Finally Debt Free..now what?

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Finally Debt Free..now what?

Postby sdubz » Sun Dec 30, 2012 7:21 pm

Hi Everyone,

I have been working diligently to pay off my student loan debt and am finally debt free.

I currently live at home and have no expenses other than food/gas/entertainment.

I try to save as much as I can and now that I am debt free, been saving more in my EF and plan to max my 401k in 2013.

I currently live at home and have minimal expenses.

I am 24 yo so dont plan on getting a house right away, but I do want to move out eventually and own a home (would it make sense to rent then buy? or live at home until ready to buy a house?)

I want to be a millionaire long before I reach my 50s so any advice/direction would be great.

a diagnosis/critique and strategy on what to do next would be great!

EF. 6,000
TSMX Vanguard Taxable Fund 11,000
401k 18600
Car 3000

net monthly income $3500
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Re: Finally Debt Free..now what?

Postby livesoft » Sun Dec 30, 2012 7:27 pm

Start a company called Nozama that sells everything via the internet and become a bazillionaire. Why stop at millionaire? That's what's next.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Finally Debt Free..now what?

Postby Rick Ferri » Sun Dec 30, 2012 7:29 pm

If you save $1,000 per month for 25 years, and earn 7% on that money including the $35,000 you already have saved today, you will have over $1,000,000 by the time you're age 50. :happy
Mutual fund investing is simple. There is risk, there is return, and there are costs. All else is marketing.
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Re: Finally Debt Free..now what?

Postby SurfCityBill » Sun Dec 30, 2012 7:53 pm

Never, ever consider using credit with the exception of purchasing a home. Take no pleasure in developing a great FICO score. Take all the money that would have gone to pay interest and invest in yourself ala Rick Ferri's advice. In regards to a home with a mortgage.. buy sensible and work toward paying that debt off as soon as possible.
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Re: Finally Debt Free..now what?

Postby Sam I Am » Sun Dec 30, 2012 8:00 pm

Message deleted.
Last edited by Sam I Am on Sun Oct 06, 2013 3:36 pm, edited 1 time in total.
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Re: Finally Debt Free..now what?

Postby campy2010 » Sun Dec 30, 2012 9:09 pm

Congratulations!

Next step is increase income, keep expenses low, and work toward maxing out your 401k and/or Roth IRA. But, being debt free is a great accomplishment at your age. Good job.
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Re: Finally Debt Free..now what?

Postby timmy » Sun Dec 30, 2012 9:37 pm

My advice is pretty generic and conservative. But I've found it useful.

Establish a 6 to 12 month emergency fund.

Save 15 to 20% of your gross pay towards retirement. Take advantage of 401k, 403b, Roth IRAs, IRAs, etc.

Regarding your retirement savings, you'll need to learn your risk tolerance. I'd suggest starting at 50/50 (bond/stock) and adjust from there.

Establish goals (house, car, vacation, etc). Save accordingly.

Avoid debt.

Regarding a house purchase... put down at least 25% and limit your monthly payment to less than 25% take home pay.

Give.

Avoid big mistakes. Spouse who doesn't share goals/world view, divorce, addiction, big bets, leverage, etc.

A good income helps. Figure out how to add more value.

I would read up on investing and personal finance.

Good luck.
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Re: Finally Debt Free..now what?

Postby Padlin » Sun Dec 30, 2012 9:47 pm

Now that you're debt free I think it's time you get out of your parents house. They need to start preparing for the rest of their lives.
Regards | Bob
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Re: Finally Debt Free..now what?

Postby investor1 » Sun Dec 30, 2012 9:50 pm

1. Get your EF where it needs to be (in your opinion)
2. Max out retirement accounts (compounding interest is the bomb!) - 401(k) and IRA
3. Start saving for a down payment on a house. Figure out how much you would like to spend on a mortgage payment add extra for insurance, property taxes, increased utility costs, maintenance and repairs. Basically, figure out how much owning a home will cost you each month. Once you have that figured out, save at least that amount for your down payment. You should probably adjust your EF with these costs in mind (in other words, consider these current expenses so your EF is in good shape by the time you purchase).
4. Save for the inevitable. Car maintenance, repairs, and replacement. Example: Say your cars last around five years and the next car will cost about $12k. Add extra for maintenance and repairs of the current car, say about $3k. That's $15k divided by five years (or 60 months) which means you should be saving $250 each month. There are other (non-car) expenses which are inevitable, so apply this concept to those things too.
5. You are young and likely healthy now, but that won't last forever. You should be saving for future health care costs. People with low medical expenses are excellent candidates for a HDHP which gives you access to an HSA.
6. Travel and enjoy life :)

If your parents are okay with you living at home and you enjoy being there, stay there. I'm sure they would like it if you contributed to the bills and managing some of the household bills now will give you experience doing it for when you own your own home.
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Re: Finally Debt Free..now what?

Postby Grt2bOutdoors » Sun Dec 30, 2012 10:10 pm

investor1 wrote:1. Get your EF where it needs to be (in your opinion)
2. Max out retirement accounts (compounding interest is the bomb!) - 401(k) and IRA
3. Start saving for a down payment on a house. Figure out how much you would like to spend on a mortgage payment add extra for insurance, property taxes, increased utility costs, maintenance and repairs. Basically, figure out how much owning a home will cost you each month. Once you have that figured out, save at least that amount for your down payment. You should probably adjust your EF with these costs in mind (in other words, consider these current expenses so your EF is in good shape by the time you purchase).
4. Save for the inevitable. Car maintenance, repairs, and replacement. Example: Say your cars last around five years and the next car will cost about $12k. Add extra for maintenance and repairs of the current car, say about $3k. That's $15k divided by five years (or 60 months) which means you should be saving $250 each month. There are other (non-car) expenses which are inevitable, so apply this concept to those things too.
5. You are young and likely healthy now, but that won't last forever. You should be saving for future health care costs. People with low medical expenses are excellent candidates for a HDHP which gives you access to an HSA.
6. Travel and enjoy life :)

If your parents are okay with you living at home and you enjoy being there, stay there. I'm sure they would like it if you contributed to the bills and managing some of the household bills now will give you experience doing it for when you own your own home.


Eat well, exercise, relax and save on your future health care costs. Pick the right life partner and enjoy your life. :happy
"Luck is not a strategy" Asking Portfolio Questions
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Re: Finally Debt Free..now what?

Postby sdubz » Mon Dec 31, 2012 12:12 am

I sincerely thank and appreciate everyone who has posted in this thread. I have taken all of your advice and opinions to heart.

I currently pay $500 rent to my parents each month (sometimes I'll add $100-$300 extra each month depending on my commission checks).

Would it be a good idea to just throw any extra money after investing and EF into the VTSMX vanguard fund I have? (ie house down payment, car repairs, new car, etc.)
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Re: Finally Debt Free..now what?

Postby investor1 » Mon Dec 31, 2012 12:31 am

If you are not utilizing your IRA space for retirement, I would recommend contributing to a Roth IRA before using a taxable account for EF/etc savings. Utilize your tax advantaged space first.
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Re: Finally Debt Free..now what?

Postby scrabbler1 » Mon Dec 31, 2012 3:26 am

Sdubz, I became debt-free at 24, paying off my student loan at that age before taking on a mortgage 2 years later. I bought a small apartment (a co-op) which eventually became cheaper than renting when I paid off the mortgage 9 years later. My annual salary never exceeded $80k (in 2000).

I always paid cash for my car purchases and always paid my credit card bills in full each month, avoiding two costly types of debt, I also lived with my parents for a short time when I was 24 which enabled me to (re)build my relatively low savings at the time.

I never wanted to have children but that was not for financial reasons even though that played a big role in reaching the $1M net worth level by the time I turned 45 four years ago and retired. I am also single but would never consider marrying someone who wanted kids.
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Re: Finally Debt Free..now what?

Postby HardKnocker » Mon Dec 31, 2012 9:28 am

Padlin wrote:Now that you're debt free I think it's time you get out of your parents house. They need to start preparing for the rest of their lives.


This.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
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Re: Finally Debt Free..now what?

Postby FRANK2009 » Mon Dec 31, 2012 9:46 am

[quote][/quote]Start a company called Nozama that sells everything via the internet and become a bazillionaire. Why stop at millionaire? That's what's next.

It took me a second or two; thanks for the laugh and happy New Year forum members!
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Re: Finally Debt Free..now what?

Postby Jay69 » Mon Dec 31, 2012 11:26 am

As a parent I would have no issues having my kids live at home for a few years, save like a dog and pay cash or have hefty down payment for a simple home if they choose to buy a home that is. This would be a great gift I think for my kids if they choose it. Now if rates are still at 2% when my kids get to buying a home I may give a little quicker nudge!

I would even look at charging rent, maybe half of an apartment and supprise them with a nice gift of the sum when they do buy a home.
"Out of clutter, find simplicity” Albert Einstein
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Re: Finally Debt Free..now what?

Postby LowER » Mon Dec 31, 2012 11:47 am

.....
Last edited by LowER on Sun Aug 24, 2014 8:05 pm, edited 1 time in total.
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Re: Finally Debt Free..now what?

Postby investor1 » Mon Dec 31, 2012 12:36 pm

sdubz wrote:Would it be a good idea to just throw any extra money after investing and EF into the VTSMX vanguard fund I have? (ie house down payment, car repairs, new car, etc.)

Also whichever account you use to invest, you should be following your investment plan and meeting your desired AA. I assume this is not 100% stock, so you shouldn't use just the VTSMX. When you are at small amounts, it doesn't really matter, but your goal should be to follow your plan.

It is possible you are making up your AA across accounts, but you didn't really mention that.
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Re: Finally Debt Free..now what?

Postby SimonJester » Mon Dec 31, 2012 12:46 pm

PS I would rent until you discover just how far away from your future in-laws you want to live... :D
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin
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Re: Finally Debt Free..now what?

Postby reggiesimpson » Mon Dec 31, 2012 1:53 pm

You will never be this free again for the rest of your life. Savor it.
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Re: Finally Debt Free..now what?

Postby wander » Mon Dec 31, 2012 4:48 pm

You may want to help your parents with their mortgage payments or retirement. Although they don't ask, it doesn't mean they don't need your help.
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Re: Finally Debt Free..now what?

Postby Jay69 » Mon Dec 31, 2012 4:51 pm

SimonJester wrote:PS I would rent until you discover just how far away from your future in-laws you want to live... :D


:sharebeer
"Out of clutter, find simplicity” Albert Einstein
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Re: Finally Debt Free..now what?

Postby NYBoglehead » Mon Dec 31, 2012 4:58 pm

Not sure what your parents pay for a house but I think $500/month in rent to your parents is good for both of you. It is cheaper than you could likely get (don't know where you live obviously) in the marketplace and $500/mo extra into your parents account exceeds the added expense of keeping you in the house (I'm guessing, unless you blast the A/C or heat all the time and charge every electronic known to man in your room).

Stay debt free at all costs, with the only exception being your mortgage. Max out a Roth IRA and your 401k, and make sure your EF keeps its purchasing value as time passes. Maybe save a nice little lump sum gift to your folks on the day you move out with some of your extra cash flow. I think you off to a great start and should be in great financial shape going forward.
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Re: Finally Debt Free..now what?

Postby sketchy9 » Mon Jan 07, 2013 6:59 pm

I'll be contrarian and say that you will only be in your mid-20s once in your life so enjoy it. Yes being young is not the end-all-be-all of life, and there are plenty of things you can do as you get older, but there are things that only a 24 year old will have the stamina and tolerance for. Backpacking through South America? Sleeping on a random couch or in a shared room with 8 other people? Of course you can do that at any age, but it's a lot easier when you're young.

Note I'm not encouraging you to just check out and be a bum. But don't get so fixated on a financial goal that is over 25 years away (that's longer than you've been alive BTW) that you don't take some time, energy, and money to enjoy life along the way.

-R
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Re: Finally Debt Free..now what?

Postby sscritic » Mon Jan 07, 2013 7:10 pm

Rick Ferri wrote:If you save $1,000 per month for 25 years, and earn 7% on that money including the $35,000 you already have saved today, you will have over $1,000,000 by the time you're age 50. :happy

And don't forget that with inflation running at 25% a year for those 25 years, your $1,000,000 will be worth about $3,800 in today's dollars.*

Follow livesoft's advice and shoot much higher than $1,000,000.

* At 3% inflation, your $1,000,000 will be worth about $480,000.
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Re: Finally Debt Free..now what?

Postby FordBiggs » Mon Jan 07, 2013 7:42 pm

Congratulations! This is a great position to be in especially at your age and also be earning a pretty good monthly salary. I think most of the advice here are pretty spot on and just take advantage and max out all your tax-advantage accounts before investing in taxable accounts. Also, the most important advice from here is to enjoy life! We're saving money and keeping it simple to give us more time to be able to savor and enjoy life! :sharebeer
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