Hello Mustachians, I recently discovered MMM 2 months ago while starting to get into understanding how to better invest my money in order to achieve my goal of early retirement. I have always had a goal of retiring early; though I thought the earliest it would likely happen would be at 55, I loved discovering through reading MMM that it could be something that happens much earlier. I thought I would submit my own reader case study to the forum and see what people though, sorry in advance for it being so long. I have read a number of the previous threads and wanted to address many of the common questions and comments that come up.
Location: MD/DC area
Stats: 26 yrs old male
Income: $69k salary job
I also earn income from my investments but I am not sure that is intended to go here, and that money is only ever reinvested.
Current expenses: I spent about $31k last year according to Mint. The big overview from Mint of those expenses looks like this:
Home $8,081.16
Shopping $5,124.32
Auto & Transport $4,373.09
Food & Dining $4,339.54
Uncategorized $3,021.52
Pets $2,583.92
Health & Fitness $1,763.93
Taxes $1,559.99
Bills & Utilities $267.23
Gifts & Donations $118.87
Personal: Care $80.00
Entertainment $29.90
Business: Services $22.16
Fees & Charges $13.87
My rough budget of predictable expenses, $1,643 per month, looks like below. It is by no means complete; there are always expenses (auto repair, health care, one time purchases, etc) that fall outside of it, my average spending per month as you can calculate is about $2,500.
Gas 170
Auto Insurance 63
Motorcycle Insurance 19
Cell Phone 58
Groceries 300
Rent 600
Rental Insurance 10
Pet 200
Restaurants 55
Movies 8
NEW* Medical Ins 160 I forgot to add Medical insurance costs, which only show up on my pay stubb, this is total cost for DENTAL, EYE and health insurance plans
Some background on the above:
Rental insurance, cheaper to get with my car insurance than car insurance alone, go figure.
I rent a room in a multifamily home. Rent includes all utilities, the price is an incredibly good deal for the area. I also have access to a small fenced yard for the dog, and a garage for woodworking and the motorcycle.
Groceries, I would like to get this lower, but I eat a lot for a single person, I am blessed with a very inefficient metabolism and an active lifestyle. Nothing to extravagant, I pack all my own lunches, premade heat up or whatnot food is fairly rare. I have been trying to do more oatmeal, as one of the suggestions by MMM, but even mixing honey and berries it can get tiresome to eat regularly and I often don’t feel like eating so many carbs, just doesn’t sit right in my belly.
Pet, I got a dog early last year. I love him and he has been a blessing in many ways, because of him I know 10 times more about the area I live in. That being said he has been very expensive, I am coming up on a year with him now and have spent about $3,000on him total. Most of the expense comes from being a first dog and the purchase of the things necessary. The two top expenses have contributed to the majority of the cost; the first was him catching doggy pneumonia, $800. The second was me going on vacation recently, I tried to save on nearly $1000 for a kennel and left him with friends, unfortunately he was not a good match with the first family he stayed with and became destructive, costing me around $600 in replacement stuff. Feeding him is cheap; he eats less than $29 of food a month.
Restaurants and Movies are very rarely used categories, left over from when I had a girlfriend, who often wanted to go out.
Motorcycle, not very MMM, I have considered getting rid of it but I enjoy it and am ok with it, its staying, at least for now.
Assets: Net, I am worth about $300k.
Car: Ford Ranger 4cyl worth $~4k
Motorcycle: $~5K
Cash $~3-4k
401k $31k
Vanguard Full Stock market idx $20k
Investment Adviser accounts:
Taxable investments $190K
Roth $42k
I just moved up 401k contributions from 12% to 14% + 5% employer match, and 401k Roth to 3%. Still not maxing out, but I am nervous about committing so much, both from a reduced paycheck coming in and from a getting them money out in early retirement perspective (even with the methods available for getting the money out that I do not entirely understand).
I also contribute the max to my Roth every year.
Liabilities: None besides credit cards paid in full every month.
I have only really started seriously investigating investing in the past 2 months. From what I have read investment guys can bring down your returns significantly due to their cost. But I am still nervous going it alone. I am a big believer in efficient markets, or at the very least that at the current point in time I don’t have a strong enough feeling about any companies that would make me want to invest in them individually, and I do not want to have to dedicate much time to researching and managing a portfolio on the side. The guy I am with has a deal with my family and he charged me about $800 total last year for himself. Granted he also has my money invested in higher cost funds (whose fees are separate). The allocation he has me at currently is a bit conservative for my tastes with 40% in bonds, 20/20 domestic/foreign but I am not sure what a good allocation is, there is a lot of conflicting advice.
While I am naturally a very risk adverse person, at this point I would consider myself to be very risk tolerant when it comes to investing given what I know of the market. Overall I am a big believer in the maxim that given enough time the stock market always goes up. I am fairly convinced that it is pretty difficult to beat the market on passive returns long term without risky speculation on winners/outside investments. But I am open to having my mind changed with good data.
As a result the best strategy for me currently is probably some kind of stock heavy allocation. Any ideas on what the best allocation is?
I am not sure what the best move for the portfolio becomes as I reach early retirement though. Obviously given the long period the money will need to last and be productive returns will be important, but I am not sure I would be comfortable facing big market swings without at least some less volatile investment cushion. What would be the best allocation once I reach early retirement?
In other detail, I have not been enjoying Maryland. The traffic and commute are no fun. The culture seems to be largely food, drinking and consumerism/Jones-ism . For now though I am a bit addicted/stuck to the salary I am getting plus benefits like getting paid if any overtime is required, and generous vacation time (3 weeks a year + flex time + vacation). I would long term like to find a place with much more nature, I love MMM descriptions of Colorado but during a short summer living there I found it too dry, though perhaps that varies by area, I love green, creeks, and mountains. I would love to find a place similar in lifestyle though.
Eventually when I find this magical place I would love to buy a house. Oh I would love to buy a house, I am so sick of sharing living space with strangers. But for now, according to the giant spreadsheet I made to look at the issue it would lose me money/be risky. That spreadsheet would actually probably be very useful to the members of this forum to look at the question of buying a house or not in their area. I hate the idea of a mortgage, paying nearly double the price of the house for the house due to interest. But I can see how it can be advantageous due to tax breaks and a higher return on the money in the market. Has anyone taken a look at the issue of buying a house outright vs getting a mortgage?
I think that about does it, punch away!
Edit: I changed a few details above. Also I looked around in the forums but couldn't find one. Does anyone have an awesome spreadsheet they would like to share that they use to track their journey to FI. I use MINT and Personal Capital, but they are both still lacking in abilities to project into the future and perform certain analysis. It would be easiest to start from something someone has already made. Excel sheets are mentioned all the time on the forums but I have not seen one made available.
