Author Topic: Case Study: Looking for highest degree of freedom  (Read 4004 times)

wanderlust

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Case Study: Looking for highest degree of freedom
« on: March 05, 2014, 03:58:58 PM »
Hi All,

First post here, I want to start off by saying that you guys are pretty awesome.

I'd like to hear what others have to say about my current savings plan. My goal is to be as free as possible to take some time off of work and experience the world. I'm 25, no kids or wife, no more debt.

Current Situation:
Monthly Income:Gross $5000 (after taxes, insurance, 401k, hsa, its around $3k)
401k: 11% employee contribution, 12% employer match
$250 into HSA


$450 into Roth
$250 Rent
$500 Tithe
$200 gas
$300 food (too much eating out)
$600 into savings

Current savings: $7k in Roth, $3k in bank

The rest I spend on things like SCUBA courses, weekend trips...

Should I be putting more into my 401k? I could swing a way higher contribution, but am concerned about getting that money back in the next 35 years. I know I could do an IRA ladder, but that takes 5 yrs.

Any thoughts on how I can smartly invest the rest of my money? Are there other tax advantaged accounts I don't know about?

-wanderlust
« Last Edit: March 05, 2014, 04:31:34 PM by wanderlust »

wanderlust

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Re: Case Study: Looking for highest degree of freedom
« Reply #1 on: March 05, 2014, 04:49:58 PM »
DMY - there isn't much surplus. I think i spent the rest on stupid things


I'm thinking that I can travel for relatively cheaply, the big problem is I'm no longer getting paid. I want to visit places like Nepal and Thailand, so it isn't too expensive once you get there.

I wish I could find a job where I don't have to work 11.5 months a year. I guess many mustachians think the same thing, hence the early retirement. I want to experience things before I retire, too. Who knows if I'll have a family, say goodbye to trekking in nepal for weeks on end if you have a baby.


ch12

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Re: Case Study: Looking for highest degree of freedom
« Reply #2 on: March 05, 2014, 11:48:04 PM »
My goal is to be as free as possible to take some time off of work and experience the world. I'm 25, no kids or wife, no more debt.

Current Situation:
Monthly Income:Gross $5000 (after taxes, insurance, 401k, hsa, its around $3k)
401k: 11% employee contribution, 12% employer match
$250 into HSA


$450 into Roth
$250 Rent
$500 Tithe

$200 gas
$300 food (too much eating out)
$600 into savings

Current savings: $7k in Roth, $3k in bank

The rest I spend on things like SCUBA courses, weekend trips...

Should I be putting more into my 401k? I could swing a way higher contribution, but am concerned about getting that money back in the next 35 years. I know I could do an IRA ladder, but that takes 5 yrs.

If I were in your shoes:
  • I'd be putting more into my 401k. I'd also be asking about a Roth 401k option, or having my employer set it up to offer it in the future. When you terminate employment at an employer, you can roll your Roth 401k into a Roth IRA. You can always withdraw your contributions, though, as with the normal Roth IRA, you can't touch the earnings until you hit 59.5. See the Bob example: http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-on-Designated-Roth-Accounts#distns - Investing money via a Roth account is preferable to a normal investment account because you have a little bit less of a headache when you move money. Fewer fees, less investment income/transactions to report, etc.
  • It's important to do things that make you happy. However, you need to decide to either prioritize a) blowing your extra money (3k-your itemized spending) on weekend trips, SCUBA certification, etc. or b) taking time off to travel using that extra money. It's up to you, and not something that the Mustachians can decide for you. If your decision is truly to maximize your freedom, then you won't blow money on weekend trips and restaurants. http://en.wikipedia.org/wiki/Cognitive_dissonance

The debate about charitable contributions has been had many times, but I'm going to pipe up about it being double your rent. How do you get rent that's $250 in the US?

EDIT: Also, there's zero reason for you to be stuck in the US if you have a baby. Read Courtney Baker's blurb: http://manvsdebt.com/about/ People always tell me that I need to travel while I'm young, before I have kids. Although I agree that kids include an extra wrinkle, it's completely possible to travel with a baby.
« Last Edit: March 05, 2014, 11:52:23 PM by ch12 »

dragoncar

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Re: Case Study: Looking for highest degree of freedom
« Reply #3 on: March 05, 2014, 11:52:51 PM »
to maximize your freedom, stop tithing and plan to leave your estate to the church.  Is this allowed?

Babymoustache

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Re: Case Study: Looking for highest degree of freedom
« Reply #4 on: March 06, 2014, 12:35:28 AM »
You mentioned a more flexible work situation so that you can travel etc Have you thought about looking to do an online thing for yourself to earn an income? Pat Flynn and John Lee Dumas do really well at this (but they started off small). 

http://www.smartpassiveincome.com/my-income-reports/
http://www.entrepreneuronfire.com/income/

CrochetStache

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Re: Case Study: Looking for highest degree of freedom
« Reply #5 on: March 06, 2014, 04:36:53 AM »
Instead of weekend trips, get a second job for extra funds or start up some kind of work that will earn a bit of money while you are traveling.  You can explore your home state/country more when you are retired and have less energy for int'l travel.

Gaining skills like SCUBA cert, etc will be beneficial in your travels. Enjoy!

wanderlust

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Re: Case Study: Looking for highest degree of freedom
« Reply #6 on: March 06, 2014, 08:46:12 AM »
Thanks for all the replies!! I rent a small room from a friend in his home, we share a bathroom. It is a pretty darn good deal, but the area isn't super expensive (Lancaster, PA).


Thanks for the reading on cognitive dissonance and passive income! Flexible work is what I am looking for long term. I'm an engineer, and am hoping to start doing contract work to allow for more time off.

I'm considering only buying things in cash until I get used to not spending much money. I'm so used to just swiping the card and getting the new whatever. I need to get used to being more frugal.

wanderlust

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Re: Case Study: Looking for highest degree of freedom
« Reply #7 on: March 06, 2014, 08:48:45 AM »
Also, I'll look into Roth 401k option!

goodlife

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Re: Case Study: Looking for highest degree of freedom
« Reply #8 on: March 06, 2014, 02:16:00 PM »
Ok, one comment that I can't help myself but making: you are 25 and are not even married, so I think you don't need to worry about future kids in your current decision making and you don't need to go traveling right this second. Maybe you get married 10 years from now and have a kid some time after that. And you can plan kids...they don't just appear. I definitely think it's a great idea to travel and see the world while you are young, but you are still VERY young and have A LOT of time so there is no hurry to do this right now. I am 4 years older than you and just quit my job to go traveling, but I have very significant assets as well. So maybe make a goal to go traveling before you are 30? Then you can make some savings goals around that which should be your travel expenses plus one year of living expenses (assuming you quit your job and need to find another one).

wanderlust

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Re: Case Study: Looking for highest degree of freedom
« Reply #9 on: March 06, 2014, 02:57:45 PM »
goodlife - I mostly agree with what you have to say, I should not feel rushed.

Am i missing other types of investment accounts (other than the standard 401/roth ira)?