I'm married, 31, with a kid on the way. I just started my own solo law practice and it's taking off to such a degree that I'm humbly and surprisingly confused with setting goals for 2019. Here's the basic numbers of what my goals are for 2019:
$225,000 -- Gross Income
$18,500 -- Wife 401k
$18,500 -- My 401k (as employee)
$35,000 -- My 401k (as employer)
$6,900 -- HSA
$20,000 -- Deductible Law Firm Expenses
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$126,000 Adjusted Gross Income
($30,000 in anticipated taxes -- no state taxes for me since I'm self-employed)
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$96,000 -- Cash Flow (for Expenses)
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$45,000 -- Actual Yearly Household Expenses
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$51,000 left over
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This $51,000 is a big, big number. We are currently in 100% equities, and all the above investments will also go into 100% equities.
If we put this $51,000 in additional funds toward the mortgage, then I'd basically be able to pay off half our mortgage, which is currently at about $114,000 at 4.5% interest. The thought of not having a mortgage after just two more years is of huge psychological value to me, and also math wise -- it would lower our yearly expenses to about $39,000, thus creating more cash flow each year and each month.
I'm viewing this as a bond allocation at 4.5% guaranteed return, but also being able to pull out the equity on this amount as well (i.e., a HELOC) if needed. I also think payoff of the mortgage is fine when I'm taking up all other available tax-advantaged space.
Is thinking of this as a bond allocation mental gymnastics on my part, or does this make sense?