Author Topic: FI Newbie  (Read 3836 times)

stachestache

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FI Newbie
« on: March 02, 2017, 05:38:33 PM »
Newb here, I made sure to get two comments under my belt before posting to acquire some credit ;). Anyway, please excuse my lack of lingo and ignorance associated with being a newbie. My plan here is to share some of my story and hopefully gather some advice. I have serious respect for this community (maybe unwarranted but I think not) just from listening to all the podcasts I can interviewing MMM himself and reading a handful or two of his blog posts so far.

Quick financial/life recap:

I graduated from college in 2012 after earning a double BS in Biology and Environmental Studies with about $32,000 in student loans and no money  worth mentioning in the bank. I realized the severity of student loans while in school and on at least two occasions wrote checks back to my loan provider with excess funds after paying for my credit hours. I worked at a cafe part time during those years to cover miscellaneous living expenses outside of paying rent which my parens covered (thank you mom and dad!)

After graduation I moved back home with my parents, landed a good job earning $45-48k per year and buckled down on paying off my student loans. I was sick of driving my moms old minivan around (not cool enough for a recent college grad) and thought it was a good idea to buy a new/used car. New for me but it was in the "quite a few years old category". I put about half down and took out a $6k loan for the rest. Those damn Subarus hold they're value..

At this time one of my new coworkers convinced me to open up a retirement account (a 457) and taught me about "paying myself first", I am so grateful to this man (Jeff! I'll call him, because that is is name). It was also mandatory that I contribute 9% to my pension which was matched by my employer. I was under the impression for some reason, well because I didn't ask, that if I left before being fully vested, I would not be able to take the money I contributed to my pension with me so I compensated for that by putting more into my 457 account. I was 24 years old or there abouts when I opened the 457 account. I also became very interested in budgeting at this time, but it took me awhile to sorta figure it out. I'm still improving my budget.

In April 2015 I started a new job at a different company that payed slightly more with the expectation that I would progress into a much higher paying position in the near future. I moved to a new city for this job and rented an apartment adding $750 in rent plus other expenses to my budget. At the end of 2016 I had more than doubled my income from my first job out of college.

Last year I maxed out my 457, put some in a roth and have too much in savings/checking. My car is paid for and I have just over $1k in student loans left. I realize this is a mediocre accomplishment considering I lived rent free for almost 3 years.

More recent:

I began listening to podcasts about one week ago and listened to Tim Ferriss interview MMM and was hooked. It was odd because I had been hearing more and more about Vanguard and index fund investing and here it was again. I plan to open a Vanguard account for extra funds although I am wondering if I should just get my employer match in my 457 and then use Vanguard. The plus (that I see) for using my employer sponsored account through ICMA is that it is tax deferred and lowers my taxable income but the fund fees are outrageous. I did move what I could to two Vanguard funds (a total stock index and bond index) offered through ICMA that have fees you would expect from Vanguard but I just don't trust that those are the only fees and haven't gotten to the bottom of it yet.. Any advice on this?

Where I am also seeking advice is in housing. My lease is up on April 30th, 2017. Homes are relatively inexpensive to buy where I live and I am considering buying a duplex for $60-90k which is not hard to find here and then rent out half for maybe $6-700/month and live "rent-free".  It sounds like a no-brainer and whatever else but I do understand that there are other expenses in owning a home (tax, misc. repairs, insurance, etc.). Also, heat and water are included in my rent and a typical electric bill for me is about $30/mo. If I were to rent for another year I am considering putting most of what I have saved for a down payment into VTSAX or something similar. Thoughts?

If you made it this far, I am sorry. But thank you for reading and I am looking forward to this new lifestyle towards FI.
« Last Edit: March 03, 2017, 03:49:51 PM by kinsington »

Fomerly known as something

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Re: FI and other considerations
« Reply #1 on: March 03, 2017, 05:59:33 AM »
Find out if your 457 is a qualified plan.  If it is keep funding it first.  Unlike a 401k you can pull money out of a qualified 457 right away once you leave a job.  They fee issue is offset by your lower "income."

I think your plan for the duplex is likely sound if you can find the right property.  I'm good with investing the downpayment in anything since you aren't firm on I will by this at this time.  If you you had a firm plan I'd say keep it in cash or another safe investment.

DirtDiva

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Re: FI and other considerations
« Reply #2 on: March 03, 2017, 06:28:25 AM »
 
Last year I maxed out my 457, put some in a roth and have too much in savings/checking. My car is paid for and I have just over $1k in student loans left. I realize this is a mediocre accomplishment considering I lived rent free for almost 3 years.
 

Congrats! You are heads above so many others just a few years out of college.  Don't minimize your smart choices up to now.

Conventional wisdom would say to put your future real estate down payment money into something less volatile than the stock market if you are planning to use it within 5 years, like a plain old vanilla savings account.

stachestache

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Re: FI and other considerations
« Reply #3 on: March 03, 2017, 09:51:27 AM »
Thanks neverrun for the 457 advice, I'll be looking into whether or not it is a qualified plan or not.

DD thanks for the reminder and the tip on the downpayment funds. I should have elaborated more on the idea of putting the downpayment money in an index. If I were to do that, plan to leave it there and begin the saving for a downpayment again. But I'm thinking I'll stick with the vanilla account.