Reality Sinking In

[StartingPath2Freedom]

Hello All. My name is Brian. I just turned 30 and as I have mentioned reality is setting in. I am at the very beginning of a long road to be FIRE. BUT, I'm ready to buckle down and prepare for an early retirement as well as become at least financial stable by the end of this year.

I have caused myself some financial hardship with unsecured debt, leaving off savings bond redemption on 2015 tax return and ::cringe:: taking a loan on my retirement that I have been unable to pay back. With that said my current focus is to pay down the unsecured debt starting with the highest rate and snowballing to the next highest while maintaining min payments on the others. I have no emergency fund either. It seems overwhelmingly and would like guidance on a process to follow to tackle this.

Small positives are that I own a home (~ 30k in equity), I am contributing 5% to a pre-tax 403(b) note: I have been contributing to the Roth 403(b) until recently. my employer offers a 50% match up to 4% and basic contribution of 2.6% on top. (Current balance is ~9.2k) At the beginning of the year I started a FL prepaid program for my 4 year old daughter.

I have created a budget and I can pay the unsecured debt based on my current earnings to get rid of it in 3 years.

I am going to have to keep very closely to this budget to get myself out of this whole but I'm also concerned about have some short term savings as well.

My goal is to retire at 50 ~2 years after my daughter would graduate college (if she so decides to attend)

As I mentioned I am at the starting line of getting anywhere close to being FIRE, but I am dedicating to creating a FI future for my family.

Any suggestions on readings I can do as well as any input on my current hole that I have dug myself into would be appreciated. I am looking forward to joining this community and regularly updating my progress so I can have accountability as well as be able to look back and see where I have started.

Brian

 

[davismills]

Welcome Brian. At your young age, you have lots of time to recover from these fairly small setbacks. I think you made some wise choices toward setting your goal in motion.

Most of us here are pretty frugal and you'll constantly hear about LBYM (living beneath your means). I have no opinion on https://www.daveramsey.com/ or Clark Howard | Advice You Can Trust. Money in Your Pocket, but I believe they might be of help to you.

 

[DrRoy]

Welcome Brian. At your young age, you have lots of time to recover from these fairly small setbacks. I think you made some wise choices toward setting your goal in motion.

+1. You have recognized your situation correctly and reasonably early. I think your current plan is good and you just need to stick to it. It is great that you are getting the 403 match. That is free money. Hang in there.

 

[IMATERP]

Way to go Brian... Just to let you know - everyone "sets their goals" once unmanagibility sets in.

I did not have a dime to my name on my 29th B-day. Today, 27 years later - I have a beautiful wife, a paid off house, a graduate degree, many wonderful travel memories, lots of friends, a pension and paid health insurance when I retire, and a nice modest 401k.

All I needed to do was get sober and focus my energies on achieving the aforementioned goals "one day at a time."

Enjoy the ride....

Michael

 

[StartingPath2Freedom]

Thank you all for the encouragement so far! Can anyone direct me to a forum or provide advice as to what the recommend way is to start an emergency fund? I feel it is very important but my financial mind (crazy fact- I am a finance major and can become obsessed with numbers- it just so happened I was making horrible decisions that helped me "numb" the financial rat wheel going in my head) has a hard time wrapping itself around having money sitting in a savings account (is there a better place for an emergency fund to be held?) when it could go to unsecured debt with ridiculous interest rate.

-B

 

[evilanne]

I don't know of any other place to keep an emergency fund, other than savings or money market account. It has to be available in the event of an emergency. Think of it as a way to avoid adding more to that unsecured debt. If you are in a hole, you have to stop digging.

Do you have a budget? Is there any way you can earn extra income outside of work?

 

[Blue Collar Guy]

Hello All. My name is Brian. I just turned 30 and as I have mentioned reality is setting in. I am at the very beginning of a long road to be FIRE. BUT, I'm ready to buckle down and prepare for an early retirement as well as become at least financial stable by the end of this year.

I have caused myself some financial hardship with unsecured debt, leaving off savings bond redemption on 2015 tax return and ::cringe:: taking a loan on my retirement that I have been unable to pay back. With that said my current focus is to pay down the unsecured debt starting with the highest rate and snowballing to the next highest while maintaining min payments on the others. I have no emergency fund either. It seems overwhelmingly and would like guidance on a process to follow to tackle this.

Small positives are that I own a home (~ 30k in equity), I am contributing 5% to a pre-tax 403(b) note: I have been contributing to the Roth 403(b) until recently. my employer offers a 50% match up to 4% and basic contribution of 2.6% on top. (Current balance is ~9.2k) At the beginning of the year I started a FL prepaid program for my 4 year old daughter.

I have created a budget and I can pay the unsecured debt based on my current earnings to get rid of it in 3 years.

I am going to have to keep very closely to this budget to get myself out of this whole but I'm also concerned about have some short term savings as well.

My goal is to retire at 50 ~2 years after my daughter would graduate college (if she so decides to attend)

As I mentioned I am at the starting line of getting anywhere close to being FIRE, but I am dedicating to creating a FI future for my family.

Any suggestions on readings I can do as well as any input on my current hole that I have dug myself into would be appreciated. I am looking forward to joining this community and regularly updating my progress so I can have accountability as well as be able to look back and see where I have started.

Brian

Welcome Sir. Im proud you have a plan. I listen to this guy on the radio he swears a WRITTEN budget is the key to see where your money is going. It takes a few months to get a handle on expenses but once you do , things fall into place. He has people come on his show and do shout outs they all swear the WRITTEN budget it the key. Best of luck to you. Im positive your a winner, and will be a 50 year old retiree with great wealth..

 

[Walt34]

Here are some books commonly recommended on the forum. If available at the library, get them there, the second place is a used book store, and as a act of desperation, buy them on Amazon.

The books I found helpful are these:

The Millionaire Teacher by Andrew Hallam

How a Second Grader Beats Wall Street by Allan S. Roth

These first two are the ones I absolutely recommend.

I also have read these:

Predictably Irrational by Dan Ariely – I found this very interesting!

The Four Pillars of Investing by William J. Bernstein

Why Smart People Make Big Money Mistakes by Gary Belsky & Thomas Gilovich

Your Money & Your Brain by Jason Zweig

The Investor’s Manifesto Preparing for Prosperity, Armageddon, and Everything in Between by William J. Bernstein

A Random Walk Down Wall Street by Burton G. Malkiel - this is also a classic and updated frequently.


The Millionaire Next Door by Thomas J. Stanley and William D. Danko. The numbers in the book are now somewhat dated but the principles most definitely are not.

 

[Hexanova]

Welcome! My wife and I didn't start retiring in earnest until 32 and 30 respectively, due mainly to graduate school and resulting lost earning time and debt accrued. That being said, I retired the beginning of the year at 52. My wife is still working as a teacher because she wants to, only works 9 months a year, and will have a very nice state pension later.

If you are disciplined (and depending on your earning potential) you should be fine. The single greatest challenge of saving for retirement is discipline. To bad my niece doesn't believe me... :-/

 

[StartingPath2Freedom]

Last night I did write up a budget of my fixed expenses. I am currently coming up with a plan to cut wasteful spending i.e. Bring lunch to work, stopping smoking (if becoming FIRE is as difficult as that I may be in trouble) and limiting eating out. All other wasteful spending I have cut.

In regards to working on the side it may be difficult due to being salaried and also raising my daughter full time. But the industry I'm in does offer the ability to do work on the side consulting. I will need to look into avenues to do so though, as I'm not familiar with it. If anyone is in the recruiting/HR industry and knows of ways I can become involved in revising resumes, or side recruiting work please PM me.

 

[Blue Collar Guy]

Last night I did write up a budget of my fixed expenses. I am currently coming up with a plan to cut wasteful spending i.e. Bring lunch to work, stopping smoking (if becoming FIRE is as difficult as that I may be in trouble) and limiting eating out. All other wasteful spending I have cut.

Awesome.

 

[pj.mask]

I'm curious about the FL prepaid program - high chance your kids will go in state but consider something that may be more portable should they decide to go elsewhere (maybe they get good scholarships at Georgia tech?).

As to the emergency fund, you can earn 1% at several banks so it isn't doing nothing.. but I really needed mine last April when we had a big surprise tax bill. Not only that year but that meant paying quartet for this year also so we had to come up with a lot of money in about 2 months. I guess a way to look at this is maybe earning 1% isn't much but saving the x% on interest if a difficult situation arises is an un-measured value.

 

[StartingPath2Freedom]

In regards to the FL prepaid if she was to go out of state, I would get the value that I put in. Which most likely will not pay out of state tuition. I'm open to other options, especially something that could increase in value. I believe 529 is tied to the market isn't it? I haven't looked into it and don't know what is covers and what stipulations there are.

In regards to savings, I'm trying to figure out how much I should "pay myself first". Obviously it will be based on how much I have left as I work on cutting wasteful spending. But is there a percentage that is recommended I should put aside out of each check ? My financials have been such a mess that this month is the first month that I'm really trying to buckle down. Again it's just so hard to see money sitting in my account when I know I have 25% interest building on substantial unsecured debt. Though I completely agree that the savings will be better than having to pay a 25% interest in the future once I have an emergency come up.

 

[Amethyst]

A lot of us get into the habit of tracking every expense, no matter how small, in categories, on a spreadsheet. Then we look at the categories to see if there are places we could cut back or rebalance.

When you have to key in every single time you spend cash or use a credit card or write a check or have an automatic debit from your account, it is incredibly effective in finding budget leaks and money sucks that you might otherwise be tempted to ignore. Automatic debits are especially evil, when you are trying to work within a budget.

Your spending data also forms the authoritative guide to How Much Money Do I Need to Live?

Good luck!

Amethyst

 

[rodi]

Welcome.

I was in debt (credit card) and in a similar state to you at your age. Like you plan, I snowballed the credit card debt. I also upped my 401k contributions.

I wish I had figured out some of the low hanging fruit of saving monthly expenses earlier... I didn't price compare cell plans, didn't argue with the cable/broadband provider each year to get reduced charges, and still stopped by starbucks several times a week... every week. Once I tackled those expenses I had an extra $100=150 to invest/save. Over time it became a game to see how much I could pay off, save, invest... and my monthly expenses continued to decline without a hit to my lifestyle.

You can do it. You've identified the problem (debt) and identified a plan... now work the plan and have fun at it.

 

[Amethyst]

Nobody here is likely to tell you to put a limit on that. The answer will always be "save as much as you can without making everybody in your life miserable." That said, I have always (well, since 1980 anyway) heard 10% as the minimum you should "pay yourself first."

And get out of paying credit card interest - which is nothing but a very expensive short-term loan, hardly better than a payday loan - and stay out of it for good. That is also a path toward an "excellent" credit rating if yours isn't excellent already. With a top credit rating you will never have to worry when it comes time to approach the bank for a "real" loan.

In regards to savings, I'm trying to figure out how much I should "pay myself first". Obviously it will be based on how much I have left as I work on cutting wasteful spending. But is there a percentage that is recommended I should put aside out of each check ?

 

[pj.mask]

Very recently we kept having to 'borrow' money from our savings to make our monthly budget. I sat the SO down and we had a discussion on how we are overspending and talked about how there are things that we 'want' that we buy and end up not using or wasting (anyone who has shopped at costco knows what I am talking about).

We did increase the budget by 12% but I think we actually started spending less as well. In 2 months since our monthly CC spend has been declining and we have built a balance for next months' quarterly estimated taxes.

I look at spending the same way I buy wine. I dont ask for the cheapest bottle. I dont ask for the most expensive bottle. I ask for the best value.

I know our expenses on kids toys dropped a lot after seeing that they value time with adults (and icecream) more than toys. We 99% of the time buy beer to drink at home because we dont get any additional value from going to a pub. I see people on diets trying to restrict everything and diets dont work because they are so painful and they are temporary. If you focus on maximizing value with your budget you rank your purchases and decisions and really consider where you spend your money and the savings (at least for me) takes care of itself.

 

[Amethyst]

One more thing, which I thought of while we were cleaning up after dinner: i always thought of retirement contributions as paying myself. So you are already doing that with your 401K, even though it may not seem like "savings" since you cannot touch it. Beyond that, you need to set aside some regularly recurring amount for your emergency fund, which you do not touch except for emergencies. So there is yet another %age to consider.

Then everything else becomes a game of "How much can I avoid spending on X so I can invest it?" and that's where a stern application of "Value for Money" becomes important.

Nobody here is likely to tell you to put a limit on that. The answer will always be "save as much as you can without making everybody in your life miserable." That said, I have always (well, since 1980 anyway) heard 10% as the minimum you should "pay yourself first."

And get out of paying credit card interest - which is nothing but a very expensive short-term loan, hardly better than a payday loan - and stay out of it for good. That is also a path toward an "excellent" credit rating if yours isn't excellent already. With a top credit rating you will never have to worry when it comes time to approach the bank for a "real" loan.

 

[Cassius King]

Welcome aboard Brian! You're already thinking the right way. Patience and LBYM are your two best friends. I have four quotes from this wonderful site on my computer monitors at work for my daily viewing/reminding:

"Retire when you have enough and you have had enough."

"Reducing costs is a 100% risk free return...tax optimization is similar...investment returns are the least predictable and hardest to control so spend time accordingly."

"All the money you have can't buy good health. You already have the FI, so get out before you have more health problems."

And the great:
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours let before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending in on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" --Joe Dominguez (1938-1997)

THANKS TO ALL WHO HAVE POSTED AND OR USED THESE IN THEIR SIGS! They have helped remind me and keep me on task daily!

 

[StartingPath2Freedom]

Thank you for all the support!

I have some questions about my 503(b) account and how I have it allocated. I'm not sure if this should be posted in a different sub so please excuse me if so.

Basically I wanted to determine what funds I should use and how to allocate. Obviously you don't know what funds I have available but I could provide if someone was willing to get that detailed with me.

Also the account allows us to use professionals to allocate on a monthly basis. The few is ~ 30 basis points or close to .5% a year (does that sound correct at all? I am have the incorrect time frame when those fees are charged)

Also I can open up a brokerage account and trade stocks with a portion of the money in my 403b. I am quite interested and have minor background in finance (bachelors degree). But I wanted to see what others would suggest with approx 20 more years of investing. Right now I am earning 12% return since the beginning of the year. I feel the way the market has been I should have greater returns even though as off now it is 40% greater than average yearly returns but I have a feeling a correction is due. Thoughts?

 

[evilanne]

With 20 years to go, I'd recommend primarily low cost index funds, something that tracks a major index like S&P 500 or Total Market, perhaps something with international exposure. The markets will go up, down or sideways...but I cannot predict when. You may want to check out the treads under Stock Picking and Market Strategy - Early Retirement & Financial Independence Community

 

[jimnjana]

Stick with index funds. Focus on paying off your debt. I'd look at using a home equity line of credit as an emergency fund while you pay off your debt as quickly as possible.