Author Topic: Reader Case Study - 29YO needing direction  (Read 2271 times)

BurnedOutButClose

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Reader Case Study - 29YO needing direction
« on: February 27, 2017, 11:03:42 AM »
Hey everyone - long-time lurker and former poster here (under a long-forgotten username!).  Wondering if I can get a bit of career+financial advice from everyone!

Life Situation: Single (but working on it), no dependents, midwest, 29 years old

Gross Salary/Wages: ~$80k/year

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc. - Max out IRA, HSA, 401k (usually, but I've cut back on the 401k early this year to 10% in order to improve cash position a bit - I'll talk more about this later).

Other Ordinary Income: Nope.  But I'm expecting a bit of a windfall (house flip) shortly.

Net Monthly Income: $4k

Taxes: Federal/state/local/FICA: $9k/1.5k/3k/7k

Current expenses:
  • Rent: $320 (House share with a couple friends. Long-run, I'll probably buy a duplex closer to my next job, but it's cheap for now)
  • Cell: $30 (my share of family plan - can't complain too much here...especially since I can't do Sprint in my area)
  • Food: $400 (too much, but a few dates a month will do this.  Facepunch-worthy and an area I should reduce!)
  • Travel: $300 (this is my "non-negotiable")
  • Charity: $200 (I target ~10% of spend to spend on others.  Potentially could cut back, but I don't have a hair on fire emergency here, so I don't see a strong need to)
  • Car: $300 ($100 insurance, 150 gas, 50 maintenance. Discussed below)
  • Other: $250 ($50 renters/umbrella insurance, $50? clothes, $50? household goods, $100? entertainment - could reduce a bit, but this is usually how it works out without any attention on it)
  • Net savings: $2200 (going into house flip, brokerage, cash reserves, and IRA)

Expected ER expenses: Should be able to save a bit on car expenses, other, and food, but it'll be countered by increased healthcare spend.  Let's assume no net change ($1800/mo)

Assets:
Invested/Investable: $230k (90%+ in index/target date funds)
  • IRA/401k: $170k
  • Brokerage: $25k
  • HSA: $10k
  • Cash: $25k (emergency fund + buffer for job uncertainty)
Real Estate: $100k (House flip ARV.  Almost done)
Car: $8k (25mpg SUV with 100k+ miles.  Could be an area to optimize, but I use the space enough (house flip) that renting when I need it would cost more than gas mileage improvements).  Besides, it's great for hauling stuff + people when camping (I'm justifying here, I know!)!
Random stuff: $5-10k.  Have a pile of stuff I need to sell, but otherwise, this is furniture, kitchenware, tools, clothes, etc.  Nothing really of note here to improve other than getting off my butt and selling my sell pile.

Liabilities: Nothing of note.  Just ~$1-2k in rolling credit card debt (paid off in full when due)

Specific Question(s): Looking for some financial and career advice!  I'm not really looking for expense optimization, but if there's anything I didn't point out above, feel free to do so!
  • What should my FIRE target be?  Expenses are likely to increase in the long-term (hypothetical kids).  Right now, it would be $540k with the 4% rule, but what should I plan on for future hypotheticals (kids? anything else I'm not considering?)?
  • What should I be planning on for future healthcare expenses?  I've been using Liberty Health Share costs in my budget, though I'm not sure if that's the best option?  Should I be looking at long-term care insurance?  What should I be modeling for increases in health care costs?
  • Career-wise, how bad would a break look this early in the workforce?  My work situation has gotten pretty bad recently and has been affecting my mental and physical health.  I'm looking to get out, but haven't found the right fit yet (been searching ~4 months now).  If I went off and pursued an entrepreneurial idea right now, would that kill my marketability in the future as an employee?
  • How bad would getting laid off twice in a row look to a potential employer?  My last job had significant downsizing, and this one's likely to can me in the not too distant future.  Assuming I don't find anything beforehand, would it be better for me to quit in this scenario or just stick it out and get unemployment?
« Last Edit: February 27, 2017, 11:16:11 AM by BurnedOutButClose »

redbird

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Re: Reader Case Study - 29YO needing direction
« Reply #1 on: February 27, 2017, 11:55:26 AM »
  • Career-wise, how bad would a break look this early in the workforce?  My work situation has gotten pretty bad recently and has been affecting my mental and physical health.  I'm looking to get out, but haven't found the right fit yet (been searching ~4 months now).  If I went off and pursued an entrepreneurial idea right now, would that kill my marketability in the future as an employee?

Depends on what field you're in, and how high of demand it is. My husband quit his job the same time as me in September 2015. He went back to work in September 2016. He had zero problem finding a job and everywhere he interviewed with barely batted an eye when they saw he'd been out of work for a year. Recruiters were constantly calling and emailing, and still were for months after he started working, even though he removed his resume from various online job pools that he'd put it in. But he is in the computer cyber security field, where there's not enough skilled people for the demand.

No idea on the layoff question, since I have no experience with that.

I also am not sure what you should do about FIRE target. I was already married and set on the kids thing (not going to have any) before I was even FI. It certainly does not hurt to make your stash larger just in case you have a family to support. My stash is larger than what I'd need with the 4% rule, but I did that on purpose because I'm a risk-adverse person. Keep in mind too that your possible future spouse may or may not want to FIRE. I've seen others here who are FIRE and their spouse still happily works because they choose to, not because they need to for financial reasons.

Your finances look fantastic. Yes, you could optimize them better, but you're already saving more than 50% of your income. The only reason to optimize is if you feel the need to for any reason (want to have more savings toward something or you realize spending as much as you do on something isn't important to you and is therefore a waste).

zolotiyeruki

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Re: Reader Case Study - 29YO needing direction
« Reply #2 on: March 01, 2017, 10:49:20 AM »
One thing I don't see in your budget that we have in ours:  saving for infrequent, but expected expenses.  Every month we put some amount away towards things like HOA dues (paid quarterly) and car insurance (2x/year, you already have accounted for this), but also things like saving up to replace my 22-year-old car, our next vacation, braces for the kids, etc.

Keep in mind that if you get married and have kids, you won't necessarily have to support the whole family on your savings.  Your spouse could work and you stay home with the kids, or vice versa.

Metalsatsuma1212

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Re: Reader Case Study - 29YO needing direction
« Reply #3 on: March 01, 2017, 11:10:02 AM »
At 29 years old I wish I had your assets/debts. You must have discovered MMM early. You are doing great! Why is travel so high if you don't mind my asking?