Author Topic: Artist With Dayjob Seeks FI some day, but am I already there?  (Read 821 times)

MrMoneyManBun

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Artist With Dayjob Seeks FI some day, but am I already there?
« on: December 26, 2018, 10:41:55 PM »
Hello,
I'm a first time poster here. I don't actually have a man bun, FYI. I discovered this site in late August and have been crazy obsessively busy optimizing my financial situation (see all my progress below), and I want some advice on some best "next steps". I currently live in a high cost-of-living city on the west coast and plan to stay here for at least the next five years. I am not a tremendously high earner, and that combined with my desire to stay here does not equal "early retirement." However, I have been very lucky financially, and progress is progress, and I believe I'll be in a good position to potentially move out of here and retire early when the time is right. Or maybe stay! But what to do in the near term?

Assets
$870,000   Townhome ($246,100 owed)
$  5,000   2009 Honda Fit
$  3,000   Honda Motorcycle
$218,000   Investment Account
$    105   Roth IRA (just opened)
$1,096,105 TOTAL

Liabilities
$246,100   Mortgage (2.93%, 26 years left, 5/1 ARM adjusts in 14 months)
$    561   iPhone Upgrade Program (0% interest, bought 11/2017)
$   0        Credit Card Debt
$   0        Student Loans
$246,661   TOTAL

NET WORTH
$849,444

Net Monthly Income (from 54k gross annual salary):
$3853.33   Job
$ 800      "Rent" from my partner
$0           "Art (breaks even)"
$4,653.33  TOTAL

Expenses
$1733.72   Mortgage (P $541.25/ I $543.11/ T+I$649.36)
$92.85     Water/Sewer/Trash
$85        Internet (switching soon)
$45.10     Natural Gas
$44.27     Electricity
$26.01     Sewer Connection Fee (15 year fee by city)
$4.58      Backflow Test (required by city)
$110       Art Studio
$50        Gas
$57.57     Auto/Moto Insurance
$56.16     Phone payment (10 months left)
$45.83     Tax Preparation
$35        Mobile Phone Service
$15.44     Vehicle Registration
$12.10     Netflix
$500       Roth IRA contribution
$144.48    Extra mortgage payment
$850       Groceries / booze
$0         Health Insurance ($0 for now)
$3,908.11 TOTAL

$745.22    Theoretical Surplus*
           *Usually doesn't happen with travel, gifts, art, etc

What I've Done In The Last Four Months Since Discovering This Blog (thanks!):
Sold a boat (saved $325/mo in moorage, got $1,000), sold some luxury goods (allowed me to buy Honda Fit), sold a newer Subaru Outback (allowed me to payoff a ~$35k personal loan @ 4% interest [$127/mo] and save $50/mo on gas), cancelled housecleaners ($295/mo), earned $500 from that Capital One Savor card, earned $100 for referring someone to my credit union, cancelled Spotify/Amazon Prime/Showtime ($30/mo), changed my phone bill from $87 to $35/mo, reduced my monthly auto insurance by $56/mo, reduced my homeowner's insurance by $25/mo, reduced my annual vehicle registration by $20/mo, asked my partner to move in with me (+$800 mo - but it's for the right reasons as well). All this has allowed me to be able to afford the $500/mo towards Roth IRA and the equivalent to a 13th payment on the mortgage.


What Do I Do Next?
My investment account was $257k four months ago, and my plan was to pay off my mortgage right before the ARM adjusts. Although the amount is down to $218k right now, I still like this plan as it would make me feel at ease, and vastly reduce my living expenses, allowing me to throw a lot more into retirement and investment monthly. Would it be better to keep the mortgage and throw money in retirement as I'm doing? Some place in between? Sell my stock portfolio and get high dividend REITs or something?

What am I missing, and how can I speed this up?

We are also able to AirBnb out a portion of the townhome, and I did earn $6k from that last year, but with the partner moving in, we've been liking the extra space. We are open to doing that at least part time, however, and I think we could earn up to $1k/mo doing that.

Freedomin5

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Re: Artist With Dayjob Seeks FI some day, but am I already there?
« Reply #1 on: December 27, 2018, 03:45:12 AM »
Consider getting rid of the motorcycle.

Your groceries are extremely high for one person. Read up on the forum thread about reducing your grocery bill. Some people on the forums can get it down to less than $200/month.

Read up on Investment Order: https://forum.mrmoneymustache.com/investor-alley/investment-order/

This will help you decide whether to pay off your mortgage. It also depends on what the new interest rate will be. There are typically two camps here on the forum ó some will argue to pay it off for emotional peace of mind. Others argue that logically/mathematically it doesnít make any sense. Personally, we will pay off our $10k mortgage in six months. It doesnít make sense for us to renew for such a piddly amount and it simplifies our financial picture in several ways. Do what works for you.

You need to get a handle on your ďtheoretical surplusĒ and figure out why itís not an actual surplus. I have a feeling thatís where all your splurging and unplanned purchases are coming from. You need to get a handle on that. One way to do that is to track every expense through YNAB/Mint/Personal Capital. Another way is to pay yourself first by diverting a set amount to your investment account each month before you even have a chance to spend it.

Once you pay off your iPhone, donít buy one on a Plan ever again. Use your current phone until it dies.

nurseart

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Re: Artist With Dayjob Seeks FI some day, but am I already there?
« Reply #2 on: December 27, 2018, 12:06:20 PM »
You have made some great steps, congrats! That is awesome!! You are in a lot better financially shape than you were just a few months ago.

I'd start by making the theoretical surplus a real surplus. Use personal capital or mint to figure out where it is going and budget for travel and gifts just like any other category (or see last paragraph for alternative idea). If you make the food/booze budget a bit more reasonable you should be able to have at least a 500 surplus. Which as Freedomin5 said it would probably be best to pay yourself first.

If I were you, and it does depend on how the interest rates change, I wouldn't be comfortable having so much of my net worth tied up in your primary residence and I wouldn't use my investments to pay it off.

Regarding airbnb, I'd start it back up again but be picky with your availability and pricing. One thing I like about hosting on airbnb is the pricing is so flexible. Since you value the extra space more now that your partner is there maybe up your nightly rate. When we were hosting we used airbnb as our "fun/extra/travel" money which made it more fun to host. One possibility would be using airbnb money for your travel/gift/art/etc fund and then that 745 could automatically go to retirement or mortgage principle.

lhamo

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Re: Artist With Dayjob Seeks FI some day, but am I already there?
« Reply #3 on: December 27, 2018, 01:55:58 PM »
Agree that the grocery/booze spending is WAAAY high for a single person.  This can easily be reduced without a decline in food quality simply by shopping better.  Check out some of the food- and meal-prep oriented threads for inspiration.  We have some awesome frugal cooks on the forum!

With your regular expenses you should definitely consider more travel hacking.  Pretty easy to rotate cards for the bonuses and get cash back/air or hotel points sufficient to cover at least one splurgey vacation a year. 

What will your mortgage rate bump up to when the current rate runs out?  I think you have too much of your net worth tied up in real estate already, so would advise refinancing over paying it off in full.

Do you really need tax prep services?  Maybe the art/Air BnB income makes it worth it, but taxes are not really that complicated.  Consider doing your own.