Hey guys. I've been able to start cranking up savings in 2015 after getting a 40% bump in income. It's been great getting out of a paycheck to paycheck life wherein my net worth is flat and below zero. I've also finally gotten out of chasing seasonal/temp jobs that do not have access to retirement accts or benefits. I've got an investment policy, outlined some basic financial goals and feel I'm set up for a good critique. I'd like your general thoughts on my situation and my questions.
Life Situation: 27, single with significant not living with me, Education is BS and MS, US citizen
Gross Salary/Wages (all numbers annual accompanied by % of gross day job income)
day job: $45,000 (expected bump by Jan 2016 to $50-53K)
Pre-tax deductions
401(a) DCP: $3600(8%)/4950(11%), employee/employer (immediately vested).
403(b): $1350 (3%)
tIRA: $1000 (2%)
HSA: $360 (0.8%)
Health insurance: 0$ employee contribution
Other Ordinary Income
~$1000 from CC rewards, checking promotions, bank interest, lending club interest
$3-4K in side consulting which is paid around Dec 31, so depending on contract completion will occur in 2015 or 2016. The net will be deposited into solo 401k.
Qualified Dividends & Long Term Capital Gains
Not significant
Taxes
Federal income: $4579 (10.2%)
Medicare: $650 (1.4%)
State income $1560 (3.4%) (4.63% pre-deductions)
no SS withheld
Current expenses (last 6 mo avg)
Rent: $6000 (13%)
Groceries: $1044 (2.3%)
Other/shopping: $944 (2.1%)
Restaurants: $910 (2.0%)
Auto insurance: $644 (1.4%) (for 2 vehicles, looking to sell one)
Automotive parts/vehicle storage for 1 vehicle: $624 (1.4%)
Cell: $488 (1.1%)
Gas: $368 (0.8%)
----
Total:$11022 (24.5%)
Assets
Cash
reserved for 'everyday' checking: $2090, earning~0.25%
reserved for occasional large purchases: $100, earning 1%
emergency fund (cash portion): $14,350, earning 4%
Investments I won't get into details but the target AA is 95% equities. With exception of Lending Club, all is invested in index funds. The old pension fund is screwing with that.
Retirement
Old 401 (a) pension: $3900, not vested, currently earning 3% acting as if fixed income I suppose
new 403b: $120
new 401(a) DCP: $1512
rIRA: $4050
tIRA: $3030
Taxable accts
(2) $1500
Play/learning money
Robinhood: $94
Lending club: $1100
Debts
None
Planning
I'll be taking a pay bump soon to ~50K.
My budget for 2016 is as follows:
50K gross, 20K into 401(a), 403(b) and tIRA.
Spend $12,600 (28% gross income) for regular expenses
Reach an emergency savings of $20K
Set aside 5% for large expenses
Save 7% for a house downpayment (purchase date unknown)
Increase Lending Club to between $2500 and $5000 to diversify in consumer debt loans
Specific Questions
- First, apologies if my breakdown isn't consistent/clear.
- Looking at my spending now (<25% of gross income), any suggestions for improvement?
- Any thoughts on letting the old 401(a) pension fund sit there? I'm not sure if I'll return to a position to actually get a defined benefit in retirement. My current job will not last forever and if I put my money on it, I'd bet there's a 50% chance I go back to a state job (making the pension fund active again). I'm okay earning just 3% on it for now.
- I hate going out restaurants, nice bars, etc. but the significant other and friends want to and I don't want to alienate anyone by disagreeing (or myself for that matter). Looking at my current spending, am I being a miser?
- I have the option to opt in to SS. I plan on doing this by 30. I would hate for my eventual benefit to be averaged across years with zeroes. Right now, I have 9 years with earnings according to mySS.
- I plan on aggressively saving in retirement accounts (40% gross income). With that, I feel that I'm going to make it harder to save up for a house. Any suggestions? I am comfortable with a lower actual retirement savings rate and holding some pre-tax retirement dollars in safe places such as money market within my IRAs. I can then use first time home buyer's withdrawal from the IRAs. Is that a solution?
I've been going back and forth on the idea of owning a home. It's a definite want, but median home prices have been rising here (13% this year) to 330K or so. I wouldn't feel comfortable with a mortgage over 160K and that's anticipating renting a room.
Essentially, I'd like any general guidance on helping me cut any fat or optimize savings. For one, I've learned that there are alot of cool options out there, but I need to stick with just a few places to stuff my money.
In case any one asks why I am building up for over 1.5 yr for emergency savings, it's because I want to be prepared for some true, rare and likely costly emergency. As in, I hit a pedestrian driving and their medical bills exceed my insurance.