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Introducing myself
Old 12-02-2013, 10:53 AM   #1
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Introducing myself

Hi there, I figured it was time to introduce myself as I am planning on sticking around. Despite my username I am no where close to retirement (mentally ready!) About 2 years ago I realized I was wasting a lot of money and not saving or tracking my expenses. I did some basic reading, lurked on this forum for a long time, and finally signed up a few months back. I would classify myself as one step above 'clueless' when it comes to personal finance and investing, but I am working on that.

I like it when other members share their details so here is my current situation.

Age: 29
Target Retirement Date: ~50
Salary: $100K/year
401k Contribution: $17,500/year
Roth IRA Contribution: $5,500/year
Taxable Investment Account Contribution: $3,000/year
Total Savings per year: $26,000

No debts beyond my monthly credit card bill which I pay in full each month.

Current Net Worth:
Code:
+-----------------+-------+
|     Account     | Value |
+-----------------+-------+
| 401K            | 34K   |
| Roth IRA        | 11K   |
| Taxable Account | 130K  |
| Company Stock   | 200K  |
| Cash            | 16K   |
+-----------------+-------+
| Total:          | 391K  |
+-----------------+-------+
Monthly budget/expenses breakdown:
Code:
+-------------------------+----------------+
|          Item           | cost per month |
+-------------------------+----------------+
| Rent                    | $1,200.00      |
| Car lease payment       | $440.00        |
| car prop tax            | $78.00         |
| cable/internet          | $74.00         |
| cell phone              | $76.00         |
| car insurance           | $105.00        |
| electric bill           | $70.00         |
| gas (car)               | $140.00        |
| renters insurance       | $10.00         |
| Roth IRA                | $459.00        |
| cleaning                | $67.00         |
| car maintenance         | $30.00         |
| travel                  | $140.00        |
| Health/personal care    | $20.00         |
| haircut                 | $25.00         |
| netflix                 | $8.00          |
| taxable investment acct | $250.00        |
| fun money               | $100.00        |
| clothes/shoes           | $100.00        |
| shopping                | $100.00        |
| food                    | $700.00        |
+-------------------------+----------------+
| Total:                  | $4192.00       |
+-------------------------+----------------+
This budget consumes my entire take-home pay. I fully realize I could cut a lot out of my monthly budget and save even more, but I am trying to find a balance of having a good lifestyle while still saving heavily. As a rule of thumb, each time I get a raise I will be taking 2/3 of the new take-home pay and saving it and keeping the 1/3 for myself.

The biggest questions & uncertainties I have:
  1. Will I actually get meaningful social security later in life?
  2. Currently single with no kids. Not sure what situation I will have in my 30s
  3. What will the healthcare/medical situation be like when I am 50?

I realize these questions aren't answerable, so I just focus on good saving habits and hope for the best.
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Old 12-02-2013, 11:29 AM   #2
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Welcome! I think you are doing amazingly well so far. The most important factor in FIRE is LBYM and at 26% savings you are certainly doing that. Your budget seems very reasonable; apart from the rent, it is not unlike mine. However, I question whether your travel budget is sustainable. Maybe you need to get out more! Your NW is far ahead of most people at your stage in life. The real challenge will come if and when you hitch up with a partner, especially if you decide to have children. The key to success will be to choose a partner with a compatible approach to LBYM. Also, take time to stay healthy and keep that six-figure salary growing!
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Old 12-02-2013, 11:34 AM   #3
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Welcome and seems you have a good handle on your finances, especially at your age!

I think the best advice is to live beneath your means LBYM as much as possible while still living a great life. I didn't do this as much as I should (i.e. I bought a vacation home on the water back a few years ago and it is STILL underwater on the mortgage).

These are the things that keep me up at night! Hoping to retire as soon as business sells in the next few months (at age 57).

Deb
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Old 12-02-2013, 11:37 AM   #4
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Everyone should be as clueless as you say you were--nice nest egg, nice saving rate.

What is the deal with the company stock? More than half of your nest egg there, which is risky by definition. Any way you can diversify it?
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Old 12-02-2013, 11:42 AM   #5
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"Save Early, Save Often".... LBYM combined with significant early career savings is a known path to get to FIRE quickly and reliably. Also when you find a partner seek one with similar values and goals in this regard. Worked for me.

-gauss
..out after 22 years
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Old 12-02-2013, 12:21 PM   #6
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Welcome to the forum. You are doing fantastic for your age!

The only thing that stands out for me is the car lease. If it's a typical lease, you are likely buying a new car every three years. Holding on to a car for 10+ years will save you many thousands of dollars over your lifetime, so unless you're an absolute car fanatic that needs a new car every three years, find a way to either buy it out if it's a good deal or turn it in when the lease is due and then buy a late model used car and keep it for a long time.

Good luck and keep up the great work!
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Old 12-02-2013, 03:06 PM   #7
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Thanks everyone! To answer a few questions - Company stock is high because I am waiting for LTCG to sell it. Not sure how much I will sell but a good chunk for sure. I will put the cash into low cost ETFs. Regarding my car lease, I know it is a money sink but I do enjoy cars and consider it both a transportation and hobby cost.
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Old 12-02-2013, 04:57 PM   #8
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I love the 2/3rds, 1/3rd split of future salary increases. I did 50/50 and am on the cusp of ER. Keep the car. You're doing great and are saving a very high portion of your income; healthy spending is fine as long as it is still LBYM as yours is.
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Old 12-02-2013, 05:55 PM   #9
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Great job! Hopefully your "fun" budget is more than 100 bucks a month.
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Old 12-02-2013, 06:27 PM   #10
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Sounds like you are doing great! Welcome to the forum.
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Old 12-03-2013, 07:17 AM   #11
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Quote:
Originally Posted by Meadbh View Post
The real challenge will come if and when you hitch up with a partner, especially if you decide to have children. The key to success will be to choose a partner with a compatible approach to LBYM.
+1 on that!

I learned that lesson the hard way and had to start over at age 34/35.
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Old 12-03-2013, 08:52 AM   #12
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Readytofire, here is what stood out to me (some items have been mentioned by others):

You have made a good start on the way to an early retirement. In some big ways your path has paralleled mine. I ERed 5 years ago at age 45 in large part due to being able to liquidate the company stock I owned whose value had exploded in the 11 years I owned it (1997-2008). By 2008, just before the markets fully collapsed, my overall portfolio was about 1/3 company stock, 1/3 taxable accounts, and 1/3 401k. Using NUA (Net Unrealized Appreciation), I was able to cash it out at favorable income tax rates (Long-Term Cap Gains). You should keep this in mind if you eventually cash yours out.

Speaking of taxes, I did not see an entry in your expense list for income taxes. You are probably paying a hefty amount there. If you were to buy a place to live, you would be able to lower your income tax bill once you start itemizing your deductions for property taxes and home mortgage interest (and your car tax, too).

For presentation purposes, I would have separated the ROTH IRA and taxable investment account investments from the rest of the expenses so we can get a better idea of what your "true" expenses are versus what you are actually saving from the remainder.

When I was preparing my ER plan in the years before I actually ERed, I separated it into 2 parts. The first part was getting from to age ~60 using only my taxable accounts, a tougher task, than getting beyond age ~60, the second part. The second part included what I refer to as my "reinforcements" such as unfettered access to my TIRA, my frozen company pension, and Social Security. Running one of those retirement calculators (FIRECALC, which I have not used because I used Fidelity's Retirement Income Planner being a Fido client) would be helpful for you. When I cashed out my company stock, I basically shifted from a 1/3 taxable, 2/3 tax-deferred, to a 2/3 taxable, 1/3 tax-deferred, because I needed more in taxable in the early years of ER.

I saw your monthly food budget was $700. That seems high for one person. When per-person monthly food budgets have been posted in this forum, they are usually in the $200-$400 range.

I agree that your car costs seem high and that will be a drag on your finances.

I did not see health insurance in your list of expenses.

If you remain childfree, that will greatly help your finances. Although I knew I would be childfree many years before I kenw I could ER, I credit that lifestyle choice as a big reason I was able to ER 5 years ago at age 45.
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Old 12-09-2013, 09:18 PM   #13
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scrabbler1, I would like to thank you for the detailed reply. I was traveling and not able to respond until now. I would also like to thank the other commemorators, the warm welcome is much appreciated!

Quote:
Originally Posted by scrabbler1 View Post
Readytofire, here is what stood out to me (some items have been mentioned by others):

You have made a good start on the way to an early retirement. In some big ways your path has paralleled mine. I ERed 5 years ago at age 45 in large part due to being able to liquidate the company stock I owned whose value had exploded in the 11 years I owned it (1997-2008). By 2008, just before the markets fully collapsed, my overall portfolio was about 1/3 company stock, 1/3 taxable accounts, and 1/3 401k. Using NUA (Net Unrealized Appreciation), I was able to cash it out at favorable income tax rates (Long-Term Cap Gains). You should keep this in mind if you eventually cash yours out.
Fantastic! I think/hope I will be in a similar situation. I have more stock options en route.

Quote:
Originally Posted by scrabbler1 View Post
Speaking of taxes, I did not see an entry in your expense list for income taxes. You are probably paying a hefty amount there. If you were to buy a place to live, you would be able to lower your income tax bill once you start itemizing your deductions for property taxes and home mortgage interest (and your car tax, too).
I live in a very high cost-of-living area. I cannot afford to buy anything reasonable right now. Even a condo's mortgage would be higher than my current rent, and tack on condo fees on top. I also like being able to move to somewhere else without being tied down.

Quote:
Originally Posted by scrabbler1 View Post
For presentation purposes, I would have separated the ROTH IRA and taxable investment account investments from the rest of the expenses so we can get a better idea of what your "true" expenses are versus what you are actually saving from the remainder.
Fair point. I wanted to show my total monthly budget, and did not split essentials vs. savings & nice-to-haves. I will split this up in my next major status update.

Quote:
Originally Posted by scrabbler1 View Post
When I was preparing my ER plan in the years before I actually ERed, I separated it into 2 parts. The first part was getting from to age ~60 using only my taxable accounts, a tougher task, than getting beyond age ~60, the second part. The second part included what I refer to as my "reinforcements" such as unfettered access to my TIRA, my frozen company pension, and Social Security. Running one of those retirement calculators (FIRECALC, which I have not used because I used Fidelity's Retirement Income Planner being a Fido client) would be helpful for you. When I cashed out my company stock, I basically shifted from a 1/3 taxable, 2/3 tax-deferred, to a 2/3 taxable, 1/3 tax-deferred, because I needed more in taxable in the early years of ER.
I run firecalc all the time with various parameters. What I have realized is I can plan for any situation except being married and having kids - both real possibilities for me, and it is scary how big of an unknown that is. I would rather focus on some decent overall savings habits than micromanage my retirement portfolio when my living and financial situation may change dramatically in a few years (or not).

Quote:
Originally Posted by scrabbler1 View Post
I saw your monthly food budget was $700. That seems high for one person. When per-person monthly food budgets have been posted in this forum, they are usually in the $200-$400 range.
Agreed here it is high. This includes alcohol & happy hours and I definitely pay more for convenience/time saving foods. My work constitutes long hours and high stress so this is an okay trade-off for me to keep my sanity (I hate cooking). I do want to better analyze where my food $$ goes though, and see if I can reduce it a bit. I know I can.

Quote:
Originally Posted by scrabbler1 View Post
I agree that your car costs seem high and that will be a drag on your finances.
This does not bother me at all. I am really into cars and treat this as transportation + hobby costs. One of the reasons I push myself to succeed financially is to have a nice car, and this is not going to change. It is a concession I am willing to make, and it is a motivator too.

Quote:
Originally Posted by scrabbler1 View Post
I did not see health insurance in your list of expenses.
I spend about $30/month on health insurance. For now, it is not a noticeable or significant cost to me. When planning my retirement date and finances, I do consider LTC and health insurance, but right now I do not need to worry. For long term, it is a huge open-ended question that I cannot answer. This bothers me, but again it is something that is largely out of my control so I try not to worry too much.

Quote:
Originally Posted by scrabbler1 View Post
If you remain childfree, that will greatly help your finances. Although I knew I would be childfree many years before I kenw I could ER, I credit that lifestyle choice as a big reason I was able to ER 5 years ago at age 45.
I fully get what you are saying and I can honestly say I do not know what the future holds for me here. I am trying to be in good financial shape so that I can keep my options open. I honestly have no idea what my future holds in this regard and I am okay with that.



----------------------------

I just want to say a quick thanks to everyone who has contributed to this forum as it has changed my life for the better. I will be around and regularly updating this thread or similar for the next 20 years as I head towards retirement, and I hope that this site will still be around in some fashion to receive my updates! I plan to keep this thread updated as I progress in life & career. My short term priorities are thus:
  • save cash for AMT taxes due to stock options
  • save cash to purchase more stock options
  • max my Roth IRA and 401K in 2014
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Old 12-10-2013, 08:43 AM   #14
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You are doing great for your age, though you still have major expenses ahead of you like family and home ownership. You've already gotten some great financial feedback, so I won't repeat the others.

Planning for financial independence at your age is a great goal, planning on retiring may not be. So this really stuck out to me, I hope it's just conversational humoring for a bunch of older retirees here, like me.
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Despite my username I am no where close to retirement (mentally ready!).
Being mentally ready to retire at age 29 sounds like a miserable next 30 years to me. Sure work is hard, it's supposed to be, but it shouldn't be drudgery at age 29. You might want to work towards having an exciting, challenging, rewarding career over the next 30 years or so too.
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Old 12-10-2013, 02:37 PM   #15
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Welcome...
If your NW was less than 50-100K at your age, I'd've pinpointed your food, rent, and car expenses, but IMO you're doing great. Enjoy while you can (yeah, it's a cliche, I know). When a baby comes aboard you'll probable be more prudent to switch from 'oh, the boys and their toys' to 'family and a van' mentality
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Old 12-13-2013, 07:31 PM   #16
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Midpack - I am not stuck in a rut in the way that I have seen from others on this forum. My career is going fairly well and I am happy overall with my situation. If I was actually miserable, I would definitely be changing jobs and cutting my spending to RE as quickly as possible. I hope that clarifies my situation, the 'ready to fire' name and 'mentally ready' are fairly light-hearted jabs right now

aida2003 - Agreed! Might as well live a little before those other things weigh me down financially.
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Old 07-13-2015, 07:22 PM   #17
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I'm still around and thought it would be good to give a quick update. I have been maxing 401k and IRA each year plus some after-tax savings and stock options on the side. My current net worth:

Code:
+-----------------+-------+
|     Account     | Value |
+-----------------+-------+
| 401K            | 68K   |
| Roth IRA        | 23K   |
| Taxable Account | 157K  |
| Company Stock   | 306K  |
| Cash            | 51K   |
+-----------------+-------+
| Total:          | 605K  |
+-----------------+-------+
I am looking forward to saving more as the years progress.
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Old 07-13-2015, 10:29 PM   #18
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Great job!!! No doubt
However the only thing I would question would be car lease. Read million next door. Most millionaires live below their means as you have started. A paid off car driven for 10yrs goes a long way.
Anything that has wheels will depreciate. Just a little math calculating payments and car insurance. Car insurance goes down with age of the vehicle.
Over all your thinking ahead, most people live paycheck to paycheck.
Again great job 😃


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Old 07-13-2015, 10:32 PM   #19
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I'd see if you have access to an after tax 401k. It is a nice vehicle to get extra Roth contributions since you already are investing after tax money. Your after tax 401k contributions can be withdrawn penalty free at any time. Gains can be withdrawn at age 59.5 after a minimum of holding period of 5 years. Your company sets the limits for the after tax, but your maximum total contribution pre tax, Roth after tax and employer match is $53k for the IRS.
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Old 07-13-2015, 10:33 PM   #20
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Nice work by the way!
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