Advice for a newbie

[franny61390]

Hey there! I only recently joined the MMM forums and I am looking for some guidance from those that are older and wiser than I am.

My husband and I are 24 and 23 respectively (newly married after 4 years together) and are completely debt free. We paid off around 27k in debt last year making around 60K on average (before taxes). This year we are projected to earn around 93k before taxes. He is a teacher and in the national guard (makes around 37k total), and I work in clinical trials full-time (43k per year) and part-time as a professional singer (13k per year, irregular income).

Here is my question. We work really hard. I work 70 hour weeks, and he is a teacher so usually works between 50-60 hour weeks plus weekends away for guard duty. When is it ok to relax into a normal work load? We have financial goals like early retirement and being completely debt-free (including the mortgage), but we also have personal goals like having a family and being able to spend enough time at home to enjoy the life we have built. Is there a way we can have both?

[SunshineGirl]

I worked really hard until I was thirty, and then I had a base of savings that I knew would grow and grow. Even then, though, I subscribed to the work hard, play hard mentality - went to Europe, etc., but I saved a high percent of my income right from college. Also quite helpful was we bought a fourplex when we were about 24-25, and we lived in one unit and had the tenants pay the mortgage - so we were able to "live free," which allowed us to save a lot more.

When I was thirty, I had my first kid, and because we had a solid base of savings and investments, I had a lot more choices as to how I wanted to structure my life.

Probably the best advice I can offer is to get to the point where you save one entire income. If you have plans to have kids and then stay home for awhile, I especially would NOT give up your singing, because that could be your creative outlet that makes a little money.

Welcome to the forums!

[Gimesalot]

One key about MMM is controlling expenses.  As a crazy example, I was watching Extreme Cheapskates.  A lady on the show lived off of $20 a month in Manhattan.  Of course, she had to dress up like a homeless person to dumpster dive without getting hassled.  So technically, as long as she made $1000 a year, she could save a majority of her income.  However, she was eating out of the trash.

So figure out your minimum comfortable expenses.  Then multiply by 25, as a minimum, 30, if you are risk averse.  Then use a compound interest calculator to figure out how long you would have to save for.  Adjust your spending / saving as necessary to get to a comfortable age for FI.  At this point, you will be able to figure out when it makes sense for you to "slow down."

I agree with working really hard until around 30.  Those extra 7 years will make so much difference in your savings, due to the magic of compound interest.  Also, I really felt myself slow down A LOT the closer I got to 30. :(

[marty998]

A teacher should be on a lot more than what your husband is on. First thing I'd be doing is find a way to get a pay rise for him.

If that's not possible then hunt around. Employers love "well-rounded" people. Both of you have quite interesting CVs and would stand out in the job market.

[franny61390]

A teacher should be on a lot more than what your husband is on. First thing I'd be doing is find a way to get a pay rise for him.

If that's not possible then hunt around. Employers love "well-rounded" people. Both of you have quite interesting CVs and would stand out in the job market.

I wished teachers earned more, but that is how much teachers make in North Carolina. He is even payed an additional suppliment because of the district he teaches in! He loves teaching, but is considering other paths because there is no pay raise anywhere on the horizon (even if he got a graduate degree, even if he gains an additional 5 years experience). He is a musician as well and has marketable skills as an audio technician.

[franny61390]

Thank you for all the advice!

What do you think about having kids before age 30? Would this get in the way of these senarios?

[nereo]

Here is my question. We work really hard. I work 70 hour weeks, and he is a teacher so usually works between 50-60 hour weeks plus weekends away for guard duty. When is it ok to relax into a normal work load? We have financial goals like early retirement and being completely debt-free (including the mortgage), but we also have personal goals like having a family and being able to spend enough time at home to enjoy the life we have built. Is there a way we can have both?

It's a personal choice.  You are debt free (except for the mortgage, if I understand you correctly) - congratulations on that point.  I would suggest making some concrete goals about when you want to reach Financial Independence (FI) or retire early, as well as any other goals oyu may have (like paying down the mortgage).  Then you can come up with concrete numbers about when it is acceptable to work less.
At 24 and 23 the biggest advantage you have is time.  Definitely open up retirement savings account (t-IRA or ROTH) and use any 401(k)/403(b) available to you.  If you do nothing more than max out your IRAs each year starting in your 20s then retirement in your 50s is easily obtainable.  Add extra savings from 401(k)s, taxable accounts etc, and lead a low-cost lifestyle and you could call it quits before 40.

Decide how much income you will need annually in early retirement and then we can run some simulations about what it would take to get there in 10, 15 and 20 years.

Thank you for all the advice!

What do you think about having kids before age 30? Would this get in the way of these senarios?

I think having kids are great, in your 20s or 30s.  However, they do make it harder to save quite as much.  Just 2-4 years of maximizing your retirement accounts now will put your early retirement on track.  If you have kids now and it prevents you from saving anything until you are in your mid 30s, then it becomes far more difficult to retire as early.  OTOH, you aren't going to get any younger, and at 32 I can say it's no easier having kids.

[Ty Webb]

It is insane how little teachers are paid in the US. Here in Canada they make up to and above six figures with a huge pension.

[RetiredAt63]

OT and a bit of a rant -  I am a retired teacher (Quebec CEGEP and Ontario university) and at my highest (university) was in the low 80's, CEGEP was 70's.  And that was at 35 years, I maxed out the salary scale years ago.  Starting salary (base level) for CEGEP this year is under $39000, and can be found by a Google search, it is not secret. Pension is 2% a year employed (up to a maximum of 74% after 37 years) of the average of the best 5 years, which means my pension is about $49000 right now.  I paid over half the contributions, my employer paid less than half, and it is not fully indexed.  I also was only able to put about $3000 a year in my RRSP, since my pension at work took most of my contribution room.  So when you talk about "huge pensions" please remember these are not freebies, we paid for them just like any other employee.  And many of my colleagues took huge pay cuts to teach, they could have made much more in the private sector.  Plus, there is a time cost - teaching in higher education means more degrees, I only started full-time work at 25 and took two more post-grad diplomas while I was working.

So please tell me what province you are talking about?  Obviously I was working in the wrong ones  ;-(

Actually, I blame the Conservative Federal government for this attitude, they keep talking about civil servants as if they were all being given these wonderful handouts, when historically the trade-off was lower salary for a solid (not wonderful) pension and job security.  And a few years ago, Lowell Green on CFRA (Ottawa radio station) was sounding off about retired people being out of the job market too young (obviously not an MMM fan) and not paying taxes and contributing their fair share to society - well, I am on pension, and I am sure paying income taxes!  Plus I see a lot of retired people doing a lot of volunteer work that helps their communities, and that is a social benefit that is not costing any government any money.

Now stepping off my soap box and going for a coffee to calm down and get the blood pressure down.

It is insane how little teachers are paid in the US. Here in Canada they make up to and above six figures with a huge pension.

[nereo]

OT and a bit of a rant -  I am a retired teacher (Quebec CEGEP and Ontario university) and at my highest (university) was in the low 80's, CEGEP was 70's.  And that was at 35 years, I maxed out the salary scale years ago.  Starting salary (base level) for CEGEP this year is under $39000, and can be found by a Google search, it is not secret. Pension is 2% a year employed (up to a maximum of 74% after 37 years) of the average of the best 5 years, which means my pension is about $49000 right now.  I paid over half the contributions, my employer paid less than half, and it is not fully indexed.  I also was only able to put about $3000 a year in my RRSP, since my pension at work took most of my contribution room.  So when you talk about "huge pensions" please remember these are not freebies, we paid for them just like any other employee.  And many of my colleagues took huge pay cuts to teach, they could have made much more in the private sector.  Plus, there is a time cost - teaching in higher education means more degrees, I only started full-time work at 25 and took two more post-grad diplomas while I was working.

So please tell me what province you are talking about?  Obviously I was working in the wrong ones  ;-(

+1.  Moving to Quebec and teaching at CEGEP for a year, we can attest that teachers with advanced degrees (Masters minimum) aren't earning huge sums here.  And as Americans living in Canada, the taxes here constantly put us into shock.  Moving from one of the countries with the lowest taxes in the developed world to the country that has the highest for middle-class earners... oy.  And from what I read Quebec has the highest taxes of any Canadian province.

Haven't been her through enough political cycles to fault one party or another, but there does seem to be a backlash against folks retiring very early here - I've known one person who is very mustachian (although I don't think he's ever been to the MMM website) and after saving 50%+ of his income for over a decade he recently quit when his governmental department was going through yet another cost-cutting round.  He's 41.  Now he's whispered about as if this act of retiring was some sort of treason. 

[RetiredAt63]

@Nereo - Quebec has very high taxes, even for Canada, but relatively low COL. I think the tax money we saved when we moved to Ontario mostly went to increased electricity bills - out usage did not change, but our cost doubled.  And you have all that joie de vivre - enjoy ;-)  But get rich teaching, nope. And it does mean that when retirement rolls along, you won't have a great pension, because it is salary based.

I don't know anyone (personally) who permanently retired at 41, or any age close to that early - I do know people who took early retirement in industry and shifted to teaching, they wanted to teach, were good at it, and could "afford" it because of their previous better-paying jobs. So no idea about attitudes.  People can be pretty locked in to what they see as the norm - when we moved off island (Montreal) a lot of my friends at work acted as if we had fallen off the edge of the world.

[nereo]

@Nereo - Quebec has very high taxes, even for Canada, but relatively low COL. I think the tax money we saved when we moved to Ontario mostly went to increased electricity bills - out usage did not change, but our cost doubled.  And you have all that joie de vivre - enjoy ;-)  But get rich teaching, nope. And it does mean that when retirement rolls along, you won't have a great pension, because it is salary based.

Interesting.  I've never lived in Ontario so I can't comment on the COL there, but the taxes here continue to shock us, including the 15% sales tax (which taxes both goods and services).  Some things are cheaper here, like electricity (we average just under 7¢/kw*hr), but also lumber/wood and maple syrup.  Housing varies so much from location to location I don't know how anyone would make a fair comparison.    Food, particularly fresh produce, is a lot more than we were paying in the US, as well as all alcohol. Gasoline is about 50% higher right now in Canada than New England.  cell-phone plans are ridiculous, so-much-so that it's far cheaper for us to stay with a US+Canada plan in the united states.  We make 4-6 trips a year to the US to see family, and have a long list of things we stock up whenever we're on that side of the boarder.  The cbc even did a mini-faux-expo story recently and showed that across almost every category prices were higher in Canada than hte US, even for products made in Canada.
I do absolutely love how many free things there are to do, particularly in the winter, from ice-skating to maintaned xcountry and snowshoeing trails. They don't hide from winter here.  joie de vivre indeed!

[Ty Webb]

@retiredat63 Ontario teachers can make $94,000/year and then make a pension $70,000 a year for the rest of their life starting as young as age 53.

[RetiredAt63]

Sure, but that is someone at the top of the education and experience scale (I know Quebec pension arrangements a lot better than I do Ontario, so I can't get specific for Ontario).  Plus taxes (we do not have the option to file jointly) - federal:

    15% on the first $43,953 of taxable income, +
    22% on the next $43,954 of taxable income (on the portion of taxable income over $43,953 up to $87,907), +
    26% on the next $48,363 of taxable income (on the portion of taxable income over $87,907 up to $136,270), +
    29% of taxable income over $136,270.

and provincial (Ontario):
5.05% on the first $40,120 of taxable income, +
9.15% on the next $40,122, +
11.16% on the next $433,848, +
13.16 % on the amount over $514,090
and HST of 13%, not to mention high electricity rates, and in Toronto, at least, high housing prices.

Could be worse, as @Nereo pointed out, Quebec income taxes are:
$41,095 or less    16%
More than $41,095 but not more than $82,190    20%
More than $82,190 but not more than $100,000    24%
More than $100,000    25.75%
and HST is 15%
Someone retiring at 53 started teaching young, and probably would not be in the high salary scale.

OP and husband are 24 and 23 - at 24 I was still in grad school, not working - so the husband's salary is at the start level;, and seems in line with what a first year CEGEP teacher would make (that is College, not high school) and COL in North Carolina has to be a lot less than in Quebec or Ontario - no hard winters and high heating costs and warm clothes are one obvious difference, federal and state taxes are another, cheap everything by Canadian standards.  I couldn't believe how cheap things were in Cape Cod  when I was there at Christmas, and I get the impression that would be considered a high COL area.

Maybe we should get back on topic?  We have strayed pretty far.

@retiredat63 Ontario teachers can make $94,000/year and then make a pension $70,000 a year for the rest of their life starting as young as age 53.

[Cassie]

The best age to have kids is when you really, really want them and feel prepared. I married young but hubby was 10 years older so had my kids young-3 by time I was 25.  When the youngest went to school I went to college.   It worked out well for us but would not be for everyone.  HOwever, we were financially sound by being frugal but were still able to buy house, save $ for retirement, and provide decently for our family.  I have many friends that waited until 30 to have their first baby.  It just depends on what you want to do and feel ready for.