I'm a long-time lurker, first-time poster! I’m 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
———————————
$726 taxes
Current expenses:
Mostly Necessary
$140- Groceries
$20- farm share (produce)
$550 - Rent
$10 - Renter’s 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
_______________________________________________
$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’m 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’m 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’s a very high-stress job and I’ve been there for 3 years. I won’t go into specifics but it’s 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’s no prospect for a significant raise, so the only way I’ll 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’t 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’ve 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’s, 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’s 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’t graduate undergrad until I was 27 (avoiding student loans, supporting 2 people on $20K/year), and that’s slowed my journey to FI. Delaying even further with 1-2 years out of the workforce makes me nervous, especially when there’s no guarantee I’ll 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’d also able to ramp up one of my side hustles while I travel, so I wouldn’t be without income (though it wouldn’t be enough to pay for my full expenses). It’s 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’ll 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’t particularly like debt AND of course, of course, I don’t really view a house as a good investment compared to index funds (I’ve read jcollins!)
Unfortunately, with my income, there’s 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’d 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’d 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’m worried if I don’t 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!