Raise on the horizon

[netskyblue]

I make $35k currently, as my "base pay."  (I take home approx. $22,500/year after taxes and other deductions).  For the past several years, my employer has paid out a % of profits (weighted against your time with the company, performance, "tardies," etc) as a quarterly bonus and that has bumped me up to about $37k a year, gross.  They discontinued that this year.  Luckily for me, I never counted on those bonuses as anything more than money to be stuck into savings.

I just had a performance review, and my supervisor told me he's going to recommend that our boss, the owner of the company, sit down with me for a wage review.  I anticipate a 2k-3k increase. 

I'm putting 5% of my pay into a 401k, with a 3.something% employer match.  Not enough, I know.  I KNOW I should put whatever this raise turns out to be into an IRA or ROTH IRA, but OMG I want a house.  I'm debt-free, and in the process of saving 10k for an emergency fund, then 50k for a downpayment, and at this rate, that's going to take me over 9.5 years.  (Yes, that's with saving 28% of my take home pay.  Just shoot me now.)

FI/ER doesn't really feel like a reality for me - I'm afraid to even hope for more than retiring in my 60's.  I could shave 21 months off the time it would take me to save up that money if I got a $2k a year raise and applied it towards that savings goal!  The now, now, now part of me thinks that buying a home at 38 instead of 40 is TOTALLY worth it, but I know it's really not. 

The house:  I want to buy a 120-150k house, which is "starter home" prices where I live.  I'd be financing 70k-100k, and that's really all I can afford.  I pay $750/mo in rent now, and I'd need a mortgage payment less than that in order to still be able to afford insurance & taxes.  Plus of course increased utilities, and likely more in gas money.

FWIW, I hate apartment living *so freaking much.*  But to rent a house such as I would like to buy would be more expensive than I'm paying in rent, setting me back even further.

Please help convince me to put it in an IRA!  So much of me wants to live for the now (or, 8 years from now) because who knows - I might not even LIVE to retirement age.

[SunshineGirl]

Is there anything drastic you can do for a year or two to make/save more money? Get a roommate? Live with parents/siblings? Find a second job? Get a job that pays more? Negotiate a MUCH higher base wage? Take on more responsibilities at work for more pay?

Sometimes I find that when there's a definite time limit on how long I have to "suffer," it's easier to bear. Personally, I could see directing the money toward a house downpayment; I think it's justified. However, I think you're very, very wise to have as large a downpayment as possible, especially at your low income level. Houses can be money pits, and there will be maintenance costs.

Have you thought about buying a duplex and renting out one side? That might accelerate your plan and also give you more for retirement.

[SunshineGirl]

Sorry - I was answering thinking your base pay was $22K. Big difference from $35K!

[netskyblue]

And (argh!) excuse me, my bad.  My take-home is $24,400, approx.  I ALWAYS forget about the twice a year "3rd paycheck of the month" that happens on a bi-weekly schedule.  I always stick it straight into savings, so I never think about it.  10 months a year, I bring home ~$1875.

Sadly for me, I'm pretty well-paid for my company/job.  I did work a second job for the last 4 years, but quit in November when I got debt-free.  I can't say I regret it, having 15 hours a week more free time is pretty darn sweet right now.   

[netskyblue]

I suppose my third option would be to put it in a ROTH IRA, knowing that I COULD take out the principal when it's time to buy.  If the market's gone up over 3.25%, I'd be ahead of where I would have been if I'd just saved the money in my bank account (rather likely, after 8 years?  But who really knows...)  If its gone down, I could just suck it up and leave it alone, grumpily admitting to myself that at least I've done the right thing.

[SunshineGirl]

LOL. Yep, you could!

[Thegoblinchief]

Principle in a Roth can be withdrawn after 5 years, so part of that could go towards the down payment. Since your house timeline is relatively far away, invest the money. Even a conservative bond-heavy portfolio will do better than straight cash.

Consider finding a roommate. Can you go car free and do bike commuting?

If your job is already towards the top of the pay scale, consider starting a side business. Yes, it's work - especially at first - but I find it less draining when you work for yourself than a second PT job. Plus, having a stable PT source of income can make early retirement a lot more feasible, since you need a much smaller asset pool.

[ZMonet]

I would just add that you shouldn't devalue yourself.  It sounds like your boss thinks you're performing at a high level, thus the recommendation to have you sit down to discuss a salary increase.  Also, you just received a $2k/year reduction in your pay.  It doesn't matter that you didn't count on the bonus, it was a benefit taken away.  I'm not saying to be belligerent about a raise, but I would make it clear that your salary had been reduced and, if they value your work, to factor that into the increase.    If they don't want to give you the raise you ask for: (1) they'll probably respect you more for asking (as long as you're not belligerent); and (2) ask them what you need to do to achieve a higher salary and what opportunities exist, either now or in the future.  You'd be amazed what people say when you ask for what you want.  I see too many young people who don't know how to advocate for themselves...

 

[netskyblue]

Good advice, ZMonet.  3 years ago I asked for a raise (from 30k to 35k) and within an hour of sending my boss the email, he texted me saying he completely agreed, and it would be on my next paycheck.  After a few minutes of excitement, I thought, "That was too easy.  I should have asked for more!"

I will go through my pay stubs and calculate exactly what I received in bonuses the past 2 years, and try to make sure they give me no less than that average, and try for more.