claudefergus
Confused about dryer sheets
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.
Late start in semi-crisis. Better late than never?
- Thread starter claudefergus
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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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HI Bill
Thinks s/he gets paid by the post
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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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VanWinkle
Thinks s/he gets paid by the post
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/one-participant-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,
VW
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/one-participant-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,
VW
gooddog
Recycles dryer sheets
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.
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.
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
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
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.
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...
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.
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.
HighOnLife
Dryer sheet aficionado
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: http://www.early-retirement.org/forums/f28/volatile-income-91320.html
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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.
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!
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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jastew
Dryer sheet wannabe
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.
It CAN be done and you sound like you have the drive to make it happen. Good luck.
Thanks for sharing. Reminds me a quote that hits home to people that don't give up . " Regardless of how many times life knocks you down, get up and keep pushing forward".
Welcome! We were in debt in our early 30's. Over the years, we did everything to pay down debt and live below our means. Gradually, listening to money managers, Bob Brinker (no longer has a radio show) who guided us towards Vanguard investing, the savings started to grow. Always maxed 401k contributions and any bonuses went towards savings, not cars, clothes or vacations. There were bumps along the way but we stayed focused.
