Hello World,
Last year, when several months of blog entries were lost, I lost my blog. All my entries were within the time range of lost entries. I kept waiting for them to be re-instated, but it did not happen, so I am starting again.
I am 41, single, no kids, in the healthcare field, and am newly self-employed.
Here is the gist of my financial situation:
For all my twenties, I was a financial idiot. I saved nothing, spent more than I could afford, did not learn about managing money, and got myself into a giant mess of high-interest consumer debt.
In my early thirties, this started catching up with me, and I started to educate myself about money and how to dig myself out of the hole. Unfortunately, two things were working against me - the high interests made it harder to make a dent in the debt, and I was in an abusive relationship which also included financial abuse and a gambling habit. I divorced when I was 36, and spent the next four years pulling myself together financially. I started working for myself on the side, paid off all my debt (~$58,000), purchased a new-to-me car in cash, saved an emergency fund of $20K, saved 5% for down-payment and purchased my current home, and determined that I will never again carry consumer debt.
I have just started my forties. Earlier this year, I left my salaried job of ten years, and went into full time self-employment. I work 2/3rd as much and make twice as much, and was the best decision I could have made for myself. For the first time in my life, I am not living paycheck to paycheck. For the first time in my life I am not constantly thinking or worrying about money. So, for the first time in my life, both my money and my time actually belong to me. It is a tremendously freeing experience. I am truly happy for the first time in my life.
My current focus is trying to save and catch up on retirement planning and investing as much as I can. Never having had money to invest before, this is new to me and I am learning as I go. I hope to retire at the age of 55. However, it will require consistent and aggressive savings to do since I am starting so much later than I should have. I hope to save 75% of my post-tax income if I can. At my current income level, I think this is doable. Years of living frugally due to necessity also makes it easy to save - it has become habit by now. It also helps that I have no debt and am a single member household. I have a small amount of retirement from my previous job, but apart from that, everything else I have saved in just this year.
My financial strategy is as follows:
1. Save by maxing out tax-deferred retirement contributions. Since I am self-employed, I get to save more than the traditional IRA amounts.
2. Invest in taxed retirement accounts. (Can I have a Roth IRA in addition to the tax-deferred? Need to check up on this)
3. Invest the remainder of what I can save in a brokerage account
4. Pay off my house in 10 years. It is a 30-year mortgage, but I want to prioritize paying this off because I only have one income coming in and want to get this off my back as soon as I can. This provides psychological relief, but also if I don't carry a mortgage into retirement, I need to save less for retirement.
5. As I get closer to paying off my mortgage, purchase some rental property and pay that off by the time I am retired. This should provide passive income for me to live on in addition to savings/dividends until I can draw on retirement and social security income.
Here is where I currently stand. (** I am not going to do exact decimals. I will round debt up and assets down to the nearest hundred)
60,000 - House Equity
27,000 - SEP IRA
52,000 - 457 Account
20,000 - Brokerage
20,000 - Savings(EF)
3,900 - HSA
----------------------------
182,900 - NET WORTH
----------------------------
Edit: Thanks to a comment by Petunia100, my NW jumped $253,000 this morning. I guess I was incorrectly counting my mortgage twice. I have been in positive NW for a while now, but my brain has just caught up with this fact. WTH! How am I so lucky? Petunia - thank you so much!!
Hello World
October 14th, 2020 at 03:38 pm
October 14th, 2020 at 04:35 pm 1602693327
October 14th, 2020 at 04:36 pm 1602693363
Yes, you can have a Roth IRA. But, if you make too much to contribute directly you will have to contribute to a traditional first then convert. Part of the conversion will be taxable as you have a SEP IRA as well, and pro-rata rules say you can't convert only your nondeductible contributions and not your deductible contributions, you must convert a proportionate share of each.
Welcome back!
October 14th, 2020 at 05:15 pm 1602695749
Rachael Resk - Thank you so much. I really appreciate your words. I am a psychologist. I think it was being fed up with working 8-5 more so than courage that made me switch. That being said, it wasn't quick. I spent 1.5 years slowly building up my practice on the side. I decided that I wasn't going to quit until I had paid off all my consumer debt, had a substantial (to me) EF, and a down-payment for a house. Once I got those things covered, it made it so much easier to quit my regular job.
October 14th, 2020 at 05:25 pm 1602696300
October 14th, 2020 at 05:26 pm 1602696398
October 14th, 2020 at 07:16 pm 1602702984
October 14th, 2020 at 10:50 pm 1602715833
October 14th, 2020 at 11:30 pm 1602718203
October 15th, 2020 at 12:21 am 1602721301
October 15th, 2020 at 06:48 pm 1602787718