Reader Case Study - How do I retire by 46?

[Sirius, with a Dash of Humor]

Hi Mustaschians!

Topic Title: Reader Case Study - How do I retire by 46? (age 36 now)

Life Situation:
IRS filing status: Single
0 dependents
California, USA

Gross Salary/Wages: Average $20,000 annually, Substitute Teaching/Tutoring

Pre-tax deductions: don't know

Other Ordinary Income: 0

Qualified Dividends & Long Term Capital Gains: $20,000 in Roth IRA, don't know how to answer this

Rental Income, Actual Expenses, and Depreciation: N/A

Taxes:

Social Security
Medicare 
CA SUI/SDI   

all together about 11%

Current expenses:

and ? = I don't really know because it occurs rarely.


Monthly Personal Expenses
Actual/Est.
Rent/Utilities
650
Groceries/Home Supplies*
300
Gas
80.00
Car Insurance*
75.75
Car Repairs/Maintenance*
?
Doctor/Dentist/Health
?
Student Loan (Navient)*
0 for now
Phone*
40
Time Warner Internet*
14.99
Public transport*
0.00
Fun/Non Essentials
20
Meditation Classes
50
Wardrobe
?
Laundry
6


Total Expenses
1,236.74


Total Monthly Expenses: $1,250 (average)

Total Annual Expenses: $17,000 (average mo. x12 plus $2,000 for unexpected expenses, car repair/health care, etc.)

Total Savings: $3,000 (average) left over from average annual income ($20,000)

Expected ER expenses: don't know what this is

Assets: 1995 Honda Accord

Liabilities:
Student Loan (Navient),
original amount $23,000,
original length: ?,
mo. payment: I'm on an Income Base Repayment Plan and am currently not paying it down.
Current Balance is $28,000

Specific Question(s):

What are the 3 major things I can do now to work towards FI by age 46. Also far things I wasn't able to provide info for what's a good resource for learning about all the nitty gritty of finances?

[swick]

Welcome to the forums!

I would strongly encourage you to write a complete case study:
http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/

We can't really give you specific suggestions unless we have a really clear picture of your income and expenses.

I will say, you really need to focus on getting a higher paying job or side income. You are not making enough right now to meet your goal of paying off your debt and retiring in 9 years.

You need a specific plan with clear ideas of  what retirement would look like for you. We can help you get there though :)

[Sirius, with a Dash of Humor]

Thank you! Will have that done soon. Should I post here or start a topic titled Reader Case Study?

[swick]

You should be able to re-title this post (if not, I can do it for you) and edit your first post to include your case study.

[rubybeth]

If you can't retitle this topic, start a new topic with Case Study in the title. You say you're saving, but how much? And include interest rates on those debts. Be specific about expenses so we can suggest cuts or ways to save.

You may also enjoy playing around with this simple calculator: https://networthify.com/calculator/earlyretirement

Running some of the numbers you provided, to retire in 9 years on a salary of $20,000/year with $30,000 in savings already, you'd need to be saving close to $13,000 a year while living on $7,000--you'd end up with a stash of a bit over $200,000. Now that's not impossible (look at Jacob of Early Retirement Extreme as an example), but it's not typical. If you could get a full time teaching job and earn extra side income by coaching, tutoring, etc. and earn $40,000 (or more) a year while saving $20,000 and living on the other $20,000 (ignoring taxes from this equation), you could retire in about 15 years with a stash of $550,000. Start playing!

[Sirius, with a Dash of Humor]

Thank you for those suggestions! I reposted the reader case study. I put in as much as I knew, I'm kinda without clue on a lot of particulars.

[Murse]

I don't see your age listed anywhere. The advice is going to very different idepending on if you are 25 or 45. Judging by a previous response you are 37 and edited it out?

[swick]

Here are a few places to start to start getting a grasp on the financial side of things:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
http://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/
http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/
http://www.mrmoneymustache.com/2012/07/15/two-fun-tools-from-the-mmm-software-department/

These will give the early retirement basics and help you figure out things like "expected retirement expenses"
Plugging your basic amounts into the calculator in the last link, it will take you just about 34 YEARS to retire. and that would be a pretty meager retirement, so not much traveling or lifestyle inflation.

You need to get very particular about keeping track of your spending so you have an idea of where your money is going. Downloading an app or program like MINT or YNAB or even just a spreadsheet would be enough to start.

The main thing you can do though is boost your income. Are you working full time? If not you should be working at least the equivalent amount of time on either finding a job or developing a side hustle that will make you more money. You are on such a small budget, there isn't a huge amount of room for you to cut.

Do you have an emergency fund, or access to emergency money? Do you have money saved up for a car replacement, or even repair work? What would you do if your car died tomorrow?

[Sirius, with a Dash of Humor]

Thank you for the resources!

Yeah I do have about $10,000 in the bank for emergencies. I got some windfall a few years ago and have put most of it into the Roth IRA. I do use a spreadsheet, I just couldn't figure out to transfer it properly to the post. So, it's what I suspected, I just have to get over not liking to work and earn more. I just needed to hear it from a more neutral party. I'm lucky to have the support of my community to keep me motivated and take these steps.

Peace :)

[rubybeth]

Total Monthly Expenses: $1,250 (average)

Total Annual Expenses: $17,000 (average mo. x12 plus $2,000 for unexpected expenses, car repair/health care, etc.)

Total Savings: $3,000 (average) left over from average annual income ($20,000)

Expected ER expenses: don't know what this is

Assets: 1995 Honda Accord

Liabilities:
Student Loan (Navient),
original amount $23,000,
original length: ?,
mo. payment: I'm on an Income Base Repayment Plan and am currently not paying it down.
Current Balance is $28,000

Specific Question(s):

What are the 3 major things I can do now to work towards FI by age 46. Also far things I wasn't able to provide info for what's a good resource for learning about all the nitty gritty of finances?

Expected ER expenses = your expected Early Retirement expenses. If you keep your spending the same now as in retirement, this would be the same as your monthly expenses. But oftentimes people have fewer expenses in retirement than while working because they no longer drive to work, buy work clothes, have work lunches, etc.

You have a good thing going in that your expenses seem really low for California.

Things I would suggest:
-track your actual expenses via Mint.com or another method you prefer
-figure out how much you are paying in taxes, if anything--it could be that your income is low enough right now to not pay taxes at all
-get a full time teaching job (average teacher starting salary in CA seems to that $40,000 number I threw out earlier, plus you'd have more predictability/stability in terms of income if you can get tenure after 3-5 years)--if you already have experience, maybe you could negotiate starting at a higher range/step than most 22 year-olds
-if you get a better paying job, start paying off your student loans
-if you're a teacher, see if you can contribute to a 457b account--it's even better than a 401k because you can take money out before age 59 1/2
-pick up extra work anytime you're not teaching--it seems you're already tutoring, so you could continue that, and maybe teach summer school (for example, my sister works in a school and was offered a few thousand extra on top of her regular salary to teach a 2-week summer school session) or do something different during the summers like being a Boy or Girl Scout camp counselor

[Davids]

I am going to be flat out blunt you need to increase your salary big time. You make $20K/yr and have just $20K saved. If you want to retire in 10 years you are going to need to quadruple that salary.

[Sirius, with a Dash of Humor]

Thank you rubybeth and davids! It's pretty clear, I've got to work more. There is a great program called Teach for America, and I'm hoping I can get a two year assignment at a public school through them. Seems like that's the major next step. I suppose I can take a little time each day to learn more about finances and getting the most out of the money I make.

[expatartist]

Hi Ian,

Are you a qualified teacher? If you're interested to teach overseas, there are lots of options for you in international schools worldwide. East Asia and the Middle East are good places to get started with international school experience (you can easily save $20+k/year or more here), then potentially you could get a good contract in one of the higher-paying European countries like Switzerland or Luxembourg to finish off before retirement.

Airfare, housing, and other perks are typically covered.