27. Single. Big lifestyle changes; trying to adjust savings and such accordingly

[zoochadookdook]

Hi all.

I'm 27. Single. No dependents. Recently got a new job that offers a 401, health insurance etc and am having a interesting time balancing everything (especially trying to sell my house accross the country/bouncing around living here).

The numbers:

Current Income:
65K/Year with 5k bonus this month (expect a raise in Jan/Feb)
Which comes out to $4300 take home
I've been trying to reestablish my side hustle/business but it's a bit tricky without storage space/a hectic transition-this month I pulled a few hundred but I expect min another 3-400/month once I get up and settled.

Assets:
65K Cash/easy liquid (72k After next check)
31K Roth IRA (1200 left to max for 2019)
Est. 100k in equity + for the house for sale.

Debt: 900 (pays off monthly
1600 (prop taxes to pay off; can have done by next week)

Expenses:
Current mortgage: 600/month due the first
Living/rent (900?)- This month I stayed rent free with the buddies family (moved for the new job), he bought a new house and offered me 600/mth and half utilites so may do month to month starting next. This bides me time vs a 12 month lease and gives me the option to explore a multi family or duplex (this city is crazy with colleges, a big downtown/military bases and I always enjoy business/the idea of buidling real estate into a my assets)
Food/gas/other: $300
Roth Ira: 500/month
Health insurance (see following) 190 (plus contribution?) vs 240
Dental (below) $40?
Other investments/wants/such: ?



My first decision I'm struggling with is healthcare, here's the breakdown:

No major health issues. Fairly active. Do compete in sports so stitches happen and such occasionally/antibiotics for staph. May tear something here and there.

Comparing a HSA and a non HSA (190/240) with no employee contribution to the HSA. HSA is capped/3500 year.
Any advice on what to choose? Dental is attached as well-but i'm thinking if you can use an HSA.....it's a moot point to go seperate dental.

Other relevent info:
Marginal Tax Rate: 22%
Effective Tax rate: 11%
FICA: 7.65%
State tax: 0%



Health:

https://photos.app.goo.gl/RkALTQDdtM8Crzch7

https://photos.app.goo.gl/6BkV8zUwFpws9gov7

Dental:

https://photos.app.goo.gl/qb7mp6amkjLvZdVv6



Next is my investments. I was self employed the last 4 years and never opened a SEP or such. Now i've been offered a 401k (no match but *vested numbers). Obviously this is tax advantaged so I should take advantage? The 401k is offered through John Hancock which seems to have higher fees; but maybe a total market fund wouldn't be awful (I'm vanguard 2060 target in my roth)

Details:
https://photos.google.com/photo/AF1QipM-6Iv8P1_nx2sl-EHOHY13qCarE5tsrOnjHSI

Last of all; How should I go about allocating money for invesments usch as rental properties/a possible temporary shared multi family while I get used to the area along with other things? I'm not as hardcore FIRE in terms of stopping working as I am having financial independence to pursure whatever business ventures I eventually fall into. Retirement is important but maintaining some sort of working capital in times of emergency and other things also seem important (shoot I never spend much on myself but was thinking the other day I should at least pursue a vacation I want while i'm still youngish). Budgeting for things like this vs retirement vs my version of "FIRE" sort of has me stumped.

Thanks for any insight and such. Just trying to make the right choices.

-z

[Chrissy]

Have you checked out the Investment Order?

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

[zoochadookdook]

Have you checked out the Investment Order?

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

WHAT           
0. Establish an emergency fund to your satisfaction 
          Check

1. Contribute to your 401k up to any company match 
          No match so check

2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.   
         n/a

3. Max Health Savings Account (HSA) if eligible.
       I could but not sure if my HSA is a decent account. Seems to be pros and cons to each. May be a stretch to max 2019 with 3 paychecks (and trying to hit a cc bonus for DD)

4. Max Traditional IRA or Roth (or backdoor Roth) based on income level   
        Will be maxed EOY. I need to math out what makes sense going forward as I do expect to make more.

5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - your earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           

No idea. The general fund is .19 or so which....isn't awful but not the worst. This is a big part of my allocation I need info for.

6. Fund a mega backdoor Roth if applicable.     
No idea.
   
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield. 
None sans mortgage
         
8. Invest in a taxable account and/or fund a 529 with any extra.   
Will look into a 529. I guess I could run the taxable account but was also looking at a duplex/multi family local to mitigate living costs and start on a realty portfolio.

[Chrissy]

Are you estimating expenses of $2k/mo (not counting your monthly ROTH investment) or $2,900/mo with the debt that you pay off monthly? 

I'd go with the HDHP + HSA.  No dental as long as you have good teeth & genetics.  Max the HSA and do not touch it.  It's a great retirement vehicle.

Will you have enough for a downpayment on a rental once your house sells?  $100k equity + $35k from cash?  This leaves you with $18.5k as a personal emergency fund and $18.5k in a rental emergency fund.  I'd keep the rental downpayment in cash if you think you're going to buy something in 12-24 months.  Longer than that, and you might want to put 50% in the market.

Yes, take advantage of the 401k.  The amount depends on your expenses and whether or not you need to save additional funds to purchase a rental.

In terms of balancing spending on life/short term goals vs. saving for FIRE:  you don't ever HAVE to FIRE.  However, if the day comes when you want to, but you haven't done the work, it won't be an option.

Don't do a 529 if you can't max your 401k.

[zoochadookdook]

Are you estimating expenses of $2k/mo (not counting your monthly ROTH investment) or $2,900/mo with the debt that you pay off monthly? 

I'd go with the HDHP + HSA.  No dental as long as you have good teeth & genetics.  Max the HSA and do not touch it.  It's a great retirement vehicle.

Will you have enough for a downpayment on a rental once your house sells?  $100k equity + $35k from cash?  This leaves you with $18.5k as a personal emergency fund and $18.5k in a rental emergency fund.  I'd keep the rental downpayment in cash if you think you're going to buy something in 12-24 months.  Longer than that, and you might want to put 50% in the market.

Yes, take advantage of the 401k.  The amount depends on your expenses and whether or not you need to save additional funds to purchase a rental.

In terms of balancing spending on life/short term goals vs. saving for FIRE:  you don't ever HAVE to FIRE.  However, if the day comes when you want to, but you haven't done the work, it won't be an option.

Don't do a 529 if you can't max your 401k.

Sorry about the confusion:

Current Expenses are:
600/month+maybe another 100 utilities (heat) in my current house (for sale)
Est. 750 for rent on a per month basis starting November
Est 350 for gas/food/other starting November
HSA: 190



So my baseline fixed is 2000 until the house sells (then 1400 until I decide on another living situation)
 
PLUS HSA contribution/Roth contribution.
(hsa=300/mth to max, roth=500)

I plan on maxing my HSA for 2019 (1166 the next 3 paychecks which will knock 800something off my take home after tax advantages) because why not?

I do plan on possibly dipping into it for dental though. Need to decide how to allocate it accordinly. Probably doing the same exact split as my vanguard (total stock US, maybe a bit total international, like 5% bonds).

As far as the rental downpayment; I absolutly should have enough (at least I think so).Putting down money really depends; on one side yes you have more wiggle room when you have more equity; however with current mortgage rates so low i'm almost leaning towards doing a lower down payment and using the rest on another unit/throwing in the market. Depending on where it's located I think the most I'm trying to spend is around 200k (possibly multiple units within the next year if I can make some numbers work/see how the first one goes). I plan on living in the first to save a bit extra on rent/maintain it up to date (I rented a room in my house previously so have a bit of experience vetting tenents and such).

Thanks for your advice!

[Chrissy]

Okay, thanks for clarifying.  Now we're cookin'...

Reconsider using the HSA for dental.  You have the cash on hand to handle those expenses.  SEE:  https://www.madfientist.com/ultimate-retirement-account/

Max the 401k.  After the house sells, you should have $1,100/mo to put into taxable or to service real estate investment debt.  Adjust as necessary.  (I guess you could consider a 529 if you intend to have children at some point in the future.  Put yourself as the owner & beneficiary.  You can change the beneficiary to the child later.)

Yes, put the minimum down on the rental(s), just avoid PMI.

Congratulations on being in an awesome financial position!

[zoochadookdook]

Okay, thanks for clarifying.  Now we're cookin'...

Reconsider using the HSA for dental.  You have the cash on hand to handle those expenses.  SEE:  https://www.madfientist.com/ultimate-retirement-account/

Max the 401k.  After the house sells, you should have $1,100/mo to put into taxable or to service real estate investment debt.  Adjust as necessary.  (I guess you could consider a 529 if you intend to have children at some point in the future.  Put yourself as the owner & beneficiary.  You can change the beneficiary to the child later.)



Yes, put the minimum down on the rental(s), just avoid PMI.

Congratulations on being in an awesome financial position!

That's a way easier way to view it. For some reason I was thinking you had to use your HSA funds towards the deductible in medical cases. That being said I think the max my dental pays out is like 2k anyways so..... *Rolls eyes*

So my numbers go:
1400 living monthly (Rent, utilities, gas, food, a bit of padding, HSA premium)
300 HSA max
500 Roth max
19000*.8=15200/12=1266/month
Total: 3500ish take home of 4300=800 baseline other allocations SANS side hustle (1000-1100 with)

That should be a fair bit towards a decent rental. In fact if the rental is a live in I can reallocate the est. 750/ month to month as a build in. Good point on the PMI though-not sure how it works for rentals/such but if it's a primary residence I'd assume it may be the 20% as well

I'll have to look at 529s. Not against having children but no idea when or if I'd want to.