I made my first post awhile back, and so this is kind of an update/question about how much I can accelerate my journey to FI (original estimate had me being 49 years old at FI).
I finished an academic program this past May, and I have a decent amount of student loans. My annual salary is $68,000, but it seems after taxes I am getting barely over $50,000/year based on what my steady biweekly check is x26.
Below is how I came to estimate my average monthly expenses:
- Rent $789.00
I don't like how high this is at all but I'm stuck until next summer.
- Grocery + Misc. Household $175.00
I'm trying to cut this down a bit... I don't know how people do the $25-30/week budget, but I will keep optimizing this expense over time to get it lower.
- Utilities $138.00
I don't like this amount because the apartment complex has some "public" charges and other fees and whatnot that I can't reduce easily through private behavior. Over half of this is essentially "hidden rent" imo.
- Gas/Transportation $125.00
Thank you, long commute. This can be addressed by moving close to my workplace when my lease is up next year.
- Health Insurance (ALL) $121.36
I chose the high deductible options from my employer's available options.
- Car Maintenance $50.00
Just an vague estimate. I drive a 1999 Honda Accord Lx with 152,000 miles on it.
- Internet $44.00
This includes taxes/BS fees and whatnot all included. This is the basic cable option from Time Warner.
- Car Insurance $33.00
I have Geico and recently cut some unnecessary "fat" from my coverage to save $10/month (I pay two 6-month bills/year).
- Clothing/Shoes $20.00
Ideally this is close to $0. I just put it in there in the emergency that I would need something :P
- Phone $33.00
I use T-Mobile's no contract $30/mo. plan (before taxes) that has 100 min talk and unlimited data/texting.
- Phone/Laptop/TV (hardware) $25.00
This is a very rough estimate of the rare occasions I would need to replace a laptop or phone. If anything, I might update my phone in the next year, but I don't want to get anything pricy if it comes to that. I definitely don't plan on updating a TV or laptop for years though.
- Games $20.00
I'll admit my guilty pleasure is gaming, though I haven't played much at all for months and may very well be able to scrap this entirely. I can't believe I would have said that a year ago. I think I just put this value in here in the event I backslide a bit, haha!
- Out of Pocket Medical $15.00
I exercise regularly and am in good health. I figured I'd budget something in though in case something came up requiring a medical appointment.
- CEUs $10.00
Continuing education courses. My employer will pay to some extent for this, but I will likely have to pay for a bit of it myself too. I'll shop around of course.
When I originally posted, I believe I said I was living on something like $24,000, but I have since made significant cuts to my spending estimates thanks to developing my frugality muscles further. I am now sitting at $19,180 for my estimate annual spending (saving $30,902). I would like to eventually knock the spending down to about $15,000-$16,000, but I unfortunately signed a lease that started in July and those savings will be best achieved by moving to a cheaper living situation within walking/biking distance to work so that I can go without using my car to commute (my current commute is awful...over 30 minutes one way, not Mustachian). That would unleash MAJOR savings and more free time with less commuting! Talk about painless reduction of living expenses!
If I could get my spending down to $16,000, that would give me $34,000+ to save. Currently the first thing I do is use the first $1,000 of my paycheck to pay down my highest interest rate student loans ($26,000 for 26 annual paychecks). I then flex the frugality muscles to get the additional $4000-$5000 estimate annual savings.
Here are my debts. All of these are student loans.
Loan 1 – $12,500 (6.21%)
Loan 2 - $4,000 (5.41%)
Loan 3 - $12,000 (5.41%)
Loan 4 - $1,108.09 (6.8%) --- This just happens to be the one I'm attacking. Almost dead!!
Loan 5 - $10,131.82 (6.8%)
Loan 6 - $6,833 (6.8%)
I have jokingly thought about giving these loans various nefarious names to personify them to further the "killing" metaphor... Not sure if I'll go through with that tactic though. :P Before the end of the year, my net worth will finally be positive again.
I have about $44,000-45,000 in a Roth IRA right now (has lost value since my first post), with $28,800 of that being contributions (I rolled over an old 401k from my previous career). As I understand it, I could theoretically withdraw up that amount tax/penalty free if a major emergency arose or something. I'm assuming I should leave that invested though rather than withdraw it to pay the 6.8% student loan though right? My Roth IRA (Vanguard) has averaged 8.9% historical return since around 2005-06.
I have pretty good job security and don't like the idea of holding a lot of cash in an emergency fund. I keep between $1000-2000 in that format, and even that feels wasteful to me, haha! Considering how high my savings rate is, I feel like I could cover any true emergency cost pretty easily within that month's income (and I have that Roth as well). I see emergencies as very rare though.
Since I am a career changer, I'm a little older than I wish I was at this point financially, being 32. My "dream" would be to have a LOT of flexibility by the time I'm 40-42 to be able to work VERY part time to cover living expenses while my main Stash grows undisturbed. I am single and don't plan on having kids or owning any kind of property in the near future (I want to be open to moving if opportunities arise). I have never desired owning property to be honest. I feel like living on under $20,000 would be extremely easy if not using a car much and not picking the stupidly expensive apartment I ended up choosing...forgive me, I hadn't yet found MMM! :)
I didn't mention it before, but I am a physical therapist. Salaries nationally average about $80,000, so it's possible I could increase my earnings over the next 5-10 years by anywhere from $5,000-15,000+ depending on where I go and what practice area I choose (nursing facilities pay physical therapists the most, but it isn't really my cup of tea...though I could maybe do it for a short time for something different). I work in the outpatient setting though, and that's my preferred setting. My pay is actually relatively quite good for being right out of school and working outpatient, especially for Ohio.
In today's dollars, it seems like it would take a minimum Stash of $400,000 to even begin to entertain the idea of being FI given my spending level ($16,000/yr at 4% SWR). While I like what I do, I think I would like it a lot better if I knew I didn't depend on the job to "get by." If I amassed $400,000 (again, in today's dollars) at some point in the future, I would likely just stick to my plan of working part-time and probably still maintaining a savings rate at a more traditional level than the 65-70% I aspire to save next year (at around 60% now).
I guess I'm just a little bit dejected at how many calculations seem to suggest it will take me roughly 12-13 years. Perhaps it's just the envy of hearing about people reaching FI in 5-6 years thanks to higher salaries and no starting student loans. I am motivated to get there eventually, and even if I was 45 when I reached FI that would give me multiple decades of earlier than typical retirement.
Do you think it is realistic for me to expect FI to come for me around age 43-45 but no earlier?
Should I keep attacking the 6.2%/5.4% student loans after I finish the 6.8% loans with 100% of my savings so that I obliterate all debt, or would those lower rates suggest I maybe mix it up more? Should I be weary of putting further money into my Roth IRA because the investment returns will be inaccessible until I'm 59.5 unless I take the penalty? Is it still advisable for me to put money in a traditional 401k for the tax advantages/to the extent of employer matching benefits? I'm concerned about putting too much into traditional retirement accounts considering I'm not one of those people making over $100k/year who can easily max retirement accounts while sizably increasing a taxable account too.
Any help would be greatly appreciated. This community is incredible! Sorry for being long-winded!