Author Topic: No debt, no kids, excellent credit, emergency fund...what's next?  (Read 1236 times)

Sbpark

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I posted here a year ago as a new member asking for advice. Fast forward and some things have changed, most notably I am now 100% debt free. At 43 years old I really wish I could have smartened up and done this sooner, but at the same time the more I'm learning about money and seeing the amount of debt friends and colleagues have I don't feel that bad about myself.

I paid off close to $60k in debt (mostly student loans in a about 2.5 years and own a 2017 Subaru Outback that is paid off. I don't have any credit card debt aside from the points card I use for my everyday expenses (Chase Sapphire Reserve) that gets paid off every 2 weeks when I get paid just to establish and maintain my credit. I have a few other credit cards that don't have as good perks as the Chase card, so I only break them out every several months or so just to keep the credit limit open and always pay everything off immediately.

I live in the San Francisco Bay Area and my rent is kind of high ($2,200 w/ all utilities included; parking, gas, electric, trash washer dryer, water, cable and internet), but I live in a beautiful place in the woods surrounded by wilderness and redwoods and it's well worth it for the peace of mind and serenity and is my little oasis from the city. As mentioned before, the car is paid off and I'm not selling it to get something cheaper or lower my expenses in that regard.

My question is what now?! I max out my 403b at work, but wondering if this isn't the best option? I hate the fact that whatever I contribute to the 403b is tied up until I'm older, but the obvious advantage is that it's a pre-tax contribution.

I make $140k a year working four 8 hour shifts a week and that's considered full time with decent benefits (free health insurance, a pension that most likely won't be there when I retire and no employer contribution to my 403b). Now that I'm in the position to really save a huge portion of my salary, I'm wondering how I should go about it? Do I continue to max out the 403b and take advantage of the pre-tax contribution and thus lowering my overall taxable income at the end of the year, or do I just salt away cash as much as I can and hope to be able to afford a small home (I'm all about owning a small home that I dont have to kill myself working to afford and lead a pretty simple lifestyle), or do I go the route of Index Funds?

This is all very confusing and just wondering what the best approach would be to be able to start having my money make money for me while I'm not working and more in the direction of being less dependent of really having to work the rest of my life, or at least have multiple streams of income, that over time will pay dividends that would be enough to live off of, if that makes any sense.

Trifle

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Re: No debt, no kids, excellent credit, emergency fund...what's next?
« Reply #1 on: August 15, 2019, 06:28:03 AM »
Congrats on being in a really good place!  There's a lot of information, and it can feel overwhelming at first.  Just keep reading and it will fall into place.  Start with these two things:

Here is the recommended investment order:  https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

Also read the whole JL Collins Stock series:  https://jlcollinsnh.com/stock-series/

Whether you choose to buy a house is a personal decision, but for the financial side of that decision there are lots of rent-vs.-buy calculators on line for various areas.  Others on the forum can chime in on the wisdom of buying in the SF market, but I think at a bare minimum you should be sure you are going to stay there a good long time. 

ETA:  Money in a 403b is not necessarily tied up until age 59.5 -- there are ways to get it out early without penalty:  https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/
« Last Edit: August 15, 2019, 06:34:21 AM by Trifele »

Lmoot

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Re: No debt, no kids, excellent credit, emergency fund...what's next?
« Reply #2 on: August 19, 2019, 04:45:07 AM »
If buying a small house is something that will make you happy, then do it. Whether it pans out to be most financially advantageous or not. There is something even more important than maximum gains...enjoying life along the way, otherwise what are you working for?

Your tone changed when describing your home (which sounds lovely), so it seems that creating a stable and controllable environment (oasis) for yourself, might be something you should lend more consideration to, again whether the numbers pan out or not. There are many options these days for earning money from your residence, which you would not have as a renter. Would you feel more excited about pursuing non-active income from real estate (while also getting your small house), or is putting money in more indexes and savings more of a motivation for you?

I personally am pursuing real estate because I decided one day that I need to both invest, and enjoy investing. Watching stocks go up and down is not fulfilling to me (it is to many people though). Towards the end of my life when I review my life and think back on my achievements, picking the most winning investment strategy wouldn't make the short list. I want stories and adventures and experiences. Therefore I am trying to find ways to invest in passive income, that is a bit more active in nature, to get more balance.

Perhaps you get this experience that I am still seeking, from your job, and are perfectly fine with the most passive form of investing. If so, lucky you. Then you can focus on earning the maximum returns as possible.

BTW my role in PF/ER forums is to provide hippie dippie alternatives. I see a need for an advocate of balance in these places that tend to encourage people to be automatic cogs worshipping at the alter of FIRE/ER, for the promise of salvation. I am atheist, so sometimes it feel a little too much like religious recompense.

In regards to you specifically, I guess what I am trying to say is that because it seems that you are well set-up, and don't have dependents (kids, at least), you are the very person that can afford to seek multiple investment options, so just do what you want and what makes you happy, as long as it continues to move you forward financially, and don't get bogged down in if you could eek out more here or there.
« Last Edit: August 19, 2019, 04:58:02 AM by Lmoot »