Am I sinking, swimming, or above it all?

[startingover]

33 years old, recently divorced and here's my deal...

Residing in Northeast Ohio, I plan to move South to the Carolinas in the next few years. I own a home that's current value is $230,000. I have a note on it for $167,000 that I am paying interest only on. Suffice it to say that, if sold today, I will make the difference b/t $230k and $167k. I plan to be here for not more than 5 years. So, I am not paying principal on it.

I have $50k in mutual funds earning, on average, 6%. I have $7k in a money market account, I have $3k in a checking account. I have $35k in a 401k, another $61k in another 401k account, $28k in a traditional IRA and $8k in a ROTH IRA. I have $8k in my company stock. I also own a car that has a value of about $15k and is paid for.

I make $87k in salary, $7-10k in bonuses and I have a company car/phone/internet that gives me about a $12k/year benefit. So, I realize about $107k in income each year. I have full health care with a $1,500k deductible and an HSA that the company contributes $500 to each year. I have no pension, but do have a matched 401k, up to 6%. I contribute 6% to it each month.

My expenses are $627/month for the house, $300 in utilities, $300 in property taxed, $200 in groceries and that's about the end of it. Don't get me wrong, my Visa bill ends up around $1,500 every month for travel, clothes, "things," groceries, etc. I have no consumer debt other than the house. I pay my credit card, in full every month.

Recently divorced, I split everything we had. It was a very easy divorce and we both ended well -- i.e., we didn't give the attorney everything.

My concern: I feel like I walked into a meeting with my pants down. Everything I did for 10 years (while married) feels like for not. I am concerned I don't make enough, that I don't have enough saved and that I will not make it to my goal of retiring by/before 60. Deep down, I don't think that's the case -- having what I do in savings (never mind the equity in the house) is a good spot for a divorced individual at 33.

I guess what I am looking for is some general guidance and some direction that I'm on the right track at 33.

Thanks for considering and your thoughts.

 

[haha]

33 years old, recently divorced and here's my deal...

Congratulations on getting your divorce behind you early. You can easily recover from it and get back on track.

Pretty expensive house for NE OH- must be a really nice place.

Ha

 

[travelover]

I think you are doing great. You have a good income, low expenses and most importantly, you are actively managing your investments and planning your future. And you have 20 years to invest and still retire early.

I've been where you are and know the financial and psychic costs of a divorce. Given that a lot of guys end up in some crappy apartment with zero left in the bank, you've done a bang up job of damage control.

It is always easy to feel inadequate when you benchmark yourself against your top peers, but statistically speaking you are still in the top of the heap nationally and in the ether globally.

 

[73ss454]

Sounds to me like you have your head on straight. Just keep doing what you are doing and you will be fine.

You are lucky that there are no other problems with the divorce. That could have put a fly in the ointment.

 

[Bestwifeever]

Welcome to the boards. You do seem to be in good shape! Will you still move if your house sells closer to the amount left on the mortgage and not the appraised value?

 

[MasterBlaster]

lets see if I add up the assets I get ~$200k in funds/stock. After you sell the house you (may) get around ~$40-50k after fees.

So lets ballpark your net worth at $250k. The little chart I have suggest that savings-wise you are ahead of the game for a 37 year old planning to retire at 65 (or perhaps a little sooner).

Are you on track ? It seems that way. Your chosen lifestyle will dictate that though.

Check out the ballpark estimator at www.choosetosave.org for another little "how am I doing" estimate.

The little chart below shows that you are worth what a 40-45 year old retiring at 65 should be worth. The debt they refer to though is mortgage debt. Avoid consumer debt like the plague. The usual model for a retiree is a paid for dwelling upon retirement and SS and the income that your stash would generate. For the ubiquitous 80% income replacement ratio target for a retiree the chart below is a guide. That 80% target is (ad-nauseum) debatable if your expenses are low and/or if your income was high.

 

[startingover]

Welcome to the boards. You do seem to be in good shape! Will you still move if your house sells closer to the amount left on the mortgage and not the appraised value?

I would likely consider it, yes. I wouldn't move if I can't sell it for $167k; however, the values in my area are depressed at $230k. While possible, I don't see them to go down a lot more in the next few years.

The divorce is not something either of us really wanted in life, but we knew it wasn't going to work out, sadly. So, splitting up wasn't tough from a financial perspective. Emotionally, it was difficult. I am fortunate that it wasn't worse - I could be "that person" stuck in an apartment with nothing to show for. I am glad that is not that case.

My life style is one that will dictate so much of what I do, I agree. I don't like to penny pinch to the point I squeak, but you aren't going to find me eating filet, living in a 5,000 sq.ft. house and spending thousands at the bar every weekend. I just don't do that. I live in a modest/nice home, I buy my clothes at the outlet malls, I go on vacations where I can find a good value and I eat at chain restaurants, or at home. Sure, I splurge and buy something nice from time to time, but I don't make that a habit and I always pay it off. If i don't have it to spend, I don't buy what I am looking at.

I appreciate the perspective here and invite more as it helps lift some of the fog that has been there for a while.

 

[startingover]

lets see if I add up the assets I get ~$200k in funds/stock. After you sell the house you (may) get around ~$40-50k after fees.

So lets ballpark your net worth at $250k. The little chart I have suggest that savings-wise you are ahead of the game for a 37 year old planning to retire at 65 (or perhaps a little sooner).

Are you on track ? It seems that way. Your chosen lifestyle will dictate that though.

Check out the ballpark estimator at www.choosetosave.org for another little "how am I doing" estimate.

The little chart below shows that you are worth what a 40-45 year old retiring at 65 should be worth. The debt they refer to though is mortgage debt. Avoid consumer debt like the plague. The usual model for a retiree is a paid for dwelling upon retirement and SS and the income that your stash would generate. For the ubiquitous 80% income replacement ratio target for a retiree the chart below is a guide. That 80% target is (ad-nauseum) debatable if your expenses are low and/or if your income was high.

Easy there - I'm 33, not 37! Haha! Thanks for the input here, it's very helpful!

 

[dex]

Congratulations on getting your divorce behind you early. You can easily recover from it and get back on track.

I agree.

It sounds as if you are doing well. You may have lost some traction but are regaining you footing.

Be careful of those southern girls - soft on the outside, steel (some) on the inside.

 

[haha]

Be careful of those southern girls - soft on the outside, steel (some) on the inside.

Best to consider all women as bombs, and you as the bomb squad. But try not to communicate this.

Ha

 

[73ss454]

Oh boy Ha, you are ballzy!

 

[Moemg]

Welcome at 33 I was also newly divorced and had a net worth of not much but life got better and I got smarter so you are doing great ! Congratulations !

 

[Sue J]

Just want to say welcome from another NE Ohioan. I'm just north of Akron.

Sorry about the divorce but you're doing better than a lot of people in the area.

 

[militaryman]

You appear to be in pretty good shape but it also appears you are only saving 6% of your salary?

With no pension and early retirement a goal I would be ratcheting the savings up as much as possible.

Also if "60" is the majic number for you then consider getting a 25 year or less mortgage when you move and always keep a future mortgage such that your home will be paid for around 60 or less.

 

[jayc]

Welcome. I live in SW Ohio and think home prices will keep going down, but it should not be a factor while increasing your net worth on the asset side. Start tracking your net worth via microsoft money or other software. I think it helps with the goals seeing the numbers go up each month and also helps spot the red flags when the number is declining. You can use this time to lick your wounds, lay low, increase your savings rate and reduce spending. Your income is very good for this area and should provide enough leeway to ramp up savings. My only advice is 'Don't keep splitting the pot every 10 years'.

 

[Midpack]

I am sure you're well ahead of the curve for your age, recently divorced. I wouldn't include your home, car or checking account in your calculations - you will presumably always have to have one of each. While you may have some equity in your home, by the time you reach retirement age, the amount of home equity you can cash in by downsizing your home will probably be relatively small vs your nest egg.

But your investments, contributions, etc. look great. Shoot for a target nest egg a little higher than you think you'll need. If your finances go a little south or govt benefits change (likely IMO), you'll still be on track. If things go as expected or better, you have the option to retire earlier or better.

May go without sayinng, but make sure you live life in the present from now on. Focusing too much on retirement at this early stage is no way to live IMO. I know a few people who let retirement dominant their thoughts, and are pretty much miserable now...

 

[Milton]

I too would not include the value of a car, unless it is some sort of antique with an inflated investment value (like I would ever tie up money in something like that!). But I don't see any reason not to include money in one's net worth, simply because it is in a chequing account. Cash is cash.

My concern: I feel like I walked into a meeting with my pants down. Everything I did for 10 years (while married) feels like for [-]not[/-] naught. I am concerned I don't make enough, that I don't have enough saved and that I will not make it to my goal of retiring by/before 60.

Fixed for you! Seriously though, it seems to me that you are not doing too badly, all things considered. Focus on the positives, e.g.:

(1) you are employed and earn a decent wage;

(2) you are (presumably) in good health;

(3) notwithstanding a recent divorce, you have been left with significant assets and a positive net worth;

(4) you have no children and thus no custody issues to worry about;

(5) doesn't sound like you have any support obligations to your ex-spouse;

(6) you are still relatively young and have many years ahead, during which compounding can work its usual miracle;

(7) you live in a country that is essentially untroubled by war, famine, widespread corruption, etc.;

(8) presumably your marriage provided some good times and learning opportunities. No one can take those away from you.

So, no pity party!

If you sincerely want to cut back on expenses and ramp up your savings, it sounds like there is some fat in your current budget ($1,500/month for travel, clothes, "things," groceries, etc.). And as you are supplied with a company car, you might as well sell the one that is worth ~$15,000 ... that's just dead money and unnecessary costs (insurance and maintenance).

 

[walkinwood]

Welcome to the board.

Like the others have said, you're in good shape today. Time to create and follow a plan that gets you financially independent by your target date.

When I started out, I used the simple tool in Quicken to project the amount of money I would need. It makes very simplistic assumptions, but even so, it was very helpful to have a goal in mind & a savings & investment plan to get there. FIRECalc (see link at bottom of the page) is a great tool with more sophisticated investment return projections.

There are good investment books recommended in the FAQ section. Nothing like being your own financial adviser - saves you money and you know exactly where your interests lie.

All the best. Welcome again.

 

[aida2003]

You're doing great financially, though you could do even better going forward, IMO.
You mentioned wanting to retire before 60, so if I were you I would max out 401k contributions unless investments options are awful in it and (Roth)IRA. Also I'd do this because you can afford it now. If or when you get married again, maybe you'll have kids and a wife staying at home, so it won't be as easy to save for retirement as right now.
How secure is your job? If pretty secure, the $10k in MMA and checking account seems sufficient. If not as secure, I'd increase by a few thousand...but it's just me being very conservative/frugal.

 

[startingover]

I too would not include the value of a car, unless it is some sort of antique with an inflated investment value (like I would ever tie up money in something like that!). But I don't see any reason not to include money in one's net worth, simply because it is in a chequing account. Cash is cash.

Fixed for you! Thanks for the grammar lesson Seriously though, it seems to me that you are not doing too badly, all things considered. Focus on the positives, e.g.:

(1) you are employed and earn a decent wage; Agreed.

(2) you are (presumably) in good health; Yes.

(3) notwithstanding a recent divorce, you have been left with significant assets and a positive net worth; I guess so.

(4) you have no children and thus no custody issues to worry about; True.

(5) doesn't sound like you have any support obligations to your ex-spouse; True.

(6) you are still relatively young and have many years ahead, during which compounding can work its usual miracle; True.

(7) you live in a country that is essentially untroubled by war, famine, widespread corruption, etc.; Obviously, very true.

(8) presumably your marriage provided some good times and learning opportunities. No one can take those away from you. Yup.

So, no pity party! Never suggested I was.

If you sincerely want to cut back on expenses and ramp up your savings, it sounds like there is some fat in your current budget ($1,500/month for travel, clothes, "things," groceries, etc.). And as you are supplied with a company car, you might as well sell the one that is worth ~$15,000 ... that's just dead money and unnecessary costs (insurance and maintenance).

I am not selling the car. It's paid for, is 10 years old, has 9,000 miles on it and is driven very rarely. While I see what you would be getting at, it's a toy I earned, paid for and costs me nothing more than two tanks a gas a year and the insurance. If it were other than that, it would be gone.

I put 6% into my 401k to get the company match, I then have about $1,500 a month to save in other areas - 401k, ROTH IRA, Mutual Funds, etc. I struggle there with what to do what that $1,500 each month. So, in total, I am saving about $2,100-$2,300 every month. I think that's decent, if not great given it's based on one income; however, I agree I could try to spend less. I need to work on that, I guess. The $1,500/month visa bill has -- dinner out, hotel/travel expenses, clothes, groceries, personal care items, things around the house, etc. Basically, I put everything on it for the cash rewards and I pay it off every month.

 

[travelover]

.............I then have about $1,500 a month to save in other areas - 401k, ROTH IRA, Mutual Funds, etc. I struggle there with what to do what that $1,500 each month. .............

You can get some good suggestions on where to invest that $1500 over at Bogleheads. They have a standard format for asking portfolio questions that really cuts to the chase.

Bogleheads :: View topic - Asking Portfolio Questions

 

[Milton]

I am not selling the car. It's paid for, is 10 years old, has 9,000 miles on it and is driven very rarely. While I see what you would be getting at, it's a toy I earned, paid for and costs me nothing more than two tanks a gas a year and the insurance. If it were other than that, it would be gone.

There is certainly no urgent need to sell it. However, you might be well advised to do so, considering that it is a depreciating asset that you very rarely use (the cost of renting a new sports car for a few days a year is probably less than the cost of the insurance).

While we all like our toys, if you are serious about growing your investment capital you should ask yourself whether this particular toy provides sufficient pleasure to warrant tying up >5% of your modest net worth unproductively.

All that said, please yourself ... it was just a suggestion, and no one is under any compulsion to justify their financial decisions here (all of us are at least a tiny bit irrational in our own ways).

 

[startingover]

There is certainly no urgent need to sell it. However, you might be well advised to do so, considering that it is a depreciating asset that you very rarely use (the cost of renting a new sports car for a few days a year is probably less than the cost of the insurance).

While we all like our toys, if you are serious about growing your investment capital you should ask yourself whether this particular toy provides sufficient pleasure to warrant tying up >5% of your modest net worth unproductively.

All that said, please yourself ... it was just a suggestion, and no one is under any compulsion to justify their financial decisions here (all of us are at least a tiny bit irrational in our own ways).

I think this is very well put. It doesn't make sense on paper, but the enjoyment it brings sure it clear as day to me. I suppose we all have a splurge here and there...

 

[Walt34]

Welcome to the board.

At age 33 I was also going through a divorce. I was lucky, it was about as amicable as any I've heard of and no kids. When the dust settled on it I had ~$7,500 in cash and everything I owned fit in the back of a small U-haul truck. One guy I knew was ordered to pay more than his net income in child support and alimony! That's a horror story.

So you're way ahead of where I was. On the plus side I have a COLA'd DB pension and health insurance from my former employer of 29 years (law enforcement) and that's rare anymore.

I'd say keep the car. Everyone has to splurge on a toy once in a while just for the enjoyment of it and in the long run it's not going to make a huge difference since you otherwise have your financial ducks in a row.

And you're planning ahead now. That's the big issue.

 

[startingover]

Welcome to the board.

At age 33 I was also going through a divorce. I was lucky, it was about as amicable as any I've heard of and no kids. When the dust settled on it I had ~$7,500 in cash and everything I owned fit in the back of a small U-haul truck. One guy I knew was ordered to pay more than his net income in child support and alimony! That's a horror story.

So you're way ahead of where I was. On the plus side I have a COLA'd DB pension and health insurance from my former employer of 29 years (law enforcement) and that's rare anymore.

I'd say keep the car. Everyone has to splurge on a toy once in a while just for the enjoyment of it and in the long run it's not going to make a huge difference since you otherwise have your financial ducks in a row.

And you're planning ahead now. That's the big issue.

Mine sounds very similar; no kids, and what I had fit in the back of a 12' Uhaul truck. It was also very straight forward, we spent around $500 to have the divorce "processed." Yes, financially, I feel fortunate.

I agree with the car, too. I could raise another $15k, yes. In the grand scheme of things, I just don't see it to make THAT much of a difference over the next 20-25 years. I hope I am "right!"

Thanks for the input!