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25 first check up
Old 01-01-2018, 10:42 PM   #1
Confused about dryer sheets
 
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25 first check up

Hello I'm 25 year old single male. I've been fortunate to have a job that pays ~150k/yr. It allowed me to pay off my student loans (40k worth) in the first two years and now I've become fascinated with the concept of FIRE.

Here is how I'm currently setup
Assets:
Cash - $20,000
401K - $60,000
IRA - $11,000
HSA - $2,500
Cash Balance - $15,000 (Fully vested)
Brokerage - $70,000
Cryptocurrency - $2,000

Debts:
Car - $20,000 (Interest rate is 1.9% so I feel no rush to pay it off)

Currently I pay $870 a month for a 2 bedroom apartment. I max out my 401k and get a 4-6% match. This is the second year I will max out my IRA. I max out my HSA. I receive a modest contribution to my cash balance every year. I contribute about $3000 monthly to my brokerage account that is invested rather aggressively in ETFs. I will probably sell the rest of the cryptocurrency once price bounces back a bit more. I contribute 10% quarterly to an ESPP and sell it the day it is purchased to lock in the gains.

Is there anything I could be doing better? I would like to get married and buy a house, but don't think I want kids. The idea of financial independence is nice, more for the feeling of freedom than wanting to leave the work force as soon as possible.
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Old 01-01-2018, 11:49 PM   #2
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With that kind of salary, you ought to be able to save 75% or 80% after taxes.
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Old 01-02-2018, 12:14 AM   #3
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Your saving rate is not bad IMO.
Anyhow, track expenses.
One day you will ask yourself what you did with all your income.
Been there...
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Old 01-02-2018, 12:46 AM   #4
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The single most important thing you can do is not get used to a $150K/yr lifestyle. If you can just spend (for example) 50% you will have two big advantages in reaching financial independence. First, you will have a large chunk of change to save/invest each pay period. Equally important, though, the total size of the nest egg you'll need to maintain your lifestyle upon retirement will now be half what it would be if you lived on (and decided you needed) the full $150K.

The details of what percentage you choose don't matter nearly as much as the simple fact of choosing a percentage and fire-walling off the rest. Do this, keep working, invest simply and steadily and early retirement in your 40s-50s should be readily doable.
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Old 01-02-2018, 05:25 AM   #5
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Nice situation. The less you spend, the less you need and the faster your NW will grow. If you ultra RE I suggest 35-40X expenses.
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Old 01-02-2018, 06:18 AM   #6
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Nice salary and congratulations on saving at an early age. While I see you are selling the Bitcoin, it raises a flag. Many of us in our early investing experience lost money in the dot.com bubble, real estate bubbles, high flying funds or the trendy investment of the day. I would recommend you develop and follow a written investment plan that does not include these types of speculative assets. If you choose to speculate in high risk assets, pick a % of your investments (5% as an example) and let that be your play account. From a mental standpoint, you want to train yourself to realize this money is not really investing but fun/entertainment only.
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Old 01-02-2018, 10:00 AM   #7
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If you're maxing out your 401K, then those IRA contributions are not deductible. At your age, you should consider converting that to a Roth IRA. You will pay ordinary income tax on the gains you've earned, but that shouldn't be much if you currently only have $11,000 and you deposited at least $5500 in 2017. Once it's converted, then all future growth is tax free.

Also, since your income is above the limit that allows you to make direct Roth contributions, in the future you would contribute to the traditional IRA and then immediately convert it into the Roth.

You have a brokerage account, so talk to them about setting up the Roth IRA and handling the conversion.
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Old 01-02-2018, 12:32 PM   #8
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Nice start!
Check and see if you can contribute to an after tax 401k, this can be rolled into a Roth 401k or a Roth IRA beyond the $18,000 and $5,500 limits. Locking that portion of a salary in early will prevent you from spending it.
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Old 01-02-2018, 03:17 PM   #9
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While you're well ahead of most 25-year-olds there is room for improvement. I agree with stepford and can guarantee that in 20-30 years you're going to wonder what happened to all that money you earned.

Is the "future you" going to be patting yourself on the back for being smart or kicking your butt for being stupid with money?

While you may not want to retire in 20 years, chances are very good that you will be much more relaxed in life if you have that option in your back pocket.
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Old 01-03-2018, 12:28 AM   #10
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Max your 401k beyond the match and buy a rental property. This way you have income coming in that isnít tied to any retirement account. At your income you should be able to get a few rentals and get making one good money
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Old 01-22-2018, 03:50 PM   #11
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You're way ahead of the game. Great job!


Continue saving. As stated above, passive income on top of your current base salary would be a nice bonus.
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Old 01-22-2018, 05:44 PM   #12
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Quote:
Originally Posted by you235 View Post
Hello I'm 25 year old single male. I've been fortunate to have a job that pays ~150k/yr. It allowed me to pay off my student loans (40k worth) in the first two years and now I've become fascinated with the concept of FIRE.

Here is how I'm currently setup
Assets:
Cash - $20,000
401K - $60,000
IRA - $11,000
HSA - $2,500
Cash Balance - $15,000 (Fully vested)
Brokerage - $70,000
Cryptocurrency - $2,000

Debts:
Car - $20,000 (Interest rate is 1.9% so I feel no rush to pay it off)

Currently I pay $870 a month for a 2 bedroom apartment. I max out my 401k and get a 4-6% match. This is the second year I will max out my IRA. I max out my HSA. I receive a modest contribution to my cash balance every year. I contribute about $3000 monthly to my brokerage account that is invested rather aggressively in ETFs. I will probably sell the rest of the cryptocurrency once price bounces back a bit more. I contribute 10% quarterly to an ESPP and sell it the day it is purchased to lock in the gains.

Is there anything I could be doing better? I would like to get married and buy a house, but don't think I want kids. The idea of financial independence is nice, more for the feeling of freedom than wanting to leave the work force as soon as possible.
By my calculations, you're putting away $18k to your 401k, $5.5k to your IRA, $3,450 to your HSA, $15k to your ESPP, and $36k to your brokerage account. That's $77,900 being invested out of your $150k income. Over a 50% savings rate. With the remaining $72,100, you're paying all your bills, expenses, taxes, insurances, etc and funding your lifestyle.

In my mind, that's a pretty good start. In your shoes I would do two things you didn't mention:
1. Utilize the Roth IRA as stated above.
2. Start a dedicated savings for your future home purchase.

You've got over $175k in "traditional" investments, I see no reason not to have some "gambles" in there at your age (such as your cryptos) as long as they stay a relatively small percentage (like it is now).

I'd be interested to know what "rather aggressively invested in ETFs means" though, since it may mean "in some very high fee actively managed funds" (which I'd say is bad) or it may mean "in passive index funds with low fees but more aggressively invested in small/mid-cap/foreign investments than would be seen in a moderate portfolio" (which may be appropriate depending on your risk tolerance level).


At your current level of savings and spending, you're on track for financial independence before you turn 40. That's a great path to be on imo, keep it up.
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Old 01-22-2018, 06:31 PM   #13
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To me, it looks like you have $35K in cash...that's a lot, compared to your assets; I'd consider no more than 10%. Maybe take half and pay down the car (or wait until market returns dampen). Great start! Next step, determine what your budget should be at the age you want to retire, then determine your actual goal (in today's $, say 25X your desired income -then run it through FIRECALC). If I'd been in your shoes at your age (and saving that much, and having that large of an income)), I'd have retired by 45 at latest. I almost made it to retirement at 50, but then married at 47, which increased the required retirement budget, and deferred retirement until (I hope) age 54. You never know what life will throw at you, and what opportunities and obstacles will be presented, so it's best to be prepared! Best wishes!
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