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  • Late Start Earner

Early year check-in and planning for flexibility

In the past 3 months, the total stock market (VTI) has gone up 13%. Financially, I would be better off today had I put my money in investments rather than paying off the mortgage last November. Even so, I believe I made the right decision for me and my money psychology. Mortgage-free, my mental well-being, enjoyment of life, and excited desire to plan for fun trips and experiences is in a way better place knowing that I'm not burdened by a monthly payment. I already have two trips to Europe planned for the year (a cheap flight motivated 5 day trip coming up, and a longer 2 week trip in the fall), and several domestic trips planned throughout the year to take advantage of seasonal temps for fun outdoor activities.

Setting up an annual plan has helped me feel comfortable with spending money appropriate to my budget, instead of being in a mentality of 'spend nothing + panic if spend is >$0' in a category. For example, last month I spent $1.2K on pet care, which is slightly higher than my $1k/month pet budget for daycare and boarding. However, $550 of that was for one-time annual vet exams and medications, and another $500 due to boarding for a domestic trip. Knowing this rough guideline helped me compartmentalize and psychologically spend almost next to no time worrying about the cost -- since it is all planned. Last month I spent about $5.5k, which included flights, some hotels and experiences or excursions for planned vacations throughout the year, fun social get-togethers (sometimes at fancy restaurants), pet care, and gifts to family and friends.

Savings and Investment Goals: Early Progress

I am making swift progress on my retirement goals this year. Without a monthly mortgage payment and using my strategy of spending down a portion of my emergency fund to help pay for ongoing expenses to help accelerate front-loading, I expect to be done with some initial milestones by the end of February.

Retirement Contributions: $84.3K

  • +$23K: Pre-tax 401k Contribution - DONE on Feb 16

  • +$7K: Roth IRA Contribution (via Traditional IRA Backdoor Rollover) - DONE

  • +$34.5K: Roth 401k Contribution (via After-Tax Mega Backdoor Conversion)

  • +$11.5K: Employer Match - DONE

  • +$8.3k: Pre-tax HSA Contribution - Monthly Contributions through EOY

Once I finish filing my income taxes, I'll have a much better gauge on how much taxes I might still owe to federal or state(s), and can time out my remaining Mega Backdoor Roth contributions for the year.

Planning for the future with my parents

Every week or so I scour real estate listings to see what houses are available near me and in proximity to the types of every day activities my parents enjoy. I nailed down a general 2 mile radius that would work well for them, within a 15 minute drive from my place. This past weekend I saw that a reasonably priced house for the market had an open house and biked over to check it out. I was surprised by how busy the open house was with seemingly serious buyers, and appreciated some of the natural assets of the house -- large lot size, private entrance to a local park, and filled with sun. There were also some negatives -- house was on a residential throughway, potentially neglectful neighbors, and the house itself would require some repair. Overall, I definitely had the sense that if push came to shove my parents would easily make a home there.

After visiting the home, I still wondered what else could be on the market in the coming years and if I'd be able to find a place that was smaller in scale and required less maintenance, while also meeting the very specific needs of my mother who does not have a drivers license and medically unable to obtain one. This evening I was able to narrow down the search radius to a townhome community (~ 24 townhomes total) that is < 10 minute walking distance to my parents' daily needs, outdoor exercise habits, a nearby bus stop and reasonable walking distance to the metro. Finding the location of this community has been such a weight off my shoulders. These townhomes do not go up for sale very often, but I now know to look for them in the listings snatch one up if I can.

My plan is to purchase the townhome and put it up as a rental (perhaps for years) until the time comes when my parents might need to move in. The townhomes are currently in the $450k-$650k range, so I'm budgeting roughly $500k for the upcoming purchase.

Remembering to put my own oxygen mask on first, my financial plan is to first establish Coast FI, which amounts to roughly $1.5M in investments (retirement + taxable brokerage) within the next 5 years. Once I hit that, I would additionally like to save for about 50% down on the townhome before seriously considering to purchase and rent it out.

I'm feeling pretty good about this general plan, and the concreteness of knowing approximately how much the future purchase might be while also having flexibility to use it as a rental until it is needed for my parents gives me a false sense of comfort (as the saying goes -- man plans, God laughs). It also helps motivate me to not take the gas off the pedal and work to aggressively build up my investments to a point of financial stability to start taking next steps with my parents. In the meantime, my parents are still in good health and would likely much prefer taking vacations to far-off places, and that's where I'll continue to prioritize spending for them.

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