24, New Teacher - Feedback on my Situation

[n7steel]

Hello everyone, I came across Mr. Money Mustache's forum page today and I thought I could use some advice/ feedback for my current situation.

Please Note: I do live at home as I just graduated college and got my teaching job in August 2022. My ultimate goal is to buy a house within the next few years. This is one of my questions that I will post toward the end of this post. Thank you!

Age: 24 (25 in August)
Tax Status: Single
Career: Teacher (High School)
Income: $38,000 Gross *First year teaching salary. Contract year; therefore, a raise will occur next year bumping me into the $40k's.
Monthly Income: Around $2,100 a Month Net *
* The reason it is around this is due to me paying into my state's pension for school which is 14% each pay. I also pay into a 403(b) and then of course taxes get taken out. Lastly, I pay $45 each pay for my school union. 
Tax Bracket: 12% Federal | 5.75% State
Portfolio Size: $35k (Rounded)

Cash: $1,000

High Yield Savings (Future Home): $300 *I put $150 a month into it currently.
Small Emergency Fund: $800 * I randomly add to it

Investments: $35,000 (Rounded)

Taxable Account 1: $5,500 -- Schwab S&P 500 Index Fund - SWPPX
Taxable Account 2: $800 -- Schwab US Dividend Equity ETF (I buy 1 share a week)
Roth IRA: $23,500 -- Schwab S&P 500 Index Fund - SWPPX & AMZN Stock (30 Shares) - $2,500 ish dollars (Loss at the moment of 25%. But will always keep) *
* I max my Roth IRA out each year. I have $2,000 left before the time expires. That is my sole focus currently.
403(b): Roughly $1,200
Pension: Roughly $4,000 (They take 14% each pay and then they essentially match 11.09%) So it currently is roughly $4,000.

Expenses:
Cell Phone: $360 a YEAR. (I have Mint Mobile) -- It is PAID off for 2023.
Car: Paid off
House: I live at home still. I plan on living at home until I have enough for a down payment on a house. 
Gas: $100

Future Expenses Include:

Groceries
Mortgage
Taxes
Car Insurance (Parents have a plan and just pay it. Once I move out, I will pay this.)
Gas
Etc...

An estimate of about $1,000-$1,200 a month I would assume?

Debt:
Personal Loan: $1,800 (Aggressively paying this off. Will be paid off within the next two months)
Student Loans: $21,400 (In the COVID19 Pandemic Forbearance. So no payment at this time)

Important Information Re: Investments:
I max out the Roth IRA every single year. I am in the process of doing that currently before the time expires for the 2022 Roth. That is one of my focuses currently. My other focus is to pay off the personal loan which I will aggressively pay off within the next two months. Between both of these, my paychecks have been allocated to these two goals. Once I pay off the Roth for 2022, I will put $500 a month into the 2023 Roth.

Questions:

1. One of my goals for 2023 is to start saving for a down payment on a future home. I use Ally Bank for a high yield savings account and have been putting $150 a month into my home savings goal. It is a start and I know I must increase it in the future.

a. How long do you think it will take for me to have a realistic down payment? (Houses are between $100k - 200k where I plan on moving to).
b. How much should I have in this account on estimate?

2. Am I on the right track? My ultimate goal is to retire at a decently young age. I am thinking around 50 years old or so.
FIRE number is roughly $1,500,000.

3. The student loans... what do you suggest I do with these? I understand that they may be forgiven, but I am not holding my breath. Should I pay these off as fast as I can since I am living at home? Any suggestions will help.

4. Cash. High Yield Savings accounts are a good thing to have. I am wondering what type of emergency fund I should have.

Thank you so much for reading my post. I truly appreciate it and hope you have a great 2023!

-N7Steel

[Fru-Gal]

I think you are doing fantastic. I did some things right in my mid 20s (started IRA) but I also did a lot of things wrong up until my late 40s and I was still able to retire at 51 (last year). Compound interest over 25 years is an amazing thing.

I had almost no student loans and they are a distant memory but I do recall paying them off completely in my early 20s — but they were very very low compared to today’s numbers. Still, yours don’t look bad.

That said I would go by the interest rate: if it’s a low interest rate, say under 7%, you probably don’t need to be paying that off early when you can deploy your money elsewhere for future gains. Also if you plan to be a teacher for a very long time it’s possible you’re going to have those loans forgiven. Not to mention the fact that it is becoming more and more politically palatable to cancel student loans.

A big key to FIRE in my opinion is cash flow. Debt is not necessarily bad if it is sustainable and you are able to grow your wealth and/or have manageable cash flow. Remember that inflation is eating into the cost of your fixed-interest-rate debt — it is becoming cheaper over time. Use that to your advantage and deploy your free dollars into an investment like VTSAX or VTI. For emergency fund, you might look into buying US treasury bills on TreasuryDirect.gov. (Am assuming you are in US.)

Also you might look into getting an inexpensive online master’s degree if it would significantly bump your salary. You might also explore a side hustle related to online education such as a YouTube channel or writing books, courses or course materials.

Finally for a $100,000 house, I think you need $20,000 for a down payment. Simply do the math on how many months it will take you to save that. That may sound like an overwhelming number but just remember people regularly spend that much on a new car that immediately depreciates by half and you’re going to be buying some thing much more important than that. Also remember there are multiple pathways to homeownership. Rent to own is a good option, or there may be FHA loans that require less than 20% down (that’s how I bought my house many years ago.)

However, remember that owning a house is not a requirement for FIRE. Living with family is an awesome solution and if you can make it work, do it!

[Freedomin5]

As a totally out-of-the-box idea, have you considered taking a two or three year international teaching contract (DH’s teaching salary + benefits is worth approximately USD$130k), and just turbo charging your savings for a couple years? You’re young and have minimal life/family responsibilities right now, which makes it a great time to go teach in a different country for a few years. We save about $80k. Do that for a couple years, and you’ll have more than enough for a down payment (or even to buy a house outright) and give your FIRE nest egg a nice boost out the starting gate.

COVID’s really done a number on qualified teachers wanting to teach abroad, so there are many positions available, some at top schools who would typically not look at a newbie teacher, and schools keep upping the starting salary in hopes of attracting qualified teachers.

[n7steel]

I think you are doing fantastic. I did some things right in my mid 20s (started IRA) but I also did a lot of things wrong up until my late 40s and I was still able to retire at 51 (last year). Compound interest over 25 years is an amazing thing.

I had almost no student loans and they are a distant memory but I do recall paying them off completely in my early 20s — but they were very very low compared to today’s numbers. Still, yours don’t look bad.

That said I would go by the interest rate: if it’s a low interest rate, say under 7%, you probably don’t need to be paying that off early when you can deploy your money elsewhere for future gains. Also if you plan to be a teacher for a very long time it’s possible you’re going to have those loans forgiven. Not to mention the fact that it is becoming more and more politically palatable to cancel student loans.

A big key to FIRE in my opinion is cash flow. Debt is not necessarily bad if it is sustainable and you are able to grow your wealth and/or have manageable cash flow. Remember that inflation is eating into the cost of your fixed-interest-rate debt — it is becoming cheaper over time. Use that to your advantage and deploy your free dollars into an investment like VTSAX or VTI. For emergency fund, you might look into buying US treasury bills on TreasuryDirect.gov. (Am assuming you are in US.)

Also you might look into getting an inexpensive online master’s degree if it would significantly bump your salary. You might also explore a side hustle related to online education such as a YouTube channel or writing books, courses or course materials.

Finally for a $100,000 house, I think you need $20,000 for a down payment. Simply do the math on how many months it will take you to save that. That may sound like an overwhelming number but just remember people regularly spend that much on a new car that immediately depreciates by half and you’re going to be buying some thing much more important than that. Also remember there are multiple pathways to homeownership. Rent to own is a good option, or there may be FHA loans that require less than 20% down (that’s how I bought my house many years ago.)

However, remember that owning a house is not a requirement for FIRE. Living with family is an awesome solution and if you can make it work, do it!

Response:

Thank you very much for your thoughtful response. I am so glad you mentioned your rollercoaster of a ride and how you still retired at age 51. That is a story that I needed to hear. The interest rate response to the loans makes sense and I am leaning toward NOT paying them off right away as they are way lower than 7%. I never really looked into Treasury Bills but I have heard of them and know they are a good way to store money. I will continue to research that as an avenue. "Also you might look into getting an inexpensive online master’s degree if it would significantly bump your salary." -- Absolutely. This is my plan in three or less years. I most definitely want to earn a masters degree and as a teacher like you mentioned, that does increase your pay.

Lastly, thank you for giving me a solid number for the down payment on the house and reminding me that being FIRE does not mean I have to own a house.

Thank you again for all you do for this community and I appreciate such a detailed response to my post. Have a great 2023!

N7Steel

[n7steel]

As a totally out-of-the-box idea, have you considered taking a two or three year international teaching contract (DH’s teaching salary + benefits is worth approximately USD$130k), and just turbo charging your savings for a couple years? You’re young and have minimal life/family responsibilities right now, which makes it a great time to go teach in a different country for a few years. We save about $80k. Do that for a couple years, and you’ll have more than enough for a down payment (or even to buy a house outright) and give your FIRE nest egg a nice boost out the starting gate.

COVID’s really done a number on qualified teachers wanting to teach abroad, so there are many positions available, some at top schools who would typically not look at a newbie teacher, and schools keep upping the starting salary in hopes of attracting qualified teachers.

Response:

Hi, thank you for your response to my post with an out of the box answer. This is something that I have not thought of and did not even think was a possibility. The only concern I have is the language barrier. How would I do this if I do not speak other languages?

Thank you so much and I appreciate your wisdom. Have a great 2023!

N7Steel

[Dicey]

There are programs for first-time home buyers and there are programs for moderate wage earners, but they're mostly a one-time opportunity. Start by  doing your financial research. You may not need the standard 20% down. Buy something big enough that you can have roommates for a few years to help boost your Stacie. The younger you are, the fewer actual dollars you will need to invest to reach your goals. Oh, and while you're researching loan programs, don't let anybody talk you into buying anything before you're ready.

Do not pay down the loans yet, as you wouldn't want to miss out on any forgiveness options.

Love the idea of teaching in another country for a few years! I think you would be teaching in English. Hold off on the house and do this first would be my vote.

Starting salaries for teachers suck.

[uk_american1]

Regarding international teaching, here is a jobs portal that is used in Europe to give you an idea of job descrs and pay.
https://www.tes.com/jobs/browse/germany

It's not always necessary to speak the language of the country, in particular where it's a dual program or international school where the students are taught for half of their day in the local language and the other half in English. (Although it's quite helpful for getting through life in a foreign country and communicating with colleagues.)

In particular I'd recommend Germany having lived and worked there (not as a teacher) but as a place for high salaries and a high level of professionalism in the workplace. Your experience in the classroom is what they are looking for and your native level speaking/teaching skills.

[Freedomin5]

As a totally out-of-the-box idea, have you considered taking a two or three year international teaching contract (DH’s teaching salary + benefits is worth approximately USD$130k), and just turbo charging your savings for a couple years? You’re young and have minimal life/family responsibilities right now, which makes it a great time to go teach in a different country for a few years. We save about $80k. Do that for a couple years, and you’ll have more than enough for a down payment (or even to buy a house outright) and give your FIRE nest egg a nice boost out the starting gate.

COVID’s really done a number on qualified teachers wanting to teach abroad, so there are many positions available, some at top schools who would typically not look at a newbie teacher, and schools keep upping the starting salary in hopes of attracting qualified teachers.

Response:

Hi, thank you for your response to my post with an out of the box answer. This is something that I have not thought of and did not even think was a possibility. The only concern I have is the language barrier. How would I do this if I do not speak other languages?

Thank you so much and I appreciate your wisdom. Have a great 2023!

N7Steel

You would be teaching at international schools, so you would be teaching in English. As long as you are a native English speaker holding a U.S. teaching license, they will want you. You don’t need to speak any other languages.

Be aware that schools in different countries may offer different salaries depending on how “challenging” the country is perceived to be. As an anecdotal data point, here in China, with your American degree and license, you should be qualified for positions that offer at least 35000 to 45000 rmb per month post-tax salary, which equates to roughly USD$5000 to $6500 per month, plus benefits. This is your take-home pay, net of taxes, since schools usually pay your income taxes for you.

Your package should include free housing, free flights back to your home country each year, healthcare, and other things that I can’t remember right now. Really, your expenses will be low as you will only need to pay for food, utilities, and phone. Unless you also choose to live like the typical expat and inflate your lifestyle and get a household helper to clean and cook for you and travel to exotic five-star hotels during your holidays, etc. but if you’re a Mustachian expat, you will save tons of money. For example, we are a family of three, and our monthly expenses are around USD$1000-1200. Since both of us work and are on expat packages (though I'm not a teacher), and we have 10+ years of experience in our respective fields, our salaries are such that we can save about $80K a year from DH's salary, and about $120K a year from my salary.

Read Millionaire Teacher by Andrew Hallam. He is a Canadian teacher who taught at Singapore American School for several years and then FIRE’d.

Search Associates (https://www.searchassociates.com) is a popular site/organization that many of the top-tier international schools use in Asia.

I'm happy to give you more details if you're interested.  Several of our friends are international school teachers. Many of them have purchased homes in the US that the rent out for additional income. It provides them a place to live when they FIRE, and meanwhile, they have tenants paying off their mortgage for them. Others have other investment income streams. International teaching can be a very lucrative career, and many Mustachian international teachers can reach FIRE in 10 years.

[westtoeast]

Hi! Fellow teacher here. You are doing great, especially given how early you are in your career!

I second the recommendations to slow down on debt repayment. Even if general forgiveness doesn't pan out you might be able to get some forgiveness through this program: https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher

I would also suggest finding out if your investment provider offers 457 plans (as an alternative to your 403b plan). The benefit of a 457 plan is that you can withdraw funds before retirement age with no 10% early withdrawal penalty.

Best of luck!

[9ft5wt]

I second all of Freedomin5's information. We taught overseas for 6 years, found MMM during year 1, and turbocharged our savings. We have now lived in NYC for 8 years and have been doing the same. This city is as inexpensive as you want it to be if you can find a good landlord with decent rent, and the teacher salaries are higher than almost anywhere else.

Best of luck!