27 year-old on the path to Financial Independence

[makincaid]

Five years ago when I graduated from college, I did the "normal" thing buying a house and new car on credit. With big monthly payments, $500 in savings, and a high-risk job in the technology field I was completely stressed out and miserable. It was a big mistake, but turned out to be a blessing in disguise. Within weeks I had begun manageing my budget in detail, and had but together a detailed plan to get out of debt and start building wealth. I wanted to have interest working for me instead of against me.
About two years ago I began to dream of early-retirement. I could obtain independence from my job, and be free to do whatever I want with the rest of my life, travel the world, go back to school, or try my hand at a writing career.

5 years ago:
•Car - Value $20k , Loan $19k
•House - Value ~$140k, Mortgage $138k
•Retirement funds - $3k
•Emergency fund - $500
•Net worth - $6.5k

Current Stats:
•Car - Value $10k , paid for
•House - Value ~$150k, Mortgage $82k
•Retirement funds - $94k
•Emergency fund - $25k
•Net worth - $197k

Goal:
•Contribute $20k per year to retirement funds. I will eventually switch over and start putting more into after-tax investments. I haven't made up my mind when the right time is to do this.
•Pay off house by age 32 (I want the flexibility and security of low fixed expenses. Yes, I know I could get a higher return investing more in stocks.)

 

[Enuff2Eat]

wow, you are doing great. Wish i had the same thinking as yours when i was your age. Can't wait to see your progress in 10 years... Congrats and welcome to the club.


enuff

 

[bssc]

Congrats and welcome

Looks like you are doing well. I wish you well on being able to retire before most of your peers.

 

[Razor]

You are doing great. You must have a pretty good job. At 27, I didn't have a pot to pee in.

 

[makincaid]

Thanks a lot guys. It's nice to be able to brag a little bit. I can't really discuss this sort of thing with friends or familly. They would either be envious or think I was out of my mind.

I'm just a regular engineer, but I manage to save about half of what I make.

 

[GoodSense]

Welcome and congratulations on your accomplishments! Way to go.

It's great to hear that you've figured it out at such a young age. I am a couple of years older than you and just started saving diligently last year. I still feel lucky to have discovered the concept of ER. You're right about not being able to discuss it with friends. Same here. Hope to hear more from you.

 

[virginia]

Makincaid - your story is very similar to mine. Sometimes taking on that debt turns out to be the best thing, because it makes some people realize exactly where they're at. For most it doesn't work, but for others is a real springboard. Congrats - you are doing very well.

 

[Rambler]

Good on ya! Keep it up and you'll have your FIRE nice and early. You don' mention anything about family....got one yet? Going to have one? Kids sometimes have a way of getting in the way of FIRE, but mine are worth every penny, and every minute of extra w*rk I have to do to get to FIRE.

Keep it up, and good luck!

R

 

[oma]

Makincaid,

I think you identified early in your career the urgency to save for an early retirement. Most people I know don't do this. They live for the moment - some start to accumulate so many things in their early professional lives - and don't see the urgency that you did.

It will be a very interesting 20-30 yrs ahead as these people will face working in their 60-70s in order to pay their bills. We (USA) will face a very interesting social crisis fewer pensions will be available and people are responsible for funding their own retirement.

 

[innova]

Great post. We have a lot in common, I have a year on you but our stories are pretty close. Couple points I was going to make:

Contribute $20k per year to retirement funds. I will eventually switch over and start putting more into after-tax investments. I haven't made up my mind when the right time is to do this.

In general, follow these rules:
1) 401k to match
2) Roth to max
3) 401k to max
4) taxable investing

I wouldn't invest in taxable accounts at the expense of sacrificing tax-deferred space.

Pay off house by age 32 (I want the flexibility and security of low fixed expenses. Yes, I know I could get a higher return investing more in stocks.)

I have the same goal, but I decided 32 was not the right age. 40 is better - I plan to have the house paid off at the same time I reduce how much I work. Doing it earlier than that will only cost me the ability to tax-defer as much income as possible. Just another way to think about this.

I can't really discuss this sort of thing with friends or familly. They would either be envious or think I was out of my mind.

Believe it or not, there are great people out there that are doing what you are doing.. just a little hard to find. I can relate to this statement, though my family is very supportive. I guess I learned well from mom and dad.

I have friends who some day will be in a totally different financial circle than I, even though we started in the same place. I feel that this will ultimately affect our ability to stay good friends, so my wife and I work hard at encouraging them to make smart financial choices so we can spend our older years having fun with them instead of having them envy us.