Author Topic: Reader Case Study: Single, White Female (mid-thirties)  (Read 6809 times)

DenverGal

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Reader Case Study: Single, White Female (mid-thirties)
« on: July 30, 2014, 07:14:34 PM »
Hi there.  This is my first time posting, but I have been an MMM reader for awhile.  I am a 35 y.o. single female living in Denver, Colorado.  I do not have kids and have never been married, and I am interested in doing both should the right partner come along.  I recently moved back to Denver from Colorado Springs, where I lived for 10 years to take a great job where I am very happy.  It is my first job making over 6-figures.

Here it goes...

Income:

Salary: $111,000 (Gross Annual); $9250 (Gross Monthly)
Rental Income: $925 (Gross Monthly)
TOTAL Gross Monthly: $10,175

Current expenses: Provide breakdown and relevant details. Include fixed expenses and variable expenses

Home Mortgage: $1890
Home HOA: $320
Rental Mortgage: $541
Rental HOA: $220
Gas and Electric: $150 (using average from previous owners; it has not been this for me yet)
Groceries, Personal Supplies and Household Goods: $260
Car and homeowners insurance: $75
Internet: $65
Eating Out: $300 (face-punch; I budget for it but haven’t spent this amount in months; primary entertainment/socialization)
Blow/Misc.: $200 (any “random” expense that comes up ex. gifts, travel, hair cut, running shoes; easier to keep in one category and I don’t always spend)
Gas and Automobile: $150 (not always used; category for gas, oil change/maintenance; riding bike and using public transportation more now that I am in Denver; still taking trips back to Colorado Springs)
Phone: $28 (republic wireless though probably going to return - not a fan of the coverage; customer service is great)
Dog: $50 (food/care: he is awesome and old and a great pet)
Gifts to charity: $100 (important to me and intend to do more over time)
TOTAL Expenses: $4349

Assets:
Primary Home: $287,000
Rental: $90,000 (Colorado Springs - former home)

Investments:
401K: $116,000 (I could roll but I have not made any changes since left employer)
IRA: $16,000 (past employment roll over)
Roth IRA: $47,000 (variable annuity contract; fees too high; must roll over)
401K: $6,000 (current employer; 5% match starting 10/2014)
HSA: $7,000 (contributing $200/month)
403B: $2800 (retirement)
Vanguard: $21,000 (non-retirement; “emergency fund”)
Money Market: $2,400 (cash - liquid emergency fund)
TIAA CREF: $3,800 (retirement)
TOTAL Assets: 599,000

2001 Honda Civic: ~$5,000 (167,000 miles; running well)

Liabilities: Amount - rate - description

Primary Home: $240,000 (3.5%, 15-yr.) I am in my first year of owning this condo. 
Rental: $67,000 (4.25%, 15-yr.) Refinanced to get better rate.  First year of refinance.
No other debt.  No school loans.  No consumer debt.
TOTAL Liabilities: $307,000

Net Worth: $292,000

Specific Question(s):

1) Can I be FI by age 50 (in 15 years)?  I like the idea of ER.  Most likely, I will work for a long time because I enjoy what I do and feel I add value to the community.  I just want the security of FI.  I love the idea of not owing anyone anything and would ultimately like to own home(s) free and clear along with additional real estate and other investments.

2) Did I buy too much condo in Denver?

*****UPDATE*****
Some have asked me to clarify my savings rate.  On track to max out 401K by the end of the year ($17,500).  Employer will begin matching at 5% in October due to a 1 year waiting period.  I started the year funding my Roth but backed it down during move/home buying process.  Want to meet goal of $5,500 by year end or blend into next year.

All other unspent $$ will go into Vanguard funds.

If I may, I'm adding a question.
3) Do I roll my previous 401K/IRA/Roth at one time or do you do it over the course of the year(s)?  Not timing the market, but it feels strange to me to do it all at once when I didn't buy it that way.  My Roth has high fees.  I'm pretty happy with my previous 401K but might roll to have everything in one place.
« Last Edit: July 31, 2014, 09:29:56 PM by DenverGal »

Rewdoalb

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #1 on: July 30, 2014, 07:31:37 PM »
I think you are doing a great job.  Look at the big picture...

- High income
- You are tracking your cash flows in and out

There are certainly areas you could cut back spending, perhaps drastically if you wanted to.  However, that is simply a question of priorities.  Can you be financially independent in 15 years?  Without running all the numbers, I would say that it's extremely doable(!) with that time frame and at your income level, although you may need to trim back the budget to make sure.  Simply paying off both mortgages in the next 15 years will get you down to 3k/month though!

Giving to people/organizations with a need is truly awesome, and (especially if you find fulfillment in your job) seeing the fruits of your work in the lives of other people is a great way to avoid career burn-out.  So I'd like to encourage you to stretch in that regard!  My wife and I are currently trying to live on less than half our income (which is growing from about 45k this year to 80k projected next year), and split the rest between saving and giving.  It's hard to overcome my miserly tendencies but we have no regrets.  :)

DenverGal

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #2 on: July 30, 2014, 07:39:26 PM »
Thanks, Rewdoalb!  Yes, I really agree that I can/should do more by way of giving.  I really believe in education, so that is where most of my giving goes.  A dream for the future is to provide scholarships and send someone through school.  Perhaps I can "adopt a scholar" one year and direct my philanthropy there.

Yes, I can also tighten up in some categories.

I appreciate your thoughts and the time you took to respond.

chasesfish

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #3 on: July 30, 2014, 08:07:51 PM »
You're doing really well, the only huge line item is the housing with HOA fees.  I did  a double-take when you had a line item for "blow" in your budget...

Consolidate your investments with Vanguard or another discount brokerage.  Are you contributing the max to your 401k to keep your tax liability down?

I'd probably also hammer down the rental property debt and free up that income stream.

DenverGal

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #4 on: July 30, 2014, 08:28:48 PM »
Yes, Chasesfish, I am on track to max out my 401K by the end of the year.

"Blow" is my version of everything I don't necessarily want to track separately.  I do agree that it allows for a bit of anti-mustachian behavior, but I do cap it monthly.

Yes, I do agree that consolidation makes sense.  Question for you (or someone else): do you roll it all at once or do you do it over a period of time?  I am not asking because I think I can time the market, I am asking because I made all of my investments over a period of months, years, etc.  Clearly, I have just been collecting accounts as I change jobs.

MDM

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #5 on: July 30, 2014, 10:33:38 PM »
DenverGal, welcome to posting!

If the numbers were copied correctly from your post (always worth checking...), you have relatively low (~$16,500/yr) non-housing expenses .  See the spreadsheet attached to this post, with disclaimers here.

Having relatively low expenses, combined with a relatively high income, means your goal of FI in 15 years is achievable.  Not guaranteed (e.g., expenses and investment returns can change), but achievable - maybe even likely.  Given that, I'd have to say "no" to your "Did I buy too much condo?" question.

Seems you are doing the right things - keep it up and good luck!


marty998

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #6 on: July 31, 2014, 06:38:29 AM »
Not to troll or anything, but is it significant that you use the adjective "white" to describe yourself?


PloddingInsight

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #7 on: July 31, 2014, 07:23:29 AM »
Not to troll or anything, but is it significant that you use the adjective "white" to describe yourself?

I think you missed that the post is doubling as a singles ad.

Iron Mike Sharpe

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #8 on: July 31, 2014, 07:26:34 AM »
Good job.  Are you still elligible for a Roth?  Make sure to max that out.  Max out the HSA.  Invest everything else in index funds in a taxable Vanguard account.

rocksinmyhead

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #9 on: July 31, 2014, 07:27:02 AM »
Not to troll or anything, but is it significant that you use the adjective "white" to describe yourself?

I think you missed that the post is doubling as a singles ad.

it made me think of the Chely Wright song.

neo von retorch

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #10 on: July 31, 2014, 08:01:14 AM »
Simple Math Behind Early Retirement

TOTAL Gross Monthly: $10,175 (gross meaning BEFORE taxes? how much do you net/put into savings?)

Current expenses:
Home Mortgage: $1890
Rental Mortgage: $541
TOTAL Expenses: $4349

TOTAL Assets: $599,000
Investable Assets: $222,000

Assuming you NET $7349 (because I like even numbers) you're putting $3k / month into your assets. In 15 years, your mortgages will be paid off. Assuming you still pay HOA on both, you're looking at $1918 / mo in expenses or $23,016 / year. You need $575,400 in investable assets for a SWR of 4%. (If you retire before paying off either mortgage, the amount you need seems much higher. But it's not realistic since your mortgage will end "soon.")

Ignoring investment gains AND inflation, you'll have $762,000 in investable assets (plus two paid off homes). The calculations can be adjusted to account for ACTUAL savings rate based on NET income, factoring in employer match, and of course typical investment returns and inflation. But I think you'd have a great cushion in 15 years. (All this is also not even factoring in the lingering rental income which would also keep you from touching your 'stache.)

rmendpara

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #11 on: July 31, 2014, 08:48:14 AM »

Specific Question(s):

1) Can I be FI by age 50 (in 15 years)?  I like the idea of ER.  Most likely, I will work for a long time because I enjoy what I do and feel I add value to the community.  I just want the security of FI.  I love the idea of not owing anyone anything and would ultimately like to own home(s) free and clear along with additional real estate and other investments.

2) Did I buy too much condo in Denver?

You're doing just fine. Once your mortgages are paid off, your monthly expenses are closer to $2k/mo... or $24k/yr. A rough estimate based on a 3-4% withdrawal rate means you need around $600k-800k in invested assets to generate $24k of income. If we use $30k annual spending and the same 3-4% withdrawals... we get a range of $750k-1mm as your invested asset target.

If you want a bit more, maybe shoot for $1m as a very safe estimate based on your current spending levels (plus what any partner may bring in the future). At this point, if you even generate $10k/yr in part time work or something to pay the bills, it will go a very long way (that's 1/3 of your budget!!).

At roughly a 30% total tax rate, it looks like you save ~$2k/mo = (9,250 * .75) - 4,349.

If you pay down your mortgages over the next 15 years, and continue investing the extra cash, you'll be well on your way to $1m in assets (it's really just an additional $400k in assets and paying down the $300k in mortgages).

You can absolutely be retired in 15 years, but I'd feel very comfortable saying you are financially independent in probably 5 years and could slow things down or try a new lower-paying career if you wanted that (knowing you'd probably need to work a little longer, but what's the rush?).

Happy days ahead!

iamadummy

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #12 on: July 31, 2014, 09:00:32 AM »
Looks good from a single perspective.  Could change with marriage and kids??

mozar

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #13 on: July 31, 2014, 03:06:15 PM »
"Single, white, female" i think it's a reference to a movie

DenverGal

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #14 on: July 31, 2014, 09:16:03 PM »
"Single, white, female" i think it's a reference to a movie

Yes!  It is the movie reference.  I was trying to think of a title that would make people read the case study. 

Good job.  Are you still elligible for a Roth?  Make sure to max that out.  Max out the HSA.  Invest everything else in index funds in a taxable Vanguard account.

I am eligible for a Roth.  This year, with buying the new place and making a move, I had some pretty big cash outlays.  So, I held back on Roth and 401K for a few months.  I upped my 401K for the remainder of the year, so I will hit $17,500.  I will do what I can on the Roth, and I am pretty sure I can carry over to next year with some 2014 contributions.  Here on out, there is no reason to not max both.

DenverGal, welcome to posting!

If the numbers were copied correctly from your post (always worth checking...), you have relatively low (~$16,500/yr) non-housing expenses .  See the spreadsheet attached to this post, with disclaimers here.

Having relatively low expenses, combined with a relatively high income, means your goal of FI in 15 years is achievable.  Not guaranteed (e.g., expenses and investment returns can change), but achievable - maybe even likely.  Given that, I'd have to say "no" to your "Did I buy too much condo?" question.

Seems you are doing the right things - keep it up and good luck!




Thanks, and I'll have to take a look at your spreadsheet.  Yes, I will double check, but I do try to keep my expenses low.  I am naturally a saver vs. spender and try not to get caught up in having a lot of things. 

Some of the other posts asked me to look at savings rates, so I will get back to them in a bit with more information.

Thanks, all.  You are really helpful, and I appreciate your assistance.
« Last Edit: July 31, 2014, 09:33:33 PM by DenverGal »

SU

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #15 on: August 01, 2014, 01:47:46 AM »
To answer your third question, all at once.

1. You immediately save the management fees on the Roth.
2. You already know you can't time the market.

That's from an investment point of view. There might be some legal constraints which prevent you from doing it at one time, not that I am aware of any.

Plus, you do it once, and it's done. It's exactly like removing a Band-Aid. :)

marty998

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Re: Reader Case Study: Single, White Female (mid-thirties)
« Reply #16 on: August 01, 2014, 01:57:18 AM »
"Single, white, female" i think it's a reference to a movie

Yes!  It is the movie reference.  I was trying to think of a title that would make people read the case study. 

Ahh my bad, fair enough. Why did I immediately think of the Single Female Lawyer Futurama episode...

Anyway, good luck. With a high income your wealth will be compounding quickly in no time.

mozar

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