Reader Case Study Late in life Student and New Government Employee need help

[jmsperdue]

Life Situation:
IRS filing status: Single ,
number & ages of dependents: 0 and 0,
and anything else Nevada, USA.

Gross Salary/Wages:
$57125

Individual amounts of each Pre-tax deductions:
             457b deferred comp $226.40 biweekly,
Self-Funded PPO:  $52.81  out of first paycheck of month,
SubTotal Monthly: $505.61

Post  Tax Deductions:
Union Dues $36 biweekly,
Employee Fitness  Center dues $6 biweekly
Savings $75 biweekly,
SubTotal Monthly: $234

Other Ordinary Income:
None

Qualified Dividends & Long Term Capital Gains:
    None

Rental Income, Actual Expenses, and Depreciation:
None

Adjusted Gross Income:
$45,049.28
Assuming I calculated it properly, Since my  job contributes to PERS on my  behalf I don’t have to make contributions to SSI

Taxes:
TX Withholding Tax  $176.84 biweekly
TX EE Medicare Tax $32.83 biweekly
No State taxes
Subtotal Monthly $419.34

Current expenses:
 Rent: $0,
 Cellphone: $65 mo,
 Spotify Streaming $25 mo,
 Auto/Moto Insurance: $185 mo,
 Credit Card1: $120 mo,
 Credit Card2: $50 mo,
 Gas: $200 a Month
 Groceries: $300 a month
Monthly Subtotal $945
Eventually My student loans ($29k) are coming due, payments are $240 a month, but I have to see if the debt relief goes through if so my payment will be lowered substantially due to my balance being relived to $9k.
Eventual Subtotal $1190 (pending biden-harris debt relief)

Expected ER expenses:
None

Assets:
2009 Toyota Tacoma,
2012 Harley Davidson Sportster,
$2200 in Deferred Comp Plan T.Rowe Retirement Price 2055

Liabilities:
None

Specific Question(s):
Good Afternoon,

I'm 34 and I most recently the past few years went to school for a change of career. This last year I finally graduated and got a new job working for a local government. I'm making roughly 60k a year and given my age retirement is on my mind and I want to be in a situation where I can either retire early or at an appropriate age.


Going back to school late in life came with some sacrifices and I'm basically starting over with no nest egg, but the plus side is a local union government job with great benefits.

Now my job offers Nevada PERS for retirement and I can contribute to a deferred comp which I am 10% currently in a T.Rowe price retirement 2055. I also currently also delegate 5% of my income into a personal savings to build an emergency fund.

I know I need to prioritize my high interest credit cards first, I'm not worried about the tax bill as for the last tax year I owed $3000 in total, and it was split over three years evenly. So before I was working the $1000 IRS bill was daunting, but now that I'm working  banking on my refund to pay most of it if not, I shouldn't have a problem paying the remainder.

I'm not going to lie, being in school was stressful (computer science degree), but now that I'm a software engineer I kind of cut loose. I only started working in August and had a little fun for myself and been splurging, but I need to buckle down and focus.

I'm wondering where to start?
What more could I be doing right now?
How realistically could I retire early?

One thing I worry about is my PERS is only valuable if stay a government employee and become vested at 5 years minimum maxing it at 20 years, but 60K for a an entry level software engineer isn't unheard of, but I could be making upwards of 2x more in 2-3 years after I gain some experience, so I often consider leaving if such an offer made itself present, but I'm not sure if I necessarily would need to or even should I considering the pension/benefits/work life balance is so good here and I'm hoping that eventually I can get up to 100k in 5 years time, but it is government after all.

I appreciate any input or advice and thank you for reading all this.

[SweatingInAR]

Welcome to the MMM Forum!
You'll get some answers in this sub-forum, but you will get more detailed responses if you read how to post a proper "case study" and post in that sub-forum: https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/

Congratulations on the new job and degree! Those are going to be your ticket to a nicer life.

Unfortunately, you have a $7k debt emergency. Use your safety net of free rent to stay at least until that is paid off. Stop contributing 5% to an emergency fund if your brain will let you, and put all of that toward your debt. That $7k of credit card debt is an emergency to which you should throw all excess money. I would consider holding off on PERS contributions until that debt is gone, too. The interest alone is over $100 per month!

You should get cheaper cell phone service as long as you aren't financing a phone. Mint, Red Pocket Mobile, and even AT&T prepaid all have premium-level service for under $30 per month. I use US Mobile, 500MB per month data-only, and use Google voice for all texts and calls. This is only $8.57 per month!

You don't say how much eating out and groceries is costing you; you will have to add that up for a proper case study. In the meantime, I recommend only eating out socially. Do not eat out alone, and do not order delivery if you're "too tired to cook". Figure out some standard nutritious food that doesn't take much effort to have for the rest of your meals. My day-to-day meals have a lot of beans, eggs, rice, canned tomatoes, and frozen broccoli. When you do eat out, try to find joy in chicken (or other cheaper menu items) instead of steak and DO NOT order drinks with a meal. Drinks are the worst value at a restaurant.

Keep an eye on your job market. You should be able to make more than that very quickly if you are in a major city with some tech jobs. I know someone who did an intensive 12 week coding school, started at $60k 5 years ago and is now earning higher than $120k by job hopping every 1.5-2 years.

[jmsperdue]

I appreciate the feedback, I'll focus on rewriting my main post to meet the case study standards when I have some time to sit down with everything and really focus on it. I suppose I was a bit excited to get some advice when I wrote it.

[Freedomin5]

How much do you owe in total on Credit Card 1 and Credit Card 2, and what are the interest rates on those debts?
What is the interest rate on your student loans?

Since you mentioned you're basically starting over, I'm assuming you have very little in your retirement or other taxable investment accounts?

In terms of whether you want to stay with a safe, government job with a guarantee (defined benefit?) pension, or whether you want to make boatloads more money in the private tech sector, that really depends on your goals and personality. List out the pros and cons to both options, and see if one jumps out at you as being a better fit for your personality.

[SweatingInAR]

Credit Card1: $120 mo,
 Credit Card2: $50 mo,
Eventually My student loans ($29k) are coming due, payments are $240 a month, but I have to see if the debt relief goes through if so my payment will be lowered substantially due to my balance being relived to $9k.
Eventual Subtotal $1190 (pending biden-harris debt relief)

...

Liabilities:
None

Thank you for the updated post! That will help us provide better feedback. The biggest thing missing, as @Freedomin5 noted, is that your two Credit Cards and Student debt should be broken out as three separate entries in the "Liabilities" Section with the current balances, interest rates, and monthly payment.

I assumed your CC rates are around 20% when I made my generalization about the monthly interest, but I could be very wrong!

I'm wondering where to start?
What more could I be doing right now?
How realistically could I retire early?

To answer your questions:

• Your income vs expenses looks good on paper. If any of your interest rates are above 9%, I would focus on paying them off. With your excess income, you might be able to pay off the CC debt before 2023!
• Resist lifestyle inflation!
• If you maintained those expenses and this income for the rest of your life, you could easily retire early. Some lifestyle inflation is inevitable, though. Your housing expense won't be free forever, and you may choose to partner up and start a family

[Sanitary Stache]

Hi OP.

I am also a government employee. And have some thoughts on the Pension and on not contributing to SSI.

Looking at your expenses, it seems like you have a lot of unaccounted for money. Like half of it.  Where is that money now?

You should keep track of all your expenses.  Since they should be very low right now, you should do this with a pencil and paper or on a spread sheet.  Don't worry about fancy apps. Just right down every dollar leaving your control and then put it all up in a post.  You'll need to do this for a few months before you know where all your money is going.

Since you have so much unallocated income, I wouldn't change any of your savings allotments.  Let the 10% to deferred comp go for now.  But once you have $1,000 in your emergency fund, then do pay down that credit care debt as fast as possible.  Your credit card balance should always be zero.  I just wrote that advice, then went and made sure all my balances are zero.

Then build up your emergency fund.  This advice tracks with Dave Ramsey's baby steps.  I think $1,000 EF, $0 credit card debt, fully funded EF is a great way to start on the path to financial stability.  But once there, I don't abide Dave Ramsey. So I don't recommend seeking out his advice. 

Instead read https://jlcollinsnh.com/stock-series/ and start saving as much as possible for retirement.

Onto my thoughts about the pension. 

It reads like your position doesn't pay FICA tax because your state pension offers sufficient benefits. https://www.ssa.gov/policy/docs/ssb/v80n3/v80n3p1.html#:~:text=Today%2C%20state%20and%20local%20government,regulations%20requiring%20sufficiently%20generous%20benefits.
I wouldn't trust this.  I have more faith in social security than I do in my State pension.  I'd look into this more and see how you can protect yourself, likely by saving more of your income.

Your pension benefit may not be very much if you don't stick around.  You need 5 years to vest into any of it, so some portion of your compensation is held hostage to extract that 5 years from you.  I figure my pension is a 30% increase in my compensation, but only if I stay 25 years.  If I leave when I intend to, after 10 years, the pension amounts to about a 10% increase in compensation. How your pension is set up may be different, but leaving at  years won't get you much income from the pension when you reach their retirement age.  I recently vested, so I now consider it part of my retirement plans, but prior to vesting, I ignored it and saved in the Deferred Comp (457b) as if I needed to save all the money I would need to retire.

Since you aren't getting a match in your 457b, you should be saving into your IRA first. See the investment order for more on that. https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153