Case Study: This expat wonders what's next

[a_soujourner]

I'm a single, 29 yr old American and I've lived and worked in the Middle East for a few years. I work for a not for profit. My income is low, but my cost of living is even lower. I recently got a significant (for me) raise and … here are the monthly numbers

Income
$1800 salary
$225 contribution to Roth 401k

Expenses
$200 to various charities
Housing & Utilities
$318 Rent (I'm looking for a flat-mate. If I find one, this'll be cut in half)
under $20 utilities (haven't seen bills yet for my new apartment, but expect around this)
$25 Phone and internet

Food
$150 Food
$50 Eating out & coffee shops

Transport
$40 Taxis and public transport

Other
$35 gift (birthdays and Christmas)
$35 entertainment, shopping (I buy English language books that are expensive here)
$75 clothing (budgeted, but actually I spend far less, maybe an average of $40/month. This tends to be in big batches whenever I'm back in the US)
(Health insurance is completely paid by my employer)

Assets
$29,100 Roth 401k
$3500 cash savings (my get out-of-town money, important in my part of the world)

Debts
$1,100 Student loan at 5.0% ($93/month minimum, but I'm getting rid of it)
$4483 Student loan at 2.35% ($100/month minimum payment; this is next!)

My living expenses are about 38% of my take home income (ignoring the contribution to my 401k). For the past few months I've been putting about $800/month towards my students loans. I hate having them around, even though I understand I could get higher ROI doing something else.

Questions
I love the work I do and it's pretty all consuming of my time (so, I'm not really concerned with increasing my income). All that's okay because I can imagine doing it happily for a very long time to come. Big questions:

-- What's the best place for the approximately extra $800/month I'll have when my loans are gone? My priorities: I want freedom to ignore the difference in cost of living if something changes and I decide to return to the US -- if I stop loving the work or if I'm needed at home -- and to find something else I love to do.
-- Can you convince me to stop paying off my student loans early? I want to be free of the monthly payments, though I know the numbers say it might be smarter to do something else with the money.
-- Also, I also would love to buy a home in the US (I'm from Chicago) to have a home base, a place of my own. Seems like the next step, but I'm not sure. What's the smartest way to work towards that while I'm over here?

Thanks! I've been a lurker for a while and your stories of badassity are inspirational.

[dadof4]

Welcome aboard a_soujourner,

-- What's the best place for the approximately extra $800/month I'll have when my loans are gone? My priorities: I want freedom to ignore the difference in cost of living if something changes and I decide to return to the US -- if I stop loving the work or if I'm needed at home -- and to find something else I love to do.

In order, I would:
1. Payoff the 5% student loan.
2. Max Roth IRA contributions.

After that, it depends on how you feel about debt and risk. On average, you'll do better paying the minimum on the SL, and investing the rest. Many people would rather be debt free, and it isn't without merit.

Whether you pay off the SL or not, the popular thing to do is to invest the remainder in low cost index funds.

-- Also, I also would love to buy a home in the US (I'm from Chicago) to have a home base, a place of my own. Seems like the next step, but I'm not sure. What's the smartest way to work towards that while I'm over here?

If your goal is to retire in the US, then you are in for a long ride. Even though your saving/income ratio is great, you are only saving around $1k a month. While it's hard to tell what your skill sets are, chances are that you'll be much better paid in the US. Even if life is a bit more expensive here, chances are you'll be saving a lot more with a higher salary.

[arebelspy]

I know that you cannot contribute to a Roth without earned income.  I'm assuming all of your income is excluded due to the foreign income exclusion stuff (so you pay no taxes, but also can't contribute to a Roth).  I'm not sure how that plays into a Roth 401k, if at all, but it may be something to look into/be wary of.

-- What's the best place for the approximately extra $800/month I'll have when my loans are gone? My priorities: I want freedom to ignore the difference in cost of living if something changes and I decide to return to the US -- if I stop loving the work or if I'm needed at home -- and to find something else I love to do.

Investing it, naturally.  How you do that will depend on your IPS / AA.

-- Can you convince me to stop paying off my student loans early? I want to be free of the monthly payments, though I know the numbers say it might be smarter to do something else with the money.

No.  Do what feels right to you on that.  I wouldn't be making that move, but it is highly dependent on the person.  If that's what you want to do, why should we try to convince you otherwise? :)

-- Also, I also would love to buy a home in the US (I'm from Chicago) to have a home base, a place of my own. Seems like the next step, but I'm not sure. What's the smartest way to work towards that while I'm over here?

You may want to look into investing in U.S. rental real estate in your preferred areas - if you can find good slid rental deals that you'd consider living in down the line, that could be a good option.