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We got a lot, and I mean A LOT of requests from readers asking us to analyze their financial situation. In fact, our inbox is regularly described as an “exploding fireball of chaos,” so it can be difficult to get through all the emails before another bucket gets dumped on top of the pile.
But sometimes, just sometimes, one of them cuts through the entire pile and just DEMANDS to be featured. This is one of those times (edited for brevity):
I sent you an email before that was not clear, I was a bit excited because this is a new job I am getting after a bit of a setback due to layoffs.
Here are my stats:
Net income: $41,002 a year ($60,500 before taxes)
Total student loan debt : $43,300.90+ $9,420.77 (interest) = $52,420.67
7 loans at 6.8% interest
1 loan at 3.4% interest
1 loan at 4.5% interest
1 loan at 5.6% interest
1 loan at 6% interest
1 loan at 5% interest
3 credit cards:
Card 1 owes $500
Card 2 owes $450
Card 3 owes $968
Car insurance: $50
Renters insurance: $20
Gym membership: $22.75/month
Martial arts/combat sports: $30/month
(fighting tournament fees approximately $200/year give or take my tournament attendance)
Food=$250-$300 a month, all cooked at home no takeout
Gas for car $75-100
Marketing for my business(s)=$250 (give or take $100)
Taxes owed due to early withdrawal=$3.5K total
Note: The rent I pay is a grad student rate. Average rate for the city I live in is $800-1000/month in rent not including utilities. So lets just say $950. I am aiming to calculate my “retirement number” based on average rent prices (utilities included).
I also do some real estate (I own no homes but I do wholesaling),web development, internet marketing, programming and voice over work on the “side” to add to my income. I even got an offer from a rich old lady to be her manwhore ( I’m serious) but Im not going to do it. I earn anywhere from $15K to $30K extra depending on the projects I do, so lets just say an extra $15k per quarter.
Profits have been slim so far (Im just getting started), but any profits I make, 80% of them will go towards paying off debt and the rest will go to my “early retirement.”
I have calculated my “retirement number” to be $456,000 based on $950 over the course of 40 years ($950*12*40). Of course I will not stop working, I will just stop working in the offices/labs of others and work in my own studio(s) on the projects I aforementioned.
I am excited, this time last year I was laid off, my engine blew out in my car and I emptied my savings, credit cards AND retirement to get my car fully functional as well as keep from being homeless. I just got this new job and I’m start soon, I found the cheap grad student apartment and want a solid plan moving forward.
What are your thoughts on this? Suggestions?
Should I become a manwhore?
First of all, BWAHAHAHAHAHAHA! +1
If anyone out there wants to make sure their case gets read, this is how you do it.
So tabling that brilliant question (for now), let’s start by looking at your numbers and TOTALLY not sniggering like a 10 year old boy, MW here has actually set himself up nicely for success here. His earnings are good, especially when adding in those side hustles. Mad props to him for that.
|Net Income:||$41,002 (full-time income)|
|Gross Side Income:||$15,000*4 (side income) = $60,000/year|
|Expenses (assuming average rent in the area):||$950 + $50 + $20 + $22.75 + $30 + $17 + $300 + $70 + $30 + $100 = $1589.75|
|Debt:||$52,420.67 + $500 + $450 + $968 + $3,500 = $57,838.67|
A few suggestions to be made. MW’s calculation of his FI number is incorrect.
The FI number is calculated by taking your total monthly spend x 12 x 25. Multiplying by 25 is the same as dividing by 4%, and comes from the formula
Portfolio x 4% = Expenses
So that becomes…
Portfolio = Expenses / 4%
Portfolio = Expenses x 25.
So MW’s actual FI number is $1589.75 (added up expenses, excluding tax-deductible business expenses) x 12 x 25 = $476,925.
Secondly, he needs to pay off his credit cards. Now. There’s no reason to hold a credit card balance when you have the cash to kill it.
As for his savings, with his net earnings of $41k / 12 = $3417 per month, you are saving about $1827 a month, or $21,924 a year. Now add in your side income. $15k a quarter or $60k a year may not be sustainable going forward once you start working full time, so let’s say he’s only able to work on side income 50% of the time, dropping his side income to $30k a year. After taxes + expenses that bumps your savings rate from $22k to $40k a year. Seems pretty reasonable, but if he disagrees he can replace it with his own numbers based on how many side jobs he wants to maintain going forward.
How long does it take for MW to get to FI? Well, considering his starting point of -$55,413.76 (student debt + credit card debt + current savings) and having the whole thing compound at 6% (first your debt, then in investments), you get to FI in just…11 years!
Despite that big student debt, MW’s impressive side hustles and well-controlled living expenses are what will get him there.
So this is a good example of what happens if you figure out the math early. It doesn’t matter how far behind you are when you start, you can always dig yourself out if you understand the math.
And finally, back to his original question “Should I become a manwhore?”
I think I speak on behalf of the entire Internet when I say…
You’re not the Hero the FI community asked for, but you’re the Hero we so desperately need.
Do it, then start a blog called “Manwhoring my way to FI” and I promise you I will feature you when you launch.