Getting Started

[neaux]

I am new to the MMM way of life and looking to get started right away. I plan on reading through the entire blog, but what I understand so far about investing is:

- Max 401k into an index fund if possible
- Start and contribute any excess savings into Vanguard's index fund

Luckily with our jobs over the past 5 years we have no debt and some cash/retirement savings:

Cash (176k):
- 25k emergency Wells Fargo savings account with fluctuating checking account (5k) for rent and immediate expenses
- 146k Ally savings account with 2.00% APY and 1.98% Interest Rate
   (Saving for home down payment (San Jose, CA) or cash purchase/down payment (AL))

Retirement (223k):
- 33k+ each in backdoor Roth started in 2013 (66k in a mix of mutual funds recommended by a friend)
- year-to-go 401Ks (69k) and (88k) Management fee 1.7% if not mistaken

Questions:
- Should we reallocate 100% of our 401K funds from year-to-go to the offered S&P 500 with 0.005% fee and 0.01% expense cap
  (when would be a good time to reallocate?)
- Should we continue with the annual Roth contributions of 11k total?
- Should we continue to stash for a home in the "safe" Ally account?

I am 35yo and wish I found MMM earlier because we have allowed a creeping lifestyle to set in and haven't maximized our saving/investing potential. We could possibly save/invest 70-80k a year after necessary expenses. I have a loosely calculated goal of 38k a year living if we decide to move back to Alabama which would be roughly 550k in a Vanguard account. How can we reach this goal? Does it sound reasonable or am I way off in calculations.
Basically I'm just trying to get a grasp on the whole picture and I'm looking for any criticisms and advice.
I am new to forums of any kind and I apologize for any spelling/formatting mistakes.
And I will try to answer any details because I'm pretty sure I've left some important info out somewhere.

Thanks!

edits: changed "year-to-date" to "year-to-go"
         & grammar errors

[YttriumNitrate]

Questions:
- Should we reallocate 100% of our 401K funds from year-to-go to the offered S&P 500 with 0.005% fee and 0.01% expense cap
  (when would be a good time to reallocate?)
- Should we continue with the annual Roth contributions of 11k total?
- Should we continue to stash for a home in the "safe" Ally account?

I would answer yes to all three questions.

[yourusernamehere]

I just want to say that for “getting started” you have done AWESOME! It’s great that you see places to optimize, and I know you’ll find lots of help here doing so, but you should also feel very good about how you’ve saved to this point. Well done!

[AccidentialMustache]

38k/yr * 25 = 950k invested by the 4% rule.

[draco44]

I'll echo the others in saying that it sounds like you are doing pretty great managing your "big picture" financial decisions. Welcome and congratulations on all you've done thus far! Like YttriumNitrate, I also say yes to your three questions.

I'm curious, however, about the "creeping lifestyle" you mention.  Without seeing a breakdown of your budget it's hard to give specific advice on areas where you could cut back to free up extra savings, but the mere fact you are aware of needing to cut back is a good sign.  If you want help in this area from the forum, consider posting a case study (https://forum.mrmoneymustache.com/case-studies/) or providing extra details here.

And back to the big picture finance stuff, however, where is your Roth held? Vanguard? If not, consider transferring your funds to Vanguard for the lower fees. This may be a good time to check what exactly you are paying for.

[neaux]

Wow, thank you everyone for your response!

I just want to say that for “getting started” you have done AWESOME! It’s great that you see places to optimize, and I know you’ll find lots of help here doing so, but you should also feel very good about how you’ve saved to this point. Well done!

And thank you for the encouragement! Luckily my parents instilled some saving sense into me so we are off to a great start. I just feel 5 years behind on a 10 year journey and looking for any workarounds to shorten the length. No better time than now!

I would answer yes to all three questions.

Ok, so continue to max the 401Ks and Roth and find an amount for home savings that let's me contribute an adequate amount to the index "retirement" fund. Also reallocate 100% 401K to S&P Index fund ASAP?

38k/yr * 25 = 950k invested by the 4% rule.

Thanks for reminding me of the 4% rule. I had just read $7k/yr for every $100k invested in the getting started blog and got ahead of myself. I'm now looking at 30k a year * 25 = $750k invested.

I'll echo the others in saying that it sounds like you are doing pretty great managing your "big picture" financial decisions. Welcome and congratulations on all you've done thus far! Like YttriumNitrate, I also say yes to your three questions.

I'm curious, however, about the "creeping lifestyle" you mention.  Without seeing a breakdown of your budget it's hard to give specific advice on areas where you could cut back to free up extra savings, but the mere fact you are aware of needing to cut back is a good sign.  If you want help in this area from the forum, consider posting a case study (https://forum.mrmoneymustache.com/case-studies/) or providing extra details here.

And back to the big picture finance stuff, however, where is your Roth held? Vanguard? If not, consider transferring your funds to Vanguard for the lower fees. This may be a good time to check what exactly you are paying for.

Thanks you for the in depth response and advice. First I'll answer that we have the Roths with Fidelity (I don't recall why I went with them). I really didn't do much research and went with advice from an investor friend. We contribute the max each year and haven't educated myself on fees and such. It would be interesting to know.

And the "creeping lifestyle" I referred to is my ever increasing big ticket purchases:

- Guitars, bicycles, club memberships
- Concerts, movies and outrageous dinners (once in a blue moon is good, but not every month)
- Buying lunch at work and eating out constantly
- Overpriced vacations
- New electronics
- Video game systems, games and online subscriptions
- Clothes and shoes I don't need
- Amazon shopping sprees
- Alcohol consumption (I was able to quit July of this year = Big Savings!)

I was chasing happiness with money and thanks to MMM's philosophy I realized it is not fulfilling and uncontrolled spending is prolonging my unhappiness. Quitting some social media has helped a lot.
I feel we have a better outlook now and control on monthly expenses. I just need to look at a few more things like cutting car insurance/driving costs and finding term life insurance now that we had our first baby this year.


Yikes, this is scary, but I'm willing to change for a better future.

[draco44]

I was chasing happiness with money and thanks to MMM's philosophy I realized it is not fulfilling and uncontrolled spending is prolonging my unhappiness.

This mind of mindset change is key. You are off to a great start and everything should follow from there.

It sounds like you are well aware of your spending pitfalls and are working on them. Congrats in particular for quitting alcohol - that's huge! Re. some of the other items on your list, it sounds like a combination of culling some of the excess (possibly for a profit) and focusing on appreciating what you already have rather than chasing after the latest and greatest would be helpful to you. You love guitars? Awesome! No one's saying you have to give them up.  But sometime this week, pick up one from your collection and have a blast actually playing it. While you're at it, try inviting a friend over and teaching them to play with you on one of your other guitars! You get the idea.

Speaking of which, I'm going to log off the forum and hang out with my friends now. As homework, I encourage you to read http://www.mrmoneymustache.com/2013/08/29/luxury-is-just-another-weakness/. You've got this!