Young 'Wannabe'

[hova22]

Hello All!

I've wanted to FIRE since starting my first job out of college! Needless to say, I am very happy to have stumbled upon this board. Your stories have intrigued me for some time, so now I feel it's time to share mine.

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[MODERATOR EDIT, at request of hova22]

No FIRE date set yet, as one day I hope to marry and have kids... but who knows what will happen. All I know for sure, is that I'm extremely excited when the day will come that I can claim financial independence!

Thanks for your stories. It helps having a community to stay focused.

 

[Coach]

Hova, welcome aboard! Keep to your savings plan and FIRE will happen.

I like to recommend The Millionaire Next Door to the younger folks (and to future parents). It will help you keep your LBYM attitude, and see some of the inefficient things your peers are doing.

Coach

 

[SteveR]

Welcome to the forums. Glad you found the site and hope that you learn all you want to from the many folks here who have successfully navigated to early retirement.

Buying real estate always hurts in the beginning. After the 5th or 6th one it is less painful. Seriously, all you can do is do your homework and hope the market appreciates enough for you to at least break even but more likely you will have a good amount of equity by the time you want to sell. A wife and kids will soon out grow a small condo so a house might well be in your future.

You have the right idea. Save and invest. Diversify and rebalance periodically. Repeat often.

Once you get over the hit from the condo purchase, set up a fund for at least 6 months of basic living expenses and don't ever touch it unless it is truly an emergency. Continue to save as much as you can pre-tax and into tax deferred accounts. You are doing better than most your age so keep up the good work.

Again, welcome to the board.

 

[CourtneyC]

Glad to see you are on the right track. I like the Jay-Z reference. Just saw him on a Forbes show on E!

 

[hova22]

Thanks for the welcome messages. The Millionaire Next Door was a great read and I'm now lending/forcing it upon my friends.

The condo (I feel) is in a great location due to abundance of mass transportation. 6 months living expenses is a good point. Unfortunately, that's more important than the flat screen I want! I should have the emergency fund and save for the tv as opposed to vice versa...

Courtney, glad you picked up the hova reference. What started out as a nickname has developed into a sort of persona...

 

[Andy H]

Hova - great job/great plan. But something to think about. At your age and your rate of savings, you might be setting yourself up for lots of ordinary income tax at retirement when you begin pulling that money out of the 401k.

Remember, when you start pulling it out, it gets taxed as ordinary income. Many people think they'll be in a lower tax bracket, but I like to believe, with proper planning, your tax bracket may be the same or even higher.... What really matters, though is not the tax bracket, but the tax RATE.

With the intent on contributions to a Roth, it's a nice start to "tax diversification". In otherwords, when you retire, you can pull money out that's already been taxed from the ROTH, then you can pull money from the 401k and pay ordinary income tax. Some more food for thought is that if your income continues the increase, at some point you may not have the opportunity to contribute to the ROTH, at which point you may want to look for long term cap gains investments, tax sheltered investments, etc, to give you "tax diversification". Hope this makes sense.

 

[brewer12345]

The condo (I feel) is in a great location due to abundance of mass transportation.

Where in NJ? I am in northern Momouuth County.

Don't expect much appreciation on the condo in the next few years. RE market will be flat at best. But if its a place to live first, then that's all good.

 

[hova22]

I think I grasp the tax diversification thing. Very good point, to be able to withdraw the pretax funds up to a low tax bracket, then pull the rest of the money needed from the roth (or a long term capital gain / dividend investment). I definitely need to keep maxing the roth then. One positive... about 8k of the 401k is actually a Roth 401k. (My past employer was ahead of the game.)

Brewer, currently in Bergen county. It's definitely as a place to live. I need to be out on my own and call me old fashioned, but owning appeals more to me than renting. Though I have been avidly reading the owning vs. renting thread!