Author Topic: Case Study - Budget Check and what to do with $10k  (Read 2010 times)

Zarakava

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Case Study - Budget Check and what to do with $10k
« on: March 20, 2017, 02:54:41 PM »
Life Situation: Single (for likely two years) 24 year old male, no dependents

Gross Salary/Wages: $102.5k

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc. -
401k : 10% - $850/mo
Health Insurance: $67/mo

Adjusted Gross Income:
$91.5k

Taxes:
I donít know my tax stuff too well, this is what is being taken out
Federal Income Tax: $1420/mo
Employee Medicare: $123/mo
SS Employee Tax: $526/mo
State Income Tax: $452/mo

Current expenses:
Necessities
(49.2% net):
Charity - $900/mo (10% gross) (18% net)
Rent - $1100/mo (22% net)
Internet - $70/mo (1.4% net)
Electricity - $45/mo (0.9% net)
Renterís insurance - $10/mo (.2% net)
Car insurance - $85/mo (1.7% net)
Gas - $100/mo (2% net)
Cell Phone - $50/mo (1% net)
Cat Food/Necessities - $50/mo (1% net)
Misc Necessities- $100/mo (2% net)

Food (6.3% net)
Work cafeteria - $85/mo (1.7% net)
Groceries - $130/mo (2.6% net)
Eat out - $70/mo (1.4% net)
Soda - $30/mo (.6% net)

Entertainment (6.9% net)
Electronics - $65/mo (1.3% net)
Books - $100/mo (2% net)
Streaming services - $13/mo (.26% net)
Piano Lessons - $165/mo (3.3% net)

Remaining - $1850/mo (36.6% net) - plan to pay loans off first with this.

Savings-
Savings Account - $2k
CD - $10k, negligible interest

Liabilities:
2016 Jeep Wrangler -

$19,535.19 remaining, 3.99% interest
$530/mo

Student Loan
$4k remaining, 0% interest (to parents)
$1000/year (requested by parents)

Specific Question(s):

I have two primary questions. The first would be a quick check of my budget. I know that rent is high, and that I should probably move to a cheaper place, but I really like my apartment. Entertainment could probably go down as well, but those are hard sacrifices to make. I need to kick the soda, but Iím struggling with that right now.

I also want to know what you think should be done with the $10k I have sitting in a CD. Should I pay off part of the car? Should I invest it? Or just leave it there for a possible engagement ring in the future?

2Birds1Stone

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Re: Case Study - Budget Check and what to do with $10k
« Reply #1 on: March 20, 2017, 05:59:17 PM »
Congrats, you are in a GREAT spot at your age.

MAX out your 401k
MAX out a Roth IRA

This will save you a couple grand in taxes every year, AND increase your tax deferred/tax free investment growth dramatically over your lifetime.

Budget Wise
If you must drink soda, get store brand in 2-3L bottles and cut it down to a few a month. Savings $25/month

If you can't pack lunch to work, at least try to do it half the time. Savings $30-40/month

Library Card. Savings $100/month

Consider lowering charity just a tad? Donate some time instead?

"A small house can hold as much happiness as a big one." - Fortune Cookie

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Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #2 on: March 20, 2017, 06:21:59 PM »
I drink soda mostly for the caffeine, I never did like coffee. I'd like to find cheaper caffeine that I like though.


I do use the library, but book collecting is also a hobby, I'll try to work on that.

Charity is non negotiable to me though, I do it primarily for religious reasons.

What would you do with the 10K?

Bimmy

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Re: Case Study - Budget Check and what to do with $10k
« Reply #3 on: March 20, 2017, 07:30:23 PM »
If it were me-

I would use 4k of the 10k to pay off your parents in full. (I assume the balance is $4,000, but Mom and Dad only ask for $1,000 a year? Did I read that right?) The math would majorly favor paying that loan as slowly as possible, but I would take the "hit" because of the relationship.

I would use the remaining 6k as an emergency fund.

The other thing I would probably do- sell the jeep and buy something I could pay cash for. That would leave you with $2,380 per month to save/invest (the $1850 you have now, plus the $530 that used to pay on the jeep each month).



Bimmy. Close relative to Billy and Jimmy Lee of the Double Dragon Series.

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #4 on: March 20, 2017, 07:46:07 PM »
I think paying that back is my top priority, but I didn't elect to take it from them. Dad forgot to fill out the FAFSA. 

I'll think about the jeep. I know it's good to get out of that debt, but I feel so happy when I see it XD

frugal_c

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Re: Case Study - Budget Check and what to do with $10k
« Reply #5 on: March 20, 2017, 09:19:04 PM »
I would use the $10k against the car loan.   Normally I would say put it an index fund but the markets are so high right now I would just go for the guaranteed 4%.

marty998

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Re: Case Study - Budget Check and what to do with $10k
« Reply #6 on: March 21, 2017, 12:51:20 AM »
Yes. $10k against the car.

You'll quickly save that backing the next few months anyway.

farfromfire

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Re: Case Study - Budget Check and what to do with $10k
« Reply #7 on: March 21, 2017, 03:41:12 AM »
I drink soda mostly for the caffeine, I never did like coffee. I'd like to find cheaper caffeine that I like though.
Store brand energy drinks may be the way to go, as the caffeine/$ and caffeine/sugar ratios are better than regular soda.
Sell the jeep!

marielle

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Re: Case Study - Budget Check and what to do with $10k
« Reply #8 on: March 21, 2017, 06:39:23 AM »
How are you spending so much on books/electronics? From your high rent you're probably living in a big city with a great library. I bet they have all of the books you're buying.

If you're only drinking soda for the caffeine and don't care about the taste whatsoever, then caffeine pills?

Check if Republic Wireless cellphone plans would work for you, could drop down to $20/month.

Charity is REALLY high but that's already been mentioned...I would consider stopping/minimizing this until you're out of debt, then you'd be able to contribute more in a year or two because of the interest savings. Or is this a tithe or something?

I would max out the 401k and a traditional IRA first before paying off the car because of the huge tax savings.

2Birds1Stone

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Re: Case Study - Budget Check and what to do with $10k
« Reply #9 on: March 21, 2017, 07:16:25 AM »
I just take cheap caffeine pills

100 200mg pills for $5 online.
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afuera

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Re: Case Study - Budget Check and what to do with $10k
« Reply #10 on: March 21, 2017, 07:53:09 AM »
Another vote for selling your Jeep.  About a year ago, hubs and I sold our fancyass Mercedes and got a nice Toyota Highlander on Craigslist for <10K.  I can't tell you how nice it is to not have a car payment.  Also, insurance costs are much lower and we no longer worry about the paint chipping or getting little dents in the parking lot. 

Anecdata: My best friend's husband bought a Jeep that he had always coveted a while back.  He had it about a year and half before he got sick of all the repairs and maintenance so he traded it in for a used Toyota Tacoma which he still has and loves 5 years later.
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Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #11 on: March 21, 2017, 08:03:12 AM »
How are you spending so much on books/electronics? From your high rent you're probably living in a big city with a great library. I bet they have all of the books you're buying.

If you're only drinking soda for the caffeine and don't care about the taste whatsoever, then caffeine pills?

Check if Republic Wireless cellphone plans would work for you, could drop down to $20/month.

Charity is REALLY high but that's already been mentioned...I would consider stopping/minimizing this until you're out of debt, then you'd be able to contribute more in a year or two because of the interest savings. Or is this a tithe or something?

I would max out the 401k and a traditional IRA first before paying off the car because of the huge tax savings.

Charity is to tithing yes - it's something I believe in, and even though the "money making" would have me lower this, I'm not going to based on my morals.

I'll try some caffeine pills.

I'm not technically on my own phone plan, but I could try to figure that out.

Electronics would be 1 new game per month, books are a lot due to liking to collect, but it does make sense to lower that.

marielle

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Re: Case Study - Budget Check and what to do with $10k
« Reply #12 on: March 21, 2017, 08:14:37 AM »
Tithing is your choice, but seriously consider maxing your 401k so that you can get some of that money back from the highest tax bracket (not sure if that donation is tax deductible?)

As I mentioned in the other thread, definitely sell the Jeep. Your future and your future marriage is more important. That 20k can buy you four reliable $5k cars (or Jeeps if you really have to). You can go further with four cheaper cars than the one Jeep will last you. Probably until you retire.

I've had almost the worst possible year for maintenance (minus catastrophic engine/transmission failure) and still paid nowhere near a car payment. After timing belt, water pump, 4 new rotors, 4 new brake pads, 2 new calipers, a lifetime alignment purchase, several synthetic oil changes, flushing brake/tranny/power steering/coolant, and several other minor things INCLUDING buying a ton of tools to do a few simple things myself, I'm still at less than half the average car payment. Even if I throw in suspension work and tires I'm still ahead. A new car will NEVER "save you on maintenance" because you're paying more than the difference in depreciation, fancy features, and insurance. Unless you buy a lemon, but this can be countered by getting a $50 pre-purchase inspection where they will tell you exactly the condition the car is in and what needs to be done immediately and what can wait a couple of years.

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #13 on: March 21, 2017, 08:47:32 AM »
If I do decide to sell my Jeep - how do I even go about doing that? I know I need to make one repair on it (had a small collision that messed up the bumper), which will be $500-$800, if I get my insurance correct... then what? Craigs List? It only has 20k miles, so pretty good shape, though the inside is a little bit dirty.

marielle

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Re: Case Study - Budget Check and what to do with $10k
« Reply #14 on: March 21, 2017, 09:40:06 AM »
Wow 20k miles on a 2016. You can try Craigslist but you probably won't get too much luck. You might even be underwater on it? Go to as many dealerships as you can and see what they'll give you for it. Try Carmax too. I've also heard good things about online dealers but no experience with them.

Reminds me of this case study:
http://www.mrmoneymustache.com/2016/09/12/reader-case-study-young-man-saved-from-jeep-suicide/

Pennycounter

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Re: Case Study - Budget Check and what to do with $10k
« Reply #15 on: March 21, 2017, 10:43:33 AM »
You can sell the Jeep on Craigslist. I did the same with a car when I was your age. Just make sure you get cash or a cashier's check and that it clears your bank before you turn over the pink slip. 

I second/fourteenth that you should max out your 401K. Immediately start diverting 15% of your income and slowly up it to 20% or so to ensure you max out for the 2017 calendar year.  I think you are salaried out of Roth contributions. 

What would I do with $10K?  Well I just got a $12K check and dumped it all in Mr Market but we have no car payments or revolving credit. If I were you I would work on the parent loan, then the car payment. Use the rest of your monthly overage to finish paying off the loan and then start savings again.  All of this is IN ADDITION to maxing out your 401K.  That should be non-negotiable with your salary.

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #16 on: March 21, 2017, 10:55:04 AM »
This may be a dumb question, but what does maxing my 401K actually mean? The limit is 18K? So I need to put in 18%? Does the 18K include my employer contribution? And Traditional IRA means? I really don't know money stuff, but I'm trying to learn.

marielle

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Re: Case Study - Budget Check and what to do with $10k
« Reply #17 on: March 21, 2017, 11:01:15 AM »
Yes 18k is the limit for just your contributions, employer contributions do not count. There is a limit for employee + employer contributions but it's ridiculously high.

I would aim for 20% or more to make sure you reach 18k for 2017. It's all pre-tax so it will be a huge savings for you, and you may only be giving up like 12k-13k of after tax money.

A traditional IRA is a tax deductible individual retirement account. You might not be eligible for the deduction though, just realized that. It depends on whether you have any other deductions that would reduce your modified adjusted gross income.

Here's a chart:
https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work

iowajes

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Re: Case Study - Budget Check and what to do with $10k
« Reply #18 on: March 21, 2017, 11:22:58 AM »
I would use the $10k against the car loan.   Normally I would say put it an index fund but the markets are so high right now I would just go for the guaranteed 4%.

I'm good with the advice to pay down the car loan, but I'm not sure of the reason.  Do you have a crystal ball that says the high markets aren't going higher?

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #19 on: March 21, 2017, 11:44:51 AM »
Yes 18k is the limit for just your contributions, employer contributions do not count. There is a limit for employee + employer contributions but it's ridiculously high.

I would aim for 20% or more to make sure you reach 18k for 2017. It's all pre-tax so it will be a huge savings for you, and you may only be giving up like 12k-13k of after tax money.

A traditional IRA is a tax deductible individual retirement account. You might not be eligible for the deduction though, just realized that. It depends on whether you have any other deductions that would reduce your modified adjusted gross income.

Here's a chart:
https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work

Looks like I can take no deduction - what then. Max a Roth? then just normal investments?

Also what happens if I go over 18k on the 401k?

Vindicated

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Re: Case Study - Budget Check and what to do with $10k
« Reply #20 on: March 21, 2017, 11:57:19 AM »

Liabilities:
2016 Jeep Wrangler -

$19,535.19 remaining, 3.99% interest
$530/mo


I just did a KBB search for 2016 Wranglers with 20k miles, and chose the cheapest model.  It said you could sell it to a private party for $22.9k.

If you sell it for $22.9k, you have $3.4k left.  Use that $3.4k to buy a used Honda or Toyota* or something, and you've eliminated your car payment, and have that additional $530/mo to go towards investments.

So, is it worth $530/mo to drive the Jeep when you could have a paid off Civic or similar and pay $0/mo?

Also, FCA** has managed to rank 5 of the top 10 LEAST reliable car brands.

http://www.autoguide.com/auto-news/2016/10/top-10-least-reliable-car-brands.html

* Toyota/Lexus consistently ranks #1 most reliable in almost every segment.

** FCA owns Jeep, Dodge, Fiat, Chrysler & Ram***

*** Yes, "Ram" is it's own Brand now, so you could also say they have 4 out of the top 9 if you combine Ram with Dodge, as I would.

----

I also think the tithing is overly generous.  I think you'd do more good for the community by halving that and donating a weekend at a food shelter or something.  We all have different priorities though.

----

With the $10k, set some aside for Emergency Fund, invest the rest, since you're buying a $4k Corolla
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lovesasa

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Re: Case Study - Budget Check and what to do with $10k
« Reply #22 on: March 21, 2017, 03:40:55 PM »
I drink soda mostly for the caffeine, I never did like coffee. I'd like to find cheaper caffeine that I like though.

I drink a lot of tea. Black tea is enough to wake me up in the mornings. If you're not a tea fan, I like the Kroger/King Soopers knock off of the "mios". They have some that are "energy" versions. I put them into soda water.

Have you tried getting a soda stream? This would be an up-front cost, but would cut down on your soda spending in the long term, if you don't plan on quitting the soda habit. I drink a TON of soda water (I blame my inner German), so it has been very worth it to me.
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spicykissa

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Re: Case Study - Budget Check and what to do with $10k
« Reply #23 on: March 21, 2017, 06:11:36 PM »
I answered what I would do with the $10k on your other thread. A few thoughts on your budget:

1. Is your health insurance a high-deductible plan? Do you have access to one with a health savings account (HSA)? It's a great deal for young, healthy people like you probably are. In your health insurance documents, this would probably be the "bronze" or lowest cost option. Your company may even provide seed money for the HSA. Look into it!

2. What is really in the "Miscellaneous Necessities" category? I have one in my budget, too, but after awhile I realized some of these actually were regular (but 'lumpy') expenses that I could better plan for (ex: travel expenses to see family), or weren't really necessities at all (ex: fancy 'work' clothes I never wear and shouldn't buy).

Bimmy

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Re: Case Study - Budget Check and what to do with $10k
« Reply #24 on: March 21, 2017, 07:33:49 PM »
Tithing is your choice, but seriously consider maxing your 401k so that you can get some of that money back from the highest tax bracket (not sure if that donation is tax deductible?)

It should be - vast majority of churches are going to be registered non-profits.

OP- one more thing, did you get a tax refund this year? Those tax withholdings look a tad high? It's been awhile since I filed taxes as a single person though. Married with a bunch of kids really lightens my tax bill LOL.
Bimmy. Close relative to Billy and Jimmy Lee of the Double Dragon Series.

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #25 on: March 21, 2017, 08:39:07 PM »
I answered what I would do with the $10k on your other thread. A few thoughts on your budget:

1. Is your health insurance a high-deductible plan? Do you have access to one with a health savings account (HSA)? It's a great deal for young, healthy people like you probably are. In your health insurance documents, this would probably be the "bronze" or lowest cost option. Your company may even provide seed money for the HSA. Look into it!

2. What is really in the "Miscellaneous Necessities" category? I have one in my budget, too, but after awhile I realized some of these actually were regular (but 'lumpy') expenses that I could better plan for (ex: travel expenses to see family), or weren't really necessities at all (ex: fancy 'work' clothes I never wear and shouldn't buy).

1. Well, my company works in the Health Care industry, so we have some odd insurance plans. All of them are no-deductible, and if I'm still single in 2 more years the premium goes away as well.

2. Misc is household supplies really - toilet paper, cleaner, toothpaste, laundry detergent, etc. Maybe I could break them down more, but I didn't want to.

Tithing is your choice, but seriously consider maxing your 401k so that you can get some of that money back from the highest tax bracket (not sure if that donation is tax deductible?)

It should be - vast majority of churches are going to be registered non-profits.

OP- one more thing, did you get a tax refund this year? Those tax withholdings look a tad high? It's been awhile since I filed taxes as a single person though. Married with a bunch of kids really lightens my tax bill LOL.

Looked at maxing 401k today - and yeah, yesterday I just got my taxes done and I'm getting 2700 -225 back (fee for H+R block, but now I know how to do more "advanced" taxes)

Ebrat

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Re: Case Study - Budget Check and what to do with $10k
« Reply #26 on: March 22, 2017, 06:58:54 AM »
Looked at maxing 401k today - and yeah, yesterday I just got my taxes done and I'm getting 2700 -225 back (fee for H+R block, but now I know how to do more "advanced" taxes)

$225! Your taxes don't look that advanced to me...

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #27 on: March 22, 2017, 07:19:13 AM »
I'm 24, I've only ever used the EZ form XD

I don't feel bad about that one now, I think I understand it enough to do it in the future, so I think of it as a learning fee. (If I did it myself, I don't think I was even claiming the donations to charity)

Plus what I earned on the refund from using them covers the fee. So a one time learning cost...

wintertell

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Re: Case Study - Budget Check and what to do with $10k
« Reply #28 on: March 22, 2017, 07:48:14 AM »
What are your goals? Do you want to retire early? Are you looking to get settled first before pursuing early retirement? Financial stability? You said buying an engagement ring in two years -- what are expectations in terms of wedding cost. Will you want to buy a house?

The point is: Do you have any other goals other than retirement in the distance? It's hard to know what to recommend unless you clarify what you want.

I do agree with selling the Jeep and paying for a car in cash. Think of how satisfying that would be! Plus it would free up a huge amount of cash flow to put towards other goals. 

I also agree with maxing out your 401(k) - You have the income space to do so. This is something I would set and forget, other than to up it if the IRS ups the limit. This alone could set you up for a normal-ish early retirement in your 50s!

Then, once you I have more info from you about your goals, you can think of what to do with that 10K, tax refund, and other cash flow.

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #29 on: March 22, 2017, 08:10:55 AM »
I don't actually know what my goals are - mainly just to figure out how money stuff actually works.

I really enjoy working, so I don't know if I'd want to have an "early retirement", but I think it would be really cool to not NEED to do the work - so I could more easily dictate what I actually want to do at my job.

And another quick 401k question - mine is through Fidelity, and it looks like it does percentages? So for next year, for example, do I put it at 18%, then just stop when I hit 18k?

wintertell

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Re: Case Study - Budget Check and what to do with $10k
« Reply #30 on: March 22, 2017, 08:41:58 AM »
On the 401(K)
You can adjust your 401(k) percentages at any time. Most folks set it at a percentage so that they reach the IRS limit, which is 18,000.

18K/$102.5k = 17.56%

This means I would set it at 17%, since most of the time you can't do 1/2 points and 18% would be too much. You'll have to adjust it every time you get a raise to make sure you aren't going over the limit.

For your original question:
If your goals are basic financial literacy, then you've come to the right place! I might think about trying to do things that will set yourself up for life, that give you options rather than limit them. This means starting to save for retirement early, getting out of debt and staying out of debt, and having a big gap between your expenses and your income, and save the difference.

The big first steps are:
1) Save at least 1,000
2) Get out of debt
3) Save a proper emergency fund
4) Start saving for retirement
5) Save for medium-term goals

1) You already have 1K, great! Yay baby emergency fund!
2) Get out of debt --
 
- Sell the Jeep and pay for a car in cash (between 3-10K) with the proceeds/your savings. No one needs a fancy pants car like this, even if it is a lot of fun!
- Use the rest of your savings above the 1 or 2K emergency fund to pay your parents back - No need to have a loan when you have the money. Who cares if it is a free loan -- it is much better to not have to worry about it and know that you don't owe anyone anything!

3) After you're debt free, save a proper emergency fund. This would be 3-6 months expenses. This emergency fund is for "If I lost my job, could I live for X amount of months and not go into debt?" Looking at your expenses, that's about 1,500-2,000 a month. I might get to 3 months (6k total) and then slow down the savings on this to 150-200 a month moving forward.

4) Start saving for retirement - Since this can happen really quick, basically by shuffling around resources you already have, I would log in to Fidelity and set it for 17% today.

After you sell the car and no longer have that 500/month payment, I would start a Roth IRA too. Set up with Vanguard and choose low cost index funds. You are only 20K in gross income from the phase out, so I think you should take advantage while you can. This gives you diversity in your retirement accounts between pre and post tax.

5500 year/12 month = 458/month post-tax --> You can get this just by selling your Jeep!

5) Save for medium-term goals -- This is where you can do what you want! It really depends on your goals.

You could do rental property and/or investing - both are paths to early retirement.
Two basic options:
- Save for a house down payment - either for yourself, and then rent out extra rooms, or as a plain rental property
- Invest in a brokerage account, piling up cash. This would be you pile of savings to live on in early retirement until you could access to your 401(k) and IRA accounts.

Do this for 7-15 years, depending on how much you want to live on in early retirement and how much you are willing to save, and you could likely retire between ages 30 and 35. If you save 75%, you can retire at age 31. If you save 50%, you can retire at age 39.

I say - be ambitious, stretch yourself to see how much you can save by optimizing your expenses and still have a good life. Then calculate your savings rate and see if that's something you would like to maintain, so you have the option of getting off the career wagon if you wish. Lot of folks have found out that they rather do something else, if given the option. Having money stashed in a brokerage account gives you the ability to be take pivots in your career, if you wish, without having to think about your financial security.

Good luck!


« Last Edit: March 22, 2017, 08:43:50 AM by wintertell »

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #31 on: March 22, 2017, 08:51:46 AM »
4) Start saving for retirement - Since this can happen really quick, basically by shuffling around resources you already have, I would log in to Fidelity and set it for 17% today.

After you sell the car and no longer have that 500/month payment, I would start a Roth IRA too. Set up with Vanguard and choose low cost index funds. You are only 20K in gross income from the phase out, so I think you should take advantage while you can. This gives you diversity in your retirement accounts between pre and post tax.

5500 year/12 month = 458/month post-tax --> You can get this just by selling your Jeep!

I've set it to 18% for now to cover the first few months at 10%, I'll check in on it again later.

What is the phase out? I tried googling and didn't see much that made sense to me.

I'm also getting a lot of feedback from my girlfriend about not selling the Jeep. I really like the car, and she's getting stressed about me getting rid of it. I know the smart thing to do is sell it, but I also think I could get it paid off by the end of the year, then it's not debt, albeit with not great gas mileage, but I can cover that. (I'll also plan on biking around a lot more when it gets warmer - Wisconsin Winters are a bit too much for me in terms of the cold)
« Last Edit: March 22, 2017, 08:54:58 AM by Zarakava »

wintertell

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Re: Case Study - Budget Check and what to do with $10k
« Reply #32 on: March 22, 2017, 08:56:17 AM »
http://www.rothira.com/2017-roth-ira-limits-announced

For 2017, if you make above 118,500/year as a single person, then you can't put the full 5,500 a year. The amount you can put in starts to decrease.

At 133k/year in 2017 you are no longer eligible to contribute to Roth IRAs, which means that opportunity for free post-tax growth ever year is gone. Not the worst problem to have.

pbkmaine

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Re: Case Study - Budget Check and what to do with $10k
« Reply #33 on: March 22, 2017, 08:59:07 AM »
I drink soda mostly for the caffeine, I never did like coffee. I'd like to find cheaper caffeine that I like though.


Tea.

marielle

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Re: Case Study - Budget Check and what to do with $10k
« Reply #34 on: March 22, 2017, 09:56:32 AM »
I'm also getting a lot of feedback from my girlfriend about not selling the Jeep. I really like the car, and she's getting stressed about me getting rid of it. I know the smart thing to do is sell it, but I also think I could get it paid off by the end of the year, then it's not debt, albeit with not great gas mileage, but I can cover that. (I'll also plan on biking around a lot more when it gets warmer - Wisconsin Winters are a bit too much for me in terms of the cold)

Do you even live together or have joint finances? It's one thing for her to give her opinion on it, it's another to stress you out about it when it's your car. Does she even drive it? I would never stress my boyfriend out about something that is his, we're not married and we don't combine expenses on anything but food--it doesn't matter if we've been together for 4 years now, it's still his life and his stuff. So why does she care if you sell it or not? I really hope it's not because she's embarrassed to be in a "beater" or something stupid like that.

Paying it off doesn't really change the situation much. You still have a super expensive car for no reason that is also terrible on gas and has awful reliability (as mentioned by someone else above). If you're driving 20k miles a year it makes a lot more sense to have something better on gas...

2Birds1Stone

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Re: Case Study - Budget Check and what to do with $10k
« Reply #35 on: March 22, 2017, 10:02:51 AM »
http://www.rothira.com/2017-roth-ira-limits-announced

For 2017, if you make above 118,500/year as a single person, then you can't put the full 5,500 a year. The amount you can put in starts to decrease.

At 133k/year in 2017 you are no longer eligible to contribute to Roth IRAs, which means that opportunity for free post-tax growth ever year is gone. Not the worst problem to have.

You can still very easily do a backdoor Roth.

Contribute to Traditional IRA -> Convert to Roth the next day.
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Vindicated

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Re: Case Study - Budget Check and what to do with $10k
« Reply #36 on: March 22, 2017, 10:06:52 AM »
I'm also getting a lot of feedback from my girlfriend about not selling the Jeep. I really like the car, and she's getting stressed about me getting rid of it. I know the smart thing to do is sell it, but I also think I could get it paid off by the end of the year, then it's not debt, albeit with not great gas mileage, but I can cover that. (I'll also plan on biking around a lot more when it gets warmer - Wisconsin Winters are a bit too much for me in terms of the cold)

It really sounds like you want to make excuses to make a poor money decision.  It's fine to delay your FIRE date if the Jeep really brings you that much joy, you just won't find many people here that would agree with the choice.  We all have different motivations though.  Perhaps yours is more image based.  Not judging, I've made terrible vehicle choices Pre-MMM too.  I'm just not going to make them again.
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wintertell

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Re: Case Study - Budget Check and what to do with $10k
« Reply #37 on: March 22, 2017, 10:36:22 AM »
http://www.rothira.com/2017-roth-ira-limits-announced

For 2017, if you make above 118,500/year as a single person, then you can't put the full 5,500 a year. The amount you can put in starts to decrease.

At 133k/year in 2017 you are no longer eligible to contribute to Roth IRAs, which means that opportunity for free post-tax growth ever year is gone. Not the worst problem to have.

You can still very easily do a backdoor Roth.

Contribute to Traditional IRA -> Convert to Roth the next day.

Very true.

Birdie55

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Re: Case Study - Budget Check and what to do with $10k
« Reply #38 on: March 22, 2017, 10:45:34 AM »
If you already have your 401K with Fidelity, you can open a Roth IRA there also.  It doesn't have to be Vanguard as a previous posted suggested. 

Zarakava

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Re: Case Study - Budget Check and what to do with $10k
« Reply #39 on: March 22, 2017, 11:16:49 AM »
Is anyone familiar with the KBB Instant Cash thing? I think it might be easier than CraigsList

wintertell

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Re: Case Study - Budget Check and what to do with $10k
« Reply #40 on: March 22, 2017, 12:23:40 PM »
Just saw this today, relevant to our convo. See this from Camp Mustache on cars of people pursuing financial independence: https://twitter.com/FieryMillennial/status/843897530593304576

Gronnie

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Re: Case Study - Budget Check and what to do with $10k
« Reply #41 on: March 22, 2017, 08:58:56 PM »
If you are only contributing to 401k at one employer you shouldn't need to worry about going over the 18k limit. Once you reach it, they should automatically not put more in.

You do, however, want to make sure you put in at least the match % in EVERY pay period so that you get your full match amount, so don't max it early -- unless they offer a true up, which you would need to look into.