24, Software Developer, Avoiding the Rat Race at All Costs

[connerza]

Life Situation: I知 24, single by IRS definition, 0 dependents, been out of college for a year now, and currently living in Charlotte NC working as a software engineer (specifically as a consultant). However, I am about to move to Richmond, Va at the end of the week (Family/girlfriend are there, and my employer let me transfer offices).

My goal is to become FI in the next 10-12 years, but I have no idea if I値l actually RE at that time. Since I知 not dying to RE ASAP, I知 mainly trying to find a good balance between frugality and controlled spending on things that are important to me. Regardless, I知 extremely grateful I found this movement at my age, and I知 slowly learning that excess material possessions and luxuries contribute nothing to my happiness.

Overall, I think I知 doing relatively well so far. I guess I知 really just looking for a few more eyes on this and welcoming any advice for next steps/areas of improvement.

Gross Salary/Wages: $76,500 ; I expect this to be >$90,000 within 5 years or so.

Individual amounts of each Pre-tax deductions:
401(k) : $18,500 + $3,060 employer match
HSA: $1,950 + $1,500 employer contribution

Adjusted Gross Income: $56,050

Taxes: $16,483 total

Current monthly expenses:
Rent: $1383 -> cutting my portion down to $700 when I move in with my SO in Richmond
Car insurance: $70
Car Maintenance: $100 (~$1200 per year averaged out)
Christmas/Holidays: $30 (~$360 per year averaged out)
Clothing: $40 (usually need 1-2 items per month. Want to get to a point where I can stop buying clothes regularly)
Dining: $150
Electricity: $50 -> Will be roughly the same after move
Gasoline: $80
Groceries: $300
Personal Care (Haircuts / etc.): $30
Internet: $0 now -> $50 when I move
Spotify: $10
Travel: $100 ($1200 per year averaged out)
Water/Sewer: $20
Wine/Beer: $30
Gym: $0 -> $30 when I move
Cell: $30

Total: $2433 -> $1820 after move

Assets:
Checking: $2,100
Emergency Fund: $5,500
Taxable account: $8,900
401(k): $16,000
HSA: $2,010
Car: $6,500

Total: ~$41,000

Liabilities:
None!

Specific Question(s):
Would it be wise to consider buying a home at some point soon?
I知 planning on moving most of my taxable assets into a Roth IRA. Is there a particular way I should go about doing this? I mainly haven稚 done this yet because I was saving for a down payment on a home in Richmond (though that ended up falling through)
I'm kind of hard on myself for spending on unnecessary things, even if they're small and relatively insignificant in the grand scheme of things. So I'm also working on being easier on myself as far as that is concerned, while also maintaining some sort of self-check on my spending. Any tips on tackling this?

[Watchmaker]

I wouldn't be in a rush to buy a house. Take (at least) a few years enjoying the low stress, low responsibility of apartment life. See how things evolve with the SO.

You're doing very well with your budget, keep it up.

[ysette9]

Buying a home should be something you do eventually once you are stable, know you are going to stay in the area for a good, long time, and feel your job situation is also steady. Male sure you run the numbers and are doing it for the right reasons and not because it is just something that people do.

Good job on saving and investing. You can’t just move taxable investment money into an IRA, you can contribute up to the yearly maximum if you have earned income (which you do). With your income you should be making out an IRA now since if you get married to someone in the future who also makes good income you will be locked out of that option. I suggest you look more into whether a traditional or Roth is best for your income level. Traditional might be a better way to go.

Otherwise, save save save! It is so wonderful to have options down the line.

[mxt0133]

I was once in your position and at the time because I had all this money flowing in with very little expenses everyone was telling me to buy a house, this was around the housing bubble 2006'ish.  My mother even offered to gift me the down-payment.  At the time I was single and was not sure I wanted to say in the area where my family was so I decided against it for many reasons such as unused space, house maintenance, and maintenance costs.  A few years later I got married and decided to move across the country.  It would have been much harder to make that decision with a house anchoring me down especially in 2009 when the house would have probably lost half it's value in my area.

So like others have said hold of on the house until you are ready to settle down in an area you know you will be staying for a while.  Also with the input of any future spouse so that you don't have to move because they don't like the floor plan.

As with regards on being easy on yourself, I don't see the point in being frugal if you are miserable.  For me being frugal is fun.  I get a high from optimizing my expenses, it doesn't mean I am depriving myself.  For example I used to pay ATT $120 for two cell phones that we barely used, I found a prepaid option that now cost me $30 a month but I still have a smartphone with a data, I just don't happen to use it as much.  So lowered my expenses without depriving myself.  Used to pay the same amount for haircuts but had to wait an hour in line, now I cut my own hair.
 No lines cost me $60 for a hair clipper and have been doing it for 3 years, even got my wife to cut the boys hair, not the same quality as a barber, but i'm married and like wearing hats. Another example would be experiences that used to cost a ton of money, I have since discovered hiking, national parks, and free activities in the city that give me just as much if not more happiness that are free or very low cost.  So now when I do make small purchases that might not be optimal I don't fret because I know I am already saving a ton on the bigger ticket items.

Other than maximizing your income, which I recommend you try to get an offer at least once a year to know your market value even if you have no intention of jumping ship, really work on you expenses.  Again, don't cut to deprive but find alternatives that are more optimal or even better, like learning to cook, which is cheaper and healthier than eating out.

You're of to a good start and should be FI in a decade or so if keep optimizing your income, expense, and investments.

[Calvawt]

I echo the wait and see advice re: buying a house.  I see people burning dollars from transaction costs because they keep moving over and over.  Unless you decide on 5+ years (and probably more should be used) it doesn't make sense.  The starter home concept was likely invented by a realtor.

Your budget is great and you are clearly wise beyond your years.  Keep it up!

[connerza]

Thanks everyone for the wise and kind words! You all essentially echoed my reasoning for not buying a house this year during the move, so it sounds like I made the right decision.

So now when I do make small purchases that might not be optimal I don't fret because I know I am already saving a ton on the bigger ticket items.

This makes a lot of sense. I think it's the main part I need to work on when it comes to being easier on myself. I definitely never feel deprived, as I live pretty comfortably; but it's just the allowing myself not to freak out over the little things, because I'm already saving a ton by optimizing the big things.

Thanks again!

[2Cent]

1200 car maintenance is quite a lot. Learning to do at least the small stuff yourself is a good saving and feels very empowering. Groceries could also be much lower when you move together as you can buy larger sizes.

As a software developer myself I would say that you really need to push yourself the first few years to get into projects that will teach you valuable things. Also get involved in outside of work projects or do your own. All the cool companies like Google and Amazon look mainly at those kind of things for hiring. Don't get stuck with maintaining the old legacy project in an almost obsolete language. Try to get with the latest stuff and then in 2 years change jobs. That will set your trajectory to earn much much more in more fun jobs. Especially when you're young, big companies like to invest in your training so don't stick with a company if they're not training you.

[RePatriot]

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

This is a fairly comprehensive rent vs. buy calculator.  Go conservative with all of your numbers, and see where that lands you.

[connerza]

1200 car maintenance is quite a lot. Learning to do at least the small stuff yourself is a good saving and feels very empowering.

Yeah I haven't really had a full year of tracking maintenance costs, so this is just an estimate. I've also moved states twice in a year now, so factoring registration/taxes/etc. I'd love to work on my car more, but it's been difficult finding some place to do it. I live in the middle of the city, so I don't have a garage or anything.

As a software developer myself I would say that you really need to push yourself the first few years to get into projects that will teach you valuable things. Also get involved in outside of work projects or do your own. All the cool companies like Google and Amazon look mainly at those kind of things for hiring. Don't get stuck with maintaining the old legacy project in an almost obsolete language. Try to get with the latest stuff and then in 2 years change jobs. That will set your trajectory to earn much much more in more fun jobs. Especially when you're young, big companies like to invest in your training so don't stick with a company if they're not training you.

Thanks for the tips. I'm fortunate that my current employer invests heavily in its employee training and encourages continued learning. They pay for us to take certification exams and put out "innovation" challenges across the company for us to learn about and work on things like AR/VR, NLP, Machine Learning, etc. I've worked on legacy codebases in the past with internships, and I very much do not want to be doing that my whole career :)

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

This is a fairly comprehensive rent vs. buy calculator.  Go conservative with all of your numbers, and see where that lands you.

I did use this a while back when I was considering buying during my move, and it placed me firmly in the "Buy" category. It just wasn't worth giving up the convenience and freedom from risk that renting provides. I will definitely be using this next time I'm considering it though.

[2Cent]

..

Thanks for the tips. I'm fortunate that my current employer invests heavily in its employee training and encourages continued learning. They pay for us to take certification exams and put out "innovation" challenges across the company for us to learn about and work on things like AR/VR, NLP, Machine Learning, etc. I've worked on legacy codebases in the past with internships, and I very much do not want to be doing that my whole career :)

Sounds great. I would really go for those projects so that you can have a kind of portfolio of cool stuff. Remember to be ready to apply for a better job in 2-3 years internally or externally. And be bold in saying no to work that doesn't help you to grow in the direction you want.