Financial Independence/Early Retirement
 

Anyone else here on this path or interested in talking about it? I know the miata community does a lot of DIY and tries to save money where it makes sense so I figured some of you may also be on the FI/RE train.

For the uninitiated, the math behind becoming financially independent with the ability to retire early, reduce the amount you work significantly, make a career change, or just increase your flexibility to make decisions is actually rather simple. For example, starting with a net worth of $0 you could reach FI in 17 years if you can save 50% of your take home pay, 10 years at 66%, and a mere 7 years at 75%. Obviously saving is easier if you make more but it's also easy for many middle class Americans to cut out fat from their budget.

Here are two good resources to get the basics with some extremes mixed in as well.

http://www.mrmoneymustache.com/2013/...ne-blog-post/]

Mad Fientist - Financial Independence

The conversation gets more interesting when you start getting into specific strategies and assumptions for individuals. I figured since I don't like to discuss finances with my coworkers and friends (save a few I am close with) I see what thoughts you gays have. It should also be interesting as we all partake in an expensive hobby which may alter our expenses significantly depending on how much we spend on mods, track time, etc.

I'll start with some of my basics. I am 25 years old and I am currently able to hit a 50% savings rate at the moment focusing my investment strategy on a mix of maxed 401k contributions, Traditional IRA, and taxable accounts. At this point I just stick to low expense index funds and try to ride the market instead of time it because I have no interest in active investing. I am a CPA and make a solid income so I expect to be able to increase my savings rate as my salary increases. I am trying to focus on minimizing or eliminating any lifestyle creep as my income grows instead of trying to reach the extremes of cost cutting. My goal is to be able to completely retire in my late 30s or by 40 at the latest. I will likely not actually retire at this age but take the opportunity to go part time or make some sort of career change to something I enjoy doing even if I make little to no money doing it.

Anyone else got any thoughts?

I've thought about it, but I'd rather have the money/time and do it now, then 10/20/30 years down the road.

Hell I could die in a car accident on the way home from work today, eat incorrectly prepared puffer fish, etc.

I make a decent income for my part of the country and put roughly 15-20% into savings/401k combined.

There is a delicate balance between saving for the future and living like a homeless person. Save all you want, but don't deny you (and your family) those experiences which make lifetime memories. There is a difference between frivolous spending and enjoying your money.

My mother's family was extremely frugal. They found out when their parents passed that the family was in no way poor (or even close to it), but that the father had just been very cheap. They all felt cheated. That's no way to live your life.

This mentality I do get and I agree with it. However, I save most of my money on things that don't really contribute to my happiness. I just got back from a two week trip to Italy, I spend quite a bit of money on my car and track time, and I own 3 vehicles including a motorcycle. I find that experiences and learning new skills are what make me happy so I spend my money in those areas. Alternatively, I have a cheap phone plan, basic and cheap housing, buy all used vehicles (8+ years old) with cash, and try to cook as many meals for myself as I can. It seems to me that housing, new vehicles, and eating out is where most people spend way too much money that isn't really contributing to their lasting happiness.

I don't coupon cut, ride my bike to work, grow my own food, or any of the other more extreme cost cutting measures people employ but I am still able to save significant portions of my income. Granted I am young and single so I have not been inflicted with health issues or children at this point so my situation could always change.

EDIT: The time portion you mentioned above is also another factor that got me more interested in FI/RE. I don't want to wait until 65+ to retire when I might not have the physical health to do the things that I want to do. I would rather be a little more cautious with my spending now so that I can retire when I am still in prime physical condition.

Good for you. I see a lot of people who don't understand this at all and it makes me sad. There's no prize for dying rich.

We are saving 25% of our income between roth/traditional retirement plans, and several other investment vehicles. As active duty military, I get a pretty nice retirement fund in just a few years, but we're not even counting that as part of our retirement goals because, hey, sh!t happens.

50% of new pay raises go straight on top of that 25%. Even without future pay raises and military retirement, we are looking to retire at age 60 on about $6k/month in 2014 dollars, which we decided won't be too shabby.

<p>I just graduated college. Started a new job. I was able to graduate with no debt (huray scholarships) and feel like I am in a good place to start saving. My plan is to put 50% of my income towards savings. My company does a 4% 401k match so I will be putting 42% of my actual paycheck into a savings account. I currently don't have any interest in investing, mostly because I have shit luck and am not careful or remember to do things. And I feel like that could lead to trouble. While putting money in savings I'm going to live how I have been for a couple months and see where my &quot;spending money&quot; reserves end up. If they continue to grow, while I'm still saving 50% then I will look at how much and allow for additional expenses. Will report back in fall :)</p>

<p>This also could all very well change depending on my current relationship. She wants to be a doctor, and is currently studying for MCATs while becoming an EMT. If she does get into med school and I go with her I will definitely be evaluating it again. Dat surgeon money :burncash:</p>

I would highly recommend you utilize some basic investment vehicles like low cost index funds by vanguard if you are risk averse. You just set it and forget it. It allows you to diversify your risk over the entire market so unless the whole thing explodes you will do much better than the 0.05% or whatever your savings account will return. If the whole market explodes then you will have other much bigger problems than investment losses to worry about. Stocks have already made large gains over where they were in 2007 at the height of the bubble.

If you just keep huge stockpiles of cash you will be losing out on purchasing power as inflation outpaces your savings account returns. You want to keep enough cash on hand to cover 3-12 months of expenses depending on your personal preference. I personally keep a 6 month emergency fund and the rest of my non retirement account savings goes into a mixed portfolio that has enough liquidity that if I needed more money I could get at it within 3 or so days.

<p></p><p>Is there an actual like easy button for this? Can I walk in somewhere and say I want to invest money, not lose any and get it within a week. My main issue is I have absolutely zero interest in finance and can't even get myself to learn stuff. I would need some pretty serious spoon feeding.</p>

I don't save as much as i should right now. I have a backwards way of looking at it. I figure if i get my fun cars taken care of now, i can pay down a house fast as fuck when i buy in 2 years. Currently just throwing in 401k to employer matching limit and socking back a little extra for downpayment on a house.

Current plan is to buy the store she works at when current contract is up, milk it for 10 years, then retire.

So... we have a plan, the plan just doesn't require much work right about now. We'll both "fully" retire in our 40s.

You have to be careful letting professionals spoon feed you. You need to understand how they are making their money and what, if any, conflicts of interest they may have. No one can guarantee you won't lose any money, especially in the short term. However, you can invest in such a way that you minimize your risk. If you want someone to walk you through it I suggest trying to find a fee based financial planner. Do not use a broker as they will try to sell you a bunch of shit that makes them a lot of money and will give you less than optimal returns (i.e. whole life insurance). You could also go on to vanguard's website and create an account. Then you can just link up a bank account and start putting money into an index fund and not worry about it. They will evenly automatically rebalance your portfolio for you if the distribution becomes too heavy in any one area due to market forces. This will ensure that your risk is always hedged.

EDIT: Other examples of low risk investments that still offer a much better return than a savings account would be a money market fund or US treasury bonds.

I can answer this question for you with clarity. Who cares the most about your money?

My thoughts. I too am planing to retire early.

I can tell you that saving your way into retirement while working for someone else is difficult if you plan to retire early. If you're okay with retiring at 65, then yes it's doable, that's how most people do it. If you want to be done with work in 10-15 years, you're very likely NOT going to do that working for someone else.

You'll need to start your own business and grow it to something that makes YOU (not your employer when you work for someone else) a lot of money.

I recently quit my 6 figure job to start my own business....

I think I found my easy button. Just called my dad and he has an old college friend who is at Meryl lynch and manages all of his investments. He has a son who is also about to take up the business. My dad said that he trusts him with his money and all he has to do is talk to him every few months and discuss some investment ideas. I'm going to get in contact with him. I think by staying with someone who knows my family I can find a way to do it. I'll report back when I meet with then.
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<br />Roth 401k or normal?

Interested in this thread,

For me personally just getting my msm has been a constant uphill financial battle between repairs/mods/improvements. I should be getting it back soon but I'm still playing catch up on Credit Cards/Car Payments/School Loans. Car & School payments are actually almost done being paid off but essentially I am at a net worth of $0... or negative :burncash::burncash:

In hindsight, I could flip the msm for a lump sum and be done with all debt & start fresh with another miata & more car payments.

While investing with your dad's friend is definitely preferable to putting it into a savings account I would still suggest you get an basic understanding of how he makes his money. Is he fee based or does he make money from the products he sells? You want someone who is fee based so that they have no incentive to sell you a product that provides them with high margins while providing you with less than optimal returns.

To the traditional vs Roth question this is going to depend a bit on your situation. Mathematically, a traditional 401k or IRA will yield higher after tax returns due to the fact that most people fall into a higher income tax bracket while working than when they retire. However, Roth IRA's offer some additional flexibility before the age of 59 1/2 that might provide some value to you depending on your specific situation. If you have no interest in learning about finance for yourself this is definitely something I would discuss with a financial planner.

I have to say I really disagree with this. Starting your own business requires taking a huge risk and a certain level of business savvy to succeed. This is not a path for most and the chances of failure are quite high. If you do succeed the rewards can be quite large but it is far from the only or even best way to do it.

Retiring early has a lot more to do with being able to live off of less than you make. I posted the math above and it is really that simple. What you make doesn't matter. It just matters how much you can save. Making more means you can live on more while saving more and makes the process easier. However, If I can happily live off of 25% of my take home on $36,000 a year I would still be able to retire in 7 years if I planned to maintain the same standard of living adjusted for inflation for the rest of my life. The reason most people that retire early do it by running a small business is because they are able to sell the business and get a nice lump sum payment from their sweat equity that allows them to retire. Most people in the U.S. live near or beyond their means. Since most people don't have a business to sell that provides them a large windfall all at once they just never build up that nest egg over the course of their career.

General question- how old you all expect to be when you die?

I'm figuring with modern medicine and my relatively clean lifestyle I'll be well over 100 when I kick the bucket (obviously barring any freak accidents etc.) My parents are 62- super fit for their age and they smoked for 15 years... I'm guessing they'll live to be 100.


Edit: what I'm saying is that being retired for 60+ years is going to be boring. For my retirement I'll be the cranky old man at Ace hardware making keys and making fun of you for not knowing how to fix a running toilet.

:party:I expect to live a pretty long time based on my family history. I would like to spend as much of that as possible in a position that provides me with A LOT of flexibility to travel, enjoy meaningful work, volunteer, and spend time with my family and friends.

EDIT: The point is not that you have to retire in the sense of do nothing for the rest of your life but sitting on your porch. If you have any other life interests or hobbies it should be relatively easy to fill your time. Go mountain biking, travel, volunteer somewhere, take a job doing something you love but makes little to no money just because you can, learn a new skill or language. The possibilities are endless. The whole point of attaining financial independence is to provide you with the ultimate flexibility and avoid being stuck somewhere you don't want to be.

Based on family history (Alzheimers, Dementia, Heart, etc)

I'll be surprised if I make it to the current life expectancy.

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<br />The way my dad spoke about him is that he lays it all on the table for my dad. Tells him everything he can do, and the breaks it down into smaller decisions. I.e. high risk vs low risk. Do you want to invest in new tech or stable big companies. My dad pays some amount when buying stock and none when selling. He also has some money in managed funds. Where you put money in and then get a return based on the funds that are managed.

I think this is right. My wife and I have always lived well below our means in those areas and the payback has been great. I was a chef years ago, so eating at home isn't a drawback, but our house was very affordable, and we never sprung for the expensive car. Most of the people I know in Fairfield County with our income are riding around in A6/7's, 5-series and E-classes while we have a 10-yr-old TSX, my 1990 Miata and a 2001 Silverado, all bought with cash.

We own our house in CT outright, and have a small mortgage on our place in Maine. There are very legitimate arguments to be made that I should have big mortgages on both, but....

We are both 59, and only working because my wife actually likes her job, and I'm not sure what else to do yet. We can retire next week if we want - it gives you an entirely different perspective on a job to know you can tell your boss to fuck off and walk.

All that money I could have spent on cars and restaurants and a McMansion went into 401k's, index funds, and a handful stocks that I have traded over
the last 25 years or so. I spent my 20's making(and losing) memories instead of money, so it was a later start than some.

I think putting the most possible into a 401k is probably the best/easiest way to start - consider that because it's pre-tax, your first-year return is equal to your marginal tax rate - 17%, 28%, higher - plus employer match plus whatever it grows. That's a hard rate to beat these days anywhere.

I have no advice on choosing other investments, because mine were the result of advice from a very astute FIL and good luck. Finding financial advice you can really trust is very tricky - clearly a job for MT.net! I got smart/lucky with a few stocks, and they allowed me to pay for the houses.

I like index funds(TIAA/CREF and Vanguard are 2 I've owned) because they generally do as well as or better than standard mutuals, and they have lower costs.

Your math is simple, and right. In fact I agree with pretty much everything you said.

Based on your math, everyone should be retired at 40. And in reality, life happens and a large percentage of the population don't retire before 40. Thus while your math makes sense, and is right, and I agree with it too, reality is it too is doesn't have a high success rate. Though it has potential.

Anyways my goals for retirement are different than yours, thus my approach is different. I could not work for someone else and reach my retirement goals. I tried to actually, and it wasn't working.

<p>saving up for a house in california kills any chances I have at early retirement.&nbsp;</p><p>&nbsp;</p><p>But I enjoy my job so far. Switching to a part time contractor would be ideal for me.&nbsp;</p>

Unless you choose to sell the house in California when you retire and move to a lower cost of living area. As long as the home maintains or builds value it can be a good investment. If you, however, plan to live in it forever than that is an entirely different story.

<p>Just spent half an hour on the phone with the meryl lynch guy. First we talked about what kind of IRA to put money in and I think a Roth IRA is the way to go. Althought my tax rates might go up, if I retire, or start making less money. Or tax rates in general skyrocket (very possible) then I will be happy I put it in.</p><p>Then in a few months after a couple pay checks and helping the savings. Look at my monthly spending, decide how much I should keep in savings for emergencies, and start putting the rest of my paycheck in some sort of investment. He suggested mutual funds to start with.</p>

Your easy button is the devil. Merrill Lynch is a very high commission full service brokerage. I'm sure the broker is very professional and treats your dad with great respect and works diligently to earn his trust, but he is extracting huge amounts of cash from your father's retirement savings and the money he is likely saving to support your mother and pass on to you as inheritance. The transaction fees at ML are much higher than they should be. But the big commissions are in the management fees and hidden within the funds themselves. The most important numbers to look for are management fees and expense ratios.

And expense ratio is a number with a decimal point in it. It is a multiplier. However much money you have in the fund is multiplied by the expense ratio and that is how much money the bankers take from you each year. They take it even if they screwed up and you lost money with the investment they chose for you.

The management fee is another fee that is similarly multiplied and deducted.

Ok, Merrill Lynch (owned by Bank of America) has funds on their website to chose from with a expense ratio (just picking one that looks like the middle of the range) of 1.270. Vanguard Small Cap Index fund has an expense ratio of .09. So, let's say you have $10K in each fund. Merrill takes $127 and Vanguard takes $9. You see why Merrill guy has a nice car and a country club membership? Vanguard is investor owned so they keep costs down. As Ryan was saying, you don't need suit-and-tie guy to shake your hand and tell you how smart you are to let him help you. Ryan is saying "index funds" simply because they are safe, easy, and the expenses are low.

Really quickly, small cap, mid cap, large cap just refer to the size of the various companies on the stock market. General Electric is large cap. Cummins Engines is a small cap. Cap is short for capitalization, or money. There are many more small cap companies than large cap. More terminology: index funds, just like an index lists everything covered in a book, an index of stock market funds is just one of everything. Therefore a small cap index fund is a fund that has a little piece of all of the small companies on the stock market. That includes everything from engine manufacturers to biomedical companies, restaurants to homebuilders, aerospace to Abercrombie.

The last time I checked, the Vanguard's Small Cap Index Fund had just under 1500 companies in it from all types of companies so you are automatically diversified, spread out for your own protection. And, if you think logically about it, a small company has a much greater chance of growing by 10% in a year than a very large company, and many do. Small cap index funds typically outperform the stock market average or S&P500 by a large gap. Another really nice thing about an index fund is that it doesn't require much fund management (deciding which funds to include) so the expense ratio is usually quite low.

Managed funds have high commissions. I'm sure the broker is a very nice guy.

Small cap index funds don't require you being concerned with high or low risk. They are safe, cheap, and will make you money over time without worry.

^This.

I'm not quite on Ryan's plan (anybody want to buy a lake house?) when it comes to austerity, but I buy used vehicles with cash and have nearly paid off my small primary house.

You can open an IRA or just simply buy mutual funds without any help by just going on Vanguard.com and opening up an account. It really is very easy.

Here is the list of funds in the Vanguard Small Cap Index Fund, which is pretty interesting to look through: https://personal.vanguard.com/us/Fun...sortOrder=desc

I've been sitting on a modest 5 figure bank account for the last decade accumated from rent income, and holy cow I finally got around to seeing how I can grow it.. I cant belive how much more I could have with a few decent investments... Shoved half of it into a few vanguard funds. Been about a month so far and the markets have been rough, lost about $80 So far. Not ready to jump into stocks yet.

I wasn't really raised with an investment mentality.. The most anyone in my family has ever done was CDs, big banks are all they know. I'll be breaking that cycle.

Vanguard Index Funds are fantastic. Look for well balanced index funds with low fees. The lower the fee, the better. Unless you make it your full time job, you're not going to time the market swings correctly, and even the guys doing it for a full time job screw it up more often than not.

I will throw a little bit of caution on going too heavy on the small cap index, though. The last 5-10 years has been historically out of the norm in small cap performance, so when you look at index performance it looks like small cap is the best deal. That doesn't mean that it will be true over the next 5-10 years, however. If you expand the history out to 30 or 40 years, then you'll see more of a balance between small cap, med cap, and large cap funds.

The long term average is what you want to keep your eye on. If you are looking to park money for a few months, use a bank. If you are interested in 10%+ growth over the long haul instead of losing money in a savings account at .03%, then you are ready. The whole stock market average since 1965 is about 10% growth per year. The small cap index will usually significantly outperform that.

Individual stocks are for the very well educated with lots of time to devote to a second job of market watching.

Off topic but what happened to props? Was going to prop some posts and it's gone.

Damn not what I wanted to hear. More reading it is. My IRA is through my job because they match.

Listen to this guy, he's 100% right. Again, who cares the most about your money?

But to the OP, you said one thing right: Minimize lifestyle creep. This will help a lot.

<p></p><p>&nbsp;</p><p>Thats where I'm at too. Retirement savings is max out 401k that employer will at least partially match, max out max roth 401k contribution. Any exccess disposible income goes into a mutual fund which is my emergency fund and savings for a down payment on a house.&nbsp;</p><p>&nbsp;</p><p>Well, minus the miata investment which has the best return of investment of all options. Miata is on average rate of return&nbsp;of 15% of my happiness.&nbsp;</p>

Matching is awesome. Use that. It is free, automatic growth on top of everything else you will make. Put all you can into it. Just choose wisely with regard to expense ratios when choosing which fund(s) within your company 401k to invest in. The company will have a list of funds to choose from. Some will be more expensive than others. If you provide a copy of that list, I would be happy to take a look at the funds and tell you a little about the choices. It is tough to navigate when starting out.

Honestly I don't know when I'll need it. A/C could blow up in the rental property, roof could fall in, whatever. Its a safety net, I won't die if I loose some and its been sitting doing nothing for years. Not interested in investing in more real estate, savings accounts suck so I thought id try some index funds. Bought VSTMX and VGSTX to start.

<p></p><p>Thanks 6. I have to wait for like a week or so to get added to the financial benefits system. I'll shoot you a PM then.</p>

Keeping in mind that financial independence/security is a long-term program is important. Pick a sensible vehicle and stick with the program, regardless of what the market's doing this week/month/year. The value of our 401k's dropped so much in 2001, and again in 2008, that I thought we were screwed dead both times. They ultimately came back better than where they were, as if nothing had happened. People obsess over this week's Dow, but the market performance short-term is just a distraction.

Do you guys plan to have kids? Say goodbye financial independence.

The effect children would have on plans for financial independence is going to depend on quite a few things.

- How frugal are you? (Hand me down clothes, used strollers, minimal toys)
- Can either one of the parents or other relatives help out with childcare to avoid expensive daycares?
- How much money do you make?
- How far along in your FI path did you wait to have children?
- Is your child healthy?

Kids do not have to be expensive. People choose to make them expensive or are unlucky enough to have a child that is plagued with expensive health issues. Obviously there is a little luck here but for the most part children are relatively healthy. Most of the famous financial independence bloggers have at least one child. Mr Money Mustache (at the extreme) has a boy and his family spends less than $30k a year total. I am not saying I plan to live off of $30k while raising my kid but I also likely won't fully retire either. I do plan to have kids but not until I am between 30-35 years old. By that point I should have a fairly solid base for Financial independence and I should be making quite a bit of money based on my current career trajectory which would likely allow for me to still save for FI while raising a child. I also live near my parents and grandmother who would all be more than happy to help raise my child.

I admire your plan. And definitely think that starting the process to some degree as early as possible is sage advice.

fwiw- I soon realized children are far less of a predictable budget item than I thought before having them. There are many more places to spend your money on them than I anticipated. For example- take a perfectly healthy kid, with average school performance, but plenty of room for improvement. Parents opt for a private tutor and the success is significant. Now they have a 2nd greater in private tutoring for the remainder of school. OR they could let he/she go through school as average student. Just saying that children can be a far more personal budget item than what you budget for groceries, or entertainment, or hobbies.

<p></p><p>&nbsp;</p><p>FI = Forced Induction? &nbsp;:party:</p>

Thankfully, if you are using it as an alternative to a long term savings account, you can transfer just some of the money out of it if needed. Sometimes people think of it as an all or nothing deal but is possible to transfer a few thousand over to a checking account if something comes up.
FTFY.

The single most important decision will be who you partner up with in this endeavor.
Success or failure relies on no other single step more critically.

Lots of sage advice in this thread.
I'll add that controlling your expenses is far, far easier than wringing your hands over the stock market, trying to build the next great startup, etc.
Start by controlling your expenses:
Dine out minimally, if at all. This goes double if you go to a bar regularly.

Buy an old corolla for cash, drive it into the ground. Payments on a depreciating asset are bullshit. If it's feasible for you to not own a car, don't own one. Even paid off cars are expensive.

Ditch cable.

Quit impulse buying. Use mint.com for a few months, and you'll realize the $5.50 you spend every time you hit the gas station ends up being a lot of fucking money.

Buy the smallest house you need. Better yet, buy a small house that needs light renovation. Do the work yourself.

A lot of this stuff is similar to what Dave Ramsey espouses, though I disagree with him on a few major points (paying off ALL of your debt, not worrying about your credit score, etc).

Once you have your spending under control, your savings account will come along, then you can worry about investing.

edit: +1 to what Sixshooter posted. If your wife buys Prada behind your back, you're in for a long, shitty time. Choose your domestic partner very carefully, or they can vaporize your finances in a heartbeat.

Two cars bought cash
Zero debt
Don't drink
Don't smoke
Don't do drugs
Monthly overhead (all expenses) come to less than $1,000.
Income is heavily varied. 1k to 4k a month. Personal Trainer at private gym.

26/male/not married(never will)/no kids(never will).

1 hobby and I could cripple myself every time I train for it.

Where do I start?

You've got your life figured out and under control right now. If I remember correctly you have your own business, right? If so, depending on how that is going, you'll need to decide if investing further into the business has a better payback than investing in something else (that you have less control over).

Or you can do both to minimize your risk in case one of them fails.

Do you need two cars?
Six months worth of income in an "emergency" bank account
Once that is done, save some more and throw it in a Vanguard mutual fund. Add to it monthly.

Ahem, a turbo Miata is one of them. And it doesn't run.

You forgot the IRA contributions he should be making since that is likely the only tax advantaged account he has access to.

Josh, I assume the gym you work at does not offer you a 401k. Are you an employee of the gym or are you a contractor? If you are technically self employed you could think about incorporating yourself and then opening up a company 401k which would require that you pay yourself a salary. This would take some paperwork and a little $$ for the fees involved but would be well worth it in the long run if you plan to be a personal trainer in the long term. You would be able to not only max out your own 401k contributions but contribute the full allowable amount for employer contributions as a sort of little guy loophole. It would also allow you to reduce the business income by expenses. This can get rather complicated depending on how you structure it but also offers a lot of savings if done correctly. A CPA would be able to help you with the particulars but it likely would not be worth it until you start pulling in more money.

My ex-wife did this while she was a self-employed hair stylist and part-time educator.

Basically there is a certain income range (I don't remember we let the CPA handle it) that it makes sense, above and below just do it on your personal taxes.

<p>I'm taking a different approach from FI/RE.</p><p>My plan is not to retire ASAP, but rather in the age 67 timeframe (I'm 60 now). Reason is that my earning potential is greatest now than ever in my life. My thought is to be able to fund my retirement, and my children's retirements.</p><p>For liquidity, I use MITFX, a municipal bond fund, which has much better return than a CD, and&nbsp;is tax efficient&nbsp;outside my 401k. This houses my 3-6 month's living expenses and car purchases.</p><p>For long term investment, inside a 401k, I use VINIX and VTI. The ETF version of the Index Mutual Fund (VTI) has lower fees than the Mutual Fund version, and I use it as a buy and hold, not for trading. The VINIX is a mutual fund, but is my company's preferred, so has low fees as well. I have become a fan of full market index funds&nbsp;for long term, hands off,&nbsp;low risk investment</p><p>For safety against Market downturn, I have FEHIX and MWTIX bond funds. Not a large proportion here, but I'm&nbsp;working for them to be abourt 4 years worth of living $$&nbsp;when I retire, so that I would draw from bonds instead of stock during market downturns.</p><p>Not saying these are the best funds and mix, but&nbsp;they represent a mix than could be reviewed.</p>

That's awfully nice of you to say. Lets hope it's true.
It's a fledgling business. 7-8 months into it so far.

:party:
I'll google that today. As of this moment I have 4,300 cash sitting in my drawer that I have nothing to do with.

I am not employed by the gym. I work for myself. Insurance is done under my certification. I haven't made anything else official at this time.

The rest of your paragraph is melting my brain.

Short term goals are to brand this business and then go back to school next year to start working on becoming a professional strength coach. I'd like to continue personal training while I'm in school but I have no idea what jobs will be available to me in the new city. I'm spoiled as fuck working private and have no idea if I'd be able to handle a commercial gym.
I'll have to check this out, as well.

I'll try to give you a better breakdown of what I am talking about while keeping it as easy to digest as possible.

You are currently self employed and are running your own business. It would be in your best interest to incorporate that business which will offer you some additional legal protection and tax benefits. Most small businesses end up becoming S Corps. which offer a lot of personal liability protection, are relatively simple, and take advantage of personal income tax brackets (which are lower) instead of business income tax brackets.

Now due to the possibility for one of your clients to get injured while using your services and then suing you, the legal protections alone would likely be worth it as they would shield your personal assets. You just have to be careful how you treat business and personal funds/assets here because if you intermingle them then someone who sues you could 'pierce the corporate veil' and go after you personally anyway.

On the topic of financial independence, setting up a corporation offers you the ability to utilize some tax advantaged accounts in a somewhat unique fashion. You can setup a company 401(k). You are an employee of this corporation and you pay yourself a fixed salary. You would be able to contribute up the max 401(k) contribution amount as an employee which is currently $18,000. You would also be able to contribute the maximum employer contribution amount which is an additional $35,000 for a grand total of $53,000 that you could completely shield from taxes until you starting making retirement withdrawals. Its an awesome little tool that can offer pretty insane benefits if fully utilized. It also helps make up for the fact that as a self employed person you are responsible for all 15% of your payroll taxes.

If you wanted to set something like this up I would suggest you find a local CPA that specializes in small businesses. They would be able to walk you through all of the details and are more than worth their fee.

EDIT: Also, in case anyone is wondering why there is such a large focus on 401(k)'s from someone who may want to retire early, look into Roth conversion ladders which allow you to plan out early withdrawals from your 401(k) funds without penalties once you stop working.

Ryan, as a self employed individual, Josh should be eligible for a SEP, which has some advantages over a 401k, wouldn't you agree?

https://investor.vanguard.com/what-w.../sep?WT.srch=1

Financial Independence/Early Retirement
 

Actually, due to the fact that he would be the only employee this offers no additional benefit but further restricts his allowable contribution.

The 401(k) allows him to contribute as both the employer and employee. The SEP IRA only allows him to contribute as the employer.

Financial Independence/Early Retirement
 

But he has more flexibility with regard to withdrawal, too.

I own a business along with another guy. We both elect to stay as an LLC and take advantage of the SEP rules.

Much cleaner and has a certain amount of flexibility the 401K route doesn't even though the SEP doesn't allow as much contribution.

1. We have no employees and never will
2. Our revenue passes through as personal income but we get to take advantage of the usual business rules i.e. Health insurance and SEP is above the line deductions to our personal income.
3. SEP is revenue based so as revenue/income rises so does the amount of SEP contribution which frankly playing by this scenario leaves us with much more money in our pocket vs Uncle Sam.

Every year we look at the alternatives and going into a 'corporation' but our legal counsel and tax accountant both say no.

Every business is different and there's no set answer to what's 'the best'.

Following this thread there's a lot of good advice but frankly it boils down to; 1. spend less then you take in (also the best business advice), 2. find a place to park your money that hopefully will pay you the best + safest rate of return (I've not seen any mention of rental properties or the like), 3. don't have any debt and 4. if you must pay someone to manage your 'investments' pay them the least you can (index funds).