My Case Study: New to seeking FI and have an interesting State retirement set up

[huntero]

Hey everyone!

Lurker and reader here, but wanted to post about my situation since it is a bit unique to others and I thought I could get some advice along the way!

So, I have student debt, approximately 50k. I am also a public sector employee, eligible for complete loan forgiveness after 10 years of working in the public sector. I am 3 years into that (just turned 31). I'm an Urban Planner making about 49k a year. I like my field, but don't like office drudgery...As of now, I make income based repayments on my loan at about $267 a month.  Below are my life expenses, I would say thus far I am only pseudo-mustachian, however much of it has come very easy since 1. I already bike commute and own a home 4.5 miles from my office. 2. My car is mine, no auto-loan (it's a small 4 door hatchback) . 3. My spouse and I do not eat out very often at all, and never regularly rack up a big bar tab.....So do I have a big frugality muscle? No, but I am inspired to have one. I try to do most of my home improvements on my own.

Income:
$2,902 a month.

Mortgage and Home Owners Ins:
$926 a month.
Student Loans
$267 a month
Auto Ins:
$103 a month (I'm paying too much right?)
Groceries/Food
$550 a month, two people...I am ballparking this and could be better at tracking it, sometimes it's less for sure other times could be more.
Subscription services:
$80 (netflix, spotify, ADT, internet)
Phone: $150, paying off the phone..I know this is a bad one and I need to fix it.

All in all I'm saving about $200 a month.


Additionally, instead of a 401K, we have a state based retirement program, which, after working with the state for 10 years, you become vested. Once vested, the state averages the 3 highest years of your salary and pays you that EVERY YEAR after 65 until you DIE. It does not ever run out and the amount does not change, so long as you reach vested status.

On top of that...My mom passed away 2 years ago from cancer...Her life insurance policy has been a major financial windfall. With this money, I purchased my car, made the down payment on my house, and have invested the rest into a Wealthfront Index fund account and a personal IRA currently totalling $48k, I have some more in a money market acct that will be invested into the index fund once I finish remodeling my kitchen.... I received a $10,000 Roth IRA managed by Edward Jones.

So, in 10 years my goals are:
1. no more student debt.
2. Vested in the state for the security of that constant salary after 65
3. Renting my current home and paying a hefty chunk of a new homes mortgage with the rent of that one...
4. Have an even healthier, stronger investment fund..

Keep in mind that I'm pretty invested to staying here in this state, and hopefully working for it, for the next 10 years to become FI at 41ish. I know things can change, you can get laid off, etc but for now this seems to be the better path than immediately paying off the student loans...As sticking with the state allows a 2 fold win of 1. debt forgiveness 2. vested status..

I already know I could do better in the general savings department but, does my above scenario seem like a realistic goal based on what I've told y'all here?

Thank you!!!

[Gin1984]

Well first, you are missing a LOT of expenses. Where is gas, repairs (for both car and home), any pets, etc.  Start by tracking your expenses and I'm sure you'll find a lot more. Why do you have a car if you can bike to work?  Does your wife work?  Roll over the inherited IRA to vanguard.  Next do you have access to a 403b or 457?

[Laura33]

So I agree that IBR + loan forgiveness is a good choice for you, assuming the program sticks around.  My concern, though, is that you're not on track to be FI by 41, given that the pension you are counting on doesn't kick in for another 24 years. You are saving around $200/mo, but that isn't close to getting you FI in 10 years (much less FI in a new, larger home) -- read this as an FYI:  http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/.

In addition, as Gin noted, there are many, many expenses missing.  What is your deal with your spouse?  Is this just your share of expenses, or are you the sole support?

I think you need to make some choices about how much you really want to be FI vs. have a comfortable lifestyle now.  It looks like you used a significant chunk of our inheritance to improve your lifestyle -- but that choice locked you into significant additional costs that interfere with your ability to be FI in 10 years.  You paid cash for the car, but that now costs you insurance, gas, maintenance, and ultimately the replacement costs for a new vehicle vs. living a car-free lifestyle.  You used the money to cover the downpayment on a house, but that then locked you into spending 30% of your take-home pay on a mortgage, not to mention the ongoing taxes, utilities, ADT, maintenance/upkeep, and the like. 

Note:  I'm not saying these are bad or unreasonable choices -- you are not being stupid, you are not living above your means, you are not throwing money away on consumer bullshit.  But those choices are inconsistent with your desire to be FI in 10 years, at least at your current income level.  Right now, you are consuming first, paying later:  current you is still paying for past you's education; and now you have obligated future you to pay for your housing choice.  If you want to FIRE, you need to switch that around:  your mindset has to be to consume less now so you have more money to put aside to buy future you's freedom. 

If you have a reasonable 40-hr workweek, one option is finding a side hustle to earn more that you can put aside for the future.

[huntero]

Thanks you Laura and Gin!
and yes, realizing that I did not include the full details:

I'll start with saying that car free just isn't an option for us. However, we are a single car household due to our bike-ability. Some days however, the car is very necessary....We like to take day trips to mountain bike, our city has poor bike infrastructure (and very hill topography)....And while this may be softness - our summer climate is VERY HOT, by 9AM, many days from May to October are 85 degrees with 75-90%. Coupled with an office with no shower, it's pretty easy to hop in the car some days....So yes, for me anyways, the car is necessary, I just limit its use.

Additionally, the decision to have a house and mortgage came down to rent in our area.  Most apartments or houses with 2 bedrooms are around $1200 a month, this is not the price for high end "Condos" but reasonable spots....So my mortgage is less than rent would be, so I saw it as an investment that could eventually become a rental property.

My spouse makes about $1600 in a retail job, at a bike shop actually. We aren't married yet (plan on eloping in the next few months!). She handles all of our bills such as water + utilities. We have not yet merged finances. She does not have any outstanding student loans or credit card debt, I also have no credit card debt.

Other expenses I've left off in list form:
Gas: $35 to $40 a month
Home upkeep: I'll ballpark this at $150-$200, most months I don't spend that but others would be more.
Dog - 10lb malti-poo that was my mom's dog. I love this dog, like outrageously so. Her annual vet bill is about $150, 6 months of flea and tick treatment = $160 once a year (doesn't need it in the winter) $10 of food a month (she's little) Grooming $40 every 2 months.
$65 a month in bike parts/maintenance, we are both pretty serious cyclist, although I do much less racing now than I used to

Also, thanks for bearing with me on this as I realize my post was a little premature without REALLY digging in and giving everyone an exact monthly expense report. So that is my next step, I'll hold off on further speculation until then...

Again, thank you guys for the help and advice...I'll also state that for me, 41 is more of a goal to cut a 40 hour a week office gig. Ideally I would transfer more into part time consulting or mountain bike guiding, bike shop part time life, + other side hustles..

[Laura33]

Cool, pull the rest of it together and I'll check back.  But remember that language counts:  the car is not a necessity,* it is a luxury that you value highly because it allows you to drive to places you like and drive to work in cool comfort on hot days.

*I am laughing, hard, at the notion of a serious cyclist who used to race "needing" a car because the road to work is hilly.**  :-)

** That other sound you hear in the background is the world's teeniest violin bemoaning your horrible fate.

[huntero]

Fair enough, I set myself up for that one...SO where I live (Birmingham AL) is divided in half by a "mountain" not by western standards, but steep appalachian foothills standards. I do not have to cross it to get to work, but for other errands I do, and it is serious geographic barrier at times.....

That said, for my commute to work, it's mainly a lack of shower facility at the office that keeps me from doing it in the hottest months. With no shower, even the 4.5 miles turns you into a disgusting sweaty mess...It's THAT, that I avoid. Plus the actual need to travel to clients and attend public meetings which may be 20-30 minutes away by car and appear at said locations in office attire....We are compensated for the mileage on these trips and fortunately we don't do them daily, but it is a semi-regular thing.