What would you do if you were in my position?
Financial situation is as follows:
Day job total compensation: $200K USD + 12.5% bonus annual ($225K)
Side hustle income: $50-75K
401K balance: $35K
401K contributions: $7K per year + employer match $7K
So anywhere between $250-300K annual income.
$0 savings at the moment after splurging on some big renovations.
I own my home and mortgage is $3,200/mo. Equity is about $400K with 28 yrs left on the loan (2.75% interest rate, not moving ever).
Own a duplex out of state which has about $150K equity and cash flows about $500/mo though there have been lots of repairs so it’s not been a big money maker these last 2 years. Once this property is paid – 20 yrs or so, I will use those funds to buy ETFs or other lower risk investments.
Plan is to not sell the homes and gift them to my kid.
Kid will go to school soon, so that side hustle money will be accounted for (at least $12K per year).
Wife does not work and she has an allowance of $800/mo that comes off my pay check.
I have $25K of nagging credit card debt which I hope to take care of in the next 2 years. Even with this income plus having a family and expensive taste it has proven to be difficult to pay off. I have gotten my (and my wife’s) spending habits under control over the past 6mo (hence the allowance).
My financial advisor has me set to retire by 65 and with my assets and continued contributions it looks pretty good. But I wonder if it could be better or come sooner.
What would you do next if you were me?
Pay off the debt and save up a nest egg again? Should I take a low interest loan to pay the credit card off?
Good grief…all those resources and you are carrying $25K or credit card debt??
Unless that’s at zero percent interest, I’d be tightening the budget and paying that off as fast as possible. No more “splurges” until it’s gone.
$250k is $20k a month pretax.
$800 for the wife.
$1,000 for the kids school.
Where’s the other $10k a month just evaporating into? You should be able to comfortably do a little of both, but the emergency fund is priority one generally.
Classic: One-Third of Americans Making $250,000 Live Paycheck-to-Paycheck
Get the debt gone man. Very freeing and you get your cashflow back. Quit using debt. Then rebuild a nest egg. I didn’t catch your age. I wouldn’t want to retire with a mortgage. 2.75 is low but early on in your amortization schedule as you are these extra dollars to principle are super powerful. That approach is very unpopular here. I don’t care. I’ve paid down 110k on my 18 month old 2.75 mortgage. I won’t retire until it’s paid off. All the while I’m saving like gangbusters for retirement. Savings rate of 55%
At that income, you should be maxing out all your retirement options: 401k, Self-employment solo401k, backdoor RothIRAs… That’ll eat up about $50k off the top starting in 2023.
First, set up a budget that the whole family agrees to… Only using money after the above is removed (and all taxes are removed).
Second, get rid of the card debt. Immediately. Seriously, you should kill it by the February paycheck.
Third, as the solo earner, save up 6 months in cash. If you cut back on things and put the money from your Self-employment to work, you can do this in a year.
Be smart about money and you can retire by 60. Be smarter about money and your kid will have a huge leg up in life. Be super smart about money and don’t stress about things like credit card debt because you won’t have it, don’t worry about having to keep up two jobs, because you won’t need them, and don’t worry about needing a financial advisor because you’ll be able to do it yourself!
With your high salary, pay off your cc debt asap. Once you have ended your debt your options will open up immediately to save and invest more aggressively..
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