![]() Given his age, this is the perfect opportunity to pull off a house-hack. He also mentioned one of his short-term goals is to buy a house. ![]() If he keeps a clean driving record that monthly premium should go down significantly over the years. $152 per month for car insurance feels like a lot, but then I remembered he is a 23-year-old male, his insurance premiums will be high. If he really didn’t want to work out at home, he could easily find a gym that will charge less than half what he’s currently paying. That would be an easy $110 to cut out of the budget. Personally, I bought a chin-up bar and a few kettlebells and have worked out at home for the past 10 years.Ĭhin-up bars are cheap, and kettlebells are basically indestructible and will probably last longer than I will. $110 per month for a gym membership feels expensive. He’s got about $958 in free cash flow now, so he only needs to tighten his budget slightly. To save the other million, he’ll need to invest around $1,000 per month, increasing his contributions by 3% per year until he hits age 50. Give his age, income, access to a 401(k) and the fact that he is financially planning his future at the age of 23 tells me he is going to be fine.Īs I previously stated even by simply contributing enough to get the full employer match, he is on pace to have more than $1 million in his 401(k) by the time he is 50. I don’t think he is going to have any problems reaching his goal. He currently has no debt and about $13,600 already saved in his 401(k). Monthly Surplus: $958 Current Assets & Debt Total Average Monthly Expenses: $3,626.14 Xbox live gold membership $5 ($60 per year).His annual take-home pay after deducting taxes, 401k contributions and union dues is $55,013.66, which works out to $ 4,584.47 per month.Proving once again that a properly managed 401(k) is the simplest way to become a millionaire. With his projected wage growth, he could save more than $1 million through his 401(k) by age 50 assuming a 6% rate of return.Between his contributions and his employer match, he has about $11,000 going into his 401(k) every year.He wisely has opted to take full advantage of the employer match. His employer also offers a 401(k) and offers a 75% match on up to 8% of his salary.Of course, if gets promotions along the way or takes another job that pays more, he has the potential to earn even more than I am projecting in his current job.Starting off with a strong starting salary sets yourself up for long-term financial success. This highlights the power of compounding not only on your investments but on your income.By the time he is 50, he would be making more than $165,000 per year. 2.8% may not seem impressive, but remember this kid is making $78,500 at the age of 23.He has a predictable wage growth in his current role of 2.8% per year which is very solid.That is a strong income for any individual, but for a 23-year old that is an incredibly strong salary. Currently, his pre-tax income is $78,500.Let’s start by reviewing his financial situation. He wants to know what he should do to hit his $2million mark. This would give him an $80,000 per year income during retirement. He is obviously well versed in the FIRE movement as he mentioned his plan would be to use the 4% rule as his safe withdrawal rate once he hits the $2 million mark. His long-term goal is to retire by 50 with $2 million saved. Not everyone will retire in their 30s or 40s, but most people could probably shave a few years off their working career by being less wasteful and more money-conscious.A 23-year old Electrical Engineer from Washington State that goes by the user name wannabe_strongman199 is looking for advice in the Financial Independence thread on Reddit. MMM can be a bit extreme at times, but his overall message can still be useful. In the worst case he can dip into his ~$1M net worth, but this could result in reduced spending power unless he finds some way to build it back up. He has a high-deductible health plan currently, which covers any big health expenses. Unless I find an income-generating hobby, I will be using less than 4% for myself. MMM advocates for lowering expenses during a slump and potentially supplementing with side income, which is why it works for him. I played with cFIREsim to get this number.Ĥ% withdrawal is high, I agree. I think it's okay to hope for it, just as long as you realize it might not happen. This means that a 5% return is neither unrealistic nor guaranteed. ![]() Looking at 30 year periods, the average return is 590.73%, or about 6.1% yearly (1.061 30 = 590%). You have very valid points, but here are some more things to consider.Ī 5% real return on investment isn't crazy.
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