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No such thing as too late
Old 01-12-2019, 02:16 PM   #21
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No such thing as too late

I will add my voice to the chorus of "you aren't too late". You're only 34! Wind your clock forward eight or ten years; that's how old I was when my monthly statement from Gringott's showed a balance of two galleons, five sickles and a knut. After twenty years in the workforce, I had about enough saved to buy one large bag of Bertie Bott's beans.

But... then I got more serious about saving and investing. Every year I inched up my 401k, put a bit more toward the mortgage, and took the odd staycation instead of more exotic locales. A bunch of small changes amounted to a large boost to our investment rate. Put dough into both pretax and taxable accounts.

Wind the clock forward another twenty years and we are FI enough to RE whenever we feel like it. I'm going out this year, and she's planning to punch out in 2020.

You might not be looking at retiring at 35, but if your experience is anything close to mine, you could be sitting pretty at 55. In my book, that's still pretty early.
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Old 01-12-2019, 03:11 PM   #22
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Originally Posted by claudefergus View Post
Hi everyone.

I went through several brushes with completely losing everything (this involved cashing out previous retirement money for a family medical emergency and narrowly avoiding bankruptcy).

.....
Welcome.

Too bad you didn't come here earlier, could have probably saved $$$$.

I don't know your specifics, but cashing out retirement savings to pay off a debt is (IMHO) bad.
Especially a medical bill as those are generally high and unavoidable.
Instead pay the medical bill via cash and credit card or loan, if you still owe them money. Then declare bankruptcy as your retirement money cannot be touched (Varies by State).

Sure you end up with a bad credit rating, but you save your retirement.

Too many people pay their debt with all their cash, and their retirement money and then declare bankruptcy. They have nothing, and still their credit rating ends up bad.
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Old 01-12-2019, 10:12 PM   #23
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I can't believe how much time and effort you all put in to not only welcoming me here but giving me hope and encouragement and actionable advice.

Thank you all so much. I have definitely found the right place
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Old 01-12-2019, 10:30 PM   #24
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To clarify the wife/tax/emergency fund situation:

Our current emergency fund is mostly comprised of her money. We only had a couple months of expenses while we've been paying down debt.

She has put padding in there during her current freelance job (which ends in March) because she did estimated taxes the last two years and had a fairly large liability in 2017. For that reason, she decided to have more cash available in case she has liability in 2018 on her self-employed tax.

I told her we should still consider liquidating that account to throw at debt but since she is now W2 freelance and this should be the last time she deals with this for a while I decided to let it slide.

I think I'm going to do what someone suggested above and tell her that we should take whatever is leftover after she pays her liability and put it right on credit card debt.

I'm not sure what she had done incorrectly on those estimated tax worksheets but what's done is done now and thankfully she will be W2 moving forward so this won't be an issue again.

I appreciate the advice regarding this issue though. She is more conservative about emergency funds than I am as well and I do my best to find a middle ground with her.

It's understandable because just 4 years ago or so she went through a dry spell of not being able to get a gig for half the year.

She is coming around to the idea of having 3-6 months of expenses, once debt is paid off, and being more aggressive with investing.

This whole educational experience that this community and the FIRE community at large has provided me is rubbing off on her too so I'm optimistic that once we're past these psychological hurdles immediately in front us it will be easier to have her all in on this with me.

Quote:
Originally Posted by LOL! View Post
I'll focus on one thing: The $10,000 in taxes. I realize it include FICA/medicare/income, but perhaps also state. Nevertheless, to get that amount of taxes requires a lot of income or very poor tax planning. Can you hint at which one it is please?
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Old 01-12-2019, 10:39 PM   #25
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This is something that I need to learn more about for my situation.

The vast majority of the time neither me or my wife has access to employer 401k.

So the baskets we'll be investing in will have to be 100% from our own after tax take home money.

We are in the 22% tax bracket filing jointly in California.

I'm not sure what the best investment vehicles are for us and in which order.

As of now we do have the Roths. Should I be prioritizing a traditional IRA?

Should I open my own self-funded 401k?

On the other side of debt I am trying to figure out how to allocate dollars to Roth, brokerage, traditional IRA, what have you.

Any advice on how to approach this from our employment situation would be great.

Because of the nature of work, sometimes we have health care coverage and sometimes we have to buy in the marketplace so that's always a consideration as well.

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Originally Posted by pjigar View Post
Go cash only if you really want to control spending. And track every expense by category. Once the spending is under control and credit card is paid off then you can start using credit card for ease of tracking expenses. But always pay off card in full every month!!

Set savings target that is substantial percent of your income (which should hurt) like 50%. FYI: We save 60% of net income.

Once debt is paid off, you should fund in this order:
1. 401K up to company match (if you qualify)
2. HSA (if you qualify). DO NOT withdraw this money but rather invest it.
3. IRA and Roth IRA (Same order but maximize both before moving down the list)
4. 401K up to deductible limit
5. If you have kids and live in a state with tax benefits then fund collage savings account at this point.

If you have any money left:
6. Brokerage and 401K after-tax (Same order but I prefer 401K after-tax over brokerage)
7. Private equity
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Old 01-12-2019, 10:57 PM   #26
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I'm considering a career change that doesn't involve school. I am pretty tired of relying on two inconsistent incomes, not to mention benefits. Still a work in progress.

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Welcome to the forum. Maybe one (or both) of you should stop freelancing for now and find an employer with good benefits. Don't know if you are freelancing by choice but it sounds like you need a steady income.
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Old 01-13-2019, 06:06 AM   #27
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Originally Posted by claudefergus View Post
I'm not sure what the best investment vehicles are for us and in which order.

As of now we do have the Roths. Should I be prioritizing a traditional IRA?

Should I open my own self-funded 401k?
I think the intermittent employment situation may affect your decision here.

With an IRA or 401k, if you put money in, you generally can't get it back out before age 59.5 without a penalty. Not so with a Roth. There, you can pull out your contributions without negative effect, just not the earnings generated within the Roth. Thus, in a monetary emergency, it is better to have money in a Roth than a traditional IRA or 401k.

If you choose to invest in a straight after tax account, you can, of course, always take the money and the earnings at any time. An additional benefit is that in any year when your employment dries up and you are pushed down into the 12% marginal bracket, you could harvest capital gains in your taxable account at a 0% tax rate on them.
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Late start in semi-crisis. Better late than never?
Old 01-13-2019, 05:02 PM   #28
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Late start in semi-crisis. Better late than never?

Being in the 22% tax bracket means you have modestly high combined income. If so, investing in a traditional IRA means you could lower your taxable income by up to $5K each, which would save you $2200 in federal income tax.
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Old 01-13-2019, 09:26 PM   #29
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Welcome!!

You might read about one of these for you and one for your wife. Better to save tax deferred is if you can.

https://www.irs.gov/retirement-plans...ant-401k-plans

Also read the "If you Can" about investing inside your 401K or taxable account.

https://www.etf.com/docs/IfYouCan.pdf

Best to you,

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You got this!
Old 01-22-2019, 05:20 PM   #30
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You got this!

Don't despair! You have taken the important first step - realizing that you need to prepare for the future. A lot of people never even think about it, and many don't consider their needs for retirement until they are about ready to retire. Perhaps the most important part of preparing for the future is to make sure that both of you are willing to do what is necessary. Are you both willing to give up the unnecessary things in life, trim back a bit on the spending, sit down at a table and set financial goals that are achievable. You have taken the 1st step in facing up to the issue, the 2nd step is getting the family on board, the 3rd step is to come up with a plan. Setting goals that are five years out, and attainable (but just barely), and that are measurable is a good way to go about planning. Decide how much you want in stocks, bonds, real-estate five years out and at the five year point reassess and adjust the plan. Get into a home, the worst house in the best community you can afford...and fix it up, so you can build equity. Make sure your stock investments are diverse, and make the most of down markets or sectors. You are not that far behind, I know a lady who is in her mid 50's and just realized she has built nothing for her retirement (she actually mows lawns for a living), and has applied with the state for a job. You are 20 years ahead of her, and she will be fine.
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Old 01-22-2019, 05:29 PM   #31
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Welcome to the forum, you may want to check out Dave Ramsey's baby steps on achieving financial independence, and paying down debt quickly.

At 34, you still have plenty of time, if both of you are disciplined to save plenty for an ER. Pay all the taxes off, and work on reducing debt first, but you will need to set up an automatic draw on your account to make sure investment money is taken out regularly
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Old 01-22-2019, 05:51 PM   #32
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Originally Posted by claudefergus View Post
Hi everyone.

I went through several brushes with completely losing everything (this involved cashing out previous retirement money for a family medical emergency and narrowly avoiding bankruptcy).

I'm now 34 years old, married, and life is stable again. Both my wife and I freelance, but I am starting over again with debt I am still paying down.

I'm thankful to have learned about FI/RE which has given me some hope that through discipline and commitment there might still be hope for me and my wife.

Here is my current pretty sad picture.

18,500 left in credit card debt. This is our number 1 focus at the moment

My wife's Roth IRA still has $4413.13 holding VTSAX.

My Roth IRA is still empty. I intend to get this in VTSAX after eliminating credit card debt.

Have a $10,000 emergency fund at Ally which will get wiped out to some extent by taxes from my wife's self-employ freelance taxes.

That's pretty much it, sadly.

I'm a little overwhelmed by the wealth of information from all of the various FI/RE resources out there. It's all helpful of course but I'm not sure what the best course of action for me is.

Obviously, I am now in a position where I'm playing catch up to a large degree. I want to learn how to maximize/optimize everything. Checking, how much and what to put in brokerage, how to maximize retirement accounts, etc so that I can make up for lost time.

Checking right now is at Bank of America which I know I should change.

I'll continue to read and learn and participate in the community here. Thanks in advance to anyone willing to help a newb who is crawling out from desperation.

EDIT: For clarification, both my wife and I freelance so work/income is inconsistent. I know cutting expenses and save ratio are more important factors but thought I'd include that info.
If your 401K has Vanguard index funds max out your contributions every year. If you have to downsize your life , live below your means , save save and save some more and invest most of your income in Vanguard index funds. Have garage sales, if you have a hobby turn it into a profitable win for you. If you have a spare bedroom rent it out. Brown bag your lunch, drink instant coffee instead of that useless expensive Starbucks stuff. Since you freelance make every moment when you don't work profitable . Do side jobs work part time anywhere you can. Debt is the enemy. Pay it off and keep remaining debt free. It's not going to be easy. Live like a starving college student. Eat as many meals at home. Create and grow wealth. I'm not painting a pretty picture but what it took me to retire early is grow wealth save save save invest invest invest but remain humble and frugal.
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Old 01-22-2019, 07:35 PM   #33
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Welcome aboard. I'll add my 2c.

Consider the cost of living in your area. Move from a high cost of living(HCOL) area to a MCOL or LCOL area could be enough to tilt things your way.
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Old 01-22-2019, 10:25 PM   #34
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Track all spending. The original copy of Your Money or Your Life by Joe Dominguez and Vicki Robbin has a plan on how to do this in a meaningful way. It is a bit arduous to read, but stick with it. I followed this plan (not their investment advice) for over twenty years before I retired. This book changed my thinking and changed my life. Highly recommend it. Can probably borrow a copy from the public library or get a used copy through Amazon. I read it five times.
Couldn't agree more! Once I started to got in the habit of tracking every expense and understanding where every penny was going it made a huge difference. Wish I had started at your age...
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Old 01-23-2019, 03:36 AM   #35
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Originally Posted by ERD50 View Post
You are on the right track, you are doing good. We can't change the past, so look forward (but learn from the past where you can).


edit: ooops, sorry - missed this"Have a $10,000 emergency fund at Ally which will get wiped out to some extent by taxes from my wife's self-employ freelance taxes."

Well, the below concept still applies, when you have the opportunity.

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


One thing that I think was not suggested (I may have missed it) - does it really make sense to maintain a $10,000 emergency fund when you have $18,500 in CC debt? Why not use maybe $8,000 of it to pay that debt down?

The consideration is, if you did have an emergency, is there a chance that your credit would not be available? I would think it would be - you just gave yourself $8,000 in 'headroom'. Unless they change your limit on you, but I doubt they would if you showed you just paid that much off. Knocking the CC debt down means you can get it paid off faster, as there is less of it and the interest will be lower.

-ERD50
I see the red somewhat differently. Income taxes (self employment or normal should not use "emergency funds i" in general. These should be set a side or paid to the tax man in installments. It sounds like you are living on the float. You need to realize that you may be living on her tax money. Sounds like you have a tax fund, not an emergency fund. Sounds like you have a tax fund that you want to call an emergency fund.

Allocate you wife' gross income partially to taxes... in the right proportions as it comes in.
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Old 01-23-2019, 07:14 AM   #36
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Taxes aren't an emergency expense because they are known and can be planned for. You should be making quarterly estimated payments and collecting taxes from yourself each time you receive freelance income. When a check for $100 comes in, take $75 for you and sock away $25 for the taxman in an account separate from your emergency fund money.
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Old 01-23-2019, 07:35 AM   #37
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Welcome, Buckeye! I joined not long ago in roughly the same position... Had just lost practically everything but my house to a messy divorce at age 33, and self-employed freelance, so volatile income. Knock out that credit card debt and you’ll have wings to fly. Oh yeah, definitely check out a SEP 401k through a place like Fidelity; easy to set up. Alternatively, Not sure if you and your wife perform similar services, but if you were to join forces and create an LLC with an s-corp election it might save a little on self employment taxes in the good years (while being a little more expensive in lower income years). The assumption of regular employment is built into 95% of the investment strategies you’ll see... but here’s a post about how that might change when it’s not always there: Volatile Income
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Old 01-23-2019, 08:45 AM   #38
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Welcome to the forum! You are NOT too late! At age 37 I changed careers (drastically) with a wife and 4 children. We were paycheck to paycheck and not a nickel saved. 23 years later we both retired with healthy 401K's, money in savings and no debt except a house payment that I chose not to pay off (preferred to invest).


It sounds like you know what to do. Consistency matters! Good luck!
Not with kids, but we were in the negative territory at 34! We cashed out savings to move and owed money. There are many good plans on this post, follow them. Stick to it. We fired at 58.
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Old 01-23-2019, 11:10 AM   #39
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You have some great advice here. Don't sweat it. You're still very young and have lots of time to get on track. At age 50 I was wiped out in a messy divorce, my net worth went from low 7 figures to just $3K, with a child that still needed to go to college. I thought I'd be working until I dropped. But 5 years later I retired. So it's never too late.

Like you, I'd done freelance work for several years in my early career. Eventually I took a couple salaried positions for many years, made a lot of contacts. And at age 45 I finally realized my current path just wasn't enough for FIRE, or even to retire comfortably at 65. So i took the plunge and started a business. 2 years later I was embroiled in a terrible divorce, and the ensuing 4 years of divorce proceedings wiped me out. After feeling sorry for myself for a while, I kicked the business into even higher gear, worked even harder and smarter than before (ha.. and I thought I was already working near peak before), grew the business, started to save serious $, and saw my bleak future turn into a very bright one.

The point is, I'm a pretty average guy, so if I can do that, you can. I don't know what kind of freelance work you're doing, but if you have the stomach (and perseverance) for it, once you're in better financial shape you could consider starting a business. Probably the best way to FIRE, if you have the right disposition, abilities, and business model. Or maybe start something on the side. Or go the salaried route, but be sure you have a path for making fairly serious cash. FWIW my son quit his job 3 years after college, went to a 10 week software engineering crash course (cost just $15K), got a new job a month after the course, and 2 years later is making some insanely good money. So there are a lot of paths to abundance, you just need to do your homework and chart a course. Correcting your course, or even starting over, isn't always a bad thing.

IMHO success as an entrepreneur, business owner or investor all comes down to your commitment to succeeding... I thought I was working hard before, but when I was only $3K away from starving I HAD to succeed. Failure was simply not an option. It's a powerful motivator. I thank the universe for teaching me that, every day.

Best of luck... you'll do well, I'm sure!
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Old 01-25-2019, 02:39 PM   #40
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As many have said here, you're not too late or too far gone. At the age of 36, I walked away from a bad marriage (the right move but executed poorly) with nothing but my clothes, a 10 yr old car, and about $20k in debt. Twenty-three years later, I'm sitting on well north of 7 figures with no debt and a paid for house. Wife #2 helped some but she had very little aside from some equity in her house when we met 19 yrs ago.


It CAN be done and you sound like you have the drive to make it happen. Good luck.
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