Author Topic: 23 y/o Peach Fuzz with Questions  (Read 4055 times)

song gnos

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23 y/o Peach Fuzz with Questions
« on: August 03, 2016, 03:49:11 PM »
Hi all,

I'm absolutely new to the mustachian lifestyle, and have never had any financial wisdom passed down to me. I stumbled upon this site by discovering that reddit had a personal finance subreddit. That led to r/financialindependence. And now I'm here. Started growing this stache in March. So here's a little about me.

I'm 23 years old and live in Southern California. Graduated college and got a job in management working in aviation. No one quite agrees with the FIRE philosophy, so I'm reaching out to the community.

 So here's the math.

Gross: 70,452.00
401K: 14,300.00 (maxing)
Roth IRA: None.
Taxable Accounts: 2,470.00

I currently owe 21,562.51 @ 4.99% on my car. Just paid off all student loans 3 days ago.
My plan is to pump around $2,000 a month into the car payment as it is my last remaining debt. I'm engaged with a wedding planned for 2018. Would it be best to max out an IRA, pump money into my Vanguard account, or aggressively pay off my car.

Car is also about 10k underwater. Horrible, horrible life choices.

dess1313

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Re: 23 y/o Peach Fuzz with Questions
« Reply #1 on: August 04, 2016, 12:57:15 AM »
welcome song.  A few books i could recommend about finance and personal money management are by Gail vaz oxlade who has written several books but specifically look up debt free forever(covers debt management, and budgeting), money rules, and a woman of independant means. 

they are all good sources on money handling, though from a canadian perspective.  she also has a TV show called till debt do you part on the slice.ca network which she did years ago getting people out of debt.  its a nice way to see her plan in action.  Being from the USA, the ideas behind retirement accounts and such are different, but the basics of the budgeting and money handling still apply.

What sort of vehicle is it that you own?  that may change some of the decisions of what to do with it

andy85

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Re: 23 y/o Peach Fuzz with Questions
« Reply #2 on: August 04, 2016, 09:27:22 AM »
The following is just one man's opinion:

-If you're maxing your 401(k) while also putting $2000/month towards the car, then continue doing that.
-Once the car is paid off, max you're IRA (i'd do a traditional IRA with your income, not a roth)
-Once you are maxing your 401(k) and IRA, begin investing in your taxable account (an HSA may come before this step if you have access to one)
-All of this goes without saying that make sure you have an emergency fund first to your liking. Whether that is $1,000 or $20,000...that is up to you.
-Don't forget to save for the wedding some were in there :)

Good luck. You'll be FI in freakin no time at your age and starting point.

song gnos

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Re: 23 y/o Peach Fuzz with Questions
« Reply #3 on: August 09, 2016, 07:23:49 PM »
What sort of vehicle is it that you own?  that may change some of the decisions of what to do with it

Thanks for the book recommendations. Reading is definitely something I need to start doing. And it is a 2015 Ford Fiesta ST. Smart with a small car, dumb with the additional turbo :/ Fun to drive but eats more gas.

The following is just one man's opinion:

-If you're maxing your 401(k) while also putting $2000/month towards the car, then continue doing that.
-Once the car is paid off, max you're IRA (i'd do a traditional IRA with your income, not a roth)
-Once you are maxing your 401(k) and IRA, begin investing in your taxable account (an HSA may come before this step if you have access to one)
-All of this goes without saying that make sure you have an emergency fund first to your liking. Whether that is $1,000 or $20,000...that is up to you.
-Don't forget to save for the wedding some were in there :)

Good luck. You'll be FI in freakin no time at your age and starting point.

This sounds like what I had in mind. Wanted to see what tuning I can do to it!

JLee

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Re: 23 y/o Peach Fuzz with Questions
« Reply #4 on: August 09, 2016, 08:04:06 PM »
Refinance the car (I usually use Penfed) for a lower rate. You should be able to get 1.99-2.49%.

dess1313

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Re: 23 y/o Peach Fuzz with Questions
« Reply #5 on: August 12, 2016, 05:38:30 AM »
unless you sell and downgrade the vehicle, or find a cheaper loan, is going to be hard to beat the return of paying down the car loan at 4.99%.  Not a lot of market stuff, or savings accounts can do better than that right now.  There are some accounts the tax breaks are huge on, but i'm not as familiar with the american ones.  The bonus tax return could be used to pay down the vehicle if you do the right strategy.

And congrats on the wedding.  Do you have a budget or price range already set for your wedding? know how much you'll need?  are you saving for it as well?

If you want to learn more about investing, look up the millionaire teacher, the bogleheads guide to investing, and Little Book of Common Sense Investing by john c bogle.  more relevant to markets and investing information and learning.  makes it fairly easy to understand a complex topic.

MDM

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Re: 23 y/o Peach Fuzz with Questions
« Reply #6 on: August 12, 2016, 09:50:38 AM »
Would it be best to max out an IRA, pump money into my Vanguard account, or aggressively pay off my car.
See the 'Investment Order' tab in the case study spreadsheet for thoughts on exactly this type of question.  Good luck!

Slee_stack

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Re: 23 y/o Peach Fuzz with Questions
« Reply #7 on: August 12, 2016, 10:24:18 AM »
Refinance the car (I usually use Penfed) for a lower rate. You should be able to get 1.99-2.49%.
I love using PenFed for used cars.  2% all day long.

Only hurdle is you have to be a 'member' at PenFed for 6 month, maybe longer, before you can take advantage of their great loan rates.

I opened a no fee member account with $5.00 years back just so i would be in position to get a dirt cheap loan.

I've used them twice thus far.  A refi has the same rates as buying outright and there are no fees!  Blank check comes in the regular mail.

If you can refi to 2%, do it and pay minimum on the car while you invest the difference.

dougules

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Re: 23 y/o Peach Fuzz with Questions
« Reply #8 on: August 12, 2016, 10:32:02 AM »
Just curious, what's your fiance(e)'s take on spending and finances?

ShoulderThingThatGoesUp

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Re: 23 y/o Peach Fuzz with Questions
« Reply #9 on: August 12, 2016, 11:04:40 AM »
Good job making $70k at 23! What is the car, and how much do you drive it? Does it suck a lot of money to drive, or just to own?

song gnos

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Re: 23 y/o Peach Fuzz with Questions
« Reply #10 on: August 15, 2016, 05:52:51 PM »
Just curious, what's your fiance(e)'s take on spending and finances?

She's on board with the lifestyle. Only thing she hasn't done is read any articles or try to develop a grasp of the terminology/knowledge portion. She already drives a paid off 2006 Prius with 250k miles.

See the 'Investment Order' tab in the case study spreadsheet for thoughts on exactly this type of question.  Good luck!

Thanks for the reference! I definitely will take a look at this.

Good job making $70k at 23! What is the car, and how much do you drive it? Does it suck a lot of money to drive, or just to own?

Thank you! It is a 2015 Ford Fiesta ST. Cut my driving from 15k miles a year to just over 10k a year. Just requires general maintenance like oil changes. Paying $408 a month sucks, but can't decide on owing 22k or getting rid of it and owing 7-8k.

And congrats on the wedding.  Do you have a budget or price range already set for your wedding? know how much you'll need?  are you saving for it as well?

Thanks! Her mother wants a grand wedding. FiancÚ and I can do with a courthouse wedding. I agreed to a max price of 10k out of my pocket, and the rest will be covered by her family. Still a large amount, but I'm comfortable raising the money and allocating it to the wedding. Still bums me out though.

dougules

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Re: 23 y/o Peach Fuzz with Questions
« Reply #11 on: August 18, 2016, 11:10:51 AM »
Just curious, what's your fiance(e)'s take on spending and finances?

She's on board with the lifestyle. Only thing she hasn't done is read any articles or try to develop a grasp of the terminology/knowledge portion. She already drives a paid off 2006 Prius with 250k miles.


Cool.  I'm lucky that my husband's on board with being frugal, too.   I don't think it's a big deal if she's not as big into the nuts and bolts of it since you are.  It's more that she's cool with not blowing every penny that comes in. 

JLee

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Re: 23 y/o Peach Fuzz with Questions
« Reply #12 on: August 18, 2016, 12:13:32 PM »
Just curious, what's your fiance(e)'s take on spending and finances?

She's on board with the lifestyle. Only thing she hasn't done is read any articles or try to develop a grasp of the terminology/knowledge portion. She already drives a paid off 2006 Prius with 250k miles.

See the 'Investment Order' tab in the case study spreadsheet for thoughts on exactly this type of question.  Good luck!

Thanks for the reference! I definitely will take a look at this.

Good job making $70k at 23! What is the car, and how much do you drive it? Does it suck a lot of money to drive, or just to own?

Thank you! It is a 2015 Ford Fiesta ST. Cut my driving from 15k miles a year to just over 10k a year. Just requires general maintenance like oil changes. Paying $408 a month sucks, but can't decide on owing 22k or getting rid of it and owing 7-8k.

And congrats on the wedding.  Do you have a budget or price range already set for your wedding? know how much you'll need?  are you saving for it as well?

Thanks! Her mother wants a grand wedding. FiancÚ and I can do with a courthouse wedding. I agreed to a max price of 10k out of my pocket, and the rest will be covered by her family. Still a large amount, but I'm comfortable raising the money and allocating it to the wedding. Still bums me out though.

I see 2014-2015 Focus ST's for sale in the ~$20k range.  You should be able to get more than $14-15k for it.

song gnos

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Re: 23 y/o Peach Fuzz with Questions
« Reply #13 on: August 23, 2016, 05:08:46 PM »
I see 2014-2015 Focus ST's for sale in the ~$20k range.  You should be able to get more than $14-15k for it.

That's accurate for the Focus. Mine is the little brother Fiesta. Wish I could get that much out of it.

Cool.  I'm lucky that my husband's on board with being frugal, too.   I don't think it's a big deal if she's not as big into the nuts and bolts of it since you are.  It's more that she's cool with not blowing every penny that comes in. 

She's definitely trusting me with the numbers. Great to have someone on board with the self control.

dougules

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Re: 23 y/o Peach Fuzz with Questions
« Reply #14 on: August 24, 2016, 10:16:27 AM »
Cool.  I'm lucky that my husband's on board with being frugal, too.   I don't think it's a big deal if she's not as big into the nuts and bolts of it since you are.  It's more that she's cool with not blowing every penny that comes in. 

She's definitely trusting me with the numbers. Great to have someone on board with the self control.

Sometimes it's not even self control so much as waking up to the realization you don't really want it. 

BigHaus89

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Re: 23 y/o Peach Fuzz with Questions
« Reply #15 on: August 24, 2016, 11:37:37 AM »
You should look into refinancing your car loan. That could save you a couple thousand dollars while you pay it off.

TexasRunner

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Re: 23 y/o Peach Fuzz with Questions
« Reply #16 on: August 24, 2016, 12:04:37 PM »
...
Thanks! Her mother wants a grand wedding. FiancÚ and I can do with a courthouse wedding. I agreed to a max price of 10k out of my pocket, and the rest will be covered by her family. Still a large amount, but I'm comfortable raising the money and allocating it to the wedding. Still bums me out though.

Just my 2cents: That's really not  bad deal at all if the ceremony is important to your spouse.  Don't let your in-laws direct the decisions in your relationship- but also be willing to work with them if they are willing to compromise.

If it doesn't bother your SO, possibly go ahead and get court married and then just have a ceremony.  Again, just my 2cents.


Congrats on the high paying job and early realization of frugal principles (they should teach us this crap back in school :/ )

Are you sure you need both cars?  Possibly cut one or the other and share?... http://www.mrmoneymustache.com/2013/04/22/curing-your-clown-like-car-habit/

I would say:
(1) Max out 401k
(2) Direct all remaining 'free cash' towards 4.99% car (whether your sell it or not).  Preferably get it above water for more options plus simplicity when you sell it.
(3) Wedding savings plan (1.5 years and 10k nets 555$ per month.  Intentionally drop that into the Roth or a Vanguard account in oder to make $$$ while saving it up.
(4) Roth IRA