Case Study: Start over. What would you do differently?

[afterthursday]

Topic: Imagine you just graduated from college and are starting your career. What would you do differently knowing what you know now? What would you do in my situation?

Life Situation: 22, single, no dependents, living in CA, debt-free (thank you parents), started full-time software engineering job 3 months ago, recently found out about FIRE

Gross Salary: 95000 + company stock (400 RSU currently at 50/share)

Pretax Deductions (2018 plan):
401k - 18500
HSA - 1950 (+1500 employer contribution)

AGI: 74550 + company stock (currently ~20000)

Taxes (2018):
Federal - 11776
State (CA) - 5,823
FICA - 7,268
Total - 24867

Average Monthly Expenses:
Tithe - 792
Rent - 1425
Phone - 70
Commute - 260
Eating out - 320
Groceries - 50
Travel- 30
Misc- 30
Total: 2977

Monthly Expenses Explanation:
Tithe - 10% of income. No questions asked.
Rent - Unfortunately, I just signed a one-year lease a few months ago (before knowing about FIRE). I thought because I could afford it, I could live in a nicer place. I'll be moving out into a cheaper apartment once the lease ends.
Phone - Currently on Tmobile ONE plan. I use ~4-5 GB/mo and own an iPhone. I thought this was a need, but after looking at some other case studies, I started looking at other plans. Google Fi looks really appealing, but the cost of a new phone is unappealing. I'm thinking of changing to the Tmobile 45/mo plan for 4GB. Thoughts?
Commute - I use Scoop (a carpool app) to get to work. It costs $6 one way and public transportation costs $4.50 one way. Carpooling saves me an average of 45 minutes one-way. Riding public transportation would save roughly $60 a month, but use an extra 30 hours.
Eating out - I know. I know. Way too much. I'm just used to being in college where most of my meals were eating out. These past two months, I've eaten out about once per day. I'm starting to limit myself to 2-3 times/week, eventually to 1 time per week (maybe less).
Groceries - Trying to cook more in bulk so that I'll have food at home, so I won't need to eat out.
Travel - I plan to fly back home a couple times a year. Usually when Southwest has a good deal.
Misc - entertainment, shopping

Assets:
Checking - 650
Fidelity taxable account - 21000 (in low cost index funds/ETFs)
401k- 1850 (starting to contribute 1500/mo)
HSA - 1600
Roth IRA - 0 (will max out this year after selling piano)
Grand Piano - 6500 (trying to sell)

Questions/Goals:
1) I'm planning to buy a used car next August. I'm starting to save a couple hundred dollars every month in a savings account until I accumulate my goal. I'm still researching the car I want to get. Any advice?
2) I plan to buy a home in 6-10 years. How should I get started in planning for that?
3) Reiterating the topic question: what would you do in my situation? What should I watch out for? Any general advice?

Thank you for your time.

[ElleFiji]

If we're going back to when I was 22, just graduated, making 24-34000/year in a company that would go under by the time I'm 23, the only change I'd make is putting my savings into an RRSP instead of at the ex's student loans.

In your case, at your income, you want to buy a house in 10 years? Pick a savings rate that lets you be FI in 10 years, then you can choose if you want the house plus working, or to FIRE.

A lot of goals will change in the next 10 years, so I'd just save like crazy.

[pyyj]

One thing I did without any grand plan was *not* own a car, for a good 15 years after graduation. Lived close to work always, walked, biked, used a car-share, used a taxi. The thousands and thousands I saved with that random principle offset my in-retrospect over-the-top restaurant habit. If you can arrange your life to be car free... do it.

First advice I would give to myself: don't pick stocks, use an index fund, kid! So many bad trades. So much money down the sinkhole of the market. Second advice: max out those tax free accounts first (and ignore the financial advisor putting that money into mutual funds, get the index fund (they were much less common at the time)). Third advice: nope, everything else turned out pretty darn well. Luck is a powerful thing.

You've got a great starting situation: very good starting wage, not wasting time on graduate school, aware of financial responsibility. Get a couple years of living expenses banked so you have an f-u option with respect to employers; nothing worse than feeling trapped.  Sky's the limit!

[Dicey]

Is your apt. a 1BR? If not, can you get a roomie? Would your lease let you airbnb it one weekend a month or so when you're out of town?  Sure, it's a little extra work, but hey, free (-ish) money that pays your rent.

Fully fund your 401k and your Roth. Then put the rest in taxable investments with this method:

http://jlcollinsnh.com/stock-series/

Slash your expenses and keep watching your 'stache grow. Eventually, you will have a fat wad of cash in your taxable account, which you can pull out to make a DP on a home. Or you can leave it invested to accelerate your FIRE date. It's powerful to have such good choices.

Pay as little as possible for a fuel efficient car that's cheap to insure. Put it off as long as possible.

Get a Southwest CC so you rack up more free travel. If you will need hotels, consider the IHG Card. $49 annual fee includes one free night at any of their hotels anywhere in the world.

You're off to an excellent start!

[bocopro]

Wow, what a great (and early) start! You're making me feel old at 25.5 - which is somewhat hard to do around these parts. Welcome!

Like you, I also got an early start, with an engineering job (making about that - though a bit less straight out of the gate) - and made a few of your similar choices. Not that at 25, I have much sage wisdom, but here are a few go-backs I'd maybe consider:

- First of all, give yourself a huge, hearty congratulations. You (and I) are mighty privileged to be considering FI at this age, and I know many on the forum have wistful feelings as to not starting younger (though, I think what they've done is often way more difficult - turning around what is already a speeding train is WAY more difficult in  mid-life, so props to them.) What I'm saying is: we have such opportunity, let's use it!

- You are going to get raises. Yay! I inflated a bit upon getting my first couple, and also sprung for that $1400 apartment - you can totally afford it, but you may not need it. (I was lucky and marriage happened during the end of my lease and thus: roommate/shared expenses!). Great job on maximizing tax-advantaged accounts!

- As for a car, don't go too flashy, especially if you drive in high traffic areas. They wear out/get somewhat beat down from dings, etc. I was a Seattle tech-job commuter for a year or so. Pick a reliable brand (my choice is Honda, but Toyota is supposed to be great too.) I drive a 2011 Civic which I bought from a guy on Craigslist with 26k miles (brand new!) - he had co-signed for a (former) friend who had horrible credit and the friend (not surprisingly) couldn't make the payments. The seller just wanted rid of it and his correlated shame (NEVER co-sign for anyone!) at any cost. That Civic drives in snow, to ski resorts, out to Moab, has been car camping, etc. HIGHLY recommend the small footprint especially if you are urban - it fits everywhere!  My one regret is that perhaps, if I graduated this year, I might've considered electric or hybrid.

- It adds up. Seriously - you feel like you haven't saved anything after $40k the first year in the bank, but give it a couple. Compounding is real, and at your salary, it goes up fast. When you're 26, which maybe feels far now, but it's not, if you keep at it, you could be sitting on $300k+. For a bit of a confidence boost, check out the "net worth by age" things on the internet - you'll be, for lack of a less politicized term, the 1%, and if pursuing FI, that's not necessarily a bad thing (for net worth). 

- As a software developer, be open to relocation - the big FANG-type companies will pay you often heftily to do this, which you want to do. This means maybe keeping a rental for a few years in your early 20's. I've now lived in five states, and it's really helped me determine where "home" is - keep your options open if you like adventure/exploring and don't just settle in your childhood hometown because it's easy (until you figure out that's where you love more than other things - if so, good on you.).

- Company stock - if you get this, sell it immediately (before gains can be taxable). Put it in regular old index funds/Betterment, etc. It's pretty risky to keep it all, and your primary employment, tied up in one company (even if that company is Google or Amazon or something, which seem infallible. Remember Cisco? Yahoo? Blockbuster? You get the idea. Diversify.)

- Track your spending/net worth/etc! I really only started doing this this year, and wish I'd started earlier. You'd be surprised where it all goes if you're not watching it. Looks like you're ahead of me in that regard!

- I understand your tithe as I too value charitable/religious giving. There are many good theories here: start immediately with 10% and run (your idea), or MMM's - get rich then give big, etc. I won't push on yours because you have a high income, and I too have felt benefit from charitable giving of this nature. If I were you, I might get very involved in whatever church you're tithing to, however, and make sure that money is going where you want it to. A tithe is a wonderful symbol of trust in your life, but don't be dumb and give it to somewhere who's squandering it (a big mega-church with million dollar pastors comes to mind) - they're getting a lot of your dollars and you have a right and a responsibility to make sure those are stewarded wisely.

You are off to such a great start - I'm looking forward to seeing more of your progress around the forums!

[afterthursday]

If we're going back to when I was 22, just graduated, making 24-34000/year in a company that would go under by the time I'm 23, the only change I'd make is putting my savings into an RRSP instead of at the ex's student loans.

In your case, at your income, you want to buy a house in 10 years? Pick a savings rate that lets you be FI in 10 years, then you can choose if you want the house plus working, or to FIRE.

A lot of goals will change in the next 10 years, so I'd just save like crazy.

I've been using the madfientist FI calculator/spreadsheet to determine my FI date/savings rate. Do you recommend any other calculators? Thanks for the advice ElleFiji!

One thing I did without any grand plan was *not* own a car, for a good 15 years after graduation. Lived close to work always, walked, biked, used a car-share, used a taxi. The thousands and thousands I saved with that random principle offset my in-retrospect over-the-top restaurant habit. If you can arrange your life to be car free... do it.

First advice I would give to myself: don't pick stocks, use an index fund, kid! So many bad trades. So much money down the sinkhole of the market. Second advice: max out those tax free accounts first (and ignore the financial advisor putting that money into mutual funds, get the index fund (they were much less common at the time)). Third advice: nope, everything else turned out pretty darn well. Luck is a powerful thing.

You've got a great starting situation: very good starting wage, not wasting time on graduate school, aware of financial responsibility. Get a couple years of living expenses banked so you have an f-u option with respect to employers; nothing worse than feeling trapped.  Sky's the limit!

Hey pyyj, thanks for the advice. Definitely gonna be looking for a place closer to work. Commute costs add up! And haha yes, index funds all the way. I've been listening to the Scott Alan Turner podcast and he's always saying to choose low-cost index funds.

Is your apt. a 1BR? If not, can you get a roomie? Would your lease let you airbnb it one weekend a month or so when you're out of town?  Sure, it's a little extra work, but hey, free (-ish) money that pays your rent.

Fully fund your 401k and your Roth. Then put the rest in taxable investments with this method:

http://jlcollinsnh.com/stock-series/

Slash your expenses and keep watching your 'stache grow. Eventually, you will have a fat wad of cash in your taxable account, which you can pull out to make a DP on a home. Or you can leave it invested to accelerate your FIRE date. It's powerful to have such good choices.

Pay as little as possible for a fuel efficient car that's cheap to insure. Put it off as long as possible.

Get a Southwest CC so you rack up more free travel. If you will need hotels, consider the IHG Card. $49 annual fee includes one free night at any of their hotels anywhere in the world.

You're off to an excellent start!

It's a 2Bed/2bath for 2850. I have 1 roommate who doesn't want a 3rd roommate :(. I just checked the lease and it has a strict "no-subletting" policy. Thanks for the advice Dicey! I'm definitely planning to max out 401k, rIRA, HSA. I'll take a look at the stock series link too. Also, checking out that Southwest CC.

Wow, what a great (and early) start! You're making me feel old at 25.5 - which is somewhat hard to do around these parts. Welcome!

Like you, I also got an early start, with an engineering job (making about that - though a bit less straight out of the gate) - and made a few of your similar choices. Not that at 25, I have much sage wisdom, but here are a few go-backs I'd maybe consider:

- First of all, give yourself a huge, hearty congratulations. You (and I) are mighty privileged to be considering FI at this age, and I know many on the forum have wistful feelings as to not starting younger (though, I think what they've done is often way more difficult - turning around what is already a speeding train is WAY more difficult in  mid-life, so props to them.) What I'm saying is: we have such opportunity, let's use it!

- You are going to get raises. Yay! I inflated a bit upon getting my first couple, and also sprung for that $1400 apartment - you can totally afford it, but you may not need it. (I was lucky and marriage happened during the end of my lease and thus: roommate/shared expenses!). Great job on maximizing tax-advantaged accounts!

- As for a car, don't go too flashy, especially if you drive in high traffic areas. They wear out/get somewhat beat down from dings, etc. I was a Seattle tech-job commuter for a year or so. Pick a reliable brand (my choice is Honda, but Toyota is supposed to be great too.) I drive a 2011 Civic which I bought from a guy on Craigslist with 26k miles (brand new!) - he had co-signed with a friend who had horrible credit and the guy (not surprisingly) couldn't make the payments. The seller just wanted rid of it and his correlated shame at any cost. That Civic drives in snow, to ski resorts, out to Moab, has been car camping, etc. HIGHLY recommend the small footprint especially if you are urban - it fits everywhere!  My one regret is that perhaps, if I graduated this year, I might've considered electric or hybrid.

- It adds up. Seriously - you feel like you haven't saved anything after $40k the first year in the bank, but give it a couple. Compounding is real, and at your salary, it goes up fast. When you're 26, which maybe feels far now, but it's not, if you keep at it, you could be sitting on $300k+. For a bit of a confidence boost, check out the "net worth by age" things on the internet - you'll be, for lack of a less politicized term, the 1%, and if pursuing FI, that's not necessarily a bad thing (for net worth). 

- As a software developer, be open to relocation - the big FANG-type companies will pay you often heftily to do this, which you want to do. This means maybe keeping a rental for a few years in your early 20's. I've now lived in five states, and it's really helped me determine where "home" is - keep your options open if you like adventure/exploring and don't just settle in your childhood hometown because it's easy (until you figure out that's where you love more than other things - if so, good on you.).

- Company stock - if you get this, sell it immediately (before gains can be taxable). Put it in regular old index funds/Betterment, etc. It's pretty risky to keep it all, and your primary employment, tied up in one company (even if that company is Google or Amazon or something, which seem infallible. Remember Cisco? Yahoo? Blockbuster? You get the idea. Diversify.)

- Track your spending/net worth/etc! I really only started doing this this year, and wish I'd started earlier. You'd be surprised where it all goes if you're not watching it. Looks like you're ahead of me in that regard!

- I understand your tithe as I too value charitable/religious giving. There are many good theories here: start immediately with 10% and run (your idea), or MMM's - get rich then give big, etc. I won't push on yours because you have a high income, and I too have felt benefit from charitable giving of this nature. If I were you, I might get very involved in whatever church you're tithing to, however, and make sure that money is going where you want it to. A tithe is a wonderful symbol of trust in your life, but don't be dumb and give it to somewhere who's squandering it (a big mega-church with million dollar pastors comes to mind) - they're getting a lot of your dollars and you have a right and a responsibility to make sure those are stewarded wisely.

You are off to such a great start - I'm looking forward to seeing more of your progress around the forums!

Yeah, I realize that I'm pretty privileged to be in this position. Very thankful for my brother-in-law who got me into this personal finance thing.

For a car, I was thinking about getting a used Prius maybe around 2010 model? Not sure if it's worth the price though. And wow, congrats on getting that Civic - 26k miles only?!

I forgot to include company stock in the original post. Yeah, I was considering holding it, but you're right. I should just sell it asap.

Tracking spending has actually been really fun. I've starting using the MadFientist spreadsheet and I'm trying to beat the previous month's costs every month.

Good advice on the church involvement. I didn't really think about how they were spending it. Definitely will be looking more into getting plugged in.

Thanks for the encouragement and advice bouldertechwarrior!

[letired]

Congrats on finding MMM and getting a plan together!

re questions:

1. Assess if you actually need a car. Compare your current commuting costs with the costs of car ownership. Full disclosure, I have owned a car for my entire adult life, including many years in which I absolutely did not need it. For me, it was partially a security blanket, partially a way to amortize holiday travel costs over the rest of the year, with a side bonus of easy grocery shopping. If owning a car ends up being a luxury/convenience, that's fine, but be honest with yourself about it. Pick an older, low mileage, gas efficient, low cost to insure, liability-insurance-only car. Also look at your _actual_ needs and plans, not just it would be cool if I was the kind of person who did X with their car.

2. For home purchasing, there are a lot of variables, especially on that time horizon. +1 to the person who recommended setting your FIRE date for 10 years and deciding if you want to buy a house then. +1 to the person who recommended being open to relocation during your early career, which owning a house will really complicate. My main advice is to religiously run the assorted rent vs buy calculators and be honest with yourself about what those calculators say vs intangible/non-monetary reasons you might have for wanting to own a home. Again, you don't have to make the financially optimal choice, but you do need to know WHY.

3. Generally: Watch out for lifestyle inflation, keep an open mind about what makes you happy, what is working, what suddenly stops making you happy. Reiterating a previous comment that I have found to be very true in my own life: humans are remarkably bad at predicting what will make them happy over long time periods, and what makes you happy will change. Make sure you are constantly asking this question, and adjusting your plans to match what you need in your current circumstances, not what would have made you happy 5 years ago or what society broadly tells you will make you happy.  Having extra money is the tool that gives you the flexibility to change when your wants or needs change.

and more specifically:
re commuting costs: only switch to the longer commute if you have something you can do on the longer bus ride that you are happy/excited about spending that time on. If you can read on the bus, or have a craft or hobby (not just dicking around on the internet) that you would be happy to do for an extra hour a day or whatever, that can be a great use of your bus time. Otherwise, my inclination is to keep my free time by spending a bit more on the faster commute. In my life, it takes me longer to bike to work than to drive, but if I bike, I'm combining my workout with my commute, which leaves me healthier and with more free time overall. I don't generally do bus commutes because I get motion sickness if I read on the bus. Trains are usually ok, and great for knitting or reading.

Misc:
- you can probably do some mild credit card bonuses or something to help manage various costs. I have a lot of friends and family that live a plane ride away, and my credit card sign up bonuses have saved my bacon during this years' excessive travel.
- there is more to life than money. What are your values, what do you want to do with your time, etc. These answers will help guide you in developing your financial and/or life plan.

Use index funds and make sure you max out your IRA!

[Dicey]

Ugh, whenever anyone suggests using B'ment, including MMM himself, my head wants to explode. Go study the brilliant Stock Series to learn why. FWIW, Pete only has a tiny portion of his net worth in that "B" place and his income is high enough benefit from tax harvesting. I'd also be damned surprised it he wasn't getting some form of compensation for mentioning them. Please promise you'll study the options and costs thoroughly before sending them one hot red cent.

Also, I suspect strong ties to your community if you're tithing so dedicatedly. This makes moving a possibly less attractive option. It's a great experience for personal growth, so I'd definitely consider it, even if only for a couple of years.

More: ha, don't try to airbnb if you have a roommate! Don't kick yourself, either. At least you got a place with a roommate. Enjoy the heck out of it while you're there.

Prius is a good idea. Replacing specific cells is cheaper than whole battery sets. Fear of battery cost keeps resale prices on older models artificially low, for the mustachian win.

Though I had investment property, I lived in rentals until I was 38. Renting, under the right circumstances, is an excellent path to FIRE.

[bocopro]

Ugh, whenever anyone suggests using B'ment, including MMM himself, my head wants to explode. Go study the brilliant Stock Series to learn why. FWIW, Pete only has a tiny portion of his net worth in that "B" place and his income is high enough benefit from tax harvesting. I'd also be damned surprised it he wasn't getting some form of compensation for mentioning them. Please promise you'll study the options and costs thoroughly before sending them one hot red cent.

Ooohhh, tell me more! (Thread drift, here, but I only have 1.6% of my portfolio there, so it's more of an experiment, but you sound like this is a strong opinion and I'd love to learn more.) They do take fees, and run a simple portfolio that I'm totally running on my own elsewhere, for no fee, and TLH is entertaining if I get tons of money in there someday, but isn't really helping me out with a bit under $20k in there.  I am a bit of a pushover for a super smooth interface, however....and generally like checking out options which I can recommend to intimidated, under-educated newbie investors (early 20's etc.)

I generally only recommend it as a jumping off point for total newbies who have ~$500 to invest and want to see where it's going - what it's doing, and generally do a bit of learning from a slick interface until they take the training wheels off. At the small numbers, fees are negligible and probably saving some people from themselves and crafting a DIY portfolio out of miserable stocks or something.

Want to help the OP out with where you recommend putting taxable accounts/what allocations you use?