Howdy MMM community!
I stumbled across the MMM blog about a month ago and started reading the posts from the very beginning. I'm up to August 2012, meaning I'm still four years worth of posts behind!
I love what I've read so far and have had the idea of retiring early for quite some time prior to reading up on the ways of MMM. Given my situation, what do you guys think I should do differently?
Life Situation: Single, claiming 1 (should I claim 0??). East Bay of California. 26 years old. Male.
Gross Salary/Wages: Under an 18 month contract position making $65.25 (or ~135k/yr). Contract expires in Jan '17. I expect any job after this one to pay closer to $80-$100k given my skills and experience. I just got really lucky this time because I knew someone.
Pre-tax deductions: I'm paid weekly. Right now only health insurance which is bare minimum and costing me $45/month
Other income: On average I bring in $600/month from doing tennis lessons and stringing rackets. I charge $40/hr for lessons and usually net $10 per racket. Stringing is more a labor of love than it is anything else. Plus I can do it from the comfort of my living room while drinking beer and watching movies.
This also more than covers any tennis expenses I may incur such as team fees, club membership, tournaments, shoes --I always buy the ones with the 6 month warranty--, or any equipment. You can let my tennis expenses and tennis income cancel itself out if you'd like, but I know I don't spend $600/month on tennis even if you factor in transportation.
Passive Income: $600 in a ROTH IRA that yields a few bucks each month. I'm not planning to add any more to this account. I'll just use it when I need to rollover 401k funds.
$8,000 in a brokerage account that yields $88/month in monthly dividends. ($1,064 annually) My current "strategy" is to buy stocks and closed end mutual funds that pay a monthly dividend. I like having the monthly frequency far better than quarterly dividends and I can reinvest more frequently. This is the first year I've been adding to this account (about $1,500 per month). I never withdraw from this account. I'm curious to see how much I'm taxed on these earnings come tax filing time.
My idea is simply to keep investing in the dozen or so stocks and closed end mutual funds that comprise my portfolio until the net passive income meets or exceeds my monthly expenses. Then I'll have F You money and can choose whether or not to retire.
Savings: $25,200 just sittin' there making about $2 per month in interest.
Checking: $1,500 I keep $1,500 in checking at all times. When I get paid the balance is reset and anything extra goes towards car debt, into my brokerage account, or into my savings account.
Adjusted Gross Income:
As a temp employee I don't get paid time off or holiday pay (4th of July was just a day of lost income) Weekly pay: 65.25 x 40 = 2,610 per week. My weekly paychecks are $1,640. Monthly income from day job = $6,560 after taxes and healthcare deductions.
Expenses:
Rent: $1,125 (live alone, 1bd 1ba.) It's a steal for where I'm living
Car Payment: $315. Owe $10.6k @ 2%. 2014 Ford Focus SE w/ 34,000 miles. It is going back in the shop for the 2nd time for the 'recall repair' on 7/13/16. I'm hoping after a couple more visits it will qualify for the lemon law. I'll take the net proceeds and put towards buying a used car outright.
Car Insurance: $101/month through Geico. Full coverage since the car is financed
Cell Phone: $90
Internet: $50
Gym: $39 (going to change this to the new 9.99 gym that just opened up down the street)
Electricity: $25 (last bill was $12)
Netflix: $10
Total "fixed" expenses: $1,760 per month
Other expenses:
Groceries: $300
Fast Food/Restaurants: $150 at most (that includes paying for my girlfriend's meals too)
Shopping: $200, which is mostly tennis stuff covered by my tennis income
Gas: Averages to $100 per month including oil changes every 3 months
$200 for tennis club membership. (annual fee. Tennis income covers it no problem. Made more than that last weekend teaching tennis)
Monthly expenses: $2,500. Let's round up to $3,000 in case I forgot anything. I could easily maintain my current standard of living with $36,000 per year. $36k has been my target passive income amount after taxes. How much pre-tax dividend income would I need to pull this off assuming once I hit my target amount I quit my day job and just make tennis-related income under the table from there forward?
I figure when I get to that point I'll continue to work for at least another year to continue to invest and build a better safety margin.
So I have a lot of extra income left over. Roughly $3,500 each month. I've been spreading this money out over the year in paying off my car, adding to my savings, and adding to my brokerage account. I did have some credit card debt when I first started this job late July 2015, which is the first thing I eliminated. I also just took a 2.5 week vacation to Europe that my tennis side hustle funded. It didn't, however, make up for the 2.5 weeks I went unpaid during this _____ trip of mine.
You've been working this job and ONLY HAVE THAT MUCH SAVED??!! WHERE DID IT ALL GOOO?
-Credit card debt ($5,000)
-Purchased a mattress and box spring from amazon $300 (to replace mattress that was on bedroom floor)
-Purchased sofa to replace beat down futon I was using for a couch also from Amazon $400.
-Took a trip to Vegas for new years. We drove, didn't fly. Gas was $60 round trip. 3 nights hotel $500. Food/gambling/entertainment $750.
-Took a trip to Indian Wells to see pro tennis tournament (drove again) Gas/Tickets/Food: $350
-Europe: $1,200 round trip plane tickets. $1,000 for hotels (10 nights). $600 food & misc transportation
Money I blew on frivolous things & debt repayment: $10,160. Ouch. Could have paid off my car with that money. Wow. #epiphany
The good news? I'm all tripped-out and mustache'd up so no more big trips or furniture in the near future!
Other notes: I bought a bike recently and am using it to get to tennis when I'm not teaching (can't carry ball basket & racket bag on bike) & biking to work when I'm not teaching tennis after work. Tennis courts are 8 miles from my apartment.
My questions:
1. I've been encouraged to try and get prequalified to see if I can afford a condo or townhome around here, but am afraid of spending my savings on a down payment when I know my job is going to end in 6 months. Given my current high income I may be able to get a better rate, but am afraid of having to rely on unemployment to make a mortgage payment. I'm also uncertain how long it will take to find another job. At the same time I think it is dumb to throw $1125 out of the window each month on rent. Regardless of the decision I make I'll still have to find a job in January. I'll obviously begin looking before my contract runs out and unemployment will only be a safety net. Should I go for it or hang tight until I secure a full-time position somewhere?
2. Given my potential lemon law case with my car, should I make just the minimum payments for the next month or two until I see whether or not this most-recent repair actually fixes the shuddering problem this supposed "automatic" transmission'd car has? Anyone have any insights or similar experiences?
3. Can you think of making any cuts anywhere?
The one non-negotiable is my rental situation. I only have 1 bedroom so I can't take in a roommate, nor do I want to move out and try and find a roommate to save a few hundred bucks a month. Typical two bedroom apartments in my area go for at least $1,600/month in crappy areas so I'd be saving $300/month only to have to put up with someone in my living space. Plus its hard to "play house" with your girlfriend when you've got a third wheel!