Question for a 27 yr old.. How am I doing???

[jyllbean83]

Okay So I am new to this website and am looking for some good advice. I am currently 27 years old and make 40K a year I have a 401K which I put 6 percent in and my company matches that 6 percent (balance of 15K). I have 5K in an emergency fund and 25 years left on 104K 6.75. (would love to refinance but know my appraisal woulnd't make it) I would love to retire at 55. The only other debt that I have is a small loan I took out for my siding. I have 5K left that I've been working really hard to pay off.

My question is what else should I be doing? Should all my extra money go to pay off that small loan for should I conitue working on my 8 month emergency fund? Shoulld I increase my 401K? Thanks for any advice!

 

[Coach]

Hi jyllbean83 and welcome to the forum!

You're off to a great start -- I'd bet you are way ahead of most of your peers. If you keep going the way you're going I think you'll have a good chance at FIRE by 55.

I don't think the order in which you work on your three goals right now matters a great deal -- all are good. If I were in your shoes I'd go ahead and get the siding loan paid off, then beef up my emergency fund. At that point I'd up my 401K contribution. There's a lot of time between you and 55, but a good goal might be to try to contribute 15% to 20% (counting the match) of your earnings to retirement.

But most important seems to be something you already understand -- LBYM, live below your means. Keep that up and you'll have a great chance for real financial success.

Coach

 

[RonBoyd]

My question is what else should I be doing?

You should relax and mix some "fun" stuff into all that "nose to the grindstone" thinking. At 27, there are more than enough years ahead to obtain any/everything you imagine... with ease.

 

[Sarah in SC]

I think knowing your budget and tracking how your spending will increase in future years is helpful. All of your goals are good ones, but I'd add to the emergency fund first (to whatever amount makes you comfortable), then up the 401k to max, fund a Roth IRA, then pay off the loan. Great to have you here!

 

[aaronc879]

What's the rate on the loan for the siding?

I would recommend that you increase your e-fund to no less than 6 months worth of expenses. Then pay off the loan while continueing to contribute enough to the 401K to get the full match. Before you increase your 401K contributions above the match I would start a Roth IRA. In fact, if the rate on the loan is low, i'd start the Roth as soon as possible. You're off to a good start. Good luck!

 

[jacob]

My question is what else should I be doing? Should all my extra money go to pay off that small loan for should I conitue working on my 8 month emergency fund? Shoulld I increase my 401K? Thanks for any advice!

You didn't ask explicitly and maybe you're already doing it, but make sure to stay healthy/in-shape. Currently you can take it for granted, but that'll change if you aren't proactive about it.

If you increase your emergency fund to 2 years, it becomes different in kind. It becomes a freedom fund---you'll get options you didn't have before. You'll be able to take chances without fear of making ends meet.

On the other hand, any outgoing interest is a significant "headwind" towards increasing net worth.

 

[jyllbean83]

thank you for the advice... it's funny that you would say something about being in shape. I just got done doing my first fitness competition in the spring

So would you suggest paying off my loan (at 5 percent interst) or getting my emergncy fund up to speed first?

Where can I find Early Retirement Extreme?

 

[jacob]

You can find anything with google.

I can't really answer what you should do since it depends on what you value, how you like your job, what your career prospects are, etc.

Personally, I hate debt more than I like opportunities. You already have the basic emergency fund, right? (Wasn't quite clear to me) So if you're in a low risk/low reward job situation, I'd pay off the debt. If you like high-risk/high-reward job/careers, I'd save more money.

 

[flyfishnevada]

Consider what type of retirement you might want. I know its a ways off, but your assumed retirement lifestyle will determine how well you're doing. In other words, if you live below your means currently and your tastes run more hamburger than steak, so to speak, you might be right on track or ahead of the game. If you dream of big houses on golf courses, corvettes and first class flights around the world, you might need to step it up.

Not to mention that house (I assume thats the 104k loan at 6.75%). that should be paid off by 55, assuming you don't trade up every few years. The equity is worth something. If you were to downsize you could pocket extra equity. If you were planning on a different lifestyle, say full time RVing, you could pocket a lot! That is assuming the housing market recovers in the next 28 years

 

[Trawler]

You are off to a great start by just thinking about it. As you grow into your career your income will rise and what I did from 35 on was bank half of any increase in earnings on top of what what I was already saving. Looks like I have 18 months to go at 50.