Overwhelmed by MMM lifestyle

[Savethecash]

Hi everyone,

It is great becoming part of this forum and community. My question seems to be simple and stupid but I assure you, it is an honest one: Where to get started ????

A bit about ourselves: My wife and I are in our late, late twenties. We are both self employed and our combined income I estimate to be around 70k this year.

We read about money mustache for the first time around a year ago and we took it seriously. Within this one year now, we managed to pay back all our student debt. We are both pretty proud on that and now......we are a bit lost, because now we do not know where to go from here. Finally all this money we are making is ours and we do not know what the best course of action in order to reach FI is.


This forum is full with good advice but what is the best way to get started ? I always thought it was the classical 6 months emergency fund, but now I am not so sure. We are intrigued by this lifestyle and just want to start it off right.

Any guidance would be very highly appreciated.


Best from Cleveland :-)

[accolay]

Welcome aboard! Excellent work on paying off the student loans.

The emergency fund amount depends on your comfort level Different for everyone. Many variables: your health, your ability to make money and stability of your jobs, your monthly budget, amount of other debt if any etc. After 2008 people were recommending 6-12 months. Could be overkill. Depends.

After that, I really enjoy http://jlcollinsnh.com/ for his stock series. VTSAX. That's what MMM did. That's my plan. Why reinvent the wheel?

[pdxmonkey]

Can you live off the lower of your two incomes for an extended period? If so you have less need for an emergency fund based on months of living expenses. You still need a plan for how to cover other unexpected but likely expenses. Car repairs if you have one, medical events, whatever.

[Radagast]

First of course is to slash unneeded expenses, especially recurring monthly expenses such as TV, phone, subscriptions, memberships, utilities, etc. And especially cars. You may have already done that. Then max out emloyer retirement plans unless they are really bad. Low cost stock index funds are best where available, such as S&P500 funds.

Next open a Vanguard IRA and start dumping money into stock index mutual funds, half USA and half international by default but you need to research and see what is right for you. VTSAX is a good starting point. Others like Schwab and Fidelity are also good, with their own funds.

Real estate investing may be profitable in your area as well, especially for non-tax sheltered money, if you want to be landlords.

[h82goslw]

When you figure out how much money you can start stashing away every month, go to bogleheads.org and learn how to invest in low cost index funds.  Between these two sites, life becomes much easier. 

[NESailor]

here's a list. I find those help me:

• Figure out how much you spend monthly and improve, if necessary
• Figure out the emergency fund situation - do you have a home? Can you tap equity? If so - you don't really need much cash
• Set up retirement accounts - SEP IRA's should do the trick if you're self employed
• Anything that doesn't get spent monthly should get invested.  The SEP IRA's will allow you to defer pretty much all your income since you're the "employer" as well
• Invest in VTSAX and add some bonds if you are really worried...but most people on here at your age wouldn't
• Calculate your target stash amount (annual spend x25 for a quick and dirty)
• Calculate how long it'll take at your current savings rate = this is when you will reach mathematical FI
• Now focus on having a good fulfilling life in the meantime :)

[swick]

Congrats on paying off your debt that is a huge :)

There are some great suggestions here. I would also encourage you to fill out a case study so we have numbers and details to work with to help. http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

[Malum Prohibitum]

If you have not read MMM's blog entries, then that would also be a great place to start.  He has a button you can push to start from the beginning and read them in order.

[toodleoo]

A lot of people find this flowchart helpful.

https://i.imgur.com/g6j4IRu.jpg

[ImCheap]

When you figure out how much money you can start stashing away every month, go to bogleheads.org and learn how to invest in low cost index funds.  Between these two sites, life becomes much easier.

This plus read the Bogleheads Guide to Investing Book. Don't skip your IPS (Investment Policy Statement) many want to just blow pass that as it seems so mundane, it does not have to be pages, just a few lines will work. I spent a number of very active years at the Bogleheads fourm, some of my best time I ever spent.

I would also add a second book, Rick Ferrys's All About Asset Allocation.

You read those 2 books and you will be better off than most people, I truly believe that.

[Dicey]

A lot of people find this flowchart helpful.

https://i.imgur.com/g6j4IRu.jpg

While I have a few quibbles - HSA before Roth and investments before early mortgage payoff, IMO - I think this chart is a wonderful place to start. Probably more helpful for the average high school student to memorize than, say, the Periodic Table of The Elements. It should be issued with the same gravitas as a high school diploma.

[Livingthedream55]

Way to go on paying off student loan debt! woohoo!

If you don't already - create a system for tracking your monthly income and expenses. I personally use a humble Excel spreadsheet but there are free online sites and apps also. You won't believe how eye opening it is to capture it all in one place. To simplify things (which is what I do) you could allocate some modest amount (for me it's $50 a month which can be a splurge on a cup of coffee I don't make at home or a movie or lunch with friends) which I label as "Fun Money" in my spreadsheet which I take out as cash each month and which means I don't enter every expense down to the penny (from that line item I mean) but otherwise I know each month where every dollar has gone.

[NoStacheOhio]

Hi everyone,

It is great becoming part of this forum and community. My question seems to be simple and stupid but I assure you, it is an honest one: Where to get started ????

A bit about ourselves: My wife and I are in our late, late twenties. We are both self employed and our combined income I estimate to be around 70k this year.

We read about money mustache for the first time around a year ago and we took it seriously. Within this one year now, we managed to pay back all our student debt. We are both pretty proud on that and now......we are a bit lost, because now we do not know where to go from here. Finally all this money we are making is ours and we do not know what the best course of action in order to reach FI is.


This forum is full with good advice but what is the best way to get started ? I always thought it was the classical 6 months emergency fund, but now I am not so sure. We are intrigued by this lifestyle and just want to start it off right.

Any guidance would be very highly appreciated.


Best from Cleveland :-)

Firstly, great job, and hello from Cleveland.

I don't have much to add that hasn't already been said, but don't feel like you have to do everything all at once. Eliminating your debt was a HUGE step, so if it takes you a month or two to figure out your roadmap, that's perfectly OK. Where you put the money is important, but not as important as hanging onto it in the first place. If it sits in a low-interest savings or checking account while you're lining up your ducks, don't sweat it.

[Tetsuya Hondo]

Don't overthink it or overcomplicate it (see posts above for good paths to success). You've already started off right by paying off your student loans in your 20s. Congratulations.

Just keep chipping away and learning a bit more at a time. I was overwhelmed at first too, but then I learned that 95% of the financial advice out there is just noise or marketing and you don't have to know much more than: A) Spend less than you make, B) Save/invest the difference, and C) Continually sharpen the saw (optimize A and B by learning about the finer points of saving, investing, and tax strategies.

Regarding the emergency funds, everyone is different. There's no correct answer to how much or where to stash it. MMM/Pete has blogged about his approach if you haven't found it yet. I have about 5 months worth in traditional savings, but have more in taxable Vanguard funds that I could access in a few days if needed. Others consider their credit card limits to be their savings fund. It all depends on how risk averse you are and personal preference.

[halseyskates33]

I can relate to this feeling. I paid off all my consumer debt this month and am now able to save 50% of my net take home. I do have student loans, but am focused on building up my emergency fund right now. The feeling like I should be doing something (paying off the loans, investing, emergency fund,etc) has me really stressed out.

I am hoping it goes away, but I am thankful that this is a good problem : )