Author Topic: About to turn 30, at a crossroads! School, adventure, house, or ramp up FIRE?  (Read 3384 times)

AtaCrossroads

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I'm a long-time lurker, first-time poster! I知 trying to decide between four diverse options on the eve of my 30th birthday: stockpile to FI in my 401K, travel around the world, go to grad school, or buy a house. For context, my hope is to hit FI by 48.

Life Situation: Single, 29 years old. No plans for children ever, no partner on the horizon.

Annual Gross Salary/Wages:
$39,500 Day Job (FT) - $3,396

Pre-tax deductions:
Health insurance- $83.52
401K- $197.20

Adjusted Gross Income: $39,140 annual/$3261 monthly

Other income: Varies significantly
$100/month profit after expenses at Side Hustle #1
$80/month Side Hustle #2  (4 hours work/month)

Taxes: Filing single
Medicare: $66.47
Federal: $284
Social Security: $199
State: $197
覧覧覧覧覧
$726 taxes

Current expenses:

Mostly Necessary
$140- Groceries
$20- farm share (produce)
$550 - Rent
$10 - Renter痴 Insurance
$5 - Public Transport
$60 - Medical Copays/Prescriptions (I have an expensive medication for a chronic illness)
$10 - Household goods (toothpaste, deodorant, sponges, laundry detergent)
$25 - Electricity
$18- Internet
$12 - Hosting + DNS
$50 - Charitable Giving
____________________________
$900  Mostly Necessary


Flexible Fun Parts of Life
$40 - Beer, Wine, Liquor for home
$55 - Bars
$40 - Restaurants
$10 - Fun Spending Money (candy, cosmetics, unexpected extras)
$6 - Economist Subscription
$35 - Sinking Fund for Clothing/Shoes/Costumes
$15 - Coffee/Tea out
$15 - Entertainment (Ballet Subscription, Live Comedy Shows)
$14 - Churning/credit card annual fees (to get airline miles)
$19- Sinking fund for 4 haircuts/year ($50+15% tip)
$15 - Sinking fund for working out (running shoes, race fees)
$10 - Sinking fund for birthdays
$50 - Sinking fund for travel
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$324 Funtimes

Total Monthly Spending: $1218

Current Savings Allocation:
$198/month - 401K (no match)
$458/month - Roth IRA
$542+/month - Non-investment Savings

Total Monthly Saving: $1198 (plus everything from my side hustles)

Expected ER expenses: $25K/year (real wage terms)

Assets: 
$9,800 - Emergency Fund in 1.00% APR savings account (covers out-of-pocket maximum on insurance + 8 months of rent+groceries in case of unemployment/disability)
$4,560- 401k  (Vanguard target retirement 2050 - only decent option available)
$8,500 - Roth IRA (Vanguard Target retirement 2050 fund- waiting to get to admiral for VTSAX!)
$2,400 - Special house savings account (can only be used for house down payment- if I do use it for a down payment, $6000 bonus upon withdrawal)
$3,000 - High-End Bicycle (daily commuter + side-hustle moneymaker)

Liabilities: None

Specific Question: I知 coming to the end of a 14-month lease and my rent is jumping from $550/month to $850/month for half of a one-bedroom. I知 stuck now between continuing renting (moving will likely be a similar rent) while ramping up my 401K contributions, purchasing a condo, going to grad school, or leaving on an epic FU world trip. (A lot of options, I know!)

Door #1 Keep renting and push up 401K contributions: I like my job alright, but it痴 a very high-stress job and I致e been there for 3 years. I won稚 go into specifics but it痴 expected that my position will burn out (very long hours, weekend work, lots of pressure) and 3 years is a pretty long time to be in my role. There痴 no prospect for a significant raise, so the only way I値l make more income is to move into another job. I currently make market rate for my field unless I switch to government sector or go into consulting.

Unfortunately, my 401K has limited investment options but the vanguard target retirement fund isn稚 bad. Upping my 401K contributions would put me at a 45% investing rate. I might be able to open up a SEP for my side-hustle.

Door #2 Grad school: I致e gotten into 2 grad schools with generous scholarships next year- both prestigious. One is abroad in a low cost of living area and is only 1 year to a Master痴, but only half-scholarship (I can cover the rest out of pocket). The other is domestic and a full scholarship but is two years in a HCOL area. A master痴 will up my chance at a government job or consulting job in my field (therefore increase my earning potential to more than $60K/year). The opportunity cost of 2 years out of the workforce is the big downside. I didn稚 graduate undergrad until I was 27 (avoiding student loans, supporting 2 people on $20K/year), and that痴 slowed my journey to FI. Delaying even further with 1-2 years out of the workforce makes me nervous, especially when there痴 no guarantee I値l get a better job.

Door #3 Epic FU world trip: I finally have enough stashed away that I could go on the 8-month trip around the world that I have always wanted to do, but it may close to drain my liquid savings. I have enough in airline miles and hotel points from churning credit cards that I would be able to get the expensive stuff covered. I壇 also able to ramp up one of my side hustles while I travel, so I wouldn稚 be without income (though it wouldn稚 be enough to pay for my full expenses). It痴 possible that I could get a better paying job in a different field upon return (helped by increasing my side hustle while I travel), but worst case scenario is I stay working in my field when I return and have to build up my reserves again on ~$40K salary. I have a chronic illness so paying for health insurance will be a huge expense if I quit my job.

Door #4 Buy a House: If I stop maxing out my Roth for a bit, I could have everything I need saved for a 10% down payment on a house in the next 6 months. I have a specific government grant for buying a house that will give me $6000 for a down payment as well but I have to buy in the next year to get it.  My emergency fund would shrink, obviously. Rents have been climbing shockingly rapidly up in my area (see my $300 rent increase above- I値l be paying 3x what I was 5 years ago) and buying a house would be the best way to stabilize my fixed costs of living. However, I don稚 particularly like debt AND of course, of course, I don稚 really view a house as a good investment compared to index funds (I致e read jcollins!)

Unfortunately, with my income, there痴 no duplexes or houses in my price range, so the best I can hope for to also get rental income is a 2-bedroom condo and renting out the second bedroom. The lowest priced condos are around $190,000. With HOA and PITI, I would expect to pay about $1,300/month on a 2-bedroom, and rent out a bedroom for around $650, making my total housing costs $780/month if we assume 80% vacancy on the second bedroom.  I might also be able to airbnb the second bedroom, which would earn even more. Which is still better than my current rent, and I壇 be putting *some* money towards an asset in my FIRE portfolio and could significantly reduce my FIRE expenses if I manage to pay it off before FIRE. (And I could get a cat which are not allowed in most rentals!)

Downsides of buying a condo is that it makes grad school or world travel less likely (though I could rent out the place while I go on aforementioned epic world trip if the HOA allows that) plus all the investment downsides. I壇 also need to stay in my field through acquiring the mortgage. I would like to stay in this area long-term (family here, generally nice place to live aside from rapidly rising housing costs) but I知 worried if I don稚 stabilize housing costs, I might not be able to afford it long-term.


Okay, that was very long. I hope you all are willing to give a very privileged 29 year old some life advice! Thank you so much!

JJNL

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My first reaction to reading this: is it really impossible to combine buying a house with either grad school or travel? In both cases you could rent out the place, as long as you receive more in rent than you spend in mortgage payments, local taxes etc. you are not losing any money on it in the short term. Basically, you'd only have to cover the down payment, and you're getting a 6000 dollar subsidy to do that which you would forego if you don't buy soon. You already know you want to stay in the area and house prices are likely to keep going up while you're on your epic trip / in grad school, so isn't it the other way around, i.e. waiting until houses are even more expensive makes buying a house more unlikely? I live in a HCOL area with rising housing prices and know more than one person who has partly financed their world travel by renting out their apartment. Why could that not be you?

So, assuming that buying the house does not preclude the other 2 options, the choices are travel, grad school or keeping on as you are. You sound like you're unhappy where you are now, so I suggest changing something - so scenario no change is out. Have you considered applying for a different job? Why is that not more prominent in the scenarios? As for travel or grad school: I would say that both are things you are more likely to do now than in say, 5 or 10 years. If you manage to FIRE really early (say, in 10 years), you could of course then do the epic trip, but by then chances are your life circumstances have changed and you will have a partner / a kid / other things that might keep you from doing this. So realistically, you're not going to be in better circumstances to travel and/or go to grad school in the near future. You are young and single now, so I say go for it if this is your dream. And while you're at it: why not do both? So go travelling + side gigging and afterwards go to grad school, or the other way around? I imagine you would need a full ride for that, but isn't that what you get in the HCOL area? Anyway, I doubt whether it's going to make a difference whether you spend 1 or 2 years outside the work force, as long as you spend them doing something that makes you more employable. And from what I gather, you would be doing just that.

Yes, you would be delaying your FIRE date, but you would also be doing things now that most other people on here only get to do after they FIRE (because they are more tied down than you are). So you could see it as a FIRE-preview or a mini-FIRE-thingy. Why would that be so bad?

AtaCrossroads

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You already know you want to stay in the area and house prices are likely to keep going up while you're on your epic trip / in grad school, so isn't it the other way around, i.e. waiting until houses are even more expensive makes buying a house more unlikely? I live in a HCOL area with rising housing prices and know more than one person who has partly financed their world travel by renting out their apartment. Why could that not be you?
There's a few reasons why it's not the height of practicality: the grant I would get for a downpayment requires me to owner-occupy for 2 years, and many HOAs in the area have a waiting list for renting (there's usually 30% rental caps on buildings). Additionally, I'd need to save up money again to go on the long trip as I'm going to have to spend a huge chunk of my liquid funds on the downpayment. So it could be a good long-term strategy but wouldn't be immediate.


So, assuming that buying the house does not preclude the other 2 options, the choices are travel, grad school or keeping on as you are. You sound like you're unhappy where you are now, so I suggest changing something - so scenario no change is out. Have you considered applying for a different job? Why is that not more prominent in the scenarios?
I like my job pretty well, even if it is high-stress. All other jobs I qualify for in the area are comparable pay and stress level. The only way to make more money/lower stress is to go into consulting or government sector, which are very competitive so I likely need a master's degree to get one.

And while you're at it: why not do both? So go travelling + side gigging and afterwards go to grad school, or the other way around? I imagine you would need a full ride for that, but isn't that what you get in the HCOL area?
I've thought about this but I likely wouldn't have enough of a financial safety cushion to go to grad school post-travel.

So you could see it as a FIRE-preview or a mini-FIRE-thingy. Why would that be so bad?
That's a good perspective. It does sound pretty damn awesome. Especially if I can use travel to really get my side gig profitable enough to support me more. Sometimes I think I get lost in the numbers, not the reasons behind them.

Thanks for the perspective.

Rewdoalb

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I would consider the one year program with low COL. You won't have to deal with rent increase. Rent the cheapest thing possible while you're there, and studying abroad can be similar to a 9-month FU trip (just barely). More so if you can use some travel points during your study breaks to visit other places along the way. Then after graduating, come back to where you want to live/work and get a better job than you currently have. If your 6k house bonus expires mid-schooling, you may want to buy it a month or two early, cash flow allowing. Then you can buckle down in the FIRE direction. You'll get there quicker with the new job. Can always pause along the way for a couple nice vacations if that's high on the priority list.

limeandpepper

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I love travel, but I wouldn't drain my savings for it. Another option, have you considered the possibility of teaching English overseas? You get to experience a different country and earn some money (perhaps even enough to save) at the same time.

Goldielocks

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My first thought is that you are paying very high rent, for the salary you are getting with 3 years work experience.   You need to move to a cheaper area (state or ?), as your salary is not likely to decline much.   i assume that if 60k/yr jobs were easier to get with your qualifications you would already have one, and that it is not just by choice.

then, reading your list, I think I would opt for adventure -- like this:

1) Take the out of country grad school.   That is an adventure in itself, and travel a bit while you are away (inexpensive short trips)
2) Upon graduating, look for a much higher salary, or a lower cost of living  somewhere new.  Having already moved for school, another relocation to a great opportunity will be easy.


It really doesn't sound like you want to settle down to a long term home, just yet.   
Have fun!   Enjoy life.


AtaCrossroads

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My first thought is that you are paying very high rent, for the salary you are getting with 3 years work experience.   You need to move to a cheaper area (state or ?), as your salary is not likely to decline much.
I do *really* want to stay where I am long-term. I've lived abroad and I always come back here and I got my only family (parents) to move 3,000 miles to join me just a year ago (I've been domiciled here for 10 years, even with the long-term stays in Austria and Bangladesh.) So while I'd be willing to relocate for grad school, I want to end up back here.

The rent situation, however, has gotten crazy in this town in the past 3 years- one of the worst in the country. It used to be quite normal to have a bedroom in a house for less than $300 just a few years ago, now you can't find one for less than $600. The tech industry is booming and new people are moving here and now rents have gotten out of control.

(Note: I actually have 9 years of work experience in my field, not 3- I stayed in the same field I was working in before undergrad and worked full-time through college. It's a specific type of work so the pay is just not very good, though I make a lot more than I did before I finished my bachelor's.)

monstermonster

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Wow! We're like the same person! Nearly same housing costs & income! I spend more on booze though.

Curious where you're located because the rent is doing the same thing where I live.

It doesn't sound like your potential world trip is terribly well plotted out, and the grad school sounds like an interesting opportunity with a bit more security. What is the difference in the cost of attendance - scholarships for both options? Will you be able to work while you attend school (are you allowed at the school abroad? there's often student visa restrictions on working.) Can you defer attendance?

Can you make your current job less stressful without jumping into grad school or traveling right away? If you can really build up a solid base of throwing money in your 401K (with your safety net, could you afford to take really limited paychecks for a few months so you can max out early in the year) you would not delay your FIRE date very much (thanks compound interest!) even while going to grad school or traveling.

mozar

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I would do the domestic grad school because you are going to have an easier time finding a job here if you are actually here for interviews. You can always find some place super cheap to rent in HCOL. And since you are going full time, you can use the summer before you start school to go on an epic 3 month summer trip before you start.