Author Topic: 3 Year Update: 24, now debt-free, am i doing this right?  (Read 934 times)

wmd8t

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3 Year Update: 24, now debt-free, am i doing this right?
« on: January 21, 2022, 05:17:50 PM »
Hi All,

In 2019 I was 21 and posted on here, fresh out of college with about $70K of student debt. Since then, I've managed to pay off my student debts and take a job that pays less but is more fulfilling and has better work-life balance. ($80K+10K bonus down to $70K/year). I'm hoping for a gut-check on my saving and investing strategy. 

Life Situation: Single, 24F, Oakland CA, working remotely. Leaving soon to "digital nomad" around the world while I work, and test out what it might be like to travel if I did FIRE.

Gross Salary/Wages: $70,000
401k: Maxed at $19,500 with 4% employee match
Roth IRA: Maxed at $6,000
Health Insurance: On parents insurance

Adjusted Gross Income: $55,000/year, $4,583/month

Taxes:
Federal: $5,500
FICA: $5,300
State: $2,500

Current monthly expenses:
Rent: $920/month
Groceries: $120/month
Eating Out: $120/month (I'm aware this is egregious)
Personal Care: $80/month (clothes, shoes, hygiene products, haircut, etc.)
Public Transit: $40/month
Going Out/Drinks: $40/month
Hobbies/Outdoor Activities: $30/month
Misc.: $130/month (Charity, Gifts, Household, Ubers, Medicine, Laundry, etc.)

Savings:
Roth IRA: $500/month
401K: $1,625/month
Savings: $300/month
General Investing: $50/month

Excess: ~$600/month

Assets: Amount & description - include current asset allocation plan if you have one
Net Worth: $76,000
Roth IRA (Betterment Core): $18,000
401k: $18,600
Trad IRA: $8,800 (rolled over from prior employer into Vanguard 2065 Retirement Fund)
Taxable Investment (Betterment SRI): $5,500
Taxable Investment (Folio, Azzad Ethical Fund): $7,200 - this was opened by my dad when I was a child
Savings (Betterment): $12,000
Checking: $6,500
 
Liabilities: None

Specific Question(s):
Should I adjust the allocations of my investments? Should I move things from betterment to vanguard (this would result in tax implications, right?) What should I do with extra funds? Should I open another taxable retirement account in vanguard? Does my asset allocation and 401K allocation look okay (See below) ? General advice welcomed.

Overall Allocations

U.S. Stocks: 63%
Int. Stocks: 26.5%
U.S. Bonds: 4%
Int. Bonds: 1.75%

Retirement Breakdown
VFTAX 60%
Vanguard FTSE Social Index Fund Admiral
VIMAX 10%
Vanguard Mid-Cap Index Fund Admiral Shares
VSMAX 10%
Vanguard Small-Cap Index Fund Admiral Shares
VTIAX 10%
Vanguard Total International Stock Index Fund Admiral Shares
VBILX 7%
Vanguard Intermediate-Term Bond Index Fund Admiral Shares
VGSLX 1%
Vanguard REIT Index Fund Admiral Shares
JESRX 2%
John Hancock Funds Multimanager 2060 Lifetime Portfolio Class R6

My 2019 case study, in case you are curious: https://forum.mrmoneymustache.com/case-studies/case-study-21-yo-f-with-eternal-student-loans/msg2462660/#msg2462660
« Last Edit: January 21, 2022, 05:25:46 PM by wmd8t »

nereo

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Re: 3 Year Update: 24, now debt-free, am i doing this right?
« Reply #1 on: January 21, 2022, 05:39:42 PM »
Good to see you post an update.

A few responses in no particular order:
1) I wouldn’t be overly concerned with the tax implications of buying/selling and transferring to a new brokerage at this stage.  You only pay taxes on your gains, it won’t be much at your income - might even be zero depending on your deductions and 401(k) contributions. 

2) as for your AA - this is a personal question only you can really answer. But if it were me, I think what you have is more complicated than you need it to be, and for little/no obvious benefit. As examples, you own two bond funds and then you also have target retirement funds - which hold those same bond funds. Keep one or the other but together they are redundant and less efficient.

3) congrats on the massive debt payoff.  Impressive

4) well done on getting your financial act together at this relatively early stage. Especially good that you are maxing out your IRA/401(k).  Now comes the grind - for the next few years it might feel like things aren’t going as quickly as you’d like.  That’s normal. But suddenly you’ll reach a point when market movements can have a larger impact than your contributions ever could.  For me it felt like we reached that point somewhere around when we hit the $200k investment mark. But it might take you a few years of seemingly snails-pace progress to get there.  Be patient and stay the course

5) speaking of the IRA - you may be very close to the point where it makes sense to use a traditional IRA - see the investment order sticky for more details




SwordGuy

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Re: 3 Year Update: 24, now debt-free, am i doing this right?
« Reply #2 on: January 21, 2022, 07:49:32 PM »
You're doing great!

I agree that you could simplify your portfolio.

You've only been doing this for a few years, just make sure you're emotionally and logically prepared for a major market downturn.  Have you read the JL Collins stock series, particularly the entries about downturns?

Barring a catastrophic illness, injury, or legal woes -- or panicking on your part in a market downturn -- you're going to succeed wonderfully!   Congrats!

cool7hand

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Re: 3 Year Update: 24, now debt-free, am i doing this right?
« Reply #3 on: January 22, 2022, 09:39:14 AM »
+1 on the above comments, which are spot on. You're doing great, your asset allocation is up to you but you might want to simplify, and keep up the great work!

wmd8t

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Re: 3 Year Update: 24, now debt-free, am i doing this right?
« Reply #4 on: January 24, 2022, 09:02:51 AM »

2) as for your AA - this is a personal question only you can really answer. But if it were me, I think what you have is more complicated than you need it to be, and for little/no obvious benefit. As examples, you own two bond funds and then you also have target retirement funds - which hold those same bond funds. Keep one or the other but together they are redundant and less efficient.


Thank you for this advice/observations :) What would be the best way to simplify my asset allocation? shift all my retirement funds into one of the index funds? Perhaps VFTAX?
Not sure if I should move anything else that I have

nereo

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Re: 3 Year Update: 24, now debt-free, am i doing this right?
« Reply #5 on: January 24, 2022, 10:16:15 AM »

2) as for your AA - this is a personal question only you can really answer. But if it were me, I think what you have is more complicated than you need it to be, and for little/no obvious benefit. As examples, you own two bond funds and then you also have target retirement funds - which hold those same bond funds. Keep one or the other but together they are redundant and less efficient.


Thank you for this advice/observations :) What would be the best way to simplify my asset allocation? shift all my retirement funds into one of the index funds? Perhaps VFTAX?
Not sure if I should move anything else that I have

You might want to start by reading about the three-fund portfolio (link here).  There are several examples of specific three-fund portfolios which will give you a very high level of diversity.  Choose which one makes the most sense for you and your risk tolerance and goals (or tweak them until you've got what fits for you).

Also, while there are some particulars, in general you want to view your AA as a whole across all your different buckets, and then optimize each bucket for tax-efficiency.  As an example, suppose you want your AA to be an 80/20 mix of equities and bonds, and for it to be 60/40 domestic/international companies.  That's for your entire portfolio.  Then you might want to put your most or all of your bond funds in your IRA for tax-efficiency purposes. Which would mean your taxable accounts would hold a higher percentage of stock-fund(s) than your IRA, which would hold more bond funds.

Make sense?

zolotiyeruki

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Re: 3 Year Update: 24, now debt-free, am i doing this right?
« Reply #6 on: January 26, 2022, 02:13:44 PM »
I don't have any advice to add to what has already been posted.  I simply want to say:

WAY TO GO!

You're only 24, and in three years, you've gone from $70k in debt to $76k in assets.  Your spending seems pretty good, and you're socking away all sorts of money.  You are knocking it out of the park.

I think you're wise to be maxing out your Roth IRA contributions at your age.  If you're planning to eventually build a Roth Conversion Pipeline, you'll need 5x yearly expenses accessible, and Roth contributions are a great place to be sowing funds.