $100k in equity and $168k in other accounts (IRA, Roth, savings), you have a net worth of $268k. (ok, some people don't count their primary residence in their net worth, but it sounds like you wanted to)
Thanks for that. I always thought you should subtract your liabilities. For me, "net worth" being a financial fitness indicator, I always put my all my assets (yes, including home equity - debatable, I know) in one column and all my liabilities in another. add up both columns and subtract the sums of each. This way I incorporate any debt and assets into one single number...is this a poor approach? It seems to be a pessimistic approach...
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Old 04-27-2010, 08:48 AM   #9
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Some somewhat contrarian advice: Make sure you like your job (career?) and put as much effort in as you can. Responsible financial behaviour is very important but seems like you are very strong here. The more you make the more you can save. The more you save the earlier you can retire. Try not to think about retirement so much at this stage in your life. You have a ways to go and this could impact your performance in your job?
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Old 04-27-2010, 09:04 AM   #10
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Some somewhat contrarian advice: Make sure you like your job (career?) and put as much effort in as you can. Responsible financial behaviour is very important but seems like you are very strong here. The more you make the more you can save. The more you save the earlier you can retire. Try not to think about retirement so much at this stage in your life. You have a ways to go and this could impact your performance in your job?
What I read here is get on that treadmill and run as fast as you can now so that you can rest later. Perhaps that is a viable strategy. Others may want to smell the roses along the way and perhaps retire a little later while enjoying the ride. Those are all personal choices so there is no correct answer and you'll have to sort it out for yourself. Personally though, I believe danmar's strategy (and logic) are flawed.
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Old 04-27-2010, 12:58 PM   #11
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What I read here is get on that treadmill and run as fast as you can now so that you can rest later. Perhaps that is a viable strategy. Others may want to smell the roses along the way and perhaps retire a little later while enjoying the ride. Those are all personal choices so there is no correct answer and you'll have to sort it out for yourself. Personally though, I believe danmar's strategy (and logic) are flawed.
I guess you can see I don't belong to the job is a prison school of thought. Agree there are a variety of ways to get to the place you want but I wouldn't say my logic is flawed. It worked for me -a great career that I loved (mostly) which resulted in FIRE wildly beyond my expectations at age 56. To each his own.
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Old 04-27-2010, 09:21 PM   #12
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I am 30, and I totally feel your pain. I am constantly calculating and trying to figure out how I can get out fast! I am an engineer too, so maybe we just like to play with numbers. Currently I think it will take about 20 years. Seems like forever!!!

I probably need to find a new career path, but I am not sure what that would be yet, and I would definitly make less money. Maybe after they move my job to mexico I will figure it out! (this is a serious possibility)
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Old 04-27-2010, 10:16 PM   #13
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Originally Posted by ronocnikral
Thanks for that. I always thought you should subtract your liabilities. For me, "net worth" being a financial fitness indicator, I always put my all my assets (yes, including home equity - debatable, I know) in one column and all my liabilities in another. add up both columns and subtract the sums of each. This way I incorporate any debt and assets into one single number...is this a poor approach? It seems to be a pessimistic approach...
You are right to subtract liabilities from assets. However, the total value of your house is the asset, not just the equity. So if you had a house that would sell for $500k and a mortgage of $400k, your net worth would be $100k (value of house, $500k - amount of mortgage, $400k), NOT -$300k (amount of equity, $100k - amount of mortgage, $400k). Hope that makes sense.
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Old 04-28-2010, 07:30 AM   #14
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thanks everyone for the comments and the welcome.

thanks mchas for that. the net worth calc makes better sense now.

as far as the career, i really enjoy what i do. in 2008 I skied around 40 days at Alta, UT (amazing yearm over 700" of snow). i was still employed and i worked out of Louisiana. I also get to travel...which I am luke warm on. But seeing Thailand and Africa have been interesting. When I got back from my last trip i was cursing travel, but next time they ask me to go, i'll do it willingly. we'll see how it all plays out...but, i've been enjoying the ride (maybe a little too much). I probably save between 25 - 30 % of my gross.

thanks again...this place has a lot of information.
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Old 04-28-2010, 08:35 AM   #15
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As much as it is nice to stare out of the window and dream of retiring at 27, I would wish that you would not. There is a reason why people generally retire at 58-65; they are tired after a long and fruitful CAREER. Other wise you have the old joke: Children are God's punishment for enjoying sex.

In my opinion, a good retirement is a reward that you get for having a long a fruitful career, raising kids, and doing other things that people are supposed to do between 22 and 65. If you don't do those things, and work hard at accomplishing those things, I suspect you will really not enjoy retirement, because you never really worked.

I have a Bil who effectively retired at age 31. By age 48, when all his peers had established careers in education, business, and science, he had nothing, and eventually nothing to talk about. I was able to talk to him early on, but not later since he just didn't have any life experience. He got lonlier and lonlier; eventually at age 54 he started his own business with some younger friends.

Sure..... plan for a financial retirement. But resist taking it until you've actually had a career; you won't like your relationships in retirement if you don't.

Just my two cents.

Z

p.s.: If you are female and your career was raising children, and that is also a career, the above does not apply.
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Old 04-28-2010, 08:37 AM   #16
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C
I answered 8 (2+2*3), and it told me I was wrong. Am I missing something or do the site creators not understand order of operation? Maybe they wanted me to type "eight"?
They want 12 - or (2+2)*3.
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Old 04-28-2010, 08:42 AM   #17
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p.s.: If you are female and your career was raising children, and that is also a career, the above does not apply.
What about a stay at home dad?
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Old 04-28-2010, 09:22 AM   #18
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As much as it is nice to stare out of the window and dream of retiring at 27, I would wish that you would not. There is a reason why people generally retire at 58-65; they are tired after a long and fruitful CAREER. Other wise you have the old joke: Children are God's punishment for enjoying sex.

In my opinion, a good retirement is a reward that you get for having a long a fruitful career, raising kids, and doing other things that people are supposed to do between 22 and 65. If you don't do those things, and work hard at accomplishing those things, I suspect you will really not enjoy retirement, because you never really worked.

I have a Bil who effectively retired at age 31. By age 48, when all his peers had established careers in education, business, and science, he had nothing, and eventually nothing to talk about. I was able to talk to him early on, but not later since he just didn't have any life experience. He got lonlier and lonlier; eventually at age 54 he started his own business with some younger friends.

Sure..... plan for a financial retirement. But resist taking it until you've actually had a career; you won't like your relationships in retirement if you don't.

Just my two cents.

Z

p.s.: If you are female and your career was raising children, and that is also a career, the above does not apply.
I tend to agree. very...locke-ish. if we all had to do or did the same thing, what fun would that be? I don't follow the logic of working so you have something to talk to your friends about though. When I get together with friends, I try to avoid talking about work. Sure, I may talk about my latest business trip, but that is more on the culture and the people, not my business meetings. maybe something i will learn with age?

but it's all about creating choice - e.g. working b/c you want to v working b/c you have to. I'm sure you all know that.

Besides (and I have been unsuccessful at convincing my wife to let me be a stay at home dad), I could not imagine anything better than spending time with my family (just my wife right now) without worrying about money.
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Old 04-28-2010, 09:33 AM   #19
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As much as it is nice to stare out of the window and dream of retiring at 27, I would wish that you would not. There is a reason why people generally retire at 58-65; they are tired after a long and fruitful CAREER. Other wise you have the old joke: Children are God's punishment for enjoying sex.

In my opinion, a good retirement is a reward that you get for having a long a fruitful career, raising kids, and doing other things that people are supposed to do between 22 and 65. If you don't do those things, and work hard at accomplishing those things, I suspect you will really not enjoy retirement, because you never really worked.

I have a Bil who effectively retired at age 31. By age 48, when all his peers had established careers in education, business, and science, he had nothing, and eventually nothing to talk about. I was able to talk to him early on, but not later since he just didn't have any life experience. He got lonlier and lonlier; eventually at age 54 he started his own business with some younger friends.

Sure..... plan for a financial retirement. But resist taking it until you've actually had a career; you won't like your relationships in retirement if you don't.

Just my two cents.

Z

p.s.: If you are female and your career was raising children, and that is also a career, the above does not apply.
Great post. This was really what I was getting at but you expressed it much better. Sometimes I think people view ER as the only goal but this misses the great journey of getting there. Thanks.
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Old 04-28-2010, 09:37 AM   #20
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What about a stay at home dad?
Just talking about this with DW last night. All the members of our families have felt strongly enough about having a stay at home parent that one of them stopped worked for a few years while the kids were young. When our time I would gladly been the one but DW hated her job in a steel works at the time so was only too keen to be the one to take a time-out.

Her younger sister and BIL were the only ones where the man gave up his job (draftsman) for a few years and stayed at home for about 8 years. He actually became a registered child minder during this time and now the kids are both in school he has gone back to work full time as a teachers aid, although we're not sure if that is want he wants to all his life but it is perfect for continuing to look the kids as his wife spends a LOT of time working away from home on big IT projects.
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