Made some mistakes but I'm only 27

[DLS1]

Hey I've been lurking on this forum for about a month, and I'll probably continue to stay as a lurker, but I would like to introduce myself. I'm a single 27 YO attorney, and I've been working for about 2 years now. I'm not wealthy by any means, and I need to start making some better decisions. To sum up my financial status, I have:

Credit card debt: 0k
School Loans: 30k @ 6.5%
IRA: 13K
Car Loan: 12k @ 8%
Checking account: 4k

Salary right now: 85k expected to grow to 140-200k in 5 years with 100% job security short of brain trauma


My problem is that I have a high amount of monthly expenses with rent, loans, car, living a young life, and I'm not able to save as much money as I would like to. I used to have about 40k in an account, but I used all that to keep my law school loans down as well as a trip I took after graduating from law school. I spent too much on my car (30k), but I couldn't see myself driving a Ford Focus (I know, wrong thing to say on this forum).

I'm about to start a 401k plan with my small firm, and this forum has convinced me to put in 10% with a 3% match. I really really want to buy a condo, but I have no down payment. I'm about to move in with some friends so I can keep my rent down and pay off my car quicker and save for a condo.

I'm not perfect and I do plan on enjoying life (I lived on nothing as a law student and some friends had 100k + in loans), but I want to get better about saving. Any suggestions or comments are appreciated.

 

[honobob]

Since you're already chipping in with friends in cohousing paying sombody's mortgage why not check into alternate financing (1st time homebuyer programs, FHA, etc. If you wait till the market takes off again you'll be fighting all the other buyers for desirable properties. I'd look for the BEST property NOW for the long term. You'll probably get the best deal and financing if you start looking now. Wouldn't you rather have your friends paying your mortgage?


Good luck!

 

[Leonidas]

I think you already know the answers:

My problem is that I have a high amount of monthly expenses with rent, loans, car, living a young life, and I'm not able to save as much money as I would like to. I used to have about 40k in an account, but I used all that to keep my law school loans down as well as a trip I took after graduating from law school. I spent too much on my car (30k), but I couldn't see myself driving a Ford Focus (I know, wrong thing to say on this forum).

Nobody is going to beat you up, but I think we will all tell you the truth. The first rule of holes is when you find yourself in one you need to stop digging. You have a lot of earnings and potential earnings. But you've spent, and are spending, a lot of money, and you have a fair amount of debt. But it's nowhere near so much debt that you can't kick its butt with a couple of years of living below your means (LBYM) and not incurring new debt. I wouldn't go condo shopping until I paid off the debt.

I though new lawyers were all slaves to the billing clock and never had time for fun.

 

[Meadbh]

Salary right now: 85k expected to grow to 140-200k in 5 years with 100% job security short of brain trauma

Stranger things have happened. Get disability insurance right away.

 

[Razor]

27 years old , making 85k now and 200k in the future? You should be financially independant in 10 years if you don't go hog wild on the fancy house, cars and the toys.

 

[Martha]

Who says "living a young life" has to cost a lot?

I had some pretty wild times at your age that were free.

When I got out of law school and had my first job, I drove a used Plymouth Horizon with a leaky head gasket. No one cared. If I had to take a trip for work I could rent a car cheaper than buy a new one.

And I walked to my job at the lawfirm uphill in the snow for 5 miles too.

One thing I did was try not to spend any bonuses. So, if you expect to earn much more than 85,000 over the years, develop a budget of $85,000 or less a year and live on that amount for the foreseeable future.

 

[DLS1]

Thank you for the comments. The reason I really like this forum is pretty much everyone on the forum has one of two goals: to become FI or to help someone else become FI. It's interesting how the probably the most unbiased advice you can get comes from strangers. I'm not a corporate attorney and I really only have to put in about 45-50 hours a week. I'm pretty lucky as far as my job goes.

I am looking to get into buy a place as soon as it makes financial sense. I'm selfishly hoping the housing crash continues for me so I can get into the market. I will stop digging my hole and continue to get rid of my school/car loans.

I really like my job, and I don't know when I want to retire, but I do know that I want to be FI so I can chose whenever I want to. The best time in my life has been right now... Hey, I did do a lot of delayed gratification, but i do need to curb it a bit.

Edit: I knew I was going to get yelled at for that car comment Oh and Martha my wild times are free, but you still have to wine and dine them! haha

 

[REWahoo]

And I walked to my job at the lawfirm uphill...

...both ways, barefoot...

...in the snow for 5 miles too.

 

[Notmuchlonger]

Learn to accept that a Ford Focus is ok to drive. It suits a purpose. LBYM ..retire early..

You will find quite a few things relate to buying a cheaper car than you can afford

 

[mb]

Who says "living a young life" has to cost a lot?

I had some pretty wild times at your age that were free.

.

Yeh, but drug tests are required for employment now

When I got out of law school and had my first job, I drove a used Plymouth Horizon with a leaky head gasket. No one cared. If I had to take a trip for work I could rent a car cheaper than buy a new one.
.

But that was during the first energy crisis and the counter-culture movement when it was cool to drive something like that so you wouldn't look like "the man" But wait gas prices are high again and econo-cars are becoming popular (and that is a good thing)

And I walked to my job at the lawfirm uphill in the snow for 5 miles too.
.

Yes but where do you live? I thought that most people in you neighborhood commuted by dogsled for six months a year

Relax, DLS1, just the fact that you are here asking these sorts of questions at the age of 27 suggests to me that you will be just fine.

Despite my jibs are Martha, I basically agree with her.

You're currently making a good salary with a lot of future upside potential so just learn to control your costs, do some reading and develop an investment philosophy and strategy, max out before tax options and put what is left in tax efficient after tax vehicles and don't forget to have fun (at a reasonable cost) along the way.

MB

 

[Coach]

DLS1, you're off to a good start with your 401k contribution. The easiest money to save is the money you never see.

I dedicated half of every raise to savings. This helped me get my retirement contribution up to the maximum, and then fund a Roth, and eventually after-tax savings.

Coach

 

[chris2008]

My most helpful tool is tracking my spending in writing every day. Once a month I add up the various categories.
This gives me precise knowledge where my money goes to. We all tend to cheat ourselves if we can...
Then I try to beat some of the expenses the next month, without sacrificing fun of life.
The above advise to save at least half of each salary increase and bonus is also valuable. We lived on my husband's salary while I studied law and since I started working we saved one half of the additional income.
Invest the money right after it comes in and make it automatically. The less you have to think about it the sooner it becomes just a habit.
Also think twice before starting expensive hobbies.

Get rid of the car loan quickly. Then add the amount to your saving on a down payment.

 

[Dawg52]

Oh and Martha my wild times are free, but you still have to wine and dine them! haha

I believe it was Milton Friedman who said......"There is no such thing as a free lunch".

 

[qwester]

Qwester says hi to all,
Newbie here and older than most but sincerely believe, DLS1, that you should get a life. 27 is too young unless you have started your family and then your perspective will sharpen, especially when the kids show up.

 

[FIREd]

DLS1,

welcome to the boards. If becoming FI is really an important goal for you, then there is only one way to get there: save, save, save, especially while you are still young because the money you save right now will have more time to compound than the money you save later. For most of us it means LBYM and keeping our expenses in check.

You don't have to live like a monk though. Find how much a lifestyle you find comfortable (though probably not TOO comfortable!) would cost annually. Then try to keep it at that level even as your income increases. That way you'll save more and more each year and you'll reach your goal faster while still enjoying a good quality of life. If your expenses increase significantly as your salary increases you are basically pushing the FI goal post further and further each time.

For example, our annual income has grown from 105K to 165K since 2004, yet our annual expenses have remained in the 60-70K range over that time frame. This range gives us a very comfortable lifestyle with plenty of money left to spend on fun things and we don't see a need to spend more just because we make more.

 

[MooreBonds]

Qwester says hi to all,
Newbie here and older than most but sincerely believe, DLS1, that you should get a life. 27 is too young unless you have started your family and then your perspective will sharpen, especially when the kids show up.

While I agree that some people (like myself) went too far on the "delayed gratification" end of the consumption spectrum, without knowing anything about her specific budget, it's difficult to say that she doesn't already have a life, and that you need to piss away 100% of your disposable income (and then some) in order to have one. Spending your money to enhance your life is one thing - but becoming dependent upon spending money to enjoy life is simply another form of addiction/dependency.

We all have our areas of splurging, DLS1 - no one can say that yours or mine is incorrect - but just be aware of when you're truly splurging vs afraid of people judging you because of your (lack of) possessions. The former is ok, but the latter is almost a sure deathblow to being FI/RE.

As one poster suggested, an interesting idea is to stick with your budget on an $80k+ annual salary - which would include at least 10% to your 401(k), some money set aside for an emergency fund, and hopefully a little bit more for additional savings. Then, as your salary grows, simply plow all excess into additional tax-deferred and after-tax investments. (remember: if FIREing was that easy, everyone could do it. )

One other thing to keep your spirits up - many people have been working for longer than you (and I) have been alive, yet they still don't have a dime to their name because their happiness was dependent upon spending money, rather than having money compliment their happiness. Being aware and wanting to take the first step is the most important part (of course, actually taking the first step is the second most important).

 

[kumquat]

The best time in my life has been right now...

Just make sure you can say that every month until you die. Everything else will look after itself, or more likely, you will have already looked after it.

 

[Meadbh]

Just make sure you can say that every month until you die. Everything else will look after itself, or more likely, you will have already looked after it.

Amen!

 

[Milton]

Salary right now: 85k expected to grow to 140-200k in 5 years, with 100% job security short of brain trauma... I really like my job

Sounds like you have a different situation than most small firm associates.

Is your father the senior partner?

 

[DLS1]

Sounds like you have a different situation than most small firm associates.

Is your father the senior partner?