Need advice on cutting back investments to build a large savings

[Douggyfr3sh]

Hi everyone,

New here.  I found FI a few years ago and have been very aggressively working on paying down debt and investing, but have deferred savings.

About 3 years ago, I quit my job and took a HUGE leap of faith to go back to school and study software engineering in a coding bootcamp for 15 weeks.  To do that, I had to basically go broke and live off a credit card because I couldn't have a job for 15 weeks.

The investment/risk paid off.  I got a job within a week and 3 years and 2 raises later I am making nearly $90k in a low cost of living area, plus 10-20k per year with my side gig (playing poker seriously/competitively).

Since then, I have paid off:

• 5k in credit card debt
• 10k in personal loans
• ~14k in student loans

And I have built:

• 28k in 401k investments
• 8.5k in IRA investments
• 5k in taxable investments
• ONLY 3.2k in emergency savings

However, I have been totally prioritizing debt pay down and investing over building a savings (I know, this is the opposite of most financial advice).  I was just very eager to get a base amount invested as early as possible so it could start compounding.

Unfortunately, I lost my car in a flash flood and my insurance didn't cover it, so I also had to finance a car a few years back.  I was pretty conservative and bought a high-mileage 2009 Toyota Tacoma for 12k (1k down, ~3% APR).  Not the greatest gas mileage, but I actually need a truck and use the bed often for hauling things.  My car was paid off and I only paid $5k for it, so that kind of sucked.

My original plan was to pay off all the stuff I already have, plus my truck, plus an additional 8k I still have left in private student loans from undergrad.  I also have just over 50k in subsidized government student loans, but have been paying the minimum on them and plan to continue with that.  Basically, I am on an IBR plan where my remaining balance should be forgiven after 20 years, and some rough back of the napkin math makes me think that I don't have much incentive to over-pay on these loans when I could instead be investing that money.

However, lately I have been getting more and more frustrated with my job.  I was just out for 2 weeks for surgery, and on the night before my first day back I was tossing and turning all night and I think it was because of anxiety over returning to work.

I want to build up at least $15k in savings quickly so that leaving my job to do something else is a viable option.  I struggle with this, because on one hand I make great money, have great benefits, and don't work a TON of hours (45h is usually the most, once in a while I have to work extra).

On the other hand though, my manager is often a pain and I am often very stressed because of my job.  I am trying to stick it out 5 years so that all of my employer match on my 401k fully vests, but I don't know if I can make it that long.  I am at 3 years next month and at that point, their contributions will be 60% vested.

I would like to do this intelligently, which means cutting back on the right investments in the right order.

Currently, I am contributing the maximum amount to my 401k ($19,500 per year or whatever the limit is).  And also maxing out my ROTH IRA every month.  On top of that I am saving $200 per month in my savings, and contributing any extra money manually to my taxable account.

The MOST I am willing to cut back is to a 6% 401k contribution to get the full employer match (contributing 21% now), and 0 ROTH contributions.  I am wondering if it makes sense to start with the ROTH stuff, and then start cutting back the 401k, or if it would be better to keep the ROTH going and just cut back the 401k to 6%.  I'll have to decide whether I want to go into "extreme savings mode" and only have the 6% 401k, or go somewhere in the middle and still invest a bit more.

A little extra context:

-My only debt now is my truck payment, student loans, and a mortgage on a 2-unit property where we live in one unit.  The other unit is commercial storefront and not rented right now, but we are hoping to get it rented to generate ~$500/mo in income.  We have equity in the property.

-My DREAM is to play poker full time professionally, but I would need to lower my expenses more and build up a much larger bankroll to take that shot
-My IDEAL REALISTIC JOB is to freelance or work for a consulting firm as a contractor where I can be fully remote/set my hours.
-I am willing to quit my job with "no plan" as long as I have enough savings.  I believe that if backed into a spot where I need to find a way to make money, I will do it.
-I am 32 years old.

Thanks!

[zolotiyeruki]

Wow, you've done some gutsy and hard things, and you've come a long way.  Ignoring the mortgage on your current place, you've increased your NW by $75k in under three years.  That's awesome!  I don't know what the best thing is for you, but maybe I can pose some questions that can get you thinking in the right direction

1) What's wrong with continuing with a career in software development?  It'd be reliable income, even if it's not glamorous.  Do you not enjoy the actual work?
2) Can you specify what aspects of your job are stressful?  You've mentioned the manager, but are there ways to address that issue without jumping ship?  Maybe other departments in your company?  Or maybe have a heart-to-heart with your manager?
3) You've got a few years of SW dev under your belt.  There are plenty of companies looking to hire talent.  Can you start putting out feelers?
4) How good are you at compartmentalizing?  Can you leave the stress of work behind when you go home?  Can you choose not to care about the stress-inducing aspects of work, and throw your enthusiasm into the good parts?

Now, here's my (very biased, so take it with a grain of salt) advice:
1) You've got a pretty good gig going right now, other than the stress.  You're on a solid track right now, both in your career and your finances.  Don't throw it all away.
2) This is a good opportunity to build up FU money so that you can start telling your pain-in-the-neck manager "no thank you."
3) (start rant) Don't take gambling up as a "career."  You would produce nothing of value (unless you're on TV and providing entertainment, in which case...eh, it's not much better), and your financial support relies entirely upon taking money away from other people.  It's not a reliable income stream, and has a way of getting people into debt over their heads. (ok, rant over)
4) In the meantime, look for ways to improve your work situation (see questions above)

[seemsright]

Stop caring about the job. Go to work, do what you can and go home. Flat out do not care. Calculate how much you make per minute and start to work on getting promoted.

The more money you have in the bank the more power you hold. Do what you can to save.

You are in a good spot. Stay there and build the FU base. Once you have your FU base you can make more choices but do not throw away what you have...a few more years of putting your head down and working on your FU base you will be golden. Keep going.

[Douggyfr3sh]

Hey,

Thanks for the great advice!  I appreciate how you answered the questions i didn’t ask but really needed asked instead of addressing the direct questions.

I am on my phone but wanted to address some of the above points.

For the most part. I agree with everything with few exceptions.

My biggest problem with my manager is that he is constantly over booking me with tasks i am not supposed to be doing and he knows it.  I am working on a 2 year cloud migration project and the lead on that project as well as upper management expect me to be dedicated fully to that and doing nothing else, but he tries to assign other work to me knowing full well he should not.

I have pushed back and asserted myself very aggressively, as I usually do.  I kind of act like I have FU money even though I don’t.

Usually after i push back everything is fine and gets resolved, but it is annoying that I constantly have to do it and feel like things that should be my Manager’s responsibility end up falling on me.

Other problems are that i am really bad at compartmentaling despite trying hard to get better at it, and that no matter how hard I try, i simply cannot “not care” about my job.  When things are done inefficiently or dumb management decisions get made, it gets under my skin.

The bright side of this is that it results in me being a very valuable and effective employee.  I am pretty confident I will be receiving a large promotion early next year.

Also, i wanted to address some of the comments on poker.

Poker is gambling/relies on taking money from others/is unsustainable:

This is partially true, but is mostly a common misconception.  Poker Tournaments, yes, are extremely high variance and even good pros have losing months and even losing years.

Cash games, however, are gambling with a MASSIVE edge, and are very consistent.

Rather than just saying that, i ran some simulations in a well known poker variance calculator.  Here’s what my expectations would be if i played just 30 hours per week at mid stakes ($20k bankroll required):

Expected weekly profit: $1500
Expected monthly profit: $6000
Frequency of having losing weeks: 19%
Frequency of having a losing month: 3.6%
Frequency of losing over a 3 month sample: 0.1% (1 in 10,000)

I ran these using very conservative inputs and realistically I would play 35+ hrs per week.

Also, the way the poker economy works for the Most part, the losers are paying for the entertainment of playing and can afford to lose.

If you look at the very highest stakes, the money comes from extremely wealthy people- celebrities, athletes, business people.  People like Kevin Hart, Paul Pierce, Chumath Palpitya (sp).  In my local casino the biggest loser drives a $100k car and does not work.  Some other losers own large local businesses.

Also just wanted to add that i believe strongly that saying poker is not sustainable is incorrect.  I have been around the game for 14 years, and there have been many “sky is falling” moments in the industry over that period, and every time it has bounced back and remains a viable career path.

On poker not providing any tangible value:

I agree. I would never want to only play poker, and would instead be involved in other ways, such as coaching, blogging, and developing poker software (already have something started here).


Since my post, I cut back my 401k to 6% and turned off my roth contribs, and will be focusing on building that savings.  Even if i don’t quit, building that feels like the next step.

For now i plan to at least stick it out 2 more years.  After that I might go for poker, or might just wait until I hit some level of “skinny FI” and then go for it.

For what it’s worth, i would never go for poker without having a massive savings and also a large sample of data proving that i am a big and consistent winner.

In closing, just want to say that i HAVE to put myself fully into poker and see how far i can go with it at some point in my life.  If i don’t, it will be a death bed regret.

I could wait until I’m 40 and nearly at FI first, but it’s also very likely i would actually be able to reach FI faster the sooner i switch. 

Thank you very much for the discussion!!

[zolotiyeruki]

It sounds like you're handling your manager exactly right--clear communication, saying "no" when it's appropriate.  At this point, it would be helpful to accept that this pattern (manager makes inappropriate request, you say no) is just an annoying part of life, like having to shower or pay your electric bill, and (and this is where it gets hard) quit investing yourself emotionally in it.  Or, put more bluntly, don't let your manager's shortcomings upset you.

It's clear we have irreconcilable differences of opinion on gambling as a job, so I'll let that one lie. :)

[blingwrx]

It never hurts to update the resume and look around. You have a good chance at finding a remote job now with the virus most likely changing things up for the long term. It looks like the first Job you’ve had as a software engineer so you have never really explored this field and what other companies are offering. I also think you could probably get pod more if you jump. 90k isn’t that great for a software engineer doing cloud stuff but maybe that’s good for LCOL. So maybe finding a remote job with a headquarters in a HCOL area might net you a lot more.

I feel you on the toxic boss I’ve had those and it just kills the job. Either you can tough it out until they eventually leave or just jump ship yourself. Sometimes you can’t change how a person manages even if you’re assertive with them.

Don’t quit your job until you have another one lined up it’s a lot harder to find a job once you’re unemployed.

Poker sounds fine for a side gig until you get in better shape with your finances then maybe you can be in a better position to take a risk.

[seemsright]

You are handling your manager just fine. Yes it is a pain in the ass...but it is part of the job. Do what you are doing, keep telling the manager no. And really start to learn how to not care. That may be meditation, running, or other ideas. But you must learn how to not care till you have enough FU money to do what you want to do.

I can tell you that having FU money in the bank makes the job way better. Hubby is a Tech Lead for a big company, he has told his boss no enough times and there is enough money in the bank that he gets to do what ever project he wants to do, on his own time table and his boss never bothers him.

Keep going, you will get to the next level. Yes it is not fun, but it is called work for a reason. They pay you to deal with the kind of BS.

[Feivel2000]

Frequency of losing over a 3 month sample: 0.1% (1 in 10,000)

Isn't 0.1% = 1 in 1,000?

[Laura33]

First, if you want some more specific advice, it would help to post the details on the debts -- amount remaining, monthly payment, interest rate, etc.  For example, if you have CC debt remaining and are paying double-digit interest rates on that, my advice is going to be to suck it up at the job for as long as it takes to get that paid off, before you start building your FU fund.  OTOH, if you're down to low-interest debt that it makes financial sense to hang on to longer-term, then sure, shift over to the FU fund.

Two specific points: 

1.  Please don't cut back on your 401(k).  That will increase your taxes and put less money in your pocket to use toward all of your other needs. 

2.  I suspect a big part of your job exasperation comes from your expectations.  A boss who asks you to do more than you have time to manage?  Oh, honey, that's just life.  Stupid decisions being made by people who don't undertand the situation as well as you do?  Welcome to work!  There's a reason that Dilbert and Office Space are so popular; even the best of jobs have days that remind you why "job" should be a 4-letter word.  The solution is not to jump from job to job looking for that perfect situation.*  It's to find something good enough, while reducing your expenses and socking enough away so you can tell the whole world of paid employment to go fuck itself. 

Of course that's tough to do.  The only way I have figured out how to manage that frustration is to humanize the process -- it's not "us" vs. "them"; it's one human (your manager) who has his own bosses breathing down his neck to get stuff done and refusing to prioritize (yes, of course the cloud migration is a top priority, but we ALSO need to get XYZ done), and he knows you are great at your job and he can count on you to do it well, so his natural response is to ask you to do more, unless and until he understands that you cannot take it on.  If you can look at things from his perspective and strategize other solutions that make him look good to his bosses, that's awesome; OTOH, if you can't or don't want to, then just politely and firmly decline, as you have been. 

But the bigger point is aligning your expectations.  Happiness = reality - expectations.  Right now you're angry and frustrated because you expect to just be able to work on the cloud migration project.  So every time your boss asks you to do something more, you get angry, because it doesn't meet expectations.  What you need to do is reframe your view of your job as "work X hrs accomplishing the company's highest priorities" (or something similar).  You should absolutely expect your boss to throw other stuff at you, because that's the way companies work.  Work is a constant negotiation, period.  If you can reframe your role in your own mind, then there's no need to get angry when the inevitable request comes in; you just ask whether this is a higher priority than the cloud migration task, and go with whatever his answer is. 

Usually when people are "wrong" (from my perspective), it's for one of two reasons:  either they know something that I am missing; or they are stupider than I am and don't get it.  On the first, the lower you are down the totem pole, the more often this is the case, because you see one small facet of the bigger issue.  So it's always good to keep your own hubris in check and assume that you may not have the whole picture, and that when they say they need ABC, they actually have good reasons for it, and try to brainstorm ways that they can get ABC while still addressing the problems you are concerned about.  On the latter, well, it's pretty much a tautology that the further you are to the right on the intelligence bell curve, the more people there are in the world who are stupider than you.  So what are you going to do about it?  You can't make them smarter.  So you can either go through life perpetually angry and frustrated by how stupid everyone else is, or you can figure out how to translate your concerns into language that they can understand.  The latter not only makes you more effective at work, but it also leads to greater overall happiness (and less of the general assholishness that tends to creep in despite best efforts when your brain belittles everyone around you).   

Of course, all of that is more work (and it's often harder, because it requires exercising different muscles in your brain).  And if you're just not interested in making that investment, then go back to the top:  focus less on the short-term FU fund and more on making the decisions that will get you to FIRE faster.   


*Your complaints remind me very much of my DH when we were about your age; he was always the smartest guy in the room -- really -- and was hugely frustrated when the business guys above him would make stupid decisions, and he kept thinking that if he just got that next promotion, he'd be the one making the decisions.  But no matter what level he moved to, there was always someone higher up who was still driving the stupid decisions.  Ironically, he has been much happier since he gave up and went to work for MegaCorp; now he has worked his way into a position where he actually translates the technical stuff for the MBAs and so has more power to drive good decisions than he ever did before.

[Douggyfr3sh]

Wow, a lot of great advice, thanks everyone so much!

It's hard to follow up on everyone's posts at once, so I'll just do my best.

It sounds like you're handling your manager exactly right--clear communication, saying "no" when it's appropriate.  At this point, it would be helpful to accept that this pattern (manager makes inappropriate request, you say no) is just an annoying part of life, like having to shower or pay your electric bill, and (and this is where it gets hard) quit investing yourself emotionally in it.  Or, put more bluntly, don't let your manager's shortcomings upset you.

It's clear we have irreconcilable differences of opinion on gambling as a job, so I'll let that one lie. :)

This kind of hits the nail on the head.  I need to accept the pattern and be at peace with it.  I have done A LOT of work on this, including meditation, taking an ivy league class on the science of happiness (online), exercise, etc.  The biggest thing that helps me is that I go on a 4 mile hike at the end of the work day pretty much every day, cannot remember the last time I missed a day.  Often at the start of that walk, I am frustrated/stressed.  By the end, I am much more relaxed.

I actually think that having some amount of FU money is what's going to get me there.  There is at least a little stress in the back of my mind every time I tell my manager "no", and I think if I had 15k in cash sitting in an account a lot of that stress would be alleviated.

Regarding gambling as a job, yeah let's agree to disagree :). 

Someone pointed out I miscalculated the 3 month variance, the chances are in fact 1 in 1,000, not 1 in 10,000, of having a 3-month losing period.  I still consider that to be pretty consistent and have had plenty of losing streaks in the past, it's just a part of the game and really isn't that different from running your own business.  Sometimes business is good, sometimes not so much.


The key takeaway I feel like I am getting from all this advice is that this is a me problem, not my manager's problem.  Someone said "Oh honey, that's just life", and I think I am bad at realizing and accepting that :).  There are plenty of really good things about my job and I think I just need to get some savings built up and focus on the positives, and also derive value and satisfaction from my side hustle and other things outside of my day job.

Someone also mentioned not cutting back on my 401(k).  I appreciate the advice, but am going to disagree on that one and have already cut it back so that I can build some savings.  Probably will only have it cut back for 2 months, then going back to max contributions, so it's not a huge Tax impact and the peace of mind and life upgrades I will get from having a bit larger savings is worth it to me.

Basically, my immediate goal is to have enough money in my "To Be Budgeted" category in YNAB so that I can budget once per month instead of bi-weekly every time I get paid.  To me that is a huge milestone that will provide a lot of personal satisfaction.  Once I hit that, the 401k contribs will be maxed again, and It should be doable in less than 2 months.  I plan to keep my ROTH contributions turned off still, and to funnel those moneys into my emergency savings, until that hits 10k.  At that point I will go back to maximizing investments.


One other note, someone suggested providing more specifics on my debts, but I listed that all in the OP.  I do not have ANY high interest debt, and I have NO credit card debt at this point.  I use a credit card to get rewards, but pay my full balance every month (Chase Sapphire Preferred anyone??)

Anyway, thanks so much for the discussion.  Just talking this out has been really really helpful.

[Douggyfr3sh]

Wanted to add:

Welcome to work!  There's a reason that Dilbert and Office Space are so popular; even the best of jobs have days that remind you why "job" should be a 4-letter word.  The solution is not to jump from job to job looking for that perfect situation.*  It's to find something good enough, while reducing your expenses and socking enough away so you can tell the whole world of paid employment to go fuck itself.

This was great.

I believe I have probably found something that is "good enough", and now is the time for patience and consistency.  I suck at patience.  I need to get better at patience. 

[zolotiyeruki]

A long time ago, I heard some great advice, which I'll adapt for this thread:

Ideally, you should enjoy your job.  But it should not be your favorite activity, lest either you grow to hate going home, or work destroys your love for that activity.

[moof]

My uncle has been a professional gambler his whole life, basically in response to being kicked out of the house before finishing high school.  He has a very good head for math and odds, and calculates his expected hourly earnings for various games and chooses activities based on average hourly payout.  When he walked through how he does all this it was very much a job.  It sounds very un-sexy, un-fun.  He has scraped through, and has built modest savings (~100k last I heard at age 68), but once he went down this path no other careers were ever going to be open to him.  If you get tired of playing poker after four or five years, it will be very hard to break back into a programming job.  In my uncle's case many of his strategies get figured out by casinos, who then swap out machines, or get figured out by other competitors who will then draw un-wanted attention and speed up casinos taking notice.  It has gotten harder and harder to keep a good hourly income from it.  He averages a bit over $20/hour the last time he shared a figure.

He has won cars, but had already calculated the taxes and expected resale value when he chose to play that game.  The jackpot is a relief that his math panned out, rather than an exciting jackpot.  As a "high roller" he gets invites to events like to a VIP suite at a football game.  He is anti-social, but has to go often enough to not fear he will get labeled as anything other than a prolific gambler rather than a "professional" who can easily get banned.

Back in the day he was a poker player (>30 years ago), and actually made enough to open a small off-strip poker hall of his own.  He lost it in a hand of poker, as the family lore goes.  He does not discuss it.

[GreenPen]

You mentioned 8.5k in an IRA. If this is Roth, you can already use it as an emergency fund. I'd advise doing so as long as you are paying off high interest debt.

Also, as a bootcamp grad myself, I'd recommend quitting poker (temporarily) and using that time to study Leetcode. Switching jobs / interviewing can be fun as a software engineer. Your comp increase will likely outweigh any 401k vesting loss.

Also, please be careful with your poker. I know you mentioned some stats above, but I think you are understating the risks. You are not an algorithm, you're a human being. Just like every human being, you have emotions, an ego., and other life factors that can affect your play. In other jobs the worst case scenario is that you lose your job. With poker, it's worse than that.

[Douggyfr3sh]

You mentioned 8.5k in an IRA. If this is Roth, you can already use it as an emergency fund. I'd advise doing so as long as you are paying off high interest debt.

Also, as a bootcamp grad myself, I'd recommend quitting poker (temporarily) and using that time to study Leetcode. Switching jobs / interviewing can be fun as a software engineer. Your comp increase will likely outweigh any 401k vesting loss.

Also, please be careful with your poker. I know you mentioned some stats above, but I think you are understating the risks. You are not an algorithm, you're a human being. Just like every human being, you have emotions, an ego., and other life factors that can affect your play. In other jobs the worst case scenario is that you lose your job. With poker, it's worse than that.

Hey!  Thanks for your input.

On Roth IRA as an Emergency Fund

I used to think about my Roth this way, but realistically, I would absolutely hate to ever draw it down for any reason, and would much rather have a separate emergency savings.

On studying code instead of poker

I do both.  Just over the last few weeks I learned Chrome extension development and created my own extension.  But, the thing is, Poker is not just about money for me.  It is a GREAT intellectual challenge and I generally enjoy it very, very much.  I will not be quitting any time soon, and could see myself playing ~5-10 hours per week for the rest of my life.

Also, I did go through an interview process for a pretty high end consulting firm a while back.  I got through their coding challenge and have been put on the short list to be considered for a position whenever one opens up.  They are impacted by the quarantine, and I'm not holding my breath, but it does give me some peace of mind knowing that potential opportunity could come knocking.  That would mean cutting back to 35h per week and choosing my own hours while not taking much of a loss in terms of compensation, which would leave me more time for poker or other interests (I am also very interested in learning real estate investing and getting started with purchasing a single family rental).

I am confident if I just poured myself 100% into Software Engineering, I could probably raise my salary to north of 130k in a few years.  However, I would rather take my chances with poker nights/weekends and just do my best at my current job during the 9-5.  Life isn't all about money and I enjoy the balance of having a competitive outlet that drives me to do and be my best.

On your other Poker comments

I am going to start sounding like a broken record on this topic- but I have to say it: These are just misconceptions about how the game works.  I have been in the game 14 years now and have a much better understanding of variance, emotional factors, and the poker economy than anyone sitting on the sidelines looking in.

The data I shared in my previous post includes emotions, tilt, etc.  The calculation uses a standard deviation.  That standard deviation comes not only from the mathematical variance of the game but also from emotional mistakes.  Over a large sample of hundreds of thousands of hands in my database, my standard deviation is 80 bb/100.  I used 100bb/100 for the simulation numbers, which makes the picture worse than it even is in reality.  The above quoted numbers are actually worse than the real-world scenario I have data to back up.  Some of the most respected players in the game would agree with me on using this framework.  It is literally the best possible way to model expected winnings and variance.  This is just math, and the math doesn't lie.

What Moof said above is true.  Poker/professional gambling is NOT sexy or glamorous.  It is a LOT of very hard work.  I'm not looking for a quick payday and I understand the game and how the economy of poker works at a very deep level.

[GreenPen]

Douggyfr3sh, please don't assume that you're the only one here who understands statistics.

You are posting on a personal finance blog, so you should expect to hear cautions about gambling. The dopamine rush you get when gambling is real, and it can lead to addiction. For some people, this means playing for higher and higher stakes, which ruins many people financially.

This is not a personal comment directed at you -- it's about playing poker in general, which is zero-sum at best, because math. This may sound obvious, but you should never put your financial independence on the line. That's all I'm saying. If you agree with this, there's no reason to be defensive.

On a related note, it's not obvious to me what money you are currently using to play poker. You mention that you are making $10-20k per year playing. But the only cash you mentioned is your $3.2k emergency fund. Do you have a separate bankroll for poker? If not, my advice would be to take a short break from playing -- don't gamble with your emergency fund.

That said you obviously recognize the need for an emergency fund, so...

On Roth IRA as an Emergency Fund:

Yes, it would be a shame to take a (penalty-free) early withdrawal from your Roth IRA. But it's the same effect as not contributing to your Roth at all.

Setting the poker/job issues aside, there's the exact steps I would take if I were you:
1. Stop contributing to your 401k beyond the company match.
2. Stop contributing (monthly) to your Roth IRA.

Do this until you build up several months emergency fund (and your emergency fund should be separate from the cash you hold for poker).

3. Pay off any high-interest debt.

You'll get different (all reasonable) opinions on what do to with low-interest debt, e.g. student loans, so I'll leave that aside.

After this:
4. Roth IRA
5. Max your 401k.

Note that even if you stop/slow contributions to your 401k now, you can boost them up again near the end of the year. You can also contribute to your ROTH all at once (until tax day next year). It doesn't need to be monthly.

Caveats:
* If you are still on Step 3 at the end of the year (or really by tax day next year), it's time to put part of your (cash) emergency fund into a Roth IRA. Make the Roth contribution but keep it as cash until you build up your emergency fund outside of the Roth.
* If you finish Step 3 near the end of the year (Nov, Dec), prioritize your 401k over your Roth IRA, since you'll have until next April to contribute to Roth.

[GreenPen]

Sorry to break this into two separate comments... But I'm looking back again at your numbers:

($20k bankroll required):

Expected weekly profit: $1500
Expected monthly profit: $6000
Frequency of having losing weeks: 19%
Frequency of having a losing month: 3.6%
Frequency of losing over a 3 month sample: 0.1% (1 in 1,000)

I know nothing about the poker industry, but there's absolutely no way these numbers are correct.

On your initial 20k, you are projecting a 720% ANNUAL RETURN with almost ZERO RISK. With this kind of return, you can turn your $20k into $1MM in two years.

If you truly believe in these numbers, then you should be contributing nothing to your IRA or 401k. In fact, you should probably be gambling on margin.

[Feivel2000]

No, because there is no compound interest.

[Douggyfr3sh]

Sorry to break this into two separate comments... But I'm looking back again at your numbers:

($20k bankroll required):

Expected weekly profit: $1500
Expected monthly profit: $6000
Frequency of having losing weeks: 19%
Frequency of having a losing month: 3.6%
Frequency of losing over a 3 month sample: 0.1% (1 in 1,000)

I know nothing about the poker industry, but there's absolutely no way these numbers are correct.

On your initial 20k, you are projecting a 720% ANNUAL RETURN with almost ZERO RISK. With this kind of return, you can turn your $20k into $1MM in two years.

If you truly believe in these numbers, then you should be contributing nothing to your IRA or 401k. In fact, you should probably be gambling on margin.

Hey,

Again, I appreciate your input, but please don't get so defensive just because I disagree with you and have different opinions on a few things.  Your opinion is not the "be all end all answer".  I never said I am the only one that understands statistics.  In fact, I am very weak in statistical math, but know how to use calculators. 

What I did assert, and you agreed with, is that I know a lot about the poker industry and you know little to nothing about it.

I am not even going to begin to try to make sense of the pseudo-math in this post.  You have made many wildly incorrect assumptions here, and even if your incorrect assumptions were true, the results would still be wrong based on those incorrect assumptions.

You are looking at poker as a passive investment.  It is neither passive nor an investment.  It is an active job, just like any other job, and I have an hourly expected win rate.  My hourly expected win rate DOES NOT go up linearly with the size of my bankroll.  That's all I will say on the topic, and I am not interested in discussing it any further.  I came here to learn and grow, and not to have petty arguments.  I am not going to respond to any further comments on this topic.

One other thing since you mentioned it, yes- I do have a separate poker bankroll, which I have not included in any of the above posts, because I naturally don't view it as part of my personal finances and consider it to be my business operating expenses.  I don't even see it as "my money" really.  That's why I didn't even mention it in my above posts. 

Your cautionary advice to stop poker for a while actually makes a lot more sense now that you mention you were thinking I was using my emergency fund or something like that to play with.  I have always kept my "me money" and my "poker money" completely segregated, and I would never, ever dip into my "me money" for poker.  I guess I didn't make that very clear.

I really hope we can move past this specific point.  I understand that a bunch of smart people who are pursuing FI are going to naturally want to caution against gambling, but please try to understand that you probably don't really know how it works and that I probably have a much, much better understanding on this specific topic.

Some of the other advice you have provided has been really good and I sincerely do appreciate it.

[Douggyfr3sh]

Wanted to share an update:

I have thought a lot about the feedback I received in this thread, and decided to stick to my original plan and philosophy of maximizing investments at the expense of building a savings fund more slowly.  I have turned all my investments back on and set them such that I will max out my 401k and Roth IRA this year. 

After posting this thread, I also spent some time going through my recurring expenses and was able to lower them by $70/month pretty easily.  I am also working with my fiance' to come up with a plan for spending less on groceries.  As a result of these efforts, I now have $200/month in automated investments into my taxable M1 account on top of maxing out the tax advantaged buckets.

Thanks for the advice everyone!

[zolotiyeruki]

$200/mo after taxes is nothing to sniff at.  Nicely done!

[Ethel]

Hey, you've done really well, both in your original post and your update. Two points:

1) You mentioned waiting for your student loan to be forgiven. Is that guaranteed? I'm not from the US and have no experience on that front, all my knowledge about it comes from Dave Ramsey's rants about the Student Loan Forgiveness program being a lie because allegedly most people get denied.

2) Regarding paying poker full-time: I was interested in doing that a lot back in the day so I understand the allure. However when you play cash games during off-times (as you'll need to do to get a 35-hour week), I find you're playing against professionals like yourself - there is very little money to make then. I'd include that in my consideration.

[Douggyfr3sh]

Hey Ethel,

Thanks for posting!

Regarding student loans- my understanding is that forgiveness after 20 years for IBR plans is currently sort of “guaranteed”, and also once you are in an IBR plan you cannot be foricbly removed as long as you re file for it every year.

If you make good money, you cannot get an IBR plan.  With my current salary i would not qualify, but i got into one years ago during a year where i was able to report very low income.  It’s sort of a loophole that i stumbled upon i guess.

Additionally, there is some chance the Gov’t will introduce some level of forgiveness on these loans in the near future due to covid and what i think is an inevitable market crash.

Regarding poker, that is a VERY good point, and i have also found that myself.  I still think a lot of the “regs” up to $1/2 still aren’t that good and there’s plenty of room for win rate even against them, but lately i have found cash games to be much better fri-sat nights and Tournaments are by far best on Sunday.  That makes it very appealing to just play only those days, and that is kind of my plan for now.

I plan to study poker Mon-Thurs nights and just play fri-sun along with my job.  Staying
ahead of the game and maintaining winrate is a lot of work these days, but I love it!!

[kenaces]

Regarding poker, that is a VERY good point, and i have also found that myself.  I still think a lot of the “regs” up to $1/2 still aren’t that good and there’s plenty of room for win rate even against them, but lately i have found cash games to be much better fri-sat nights and Tournaments are by far best on Sunday.  That makes it very appealing to just play only those days, and that is kind of my plan for now.

I plan to study poker Mon-Thurs nights and just play fri-sun along with my job.  Staying
ahead of the game and maintaining winrate is a lot of work these days, but I love it!!

Nice job working hard on your FIRE goals.

I have been playing poker full time for 11 years now so I want to chime in on that. 

Poker is the best part-time job and NOT a great fulltime job.  Having to grind out the hours, deal with the variance changes things much more than you might realize.  Also the upside isn't what it used to be. Earning six figure money at poker these days is VERY hard to do and it gets harder every year.

I would suggest you keep learning and enjoying poker, and think of it as a great side hustle.

GL on the felt

[Douggyfr3sh]

Hey Ken,

Thanks, that is definitely great advice.  I have been playing poker for 14 years now (seriously for more like 5-6 years), so I've been around to see the game evolve and get tougher.  While I mostly just agree that it gets tougher and tougher, I sometimes also feel like most of the games I play in are still plenty soft, and there's still a lot of money to be made.

I played poker full-time myself for a little while several years back, and I know first hand how tough it can be.  It is an excellent side-hustle, and I have actually been thinking really hard for a while about building a blog website specifically dedicated to poker as a side hustle.  I bought the domain a while ago and feel that I have a lot to offer in this area as I have been successfully doing it for years.  Several of the debts I have mentioned paying off over the last few years were paid entirely with poker winnings.

All of the advice I am getting here is really pushing me in the direction of staying on my current path and just keeping it up as a side hustle.  Hopefully someday I will get around to using that domain name I purchased to start a blog and hopefully build a small community around this idea.

Thanks!!