Author Topic: Seeking advice or pointers to self-study info for my possibly unique situation  (Read 2404 times)

Djeayzonne

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Hello everyone, my name is Djeayzonne, and I am a recovering consumer.

I first stumbled onto this site after finally getting to a point at which I could start thinking about the issue of investing vs. paying off the mortgage earlier.

I originally did an 80/15/5 setup to avoid PMI. I have always made at least small extra payments each month, but I decided a few months ago to treat the second mortgage (15-year note at 8%) as emergency debt. So, that will be my focus for the next 6-9 months. Afterwards, I will refinance the 30-year note to a 15-year note. Hopefully the interest rate will still be around 2.5% at that time. If that is the case, I have decided I am comfortable with just making the minimum payment (something I have never really done before) while I start focusing on investing.

So, onto how my situation may be unique. I only worked in the US for a few years before moving to Japan. I was really young at the time, and had no interest in a 401K, but I was saving for a 20% down payment on my first house. Ended up using that money to go to Japan, but anyway, the point is I have no 401K.

The struggles with establishing myself as a professional in Japan was difficult and time-consuming. Investing is not a thing there either, but I did manage to build up a nice amount of savings. I used most of that for the relocation/reestablishment back in the US after 10 years in Japan and the down payment on the house in which I now live. I don't really trust their attitude and therefore policies towards foreigners, so I just decided to receive a lump-sum for my contributions to their version of social security. I only worked for 2 years at a normal company after returning to the US, and as I was focused on reestablishing myself here and getting a house, I chose not to participate in 401K with an intent to start it after things settled down somewhat and getting a house was finished.

I was laid off just a few months after getting a house due to the company filing bankruptcy. I took my freelance side hustle and went full-time with it. It has been a struggle to get this business to a mildly successful state, but I am finally a break-even point. Meaning no real debt besides the mortgage, but no real investments either.

So, I don't think I can expect too much from social security when the time comes. At the moment, all I have is two Roth accounts, one for me and the wife, with Edward Jones; the total value of which is only 3,000 at the moment.
In addition, I have about 15K in cash; though part of that is just a hold-over in place of escrow to pay property taxes, which is ridiculously high for me living in Texas.

So, in a nut-shell, what should I do after I finish paying off the second mortgage and refinance the primary?
My goal is to get pretty aggressive and at least be able to semi-retire 7 years from now, which is to say, I bought the house in an area that I knew was about to explode, so I plan to sell after some of this commercial infrastructure finally gets built, and the huge gains in property values every year start to stabilize by which time my monthly property tax contributions will probably be just under the mortgage payment itself! Yikes.

At that point, I plan to leave Texas to somewhere with more reasonable property taxes and clear about 300 K from the sale of my house even after subtracting the funds to buy the next house in cash. Then, I basically plan to keep doing what I do now, just at a much reduced volume, say around 1/4 of the amount of work I do now, which should cover or nearly cover my actual living expenses (expecting that to be around 36K a year by that time).
Anyway, starting from next year after the refinance, I should be able to invest/do something with between 3-8 thousand a month with typical months being right around 5K as my income varies each month working for myself at home.

One other thing to mention though I don't know if that would really affect any strategy you might offer as advice, but my wife and I do plan to return to Japan eventually, or more likely, maintain a residence in both countries. Part of the reason for that is health insurance and costs of health care are certainly much better affairs over there. I am frankly worried about staying in the US after a certain age. Part of it is that we would both like to enjoy the positive aspects of both environments.

Sorry the long post, but when asked for advice, I know I always want as much information as possible before giving any, so this wall of text was written at least with good intentions.

Thanks and glad to be part of the community even though I am still struggling with some of the ideas and life-style choices.

MustacheAndaHalf

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You have $3k to invest, $15k cash, and a home purchased with 5% down.  I think you'd benefit more from reading about personal finance (reduce spending / larger emergency fund), rather than investing ($3k to invest).

Djeayzonne

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Not looking for a critique on past events, but advice on going forward. Not helpful at all mate. You also clearly didn't read what I said either. In which case, why respond?
« Last Edit: August 22, 2016, 11:39:09 PM by Djeayzonne »

waltworks

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Post a real case study if you want good advice.

It sounds like you are *sort of broke* right now? But you have a house that you're certain will "explode" in value, and you want to semi-retire with houses in 2 different expensive countries in less than a decade?

That could happen if everything goes right for you. If anything doesn't, no go.

In any case, pay off your 2nd mortgage, then put spare money in any tax advantaged accounts you can, then taxable. Done.

-W

DrF

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Your situation is not that unique here. Many mustachians are self employed. Many mustachians have no savings and hold a mortgage. The reason everyone says to save in tax advantaged accounts is because... you pay less taxes, and can invest more of your money without earning more. For a good writeup, see this. http://www.madfientist.com/retire-even-earlier/

Then read this. http://www.madfientist.com/how-to-access-retirement-funds-early/

Also, you have lots of savings options for being self employed.

http://forum.mrmoneymustache.com/investor-alley/investment-strategy-optimization-group-thread-solo-self-employed-group/
http://forum.mrmoneymustache.com/ask-a-mustachian/self-employed-mustachians-is-a-self-funded-401k-worth-it/
http://forum.mrmoneymustache.com/investor-alley/take-the-test-self-employed-retirement-account-scenario-what-would-you-do/
http://forum.mrmoneymustache.com/taxes/am-i-required-to-make-quarterly-self-employment-tax-payments/
http://forum.mrmoneymustache.com/investor-alley/self-employed-retirement-options-56472/
http://forum.mrmoneymustache.com/investor-alley/early-withdrawal-tax-strategies-while-self-employed-in-fire/
http://forum.mrmoneymustache.com/investor-alley/self-employed-retirement-options/
http://forum.mrmoneymustache.com/taxes/best-retirement-account-for-self-employed-family-business/
http://forum.mrmoneymustache.com/welcome-to-the-forum/self-employed-401k-question/
http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-25yr-old-male-single-and-self-employed/

Djeayzonne

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Post a real case study if you want good advice.

It sounds like you are *sort of broke* right now? But you have a house that you're certain will "explode" in value, and you want to semi-retire with houses in 2 different expensive countries in less than a decade?

That could happen if everything goes right for you. If anything doesn't, no go.

In any case, pay off your 2nd mortgage, then put spare money in any tax advantaged accounts you can, then taxable. Done.

-W

I am not sure how much more real my case study could be since it is actually my life situation, but thanks for the pointer.
The house has already increased in value by 50%. I don't expect that to slow down for at least the next 3-5 years, but again, thanks for the attitude.
I said I want to semi-retire in 7 years, and then I said I want to EVENTUALLY either truly retire in Japan or maintain a residence in both countries.

I am sort of broke because I have been busting my ass to turn a sudden and terrible event into a successful opportunity while paying off debt incurred before and after the layoff.
Isn't that the FIRST FRIGGIN' STEP OF BECOMING FI?  I am nearly ready for the next step, thus my post, but again, thanks for the attitude.

Djeayzonne

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Your situation is not that unique here. Many mustachians are self employed. Many mustachians have no savings and hold a mortgage. The reason everyone says to save in tax advantaged accounts is because... you pay less taxes, and can invest more of your money without earning more. For a good writeup, see this. http://www.madfientist.com/retire-even-earlier/

Then read this. http://www.madfientist.com/how-to-access-retirement-funds-early/

Also, you have lots of savings options for being self employed.

http://forum.mrmoneymustache.com/investor-alley/investment-strategy-optimization-group-thread-solo-self-employed-group/
http://forum.mrmoneymustache.com/ask-a-mustachian/self-employed-mustachians-is-a-self-funded-401k-worth-it/
http://forum.mrmoneymustache.com/investor-alley/take-the-test-self-employed-retirement-account-scenario-what-would-you-do/
http://forum.mrmoneymustache.com/taxes/am-i-required-to-make-quarterly-self-employment-tax-payments/
http://forum.mrmoneymustache.com/investor-alley/self-employed-retirement-options-56472/
http://forum.mrmoneymustache.com/investor-alley/early-withdrawal-tax-strategies-while-self-employed-in-fire/
http://forum.mrmoneymustache.com/investor-alley/self-employed-retirement-options/
http://forum.mrmoneymustache.com/taxes/best-retirement-account-for-self-employed-family-business/
http://forum.mrmoneymustache.com/welcome-to-the-forum/self-employed-401k-question/
http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-25yr-old-male-single-and-self-employed/

Thank you!!! I think this is exactly what I needed.

Really, the only reason why I thought my situation might be unique is because I don't have and have never had a 401K and because I have only paid into social security maybe 6 or so years out of my entire career. The basic theme I keep seeing is max Roth and 401K. So I was thinking "Well, maxing Roth is only 11,000 dollars a year, so then what?", and that is why I posted.

I will read all the links you provided before asking anymore questions, so thanks again!

Shor

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Hiya dj,
Just in case you missed the sticky, head here:
How to write a case study

This gives you a format to lay out your full situation including income, expenses, where the money goes. This also gives people a better idea of where expenses can be cut out, whether you can FIRE sooner, later, ever :)

Just from your original post, I can see you have residence mostly set, doubly so! That's pretty awesome! Rent/mortgage is usually the biggest expense in the budget, but there are lots of other expenses that will still need to be covered. It's great if you're paying no monthly rent, but you still gotta food, taxes, health insurance, and a lot of people plan to spend more in retirement on vacation, hobbies, etc.

You're asking what to do to secure your future, but it sounds like you are spending most of your money in to housing, and the rest on expenses with minimal going towards invested accounts. This might give a lot of exposure to the RE market. Doubly bad is if you aren't ready to sell, but you don't want to stay, much harder to get money out of your investment (rent or reverse mortgage). If you plan to RE as soon as possible, you might want to review at what point you plan to sell house #2, including the possibility that it doesn't get better in the next 15 years.

Also be forewarned, the forum has some people that extremely debt adverse. Which is fine, some people need a certain amount of security, to sleep at night. Others are fine leveraging debt to build up their retirement stash. Be ready for a lot of different perspectives based on what other people think is the best route (and of course your route will be the one that you feel safest with). Best of luck!

kitkat

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Post a real case study if you want good advice.

It sounds like you are *sort of broke* right now? But you have a house that you're certain will "explode" in value, and you want to semi-retire with houses in 2 different expensive countries in less than a decade?

That could happen if everything goes right for you. If anything doesn't, no go.

In any case, pay off your 2nd mortgage, then put spare money in any tax advantaged accounts you can, then taxable. Done.

-W

I am not sure how much more real my case study could be since it is actually my life situation, but thanks for the pointer.
The house has already increased in value by 50%. I don't expect that to slow down for at least the next 3-5 years, but again, thanks for the attitude.
I said I want to semi-retire in 7 years, and then I said I want to EVENTUALLY either truly retire in Japan or maintain a residence in both countries.

I am sort of broke because I have been busting my ass to turn a sudden and terrible event into a successful opportunity while paying off debt incurred before and after the layoff.
Isn't that the FIRST FRIGGIN' STEP OF BECOMING FI?  I am nearly ready for the next step, thus my post, but again, thanks for the attitude.

I wouldn't take anyone's attitude personally -- this forum gets a lot of the same questions from people who sort of jump in blindly not having read the blog which the forum is based on, or any other posts in the forum. Since a lot of members here genuinely want to help and respond, some can have a short fuse when they feel like they're going to have to repeat themselves. Example here when he said post a "real case study" -- case studies are a huge part of this forum, and there is a specified way to post one (which Shor so helpfully linked) and yeah, like I said, some long-time forum members have a hard time remembering what it was like to be a newbie ;) Also, people here generally love being blunt a la the infamous MMM "face punch".

Additionally, a tip that helped me when I was new (aka like a month ago!) was that you can search the forum on google by typing "forum.mrmoneymustache.com <whatever you want to search>". The "search" feature in the forum kind of sucks, and this will save you having to ask people to tell you stuff they've already written about.

It sounds like your main question is "where should I save money if I don't have a 401k"? Or similarly "where should I put my retirement money if I am self-employed?" I'm assuming the links DrF shared should help with this.

Good luck!

cchrissyy

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it only takes 10 years of working (40 quarters) to qualify for social security. even your part time jobs in high school and college can help get you there. so can self employment if you are paying SS taxes.  check on that, maybe your situation later in life has more help coming than you think.

Djeayzonne

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I quickly read all those links as breaks from work today.

It answered some questions and created a lot more.
At least I have some direction now though.

I still have time to understand this stuff more because right now, I just want to get the second mortgage paid and then the primary one refinanced.

So, I guess one question for now.

If I were to start a solo 401K and max it out, wouldn't that effectively lower my income possibly making it difficult to qualify the refinance?

I saw a few pieces of advice on going S-Corp once over a certain threshold: some said 60K, some said after 6 figures.
I am right around 60K net after expenses and everything at this point. Any suggestions on that front?

I also noticed a generally negative view of Edward Jones.
Should I change?

Djeayzonne

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Hiya dj,
Just in case you missed the sticky, head here:
How to write a case study

This gives you a format to lay out your full situation including income, expenses, where the money goes. This also gives people a better idea of where expenses can be cut out, whether you can FIRE sooner, later, ever :)

Just from your original post, I can see you have residence mostly set, doubly so! That's pretty awesome! Rent/mortgage is usually the biggest expense in the budget, but there are lots of other expenses that will still need to be covered. It's great if you're paying no monthly rent, but you still gotta food, taxes, health insurance, and a lot of people plan to spend more in retirement on vacation, hobbies, etc.

You're asking what to do to secure your future, but it sounds like you are spending most of your money in to housing, and the rest on expenses with minimal going towards invested accounts. This might give a lot of exposure to the RE market. Doubly bad is if you aren't ready to sell, but you don't want to stay, much harder to get money out of your investment (rent or reverse mortgage). If you plan to RE as soon as possible, you might want to review at what point you plan to sell house #2, including the possibility that it doesn't get better in the next 15 years.

Also be forewarned, the forum has some people that extremely debt adverse. Which is fine, some people need a certain amount of security, to sleep at night. Others are fine leveraging debt to build up their retirement stash. Be ready for a lot of different perspectives based on what other people think is the best route (and of course your route will be the one that you feel safest with). Best of luck!

Yeah, thanks for that. I don't know if I am quite ready to break it down like for everyone to see on the Internet. Anyway, what I wanted to know is the best plan of attack when I am ready to start hitting the investing/saving aggressively in about 8 months. My expenses are fairly minimal, and I have already started looking at what to cut after reading the first year's worth of MMM blog posts. Unfortunately, my expenses are fairly high simply because of the mortgage and property taxes.

I only have one house though. I have been fortunate that it has appreciated so quickly even though I knew that would happen, but I didn't think it would happen as quickly as it has. I have always been stubborn to make at least a small extra payment every month. So, I already have about 65% equity.

Djeayzonne

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[/quote]

I wouldn't take anyone's attitude personally -- this forum gets a lot of the same questions from people who sort of jump in blindly not having read the blog which the forum is based on, or any other posts in the forum. Since a lot of members here genuinely want to help and respond, some can have a short fuse when they feel like they're going to have to repeat themselves. Example here when he said post a "real case study" -- case studies are a huge part of this forum, and there is a specified way to post one (which Shor so helpfully linked) and yeah, like I said, some long-time forum members have a hard time remembering what it was like to be a newbie ;) Also, people here generally love being blunt a la the infamous MMM "face punch".

Additionally, a tip that helped me when I was new (aka like a month ago!) was that you can search the forum on google by typing "forum.mrmoneymustache.com <whatever you want to search>". The "search" feature in the forum kind of sucks, and this will save you having to ask people to tell you stuff they've already written about.

It sounds like your main question is "where should I save money if I don't have a 401k"? Or similarly "where should I put my retirement money if I am self-employed?" I'm assuming the links DrF shared should help with this.

Good luck!
[/quote]

Yeah, I am not taking it personally. I was expecting a bit more professionalism and attention to detail here, but I guess a forum is a forum is a forum.
Thanks for the encouragement and tips.

Djeayzonne

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it only takes 10 years of working (40 quarters) to qualify for social security. even your part time jobs in high school and college can help get you there. so can self employment if you are paying SS taxes.  check on that, maybe your situation later in life has more help coming than you think.

Thanks for that info!

DrF

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I also noticed a generally negative view of Edward Jones.
Should I change?

Yesterday! Edward Jones sucks. They are basically salesmen trained to get you into the highest commission earning funds they offer. Go to Vanguard or Fidelity, sign up for an account, fill out their paperwork, and they will automatically pull all your money from Edward Jones for you. You never even need to say goodbye.