I grew up in a family of engineers; Dad, Mom, older and younger sister (I'm the middle sister). I completed my Mech. E. bachelor and master degrees in 2012 and 2013 respectively. I started working for the Federal Government in 2010; work-school-school-work-school etc. My job is tolerably fine and I am grateful to have it. However, I was never really interested in engineering and that hasn’t changed. (See the long explanation below case study for more info.) I am motivated to get to FI as soon as possible. I currently live in my parents’ home. I am expected to start paying rent ($200) when I turn 26. Also, I will have to start paying for healthcare at 26. Obviously, my budget is going to change in the future! This brings me to the subject line of my post. How much do I need to have saved in order to declare myself FI/RE if I don’t know what my expenses will be in the future? Here is what I am working with (numbers are rounded):
Current Gross Salary: 78,000/year
My paycheck is set to automatically contribute $1300/month to TSP (per pay period: $450 to Traditional account, $200 to Roth account).
After TPS deductions and taxes, Net Pay: $3000/month.
Debts: None
Assets:
$11,000 - Credit Union Savings Account
$15,000 - Vanguard Roth IRA (VTSMX)
$18,000 - Vanguard VTSMX
$25,000 - TSP Traditional (90% stocks, 10% bonds)
$7,000 - TSP Roth (90% stocks, 10% bonds)
Current Net Worth: $76,000
I tracked all of my expenses in 2015 and used those to estimate a very realistic spending budget for 2016. As of today, I have $240 left in my January budget.
2016 Spending Budget: $12,000 + $7,800 = $19,800/year or $1,650/month.
Monthly Breakdown:
$650 - Tithe (This is divided between Compassion International, local charities and my church)
$300 - Food
$100 - Car repair (My car is a 2005 Ford Focus wagon)
$125 - Car insurance and fuel
$125 - CrossFit gym
$20 - Cell phone
$80 - Clothes
$80 - Gardening
$50 - Entertainment
$20 - Gifts
$50 - Tools
$50 - Misc.
I know this is a really long post. If you’ve made it this far, congratulations!
Some specific questions are:
In the interest of constant optimization, what can I do better?
Investment advice is especially requested; the only thing I know right now is “put extra money in VTSMX”.
Here is why I am interested in FI/RE. Ever since I was very young, I have wanted to live in the country and have a farm. In April 2011, I visited Nature’s Harmony Farm in Georgia and got to see their working farm in operation. After this trip, I worked for several days as a WWOOF volunteer at White Pine Farm which is a vegetable CSA in North Branch, Michigan. This was an eye opening experience as I realized for perhaps the first time how much work it is to make money farming. I still wanted to farm but I didn’t want to rely on farming to pay for everything. My farming ideas have been greatly influenced by author Gene Logsdon who lives on 22 acres in Ohio. He writes books to make a living and spends the rest of his time farming. He wrote one article that was titled “Maybe Farming Isn’t Supposed to Make Money.” He explains how nature never heard of compound interest and corn grows at the same rate no matter how much money you need to pay your bills. Gene promotes the idea of having an off-farm job to pay for living expenses and using your free time to grow food for yourself and family and friends. He is an expert at describing the joy that can be found working on your own land. He talks about how much money you can save by not having to buy so much food, not having to go to the gym and not having to travel to far off places because your own place is so beautiful. This is the kind of farming that is the most interesting to me. My goal is to own a small homestead (1-3 acres) with no debts and have a small income (FI) to pay for necessities.
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3 MONTH UPDATE
Here is an update on the first post from January. All of your comments were greatly appreciated and I couldn’t have made this much progress in just a couple months without them!
Gross Salary: 78,000/year
Paycheck is set to automatically contribute $725 to Traditional TSP account each pay period.
After TPS deductions and taxes; Net Pay: $3,000/month.
Debt: None
Assets:
$6,000 - Savings Account
$17,000 - Vanguard Roth IRA (VTSMX)
$35,500 - Vanguard VTSMX
$29,500 - TSP Traditional (90% stocks, 10% bonds)
$8,500 - TSP Roth (90% stocks, 10% bonds)
Current Net Worth: $96,500
Part of the net worth increase is due to my 2015 tax refund (~2k) and redemption of savings bonds that were childhood gifts (~2k). I also went through my room and sold or donated everything that I did not need (~4k). That was a surprisingly rewarding exercise; I did not realize how much stuff I had unknowingly accumulated.
I had a budget set at the beginning of January but here is my actual spending for the past three months.
Average Spending (Jan 1- March 31, 2016) = $856.33 + $650:
$650 - Tithe (as discussed, this is tied to my income and will be much lower in FI)
$325 - Food*
$145 - Car (all expenses)
$125 - CrossFit gym
$20 - Cell phone
$33 - Clothes
$74 - Gardening
$38 - Entertainment
$4 - Gifts
$45 - Tools
$48 - Misc.
Plans for the immediate future have evolved since my original post. I still dream of owning a small homestead one day but I don’t think it’s time to purchase land yet. Right now, the plan is to become FI with current expenses (which will increase with rent and healthcare when I turn 26). Once I achieve that goal, I want to work on a local farm as an intern. This will allow me to learn more about farming and homesteading without requiring me to invest any capital. Hopefully, I could live off the wage (typically a farm intern earn room and board plus a minimal stipend) from the farm and let my savings grow on their own. It is technically possible to take leave without pay (LWOP) from my current job although it would probably be frowned upon: “it’s bad for your career”. Ideally, I would take LWOP for ~4 months during the summer to go work on a farm. When I reach “semi-FI” I will investigate this possibility further.
*This number is really high. I’ve decided to record the price of individual food items purchased for the next 3 months to get a better understanding of why I spend so much on food. None of this is restaurant spending; it is all grocery store or online purchases. I do buy some groceries that are eaten by the whole family (~$40 per month) and food for potluck lunches at work (~$20/month). Other than that, I have no idea why my food bill is so disproportionate to all the other expenses.