Life Situation - 26 years old
- single
- no dependents
- renting in Seattle
Gross Salary/Wages - $350k (
IMPORTANT: Expected to drop off to ~$270k in ~3 months)
- Max Backdoor Roth
- Max Traditional 401(k)
- Max Mega-backdoor 401(k)
Other Ordinary Income - ~$3k/year from bank bonuses
- ~$1k/year from credit card rewards
Adjusted Gross Income - $318,000
Taxes - ~$84k
- ~24% effective rate
Current expenses
-$17k
- ~$10,890 housing (1bdr split w/ girlfriend - includes rent, renter's insurance, utilities)
- ~$2,270 groceries (was much lower back when I ate 3 meals/day at the office)
- ~$2,012 hobbies (driving range, shooting range, video games, etc)
- ~$990 takeout (always value-oriented, $5.99 for a Dominoes pizza can't be beat)
- ~$900 transportation (insurance, gas, maintenance on a shared 2017 Sedan)
Expected ER expenses - ~$120k (down payment for a house, I'm going crazy without my own space for hands-on hobbies)
- ~$18k car (need to get one of my own, maybe Joe will go in half on a new Chevy Bolt with me?)
- ~$5k misc lifestyle inflation (will need home furnishings, will try to thrift most)
- ~$5k moving (limited amount of "stuff" - but will likely bounce back to mom's apt before my next place, so 2x cost)
- ~$200 phone (currently use employer-issued phone)
- ~$30/mo data plan (for said phone)
- ~$60/mo internet (currently expensed as I'm WFH)
- ~$??? HEALTH INSURANCE (will I qualify for free ACA coverage if I stop earning money, even if I have assets?)
Assets:
- $965k (current NW)
- Asset Allocation
- 08% Bonds/Cash
- 33% Intl Stock
- 59% US Stock
- Asset Location
- 16% Pre-tax
- 21% Roth
- 63% taxable
- $77k (tech stocks vesting in next 3 mos)
- $19k (max PTO - to be paid out upon leaving company)
Liabilities - none
SummaryI've enjoyed incredible earning power my first 4 years out of undergrad while keeping living expenses very lean. However, it seems the latter has backfired, as my lack of real assets (no car, house, etc.) has made me incredibly vulnerable to inflation, which seems to be eroding my early advantage. As for my current job, I have little desire to continue work at my current company. I plan on leveraging the upcoming compensation drop-off mentioned above to slip out of the golden handcuffs. Re-entry into the industry will, conservatively, put me back down to ~$150k/yr total comp - which I would welcome for a gig of either lower stress or more social value. Location is still an open variable - I mention above I rent in VHCOL USA, but I'm only here because the job required me to pre-COVID. Most places that appeal to me are ~MCOL (Colorado, Smoky Mountain region, etc.).
I come to the wise owls of the MMM forum to hopefully weigh in on the questions that have been nagging me as of recent...
Specific QuestionsAm I foolish to begin pumping the brakes when my salary/NW ratio is only ~0.33?MMM inspired me circa 2018 when I first discovered this blog with the idea that a lean lifestyle could be funded on a very small nest egg (~"I spend $16k/year, I can retire on $400k!"). However, a graphic in a more recent post of his haunts me:
https://www.mrmoneymustache.com/wp-content/uploads/2020/08/diana-tech2.png. He suggests a tech worker should optimally save "several million", which seems to fly in the face of what was supported the first decade of this blog's entries. MMM always upheld that your nest egg should be a function of your spending, but this suggests it's also a function of your earning power. Has age brought MMM the wisdom that perhaps his early financial advice left bank accounts too lean? Should earning power be considered when deciding whether or not to pull the plug?
Is it a bad timing to purchase assets that I've forgone up until now?A shared Sedan and 1 bedroom apartment aren't what I want to retire to. I've always known that there will come a time for me to "step-up" into a home of my own. However, the timing seems like it couldn't be any worse. Unprecedented supply crunches in both the automotive and housing industries have caused a spike in prices, which is believed to be temporary. The Fed promising rate hikes to come soon, which will produce downward pressure on home prices, seem to suggest it's unwise to buy now. I'd like to think we're more forward-thinking than your average consumer (which doesn't seem like a bold claim, as most people make these decisions emotionally). I figure I can take advantage of a higher interest-rate environment by putting a larger down payment on a mortgage if I wait just a bit longer... as I'm not dependent on the leverage like the typical homebuyer.
What if I quit now?Will I even need to find another job, or is there enough buffer built in between my expenses (which are expected to rise) and expected investment income? Is it important that I shuffle investments into more conservative funds (value stocks/worthless bonds) if I plan to quit soon in case of a market correction? Should I rush the home-purchase while I still have W2 income? Does my taxable/ROTH/pre-tax wealth distribution look unbalanced in any odd way that may be tough to work around?