Starting from $0 at 35years old and a new job.

[Soni]

Hello and good morning mustachian community,

I've had two major life changes occur in the last three months. First is that I started a new job. One that pays A LOT, at least compared to what I'm used to. Second is my father passed away on Valentines Day which comes with it's own bizarre complications (posted in the real estate section).

Without getting into the story of my life, that has got me to this point I'll sum it up as simply as possible. I'm 35, have a degree in economics/history, I've owned 3 small businesses, lived in 4 different countries. I've had a great life so far and plan to continue to do so. I've lived very mustachian my whole life. Mostly out of necessity. I've never made more than $15k year. I've never had savings or health insurance. We could debate the hows and whys but, we can just say that I'm an idealist and have never been carrier oriented.

Now at 35 years old I have an income of $62k per year (1099 not W2). It's a dream job and now I can start saving, investing and even have health insurance. But, I don't even know where to start! Yes, I'm putting money away for taxes, $875 each month. Which leaves me with $4,308 monthly income. My cost of living, before I started this position is about $1200/month. I've just bought a used Vibe for $13k because work requires a lot of driving. The payments are $281. Other than that, I live pretty frugally.

I would appreciate any advice you all have on how to aggressively save/invest to make up for the years I've neglected.

Thanks in advance for any ideas that come,
Jason

[Coneal]

For the first year all I would worry about is saving.  Take 40% of your weekly paycheck and pay yourself first.  You have the rest to live off of.  I wouldn't worry about investing buying a new place or anything like that.  The cash coushin will come in handy when your car breaks down or other things that pop up. 

I normally make my nut in the market.  When the market turns down (and it will eventually) all the money you saved becomes more valuable.  When you have cash and people are desperate for cash, deals can be made on your terms. 

When my father passed away a few years ago I didn't make any major financial commitments for a year.  It was a handful to just get through the first year.  I was not very rational the first year with everything that was going on.  Actually got the idea from a guy at work about just sitting on my hands for a year.  Once that year was up, I had the time to think though everything and was able to make more informed financial decisions.

[freelancerNfulltimer]

Are you sure you're putting enough away for yout taxes? If you're on a 1099 that means you're responsible for both sides of your social security. Based on an online calculator that I plugged your salary into your tax obligations could be: Federal Tax $7,466.25 + Social Security $4,743.00 which would be $1017 a month. You may have deductions that I don't know about that could bring that down, but just wanted to bring that up. Since you've been self-employed before you may already have done the proper math but just thought I'd mention it.

[rugorak]

I'd suggest reading the stock series over at http://jlcollinsnh.com/

In short no matter your age the process is the same.

Otherwise just follow what Coneal suggested. It makes perfect sense. First because you need a good emergency fund. Second because having some cash in your portfolio is always a good idea. Third because there is that emotional aspect that no one but you can fully understand.

Even if there isn't anything emotionally trying having that cash cushion is huge. I am a W2 employee and I did the emergency fund first. It just allows you the freedom to not worry as much about your investments. So if the market tanks for a little bit you don't really care because you have your emergency cash.  Given that you are not I would think the cash cushion would be even more important.

[SwordGuy]

Good luck! 

I didn't get my first good-paying job until I was 31.  My wife and I were dirt poor before that.    It's not hard to catch up at your age if you keep your cost of living down and make a major effort to up your savings and investing.

[Rebecca Stapler]

I'm sorry for your loss.

You are in the enviable position of being able to maintain your $15k/year lifestyle with a higher income, so first things first: Don't change your lifestyle! Except the health insurance. It would be a good idea to have some. If you're relatively healthy and risk-averse, a high deductible plan might be your most MMM option.

I would balance saving an emergency fund with paying off that car loan. If you paid your entire excess income toward the loan, it would be gone in 5 months. I recommend splitting the difference -- put half in an emergency fund and half towards an extra payment on the car.

For many, a comfortable E Fund is 6 months of expenses. This depends on your comfort level -- some people have a $1,000 E Fund and will charge the emergency to a cc or home equity line that they can pay off within the next month or two and the $1k in the bank. But take into account those expenses that you would not be able to charge (rent, minimum car payments, etc.). Find your comfort zone and save for it.

The next step for your money depends on your goals: What do you want your money to do for you?