Now what?

[fireandearth]

I’ve got my 6-month emergency fund, my complete next-car fund, no debt, and 15% going into the 401k. The map for that part of the journey was pretty clear. I’m feeling a little adrift now. Keep saving, yes, but how do you maintain focus when the goal is 20 years away? What are the milestones along the way?


Practically, I need to learn more about investing, but it feels way more intimidating to invest outside a retirement account. I’ll need a house at some point, but I have no interest in being tied down to one any time soon. I don’t want to lock all of my resources in retirement accounts because I’ll need some of it before then, but what proportion?


Emotionally, I’m starting to feel guilty because many of my friends are struggling financially and I’m not – but they make more money than I do! I am fiercely proud of what I’ve accomplished, but uncomfortable talking about it. I’m frustrated because I want to go on fun vacations, but my boyfriend is locked into an underwater mortgage and 25k in consumer debt and can’t afford it.

[Bimmerbill]

Hey, congrats! There is no need to talk aobut it, especially if it makes you uncomfortable. Personal finance can be... personal.

If 15% is not maxing out your 401K, work toward that as well as work toward funding a ROTH.

Boglehead forums has a great wiki on investment basics and is worth checking out.

I set up my stuff and forget about it. If your goal is 20 years away there is no need to think about it all the time. I check my balances once in a while, and rebalance once a year (maybe).

[Beryl]

Quote:

Originally Posted by fireandearth I’ve got my 6-month emergency fund, my complete next-car fund, no debt, and 15% going into the 401k. The map for that part of the journey was pretty clear. I’m feeling a little adrift now. Keep saving, yes, but how do you maintain focus when the goal is 20 years away? What are the milestones along the way? Practically, I need to learn more about investing, but it feels way more intimidating to invest outside a retirement account. I’ll need a house at some point, but I have no interest in being tied down to one any time soon. I don’t want to lock all of my resources in retirement accounts because I’ll need some of it before then, but what proportion? Emotionally, I’m starting to feel guilty because many of my friends are struggling financially and I’m not – but they make more money than I do! I am fiercely proud of what I’ve accomplished, but uncomfortable talking about it. I’m frustrated because I want to go on fun vacations, but my boyfriend is locked into an underwater mortgage and 25k in consumer debt and can’t afford it.

You can establish your financial milestones by mapping out what you'll need in 20 years using the many retirement calculators available. I use 3-4 because some are more conservative than others. As you reach your milestones, treat yourself with a vacation or something fun. Max out your Roth. That way, you aren't locked in.

Sounds like you are doing quite well and no, you can't discuss this with your wasteful friends. Even though they make more than you, they will hit you up for loans and will encourage you to get off track. You need like-minded friends.

Your boyfriend is not ready to be a husband until he gets that consumer debt under control or eliminated. The underwater mortgage may not be his fault but it is not something you need. I hope you are a positive influence on him.

[REWahoo]

Quote:

Originally Posted by fireandearth I am fiercely proud of what I’ve accomplished, but uncomfortable talking about it.

One of the benefits of this forum is the freedom to talk about your financial accomplishments without feeling uncomfortable. You are among like minds here - at least on this subject.

Quote:

Originally Posted by fireandearth I’m frustrated because I want to go on fun vacations, but my boyfriend is locked into an underwater mortgage and 25k in consumer debt and can’t afford it.

I'm pretty sure you already know how to solve this problem. The lack of financial compatibility is a huge obstacle to successful long-term personal relationships.

[fireandearth]

I'm not shopping for a husband, just a partner to enjoy life with. And I'm a very good influence on him, but he's got years of work ahead of him before he can be free of past mistakes.

[Midpack]

You should be fiercely proud, and you shouldn't want to talk about it with others, might be like gloating. FI is something you do entirely for yourself.

You are ahead of the game, now you need to learn more about investing for yourself. This is still the best reading list I know of (link below), which specific book(s) is best for you depends on your current knowledge and ability. My fav is The Four Pillars of Investing, but it may be too simple or too complex for you. Take a look at several at your local library or bookseller and pick one you're comfy with. You're doing great!
Investment Books

As for where to invest outside retirement accounts, I think most here would recommend (in no particular order) Fidelity, Schwab or Vanguard. Other brokerages can serve you well too, but if you aren't really savvy, you could get fleeced by a retail broker - it's how they operate for the most part.

[obgyn65]

+1

Quote:

Originally Posted by REWahoo The lack of financial compatibility is a huge obstacle to successful long-term personal relationships.

[HatePayingTaxes]

I'm in a similar boat as you. We're maxing out our retirement acct, have emergency fund, no debt, don't want a house. We're doing the best we can at this point.

Next step would be to fund your taxable acct. Put that extra cash to a diversified eft probably similar to your retirement acct allocation. Don't use that extra cash to make a permanent increase your standard of living b/c, then, you'll need higher retirement acct to FI. Or you can donate that extra cash.... up to you but just don't increase your standard of living if you're content now.

I know what you mean about what now. I think it brings about a new sense of contentment. For example, I don't have to work hard or OT / kiss up to boss / play politics / change jobs to make more money. I work hard b/c I want to b/c I'm making enough money now.

Definitely read up on investment books. If you search for it, you'll see many threads about it.

[Berkshire_Bull]

I'd split the difference into a monthly DCA between an individual non-qualified account using a balanced approach perhaps 60/40 and then the other half into a variable annuity 100% equities.

You have the individual account to fall back on in the event of an unforseen need, and you have the variable annuity to further defer taxes during your highest earning years with the ability to annuitize in retirement in a tax-friendly manner with an exclusion ratio for your basis in the contract.

[DblDoc]

Quote:

Originally Posted by Berkshire_Bull I'd split the difference into a monthly DCA between an individual non-qualified account using a balanced approach perhaps 60/40 and then the other half into a variable annuity 100% equities. You have the individual account to fall back on in the event of an unforseen need, and you have the variable annuity to further defer taxes during your highest earning years with the ability to annuitize in retirement in a tax-friendly manner with an exclusion ratio for your basis in the contract.

Variable annuities have very few fans here. They are a very expensive product for what they provide and frequently complex so purchasers have no idea what they are getting Annuities: Good, Bad Or Ugly? - Forbes.com. There may be good reasons why it is an appropriate choice for you but it is seldom such for the vast majority of investors. Buying one of these, and then getting out of it, was one of my most expensive investing lessons...

DD

[Berkshire_Bull]

Quote:

Originally Posted by DblDoc Variable annuities have very few fans here. They are a very expensive product for what they provide and frequently complex so purchasers have no idea what they are getting Annuities: Good, Bad Or Ugly? - Forbes.com. There may be good reasons why it is an appropriate choice for you but it is seldom such for the vast majority of investors. Buying one of these, and then getting out of it, was one of my most expensive investing lessons... DD

Anything which costs more than .20% per year has very few fans here =). By saying a variable annuity is complex are you referring to the subaccounts or riders? Unfortunately you're right in saying that it's a seldom understood product by both those who buy it and those who sell it, but it has a place when used correctly.

If you're interested in sharing, what was your bad experience with variable annuities?

[DblDoc]

Quote:

Originally Posted by Berkshire_Bull Anything which costs more than .20% per year has very few fans here =). By saying a variable annuity is complex are you referring to the subaccounts or riders? Unfortunately you're right in saying that it's a seldom understood product by both those who buy it and those who sell it, but it has a place when used correctly. If you're interested in sharing, what was your bad experience with variable annuities?

High fee, actively managed mutual funds with front end loads and steep penalty to get out. The tax deferral was waaaay overrated, I subsequently took on a second job with a SEP IRA and use an HSA as a second IRA account and can now defer plenty. For the life insurance part I replaced it with a term policy.

DD

[Berkshire_Bull]

Variable annuities don't have both front-end loads and surrender charges. It's one or the other with A-share varaible annuities which have a load being very uncommon. I hope someone didn't talk you into taking a surrender charge and reinvesting elsewhere vs just waiting for the surrenders to end and then moving it if you wern't happy.

[nbw888]

I would recommend this:

Start learning how to invest and invest in stocks with 2-5 year time horizons in mind, so you don't have to worry about managing your investments on a day to day basis.

Buy individual stocks or stock sector etfs.

Go on vacation with someone who can afford to go with you.

Never be ashamed of your wealth. Many people will be jealous and despise your accomplishments, but don't ever feel guilty for being awesome!!

[Sarah in SC]

I'd stick with the bread and butter advise you are getting about opening up a taxable account and dollar cost averaging into some low cost good-performing funds of your own choosing.

And be sure you are actually maxing out that 401k, not just putting in a certain percentage. If you qualify for a Roth IRA, you should definitely be putting money into one each year. Should you need money at some point that can't come from savings, you can pull your contributions from the Roth without penalty or taxes.

No way would I consider an annuity in any shape or form for you. Bummer about the boyfriend; it would be great if you were both in the same place and could enjoy the same fruits of your labors. You should be very proud of where you are right now.

[fireandearth]

Thanks for everyone's suggestions! I have an old 401k that I've rolled into an IRA with Vanguard, and I plan to open a non-retirement account there too for other savings. I'll look up the 4 Pillars books and keep working toward educating myself.

I like the idea of investing with a 2-5 year horizon - that will help me feel like I'm not limiting my options as much.

I have noticed that there are fewer things I'll put up with now that I have an emergency fund. I stand up for myself at work more and am less likely to let people mistreat me.

I'm not going to be joining my finances with anyone or marrying anyone, even if they were financially compatible. But I still want to have fun with them...I'll work through it.

[kaudrey]

fireandearth - good for you! You have gotten some good advice. As a woman who is probably 15 years older than you (I am guessing you are mid-20s), I can say I was in your position at that age. I was saving (maxing out 401(k) and extra in a taxable account); and in a better financial position than most of my friends. And, 15 years later, I can still say that.

Over the years, my interim goals have varied - I have saved up for a house (living in my second townhouse); I saved up for my cabin in the woods (my weekend escape); I am still saving (about 25-30% of my salary per year). But my end goal is still there - retire early. I have done all of these other things, and still am on track to retire early. Even a financially disastrous divorce didn't derail me for long.

Learn about the basics of investing. Invest consistently through DCA. Continue to live below your means. Then, whatever your financial goals become over time, you will be in a position to meet them.

Also, as someone who has had significant periods of time as a single person, let me offer this - don't be afraid to travel alone. Although I love having someone to share things with, I also enjoy the adventures of being by myself. I have met some amazing people in my travels because people are more apt to talk to you when you are alone in a public place. It's not for everyone, but if you are independent at all, you might enjoy it.

[PaddyMac]

If your boyfriend can't afford vacations, and you want to travel, then think about things you could do that wouldn't cost him much but that are still interesting. There's always day trips to new places. How about taking a driving vacation to another state: since you have to pay for gas and a hotel anyway, you could treat him to a break and you could keep other costs (like eating out) to regular restaurants.

Another way to treat yourself is to take up a new hobby or interest. That way you feel like you are rewarding yourself and seeing/learning new things without leaving home.

[kaudrey]

Somehow I can't seem to find the "edit" button for my post above. Please excuse my typo on "an financially disasterous"....

[MichaelB]

Quote:

Originally Posted by kaudrey Somehow I can't seem to find the "edit" button for my post above. Please excuse my typo on "an financially disasterous"....

Fixed