The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader JB. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I’m a single male in his mid 30’s working in technology industry; in the Boston area. I have a bSci and recently earned a masters degree. Both are related to my current career.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
Income is generated entirely from my career; which has been growing yearly since undergrad. Currently I take home about $4800 net, per month. This is after all taxes, as well as maxing out the full $17,500 in my 401k and $3,250 in my HSA.
Expenses per month are:
- First Mortgage 800
- Second Mortgage 350
- Condo Taxes and Fees 450
- Car Insurance 80
- Food/Gas/Misc 600
- Cable/Internet 70
- Gas 40 (high end, variable)
- Electric 40 (high end, variable)
- Cell 30
Total monthly is about $2,460. Given my income, I have about a $2,350 per month cash surplus. I also get about a $1,000 tax return each year as well.
Yearly cash surplus 2340 * 12 + 1000 = ~29k
But I also have some once per year expenses as well:
- Homeowners insurance 300
- Car registrations, oil changes, AAA, repairs 1500
- IRA Contribution 6000
Net cash surplus ~21k
- Cash 46k
- 401k 200k
- IRA 65k
- 130k mortgage only (car, school, credit card has been paid off)
What are the current financial issues you're facing (saving, paying off debt, etc.)?
I owe about 130k on my mortgage valued at 140k. The second mortgage about 20k of debt or 350/m will be paid off in 2020 at the current plan. The first loan runs to about 2034.
Should I pay off the second mortgage now? Half of the 46k is earning 3% in a CD, but the other half is earning less than 1%. The funds are actually planned for my next car in 2-3 years. Im very risk adverse and prefer not to take on additional debt.
What to do with the yearly surplus? Given an adequate emergency fund and funds for a new car should my surplus go into the stock market? Long term I should come out ahead, but what if? I want to bank up these funds for the timing flexibility to act if something comes up (see plans).
What are your plans for the future (retire early, build your career, etc.)?
Retire early/change career. I would like to be in a position where I could retire or more likely switch careers at age 45 to 50 time frame, possibly do part time work. My significant other she is currently working, but our finances are separate at this time. I believe starting a family should remain a net positive on the finances if she continues to work, no?
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Make a wish list. Credit cards enable people to fulfill the instance gratification on items that only add a few days of value to their life. If they added the item to a wish list something else would eventually take a higher priority. You would be surprised returning the wish list to add something new, see the previous items on the list and say, “oh wow I’m glad I didn’t buy that”. Consumers would save thousands.