Seeking to retire early, what would you do next?

[Invester17]

Hi all,

I'm new to the forum! I really like it so far I've found a lot of great reading material thus far. I wanted to start with a snapshot of my current financial and life status and get everyone's take on what I can do next / better.

I work as an engineer and I'm 26 with an annual salary of $160,000. I'll note that this is 30% commission based so this can fluctuate year to year. However, in 2016 I did $180,000 and this year I'm on track to do $260,000+. I anticipate at least $160,000k next year at minimum. I'm only about 3 years into my career (graduated college in 2014).

Networth: $390,000 +/-
Cash: $40,000
401k: $100,000 (maxed each year + 4.5% match on salary)
HSA: $5,400 (maxed each year + $500 employer seed)
Robinhood: $33,000 (stopped increasing currently to put more into the S&P 500)
Vanguard S&P 500: $72,000 (target of $100,000 by end of August or September based on incoming commission)
Vanguard Long-term bond: $10,000 (stopped adding)
Vanguard Roth IRA: $5,800 (backdoor IRA, will do this again in CY18)
Employee Stock: $22,000 (10% every paycheck is contributed to ESPP, every 6 months it purchases at 15% lower than current sticker price)
No credit card debt
No car payment (valued at $18,000)
Mortgage: $384,000 (appraised recently at $460,000).
- Interest rate of 4%
- Beach rental property / winter rental
- I don't have the exact numbers, but it's been renting well and has so far booked $37,000 gross this summer.
Renting in a metro area: $2700 a month (all inclusive)

My current goal was to hit $400,000 net worth by the end of August/September. After that my intention was to cash out the employer stock + cash and purchase another rental property in my hometown. I suspect it would be around $150k with 20% down ($30k). I would intend to rent it out immediately not for the intention of making much profit, but more or less let someone else pay it off and build equity in the property in an attempt to purchase property while I'm younger.

Beyond that, I'm not sure where else to invest / what I could do better. I know my rent is expensive and next year I will try to downsize a bit (cheaper area). However, the area I'm in is just expensive in general. I would purchase but the home prices are out of this world and I'm not sure if I intend on staying in the area long term (FYI 600k for 2 bedroom condo).

I'm seeking any advice on how I can continue to improve!

Thanks all.

[FINate]

You're waaay too young for a long term bond. Move those funds to VTSAX or other Admiral Shares index fund. Also, more important that the interest rate, what is the ROI on the rental property after taxes, mortgage, insurance, fees...all expenses - this number should should be seared into your brain as it's the only number that really matters w.r.t. rental property.

You wrote a lot about your investments, but almost nothing about expenses. The biggest threat to FIRE you face is lifestyle inflation. I've been there, with a high salary job (I was making near 7 figures for a number of years), and although we didn't have ostentatious displays of wealth, our spending did slowly ratchet up over a period of years. Mostly eating out too much, shopping on Amazon, and such. At some point I realized that no amount of saving or investing was sufficient for retirement if our spending didn't come under control.

So my number one piece of advice: Set up a Mint.com account if you haven't already, and actively cultivate a life of frugality and contentment. You're making a lot of money for someone your age, you should be able to save 80-90% or more of your after tax income. Some tangible ways to do this:

• If your employer doesn't provide lunch, make it a habit to always make and bring your own lunch.
• Learn how to cook and prepare your own breakfasts and dinners at home. This will pay dividends over your entire life.  Eating out should be no more than once a week or less.
• If you drink coffee, your "everyday" drink should be made at home with affordable coffee (e.g. from Costco or similar), not premium single origin from a speciality roaster.
• Drive your cars into the ground - don't buy new cars. Don't buy luxury cars, quite possibly the biggest money waste for people with high income.
• Keep an eye on shopping and other spending categories. Are they reasonable, can they be reduced?

[Invester17]

For the rental, I don't have all the numbers worked out (there are a lot of moving parts). This is my first summer (and year) that it's renting. At a high level so far I simply know I spent a few thousand to get it rental ready and the mortgage is $2700 per month. It has booked $37,000 gross this summer (-16% PM fee, cleaning, utilities). I expect to pull together a detailed P&L statement at the end of this year.

Great question on expenses, I would completely agree this is an area where I can improve. Generally speaking, I would say I'm pretty good besides food/eating out. I don't buy a bunch of stuff... The challenge I have with Personal Capital is that it pulls is all of my expenses from work as well (same credit card). These numbers are extremely skewed and a lot of times they are expensed/reimbursed as well so its a wash. I could probably use the work credit card to avoid this, but I like to rack up the points.

See the expenses attached for this year.

[FINate]

For the rental, I don't have all the numbers worked out (there are a lot of moving parts). This is my first summer (and year) that it's renting. At a high level so far I simply know I spent a few thousand to get it rental ready and the mortgage is $2700 per month. It has booked $37,000 gross this summer (-16% PM fee, cleaning, utilities). I expect to pull together a detailed P&L statement at the end of this year.

You should have a pretty solid idea of the ROI on a property *before* making the investment. Sure you may be off by a little (vacancy was higher/lower than expected, or some expense was a little different). Without this how do you know if it's a good investment in the first place? I know a number of people who've wasted large sums on real estate fetishes. Not saying this is you necessarily, but how would you know?

Great question on expenses, I would completely agree this is an area where I can improve. Generally speaking, I would say I'm pretty good besides food/eating out. I don't buy a bunch of stuff... The challenge I have with Personal Capital is that it pulls is all of my expenses from work as well (same credit card). These numbers are extremely skewed and a lot of times they are expensed/reimbursed as well so its a wash. I could probably use the work credit card to avoid this, but I like to rack up the points.

See the expenses attached for this year.

But how do you really know if your personal spending is conflated with work expenses (guessing these are reimbursed?). Is there a way to flag/exclude these from Personal Capital, or perhaps it's possible to open another personal credit card dedicated just for work expenses? If nothing else, add things up on a spreadsheet to check.

[Sarah Saverdink]

See the expenses attached for this year.

You can mark a transaction as a "duplicate" to hide it from being included in the total.

[Invester17]

I lived in the home for 2 years so I didn't necessarily expect that it would be a rental 2 years ago. That's why I don't necessarily have the details yet and I won't really know until I see how well it does renting. I definitely expect to get these numbers after this year, but it will only reflect 1 summer and the winter. It's a great point - I hear you I just need sometime to see how it's going to do to get the real numbers.

As for expenses the answer is I don't know, much of it was reimbursed but obviously it's entangled with the rest of my expenses. I think what I'll do is start putting all work expenses on one card and all personal on another that way I can exclude that card and track my personal expenses only.

[SwordGuy]

You need to read this book and actually learn its contents before you buy another rental.

After you do so, you'll know whether you should keep the current one or not.

https://www.amazon.com/Estate-Investor-Financial-Measures-Updated/dp/1259586189/ref=sr_1_1?ie=UTF8&qid=1500070921&sr=8-1&keywords=real+estate+cashflow

[Catbert]

Great question on expenses, I would completely agree this is an area where I can improve. Generally speaking, I would say I'm pretty good besides food/eating out. I don't buy a bunch of stuff... The challenge I have with Personal Capital is that it pulls is all of my expenses from work as well (same credit card). These numbers are extremely skewed and a lot of times they are expensed/reimbursed as well so its a wash. I could probably use the work credit card to avoid this, but I like to rack up the points.

Get a second personal credit card for work expenses.  Depending on what type of points you're earning you could get a second card that earns the same type or something complimentary. 

[Invester17]

Thanks for the recommended reading, I'll check that out!

I have 3 cards so I can just dedicate one to work/ travel (Chase Sapphire Reserve) and keep the Capital Venture for personal.