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Jon here...starting from nothing (in the hole)
Old 09-07-2016, 10:39 PM   #1
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Jon here...starting from nothing (in the hole)

Hi I am Jon. I am 28 years OLD, and married with no kids yet. I write old like that because I am close to working to retirement but not there yet, and I feel that I should have been working on it no later than 22. Read on if you are interested.

I noticed most people introduce themselves after accumulating some wealth. However, my situation is quite the opposite. I have a lot of debt (Student loans and vehicles). I hope this will act as a diary and hold me to a certain level of accountability.

I come from a very disadvantaged background, although I did not know this until studying for my first degree in Sociology. I was very fortunate to get a scholarship to a prestigious school (my only offer) that did not have an Accounting program which was my intended program of choice. After receiving that degree I worked different jobs from retail to parole officer. I was saving money to go back to school to study Accounting. That money ended up going towards living expenses for my wife and I because she wasn't allowed to work for a while (longer story). My wife is in her last year in her Doctorate in Physical Therapy program.

Rough Numbers/Notes
-I'm actually an Auditor now making about 53K in public accounting in my first year. Wife will be about 60 - 70K around this time next year.
-Student loans together will be about 130K; not a big deal as people make it. Money has to come from somewhere and my family is only rich in love. I made a financial move and a smart one because I was only making 35k as a parole officer.
-Two vehicles; together debt is about 23k. Houston is big and one car couldn't cut anymore when wife has to go 40 mins in opposite direction.
-My short version of my plan is invest in rental property to make up for lost time and tax deferred accounts saving about 30-40% of income when wife starts working and working my way up to 60% since my income may double within 6 years. I could do this now if it was just me. Currently only can save about 10-15% due to high insurance for spouse.

I've put my wife needs before my own for a long time with her not being a citizen and her schooling, but I am ready to work towards my desires and she is completely on board. I can go on and on but I wont. I'll post more later. I am happy to be a part of the community. I wish we could have a meetup or something. Thanks for reading if you got this far.
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Old 09-08-2016, 09:04 AM   #2
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Welcome. Your doing very well. At 28 we had a negative net worth, retirement at 56.
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Old 09-08-2016, 09:11 AM   #3
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Welcome to the board. Many of us got started on saving near your age. The key is to set your goals and stick with a plan. Sounds like you and DW are off to a good start in those areas. Look forward to watching your progress. And the good folks here will be happy to offer ideas and experience when you want it.


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Old 09-08-2016, 09:14 AM   #4
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Welcome aboard! The best thing is that you are here at a young age and are planning ahead.

Don't beat yourself up over student debt. Many of us started out in a student debt hole. The debt you have is justified, and you and your wife are both trained in areas where there is work. Odd that you majored in sociology and the school did not offer accounting. That set you back a bit but it seems you have a go-getter attitude and will do well.

A couple of suggestions: Once you have a cash emergency fund, start a ROTH IRA when you can 401K, ROTH 401K are usually important investing vehicles, as one can get a company match = free money. Look into index fund investing as well as rental properties. Index fund investing is so much less time consuming. Not all right away though, that's too much!!!

Delay having children until you are well established, if you plan on having children. Early to mid-30s is a good time, not too young, not too old. Don't have many children. The world is already overpopulated and they cost a lot!

Many of us arrived here as we started taking early retirement seriously and were looking for financial calculators and planning advice, so we were well on our way. When I finished school and residency at age 28, a powerful home computer was 30 MB hard drive and there was no internet. There were no online communities of any kind. You aren't the only one planning early retirement even as you get started in adult working life.

You might check out the Young Dreamers forum here as well.
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Old 09-08-2016, 09:28 AM   #5
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Jon, do not feel like you are too far behind. With your soon to be double income, and your understanding of finance, it seems to me that you are well ahead of average. You see what needs to be done, and are motivated to do it. You just need to fully develop your plan and give it time to work. Good luck.
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Old 09-08-2016, 09:39 AM   #6
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At 28 I was divorced, working minimum wage and blowing any left-over money on recreational drugs. The year before I had actually spent a night in a shelter. Retirement was not something I had ever even thought about. I was focused on avoiding thinking about my sorry life and my next hit of meth.

You are thinking about things I didn't start working on until I was over 40. That's when I got out of debt and started saving/investing. Even then I got lucky with pensions and the insane level of matching they provide in the government sector. Set aside some emergency cash, then kill that debt. There is probably some math that would indicate you should invest vs pay extra on debt. I'll leave that to others. But debt is a psychic weight. The sooner it's gone, the sooner you can see your way to early retirement.

I envy you. By the time you hit 50 you can easily be one of the people here with 7-figure nest eggs. Good luck!
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Old 09-08-2016, 09:42 AM   #7
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Welcome. You've taken the right step forward which is to actually proactively think about retirement. Setting a goal I believe is critical to success. A goal, then a plan, then sticking to the plan even when setbacks occur (and they always do).

my BF is 46 and started an IRA just last year when he finally got debt free (a few failed businesses under his belt)...so you are still ahead of the game. I had to spend several years with him, retraining his spending behaviors.. and those habits are hard to break once they have set in...so better now to set in good behaviors when your still digging out.

Not sure how familiar you are with rental properties, please just make sure you do your homework and have enough of an emergency fund before dipping in, as obviously it has its own pitfalls.

I know for me, my success was really based on the fact that as my income went up, my lifestyle didn't. I stayed focused on my plan, stuck to budget as best I could and tried not to let peer pressure sway me.
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Old 09-08-2016, 09:45 AM   #8
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With a negative net worth of ~$150K you are in quite a hole. That being said, if you continue to live on what you make now and save your raises and your wife future income then you can catch up quite well in 10 years. As soon as the wife gets a job you should start contributing the max in both 401K's and ROTH IRAs. Once you are both settled in your jobs and you think you'll stay put for a while then you can buy a modest home. Try to get the wife to get a job close to yours so you can get a house that is close to both your employers. That will cut down on commuting costs and increase quality of life by limiting the time spent in your car. If you life like you have one income and save the other then you should be fine. Good luck.
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Old 09-08-2016, 09:49 AM   #9
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I know for me, my success was really based on the fact that as my income went up, my lifestyle didn't. I stayed focused on my plan, stuck to budget as best I could and tried not to let peer pressure sway me.
+1

This will be key for this couple. They have a current income of $53K/yr but will be around $200K in 5 years. If they can continue to live like they do now or just slightly more spending then they will do well eventually.
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Old 09-08-2016, 10:03 AM   #10
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You say you're just starting to prepare for retirement now, but the years of work you and your wife have put in to get degrees in areas where there is a high demand is all a part of working toward retirement. You have built a strong foundation, and now you can build on that foundation.

The temptation after all these years of hard work will be to splurge a little, and a few splurges won't throw you off plan. But it's very important to track where your money is going and make sure you have money upfront go to paying off the loans and to your retirement accounts (especially if there is any employer match).

Welcome to the Forum!
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Old 09-08-2016, 10:13 AM   #11
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The temptation after all these years of hard work will be to splurge a little, and a few splurges won't throw you off plan. But it's very important to track where your money is going and make sure you have money upfront go to paying off the loans and to your retirement accounts (especially if there is any employer match).

Welcome to the Forum!
Assuming their income is around $130K by the time the wife gets a job, they should definitely be planning to MAX the 401Ks so they don't have too much income in the 25% bracket. Anything over around $95K will get taxed at 25% instead of 15%. So $130K-$36K(MAX X2)=$94K so that works out perfect. As your income continues to climb you will have to pay the higher rate eventually but you'll be making big money so you'll be fine.
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Old 09-08-2016, 10:36 AM   #12
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It is great that you are planning ahead. Just for perspective, I didn't graduate from college until I was 28. At 45 "we" were worth a million, retired at 54. Spend less than you make and invest the rest.
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Old 09-08-2016, 10:46 AM   #13
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I really appreciate all the encouraging words. I believe I'm on the right path, but I tend set very high goals for myself. I think my downfall is comparing myself to my peers that went to the same prestigious school. I had a football scholarship and they never thought highly of athletes even though we were up against the same admission standards.

Just a note, my current savings is all going towards an IRA for my wife and savings for HSA because the firm matches $1500. There's no 401k matching and I'm not eligible for profit sharing yet.

I hope to learn a lot, be accountable, and contribute all that I can. Thanks.
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Old 09-08-2016, 11:08 AM   #14
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Welcome. $150k in debt, not counting a house! Wow! That's terrible! You have a long, hard slog in front of you! To obtain FIRE, you and your DW will need to change considerably from the people you were that got you in that debt. Do you realize how much you will have to change? I got a BS Chemical Engineering degree with no debt. There was minimum financial help from Mom and Dad. They were poor. It was on me. I had part-scholarships, part-time jobs during school, two and three jobs each summer, ate a lot of bologna and peanut butter sandwiches and drank a lot of tap water, drove old beat up cars, and I made a very wise choice in a low cost, State University! It was not "prestigious", but I've done okay. Why did you waste 4 years getting a degree not of your choice? At your starting rate, that's a $212k mistake, but worse than that, it's four years wasted during the prime of your life! You can't make mistakes like these again and reach FIRE! So, it's good that you are here on this forum. You can learn and get advice on what needs to be done to attain FIRE. Good luck! I'm rooting for you.
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Old 09-08-2016, 11:41 AM   #15
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Welcome. $150k in debt, not counting a house! Wow! That's terrible! You have a long, hard slog in front of you! To obtain FIRE, you and your DW will need to change considerably from the people you were that got you in that debt. Do you realize how much you will have to change? I got a BS Chemical Engineering degree with no debt. There was minimum financial help from Mom and Dad. They were poor. It was on me. I had part-scholarships, part-time jobs during school, two and three jobs each summer, ate a lot of bologna and peanut butter sandwiches and drank a lot of tap water, drove old beat up cars, and I made a very wise choice in a low cost, State University! It was not "prestigious", but I've done okay. Why did you waste 4 years getting a degree not of your choice? At your starting rate, that's a $212k mistake, but worse than that, it's four years wasted during the prime of your life! You can't make mistakes like these again and reach FIRE! So, it's good that you are here on this forum. You can learn and get advice on what needs to be done to attain FIRE. Good luck! I'm rooting for you.
This guy can't be serious. It'd do you some good to think before speaking. I'm not sure why you think I have to change so much and I'm not sure how your story relates to me. I'm sure you received more help than you claim like shelter. Also if 150k between two people scares you that much, I don't know how you are able to invest. Student loans are great for financial leverage. I took out student loans to be able to finish school in 1 year vs 3 years. I could pay off my portion of student loans in two years with my increase in salary if I wanted but this wouldn't be wise.

Lastly, I didn't waste four years. I will be a CPA by this time next year after accumulating experience. Read about it.

You try paying for a spouse education and living expenses for four years with partial scholarships and limited income.

This motivates me extremely.
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Old 09-08-2016, 11:52 AM   #16
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John, I wouldn't worry! So many your age are still sitting in coffee shops picking their noses.

The fact that you are 'aware' and have a vision is more than most.

Attitude is 90% of it!

Make a plan, adjust along the way, keep tabs on the wisdom available here and elsewhere and go for it! You're gonna do just fine.
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Old 09-08-2016, 12:00 PM   #17
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Assuming their income is around $130K by the time the wife gets a job, they should definitely be planning to MAX the 401Ks so they don't have too much income in the 25% bracket. Anything over around $95K will get taxed at 25% instead of 15%. So $130K-$36K(MAX X2)=$94K so that works out perfect. As your income continues to climb you will have to pay the higher rate eventually but you'll be making big money so you'll be fine.

+1 on this... once both have a good paycheck you are going from in the hole to a 'top earner' family pretty quick... so, max out those 401(k) and IRAs and let the debt ride a bit... it will get paid off, but if you try and pay it off first before you start to saving, I think you will be giving up your compounding...

At least put in enough to get matching money.... that is the minimum you need to invest....
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Old 09-08-2016, 12:00 PM   #18
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This guy can't be serious. It'd do you some good to think before speaking. I'm not sure why you think I have to change so much and I'm not sure how your story relates to me.
You're young enough to have grown up online and recognize an online provocateur when you see one and obviously smart enough to ignore one.

I always look at the number of posts made. This forum has a way of slowly "training" newcomers to the expectations of decorum.

You'll find this is a unique online space with great moderators who keep things on a short leash insofar as unhelpful (or worse yet: political) responses.
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Old 09-08-2016, 12:01 PM   #19
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Welcome, Neaux2135.

Many of us started out in the hole, too. When it comes to financial planning, there are LOTS of ways to skin a cat.I think we each have to figure out our own road to retirement because each of us faces different challenges and opportunities. Good luck working on your financial planning!
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Old 09-08-2016, 12:16 PM   #20
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Welcome, Neaux2135.

I started from nothing, in the hole, too after a divorce at age 50. There are LOTS of ways to skin a cat, and you might not want to do any of these things! Still, this approach worked for me:

1. continued to "live like a student" (spending as little as possible)
2. maxed out my TSP (=401K) contributions
3. paid off all my debt. Didn't have much, but still had to work at it.
4. bought a very cheap house.
5. paid off the house ASAP.
6. invested the money that previously I had been putting into the mortgage, and into the extra house payments (taxable investments at Vanguard).
7. worked hard at my job, got a promotion, saved all my cash awards, and continued to live like a student and not spend a cent more than before.

For me it worked. For you? I don't know! I think we each have to figure out our own road to retirement because each of us faces different challenges and opportunities. Good luck working on your financial planning!
It's like you are in my head. We will have trouble spending more than 3 - 3.5k a month for living expenses and that includes vacation. They are currently around 2500. But of course we don't have children.

I plan on contributing enough in tax deferred accounts to keep us in 15% tax bracket which is about 36K. Taxes including federal and payroll will be about 18.3% of income. The rest will go towards debt I'm gonna buy a cheap home that'll turn into a rental.

I have built a spreadsheet for budget but does anyone have a budget spreadsheet that they are willing to share for comparisons?
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