Author Topic: Looking to minimize more expenses and would like insights  (Read 2072 times)

BlackMagic

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Looking to minimize more expenses and would like insights
« on: May 11, 2016, 11:22:01 AM »
Life Situation: Single, 0 dependents, Longtime girlfriend and I live together, 27 currently, never married (but plan on it)

Gross Salary/Wages: $70,000/year

Pre-tax deductions: Per month:$15.36 - Dental, $158.40 - Insurance, $269.23 - 401k

Other Ordinary Income: Pro Driving coach - $400/month

Qualified Dividends & Long Term Capital Gains: None

Rental Income, Actual Expenses, and Depreciation: None

Adjusted Gross Income: $5,790

Taxes: $934.16 - Federal, $287.40 - State, $323.08 - Social Security, $75.56 - Medicare

Current expenses: $4,615.18 ($943.10 -Savings) See Income Statement for breakdown.

Mortgage: $204.04 - Principal, $393.85 - Interest, $202.11 - Escrow

Expected ER expenses: None

Assets: $40,740.69 (excluding 3 paid off vehicles) See Income Statement for breakdown.

Liabilities: $117,949.89 - Mortgage

Specific Question(s): What expenses can I minimize? I had a pretty expensive month because of the dentist visit for $595.39 as well as a new diet that my gf and I tried that didn't work out for $378, which was refunded in May. I'm looking into prosper.com as a place to invest some money but I need the flexibility of cash as I'm looking for my first rental property. I would like to either rent my house out (I have a couple very interested) and buy another house/multifamily home or buy a MFH and continue to live in my house. What else am I missing? Should I be thinking of other things? Life goals are to retire around 40. If I move into a MFH I should only need to come out of pocket around 3.5% vs buying another house at 20% down. How much cash should I start investing in a Peer-2-Peer lending site? Some direction would be great, I know I have a lot of questions but in my current situation I have exhausted my resources of family and friends.

Thanks in advance!
Jeff
« Last Edit: May 11, 2016, 11:44:52 AM by BlackMagic »

eudaimonia

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Re: Looking to minimize more expenses and would like insights
« Reply #1 on: May 11, 2016, 11:33:24 AM »
Right off the bat I would recommend getting your 401k as close to maxed out as you can. Your cash flow is shown at ~$1,400 a month so that is a good start. Also in your expenses column you show another $984 going into savings. Throw both of these into the 401k until it is maxed out. After that get the rest of it into a ROTH IRA. Going from your current annual contribution of $3200 to the max of $18,000 will save you about $3700 annually just on taxes.

Also, you don't explain what those credit card costs are on your expense sheet.

BlackMagic

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Re: Looking to minimize more expenses and would like insights
« Reply #2 on: May 11, 2016, 11:44:32 AM »
The cashflow is heavily elevated because I was paid 3 times this past month instead of 2. I have adjusted the original post to show my March income statement. Most of my CC expenses are from eating out or entertainment outside the house, I'll look further into those to see where to minimize. As far as maxing out my 401k, what are you referring to? I am maxing it out in my eyes as I'm contributing the 5% so the company will give me the 4%. I don't think maximizing my 401k and IRA are going to help me with the goal of retiring by 40 as I'm penalized for taking the money out before age 65.

neo von retorch

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Re: Looking to minimize more expenses and would like insights
« Reply #3 on: May 11, 2016, 11:52:38 AM »
Maybe take things one at a time:

* Minimize unnecessary expenses
* Maximize tax savings (if you build up 5 years of non-retirement funds, you can retire and convert retirement funds into Roth IRA funds over time without paying a penalty)
* Figure out order of investments { prosper.com, rental property (house vs MFH, etc), P2P lending } - you should create an Investor Policy Statement and stick to it.

rubybeth

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Re: Looking to minimize more expenses and would like insights
« Reply #4 on: May 11, 2016, 12:05:26 PM »
The cashflow is heavily elevated because I was paid 3 times this past month instead of 2. I have adjusted the original post to show my March income statement. Most of my CC expenses are from eating out or entertainment outside the house, I'll look further into those to see where to minimize. As far as maxing out my 401k, what are you referring to? I am maxing it out in my eyes as I'm contributing the 5% so the company will give me the 4%. I don't think maximizing my 401k and IRA are going to help me with the goal of retiring by 40 as I'm penalized for taking the money out before age 65.

Nope, most people here are going to recommend minimizing taxes by maxing out your 401k to the $18,000 max for 2016, plus the $5,500 IRA maximum. There's no penalty after 59.5 (not 65 as you wrote) and there are methods for moving the money into a Roth IRA without paying a penalty. Read about Roth pipelines for how to get money out of a 401k/IRA prior to age 59.5 (you age the funds for five years, then can withdraw and pay regular income tax on those withdrawals).

dandarc

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Re: Looking to minimize more expenses and would like insights
« Reply #5 on: May 11, 2016, 01:05:09 PM »
The 59.5 rule is but a minor inconvenience to accessing your retirement accounts early:

http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/