One More Future Millionaire!- Kat

One More Person Joining Us On The Road To Unemployment


We simply LOVE talking about our plans for the future with people, especially when they ask “how is that even possible to retire that early?” Although we aren’t financial advisors (far from it) we also believe that the process is quite straight-forward, therefore we feel comfortable in taking a few hours and learning about someone’s situation (financially and personally) and offering advice on what WE would do if WE were in their situation. Most importantly, showing people that there absolutely IS light at the end of the tunnel, and that just about anyone can be a MILLIONAIRE and retire early if they prioritize it as one of their goals… Here is one person we have spent the past few weeks learning about, and here are our findings/recommendations.




Kat is a 37-year-old divorced mother of 2, who is currently a public-school teacher, but leaving her job for an independent sales position which she has been building for the past year, netting her DOUBLE the income of her teaching position! Wow! Go you!

We think its important to lay out what someone’s vision of the future is… Ours seems radical to most people, so we accept that living in a camper, or sailing around the world isn’t for everyone. In short, paying debts, saving money, and investing it isn’t very fun on its own, its only fun if you have a purpose behind it… This is what you told us.

You would like to be able to take extended vacations with your kids, own a house, teach part time, not have to work 3 jobs.

“I love teaching and changing people’s lives, it just doesn’t pay enough, which means I work more and don’t spend time with the kids, and don’t have time to workout… I like the idea of having the freedom to make my own schedule and not have to be stressed to find time to do a simple thing like do the laundry”.

Great stuff…

Lets take a look at the nuts and bolts of where you are now.


Current Income


Direct Sales and Commissions: $5000/month

School Teaching: $2300/month

Private Lessons: $350/month

Income for the next 4 months- $7,650

Income projected for the following 12 months- $5,350 (for the purposes of calculations, this will likely be more)


Current Ongoing Expenses


  • Housing: $800/month (Includes all utilities, TV, and internet)
  • Insurance/car $30/month (actual out of pocket expense- significant leasing and insurance deal through business)
  • Food: $400/month
  • Car Payment: $325/month
  • Gas: $125/month
  • Pets: $100/month
  • Leisure: $200/month
  • Miscellaneous and fun money $200/month
  • Minimum on student loans $250/month


Roughly $2,420 a month… Let’s round it up to $2,500 a month since there has been no concrete data tracked and as humans we tend to underestimate expenses.

Total Expected Ongoing Expenses- $2,500


Current Liabilities


  • Loan from 403B $2,398, defaulting in 4 months. (no interest penalty if paid within this time)
  • School loans totaling $32,712 between three loans ($6,836, $8,984, and $16,889) carrying a 6.8% interest rate each.
  • “Little Green Car” (2011 Mazda 2) Loan on a second car $4,500 at 3.6%


Total Liabilities- $39,610


Current Investments


  • MetLife: Universal Annuity/403B- $14,820 (With current loan of $2,398 defaulting in 4 months) $17,218 once loan is repaid
  • Forester Financial- 403B- $550
  • Public State Retirement Program- $142,593


Total Investment- $160,361

You’re RICH!! When we started this process you weren’t too clear on how much you had in retirement funds, a little investigation on what you were entitled to from being with your current employer for 15 years resulted in knowing you have a LOT MORE than you thought you did. Good for you for making those contributions over the years!


What We Would Do First


  • First, we recommend using Mint, YNAB, or some other tracking app to collect all of your data in regards to income, expenses, and investments. We use Mint, its free and does a good job in our opinion. It’s clear that there is not a full understanding of where your money goes, which once identified can help you eliminate wasteful spending from your perspective, and allocate those dollars to eliminating debt and increasing your investments.
  • Since you will be leaving a “safe” employment status which you have been accustomed to for a decade and a half, we recommend you set aside an “emergency fund” that safely covers your minimum monthly expenses (minimum payments on everything) for three months. This will enable you to feel safe in your future bold moves to eliminate debt, and invest in your future. Although you may find that 6 months into your being fully self-employed, you feel incredibly safe without such a large amount of cash set aside, it is wise to start with it, just to give you peace of mind about the “what if’s” that come along with self-employment and entrepreneurship.
  • Pay off the $2,398 left over on your 403B loan. It defaults in 4 months, and if that was not enough to motivate you to pay it back now, then the fact it is essentially “locking up” your access to over $17,000 in funds you can rollover into an account when you leave the public-school system should be… Besides… You’re just paying it back to yourself anyway.


Shifting Investment Strategy


First off… Stop and celebrate the fact you have no debt other than your school debt (once you pay back your 403B loan) AND you’re more than a 1/10th MILLIONAIRE!! That’s awesome! Now, what to do with your money?… You are in the same situation we will be in a few years from now when we start our step-down process from work. You will be given options with your 403B plans. You can either leave them in place (Based on what we saw for investment performance likely not a great choice), cash those babies out and buy a Tesla Model S (probably not going to get you any closer to retirement), or “rollover” your funds within the 60 day window of leaving employment with no penalty. Now, we said no penalty, but there are likely some fun hidden fees associated with the companies you are invested with that will shave some off what you take, but as long as you actually roll the funds over into an equally qualifying retirement account such as a TRADITIONAL IRA, you should avoid the 20% or so income tax penalty for withdrawing early. If we were in your situation we would choose to rollover your retirement funds as soon as you leave into a traditional IRA, we use Vanguard, thus giving you full autonomy of your retirement funds. Given your age, and your retirement goals, an aggressive investment like ours would likely be the way to go. We are mostly invested in low-cost index funds.

We know, we know, we know… A lot of people are going to ask… “Would it be a good idea to cash some of those funds out and use them to eliminate that school debt?”… We don’t think so, and here is why. Assume there is a 20% hit, right out of the gate, on cashing out some of that retirement money… That’s pretty bad… It’s basically taxed income. And as terrible as school loans are, at least you can write off the interest you pay on them each year. Being the beginning of this loan (For a recently acquired master’s degree) it is very heavily weighted towards interest, so even with an aggressive pay-off strategy, you will still pay a lot in interest, AND if done properly, diminish your income on your taxes those years by the same amount. MOREOVER, if the same money was invested properly, not only do you avoid the 20% penalty, but also net yourself a handsome compounding interest, and being more than a 1/10th MILLIONAIRE has its perks… Assume you roll your $160,000 into a traditional IRA, thus avoiding any tax penalties for “early withdrawal”. And let’s assume a 10% return in the next year. THAT’S $16,000! So, although you are going to pay a good amount in the next year in interest towards your loans, we would challenge anyone to come up with a number more than $16,000…. Now sure, the market is volatile, and you could also “lose” value on your account in the next year… But heck, our accounts are up 27% this year and that could happen too… You just never know. The bottom line is that you stand to gain far more from reinvesting that money where it belongs rather than repurposing it… Regardless of what psychological victory you might stand to gain from paying off your loans with a snap of your fingers, the numbers simply don’t add up.


Eliminating Debt Strategy


First, as we stated above, you need to pay off that pesky loan from your 403B. You’ll be happy you did, when you see what that money will return you once its freed up and placed into a retirement account you can control a little more. Then comes the longer and harder, frankly pain in the ass part… School loans. You have $32,712 between three loans ($6,836, $8,984, and $16,889) carrying a 6.8% interest rate. This part of securing your future may be long and tedious, but about as straight forward as it gets. The good thing is that your loan is split up between three separate loans, all carrying the same interest rate. This makes it really easy to decide how to move forward in our opinion. We would recommend paying the MINIMUM on the $16,889 and $8,984 loans, and absolutely HAMMERING the smallest loan of $6,836 with ALL of your disposable income beyond your basic IRA investments (The only investment we would contribute to while carrying ANY school debt) until that smallest loan is no more… Once that one is gone repeat the process by paying the MINIMUM on the $16,889 loan and HAMMERING the $8,984 loan with ALL your disposable income until it is gone. Using this method, often referred to as the “debt snowball”, allows you to gain small victories, and eliminate one debt at a time, thus allowing you to allocate even more money to the next one.


Projections and Budgeting


For the next 4 months, you will have an income of roughly $7,650. Your estimated expenses are $2,500 a month for this period, leaving you with $5,150 in disposable income.

For the following 12 months, we calculated that you will be making the same from your direct sales job and side hustles. Now, we assume as you commit to making this “side job” your new full time job, your sales will increase, but for the purposes of a budget, we will assume it stays the same at $5,350. Also, assuming your expenses stay the same (adjusted slightly after a few months and you will see why), your disposable income will be $2,775 for those months.

You told us that you would feel much better if you had 3 months of minimum expenses in savings, to give you peace of mind moving into your new ventures. This is roughly $8,000. You are starting with $1,500 in savings as we write this. You also told us that your “little green car” is something you want to hold on to, and having paid off will make you feel secure with less payments going forward and something you own. This is important so we worked it into the plan.


Month 1)


Income: $7,650

Expenses: $2,500

Disposable Income: $5,150

The last we spoke you said you are about to receive a check from your side hustle/soon to be primary job for $5,400. Awesome!… Guess what step one is? PAY OFF THE LITTLE GREEN CAR! Yep, we determined that paying off that $4,500 debt with 3.6% interest rate will make you feel like you have a huge victory under your belt, added security moving forward, ability to lower your insurance (if you choose to do so) AND will give you an additional $325 a month moving forward! Congrats on your first move forward!

$5,150-$4,500 leaves you with $650 of disposable income… Add $500 of this to your savings

$1,500 + $500 gives you $2000 in savings. You’ll notice that you have $150 of disposable income leftover this month. We left this as “wiggle room” to adjust for something you may have missed in our conversation about your expenses.

This doesn’t cost any money, but is important you start sooner rather than later… Choose your investment company moving forward such as Vanguard. Open an account with them in preparation for when you are ready to move funds to them. This will streamline the process of leaving your job and rolling over your retirement funds.


Month 2)


Income: $7,650

Expenses: $2,175

Disposable Income: $5,475 (Now that you own the little green car, you have an extra $325)

This month, the name of the game is to finish paying back your loan from your 403B. Doing so gives you the ability to avoid any further costs associated with this loan by letting it default in 3 more months, AND more importantly, gives you access to $17,000 to rollover to your traditional IRA when you do so. Pay the full $2,398 back this month so you have full access to this account moving forward.

$5,475-$2,398 leaves $3,077 of disposable income. Add the $3,000 of disposable income to your savings account which will leave you with $5,000 in savings. The remaining $77 is yet again left as “wiggle room” for any unforeseen expense.


Month 3)


Income: $7,650

Expenses: $2,175

Disposable Income: $5,475

Let’s hit your goal of $8,000 in savings this month. Put $3,000 more in your savings account.

$5,475-$3000 leaves $2,475 of disposable income. Put an additional $2,000 towards your SMALLEST student loan (Make sure to select “towards principal” when making the payment)

$2,475-$2000 leaves $475. You mentioned still wanting to spend money on the kids, or travel, or anything on yourself. You’ve been working hard, use the $475 as you see fit because after this month you have COMPLETELY obliterated your car loan and own it outright now, SAVED THREE MONTHS of living expenses, AND put an EXTRA $2,000 towards your student loans… You rock!

Student Loans:

$6,836-$2,000 = $4,836



Total: $30,712


Month 4)


Income: $7,650

Expenses: $2,175

Disposable Income: $5,475

This is your final month of extra income, so it’s going to feel good to do this. ELIMINATE one of your three student loans. By doing this, your minimum payment on your student loans goes down to $172. Pay the remaining $4,836 on your smallest student loan.

$5,475-$4,836 leaves you with $639 of disposable income. Yet again, we are leaving this as money to be spent as you see fit. If you don’t have a burning desire to do something with it, we suggest you put it on the $8,984 loan… Its next on your chopping block, you badass you! If you can’t think of anything good to spend it on, set it aside to be invested in your IRA once established. You can put a maximum of $5,500 a year into that (not including what you rollover)

Student Loans:

$4,836-$4,836= 0!!!



Total: $25,876


Month’s 5-18)


Income: $5,350

Expenses: $2,097 (Already $403/month less than where we started 4 months ago!)

Disposable Income: $3,253

Remaining debt:



Total: $25,876

Hopefully you can see the path forward from here… Take down the next student loan of $8,984 with your roughly $3,000/month disposable income, then the final one. If you can manage to put all $3,000 a month on them, you will be completely FINISHED with paying student loans in 8 months!


Investing Forward


The next logical step after the first 4 months is obviously to increase your income, and continue to decrease your expenses. The question always is, “What do I do with the extra income?” and we will leave that up to you, but our advice is to spend it wisely. If say, you are able to make an extra $1,000 a month consistently, it would be prudent to seek a private healthcare option and invest in your traditional IRA. Less than $500/month allocated towards an IRA will net you the max of $5,500 a year. Once you are beyond that, based on what you have told us about what you would like your future to look like, we believe you should invest your money into passive income streams such as index investing. Lets take a final moment, in what is already a very long blog, to daydream about the projections of the future.

… Insert the Wayne’s World “dittlidoo, dittlidoo, dittlidoo” here….

Let’s say you increase your income after this first year to $7,000/month (take home) and lets also assume you increase your expenses after you acquire that house with a pool that you want, and a camper in another state. Let’s say your expenses are about $3,000/month. This leaves you with $4,000 a month to invest. You invest an additional $5,500 a year into your IRA, to add to what is already a behemoth of snowball. Let’s say you yield around a 10% return.

$160,000 plus $5500 a year for 23 years (taking you to age 60 when you can withdraw without penalty) gives you $1.9 MILLION dollars… And we’re just getting started.

That was just investing $5,500 a year from now on for 23 years. What if you took that $8,000 you initially saved as you 3 months living expenses and invested it in an index fund that you could sell whenever you wanted… but in the meantime also yielded a 10% average return, and contributed $4,000 a month to overall investments… That’s $48,000 a year of investable cash… minus the $5,500 you put into your IRA leaves you with $42,500. Do you know what happens if you invest that consistently? If you do that every year until you are 60 you’ll have 3.8 MILLION dollars in that account… You did mention you wanted to retire early though… So lets take it down a notch. Lets say you want to only do this for 13 more years. Making you 50 when you pull the plug on investing. Investing that $42,500 a year for 13 years will give you 1.2 MILLION dollars at age 50… Hopefully that will be enough to get you through until you are 60, because when you hit that age, even if you only invest your additional $5,500 for 13 years, your IRA will continue to grow to 2.4 MILLION dollars!

Again, this is full of assumptions, and no one knows exactly what markets will do, do your own analysis, but we feel that a 7%-10% return averaged over time is not unrealistic by any stretch of the imagination.

You asked once “What about finding a way to pay for the kid’s college?” We have some thoughts on that related to philosophy, but suffice to say, if you keep on this path, you can take a few year’s worth of your disposable income and pay for it with cash if you want to… You’ll be rich… Just stay the course and don’t increase the cost of your living like a Hollywood wannabe and you’ll be JUST FINE.

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