Author Topic: CASE STUDY: Think we're doing well, how do we do better?  (Read 8548 times)

CanuckExpat

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CASE STUDY: Think we're doing well, how do we do better?
« on: September 30, 2014, 08:45:12 PM »
Hi everyone, after hanging out here for a while, I thought it might our turn to walk around in our financial underwear and face the face-punches. Due to some recent and upcoming life changes, it seemed like a good time to re-assess. Thanks in advance.

Synopsis: High income, high savings rates, high housing costs, kinda expensive tastes; kiddo on the way and we need to improve cash-flow.

Income (monthly): ~$16,000
- Gross: ~$20,000
- Take-home: ~$12,000
About $3600 of difference between gross and take-home is optional savings (401k, HSA, stock purchase plan, etc.), rest is mainly taxes with small amounts towards health plans, charity, transit passes, etc.

Current expenses (monthly): ~$5500 Total ~$4500 Total
- Mortgage: $3500 (roughly $1800 principal, $1200 interest, $500 taxes and insurance)
- Mortgage: $2400 (roughly $700 principal, $1100 interest, $600 taxes and insurance)
- Health: $400 (higher than normal due to pregnancy)
- Travel: $400 (averaged over the last 6 months, we were conciously cutting down :) )
- Home renovation & maintenence: $300 (we budget this, but thankfully have had no issues and yet to spend any)
- Groceries: $350 (we try to stay under $300, but have had trouble meeting our goal)
- Transportation: $150 (slightly over our planned budget, usually due to gas for weekend trips)
- Restaurants: $150 (more the occasional very expensive meal, as opposed to multiple small ones, also includes bars, beer and wine)
- Utilities: $80
- Internet: $60
- Pets: $75 (normal monthly spending is less, but recently had one time adoption costs)
- Misc: $125 (furnishings, cleaning supplies, bike and baby stuff, gardening supplies, etc)

Assets: ~$1,060,000 Total
- Home: $520,000 (purchase price)
- Equities: $365,000
- Bonds: $85,000
- Cash: $90,000 (Holding much more cash than normal for couple of reasons alluded to below.)

Liabilities: ~$410,000
Mortgage on primary residence 3.375% 15 year fixed 3.25% 7 year ARM

Current net worth: ~$650,000
Currently 53% equities, 27% cash & fixed income, 20% home equity
Asset allocation plan calls for 60/20/20 split on equities, fixed income, real estate

Expected ER expenses:
Hopefully non-housing budget will stay the same with child related expenses taking place of pregnancy related health costs. With paid off house (or relocation to lower COL area) that puts annual expenses at ~$25,000

FIRE Goal: $1,000,000 invested assets and paid off primary residence. Ideally we'd like to reach that in five years
The amount seems higher than needed, but we tend to be conservative, want to account for un-forseen expenses, and at least one of us will probably be working for a few years anyways for non-financial reasons.

Specific Questions/Concerns:
1) Is the FIRE goal feasible in five years and will it require moving to a lower COL area or is staying put an option (or even trading up)?

2) Housing costs are obviously high, but we do like our current living situation, and it'd be hard to get lower in this area, at least without giving up our life of luxury :) However, when we purchased we chose a fifteen year fixed mortgage as the best choice at the time, shortly afterwards we found out we were expecting. Assuming that we might soon go to half our income (or less) temporarily or permanently, there is going to be a cash-flow problem.
Potential solutions:
    i) Leave mortgage as is, count on income and cash buffer (if needed) to meet monthly expenses during mat/pat leave.
         Pros: Doesn't involve doing anything. Keeps low fixed interest rate.
         Cons: Just a stop-gap, doesn't solve cashflow problem. Using cash buffer will eat into capital that could be invested.
    ii) Re-finance to a thirty year fixed.
         Pros: The payments will be affordable, might be nice having relatively cheap credit for long time.
         Cons: Interest rate will be higher than now, also for credit reasons we may not get best 30 year rate possible.
                  There might be fees to re-finance.

    iii) Re-finance to a five or seven year ARM <-- Edit, this is what we went with
         Pros: The payments will be very affordable, interest rate might be lower than now.
                 There's a decent chance we may move around that time (or pay off mortgage to coincide with FIRE).
         Cons: Fees associated with re-financing, having a five or seven year clock over our head.
    iv) Recast current mortgage using cash buffer and other savings
         Pros: No fees with our lender, keeps low interest rate and longish fixed term
         Cons: Eats up a lot of capital, I don't think we have enough in cash to significantly reduce monthly payment.

   
3) Our asset allocation is currently off kilter. Part of that was due to pulling out cash for our house purchases, the unused portion stayed as a buffer given the new home and child on the way. We had also talked about dipping our toes into real-estate investing, for which I thought having some cash on hand might be handy, but this hasn't got off the ground yet (and may not ever at this rate :) ).

4) We presumably won't be DINKs much longer (four such sweet words), after mat/pat leave, do we stay dual income and eat the associated child-care costs and headaches, or go down to one (or possibly two partially reduced) incomes. This is probably more personal than financial, but I'm finding writing all this down cathartic, and any input would be great.

5) Where can we cut and what can we improve?

Updates/Clarifications:
1) Asset allocation: We had chose a 60/40 equities/fixed income split when we were in the position of possibly saving for a downpayment. After the home purchase, that naturally became 60/20/20. I think it is time to re-visit this as we are probably paying more on mortgage interest than the return on the bonds, but we are somewhat risk adverse and will have a non-zero bond holdings. 

2) The effective mortgage interest rate after tax deduction(s) becomes between ~2.2% - 2.4% depending on our final tax bracket, and whether state is included (need to double check when we file taxes next year). Given that, we probably aren't in a hurry to prepay the mortgage or re-cast, as others have mentioned, even on one income, cash-flow might not be as bad as I thought. Refinancing to 30 year or ARM might still be option, depending on rates and fees.

3) Groceries needs more investigation to see where the money is going.

4) Rates were good, we were offered a no cost refinance into an ARM on terms that work well with us and we decided to go with it. Just waiting for everything to be confirmed. Frees up $1100/month in cash flow.
« Last Edit: February 11, 2015, 01:10:33 AM by CanuckExpat »

Beric01

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #1 on: September 30, 2014, 11:51:13 PM »
Your mortgage is really high. If you'd like, you can rent a small room to me to reduce your expenses so we can both FIRE faster. :-)

As mentioned, other expense of note is your vacation, but I also have similar costs. You kind of need them working in this area! Only other thing of note is food: groceries+restaurants is $250/person. Do you want to post some more detail and see if it can be reduced? I admittedly eat at a cheap Chinese restaurant once a month.

And props to your transportation costs - those are quite low!

CanuckExpat

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #2 on: September 30, 2014, 11:51:27 PM »
where in the Bay Area do you live? ... I'm curious to know where you can buy for $520k - that seems like a great deal.
We're in San Jose, around here that gets you an "older" ~750 sq ft, 2 bed 1 bath, bungalow in a "less desirable" school district and down the road from a tattoo parlor and strip club..
All that being said, we do like our place and the weather, and it's biking distance to work.

My wife objected to me labeling it as luxury living, but hey, it's a gorgeous climate, we have four walls and a roof, a yard with fruit trees, and 400x the square footage that we really use at a time, so I say the shoe fits.


CanuckExpat

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #3 on: October 01, 2014, 12:21:05 AM »
Your mortgage is really high. If you'd like, you can rent a small room to me to reduce your expenses so we can both FIRE faster. :-)
These are good points, I was hoping someone could solve my dilemma about whether to refinance/re-cast or not.

As for the other point, we've experimented with AirBnB for our second bedroom (shameless referral link). It brings in good income, ~$800/month at 50% occupancy, without the permanency of a roommate. I didn't include that income above, as I think AirBnB (or having a roommate) is only temporarily feasible. Once we have a screaming baby and two barking dogs, it might not be best for all involved, but I could be wrong :)

That being said, we have a separate garage that I would love to turn into a guest suite, but don't have the DIY knowledge or time right now. If anyone is interested in some carpentourism or the like in the Bay Area, that would be interesting (I wonder what the chances of MMM seeing this are..)

Quote
As mentioned, other expense of note is your vacation, but I also have similar costs. You kind of need them working in this area! Only other thing of note is food: groceries+restaurants is $250/person. Do you want to post some more detail and see if it can be reduced?
Food is an area we need to work on, and admittedly a lot of that restaurant spending is travel spending disguised in another category. I'll try to update with more details. Anything that would be helpful to see?

Quote
And props to your transportation costs - those are quite low!
Thanks! So that is good for transportation? Given that I can bike to work and my wife works from home most of the time, I thought this should probably be lower, but wasn't seeing where to cut!

Thanks for the input
« Last Edit: October 01, 2014, 12:47:29 AM by CanuckExpat »

Beric01

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #4 on: October 01, 2014, 12:40:54 AM »
These are good points, I was hoping someone could solve my dilemma about whether to refinance/re-cast or not.

Hopefully someone can help you on that one - I admittedly know little on this topic.

As for the other point, we've experimented with AirBnB  for our second bedroom (shameless referral link). It brings in good income, ~$800/month at 50% occupancy, without the permanency of a roommate. I didn't include that income above, as I think AirBnB (or having a roommate) is only temporarily feasible. Once we have a screaming baby and two barking dogs, it might not be best for all involved, but I could be wrong :)

As the oldest of 6 I've had plenty of experience around loudness. :) But seriously, $800/month is incredible! I can see why it's so hard for me to find a room to rent if you can make that kind of income off 50% occupancy.

So that is good for transportation? Given that I can bike to work and my wife works from home most of the time, I thought this should probably be lower!

Only real way you're going to lower that is if you ditch the car altogether (what I did). Even having a car parked and unused has costs of insurance, maintenance, registration fees, etc. Then add in any fuel or repair expenses if you actually use it. I was paying more than that on my clunker, though I'm sure your insurance rate is better than mine was as a sub-25-year-old. But you may not be able to get away with no car... it all depends to what level of frugality you're willing to go. If you use the car occasionally enough, it may be worth it to look at car-sharing such as zip-car, or even (gasp) taxis, if you can somehow get away with owning a car altogether. Average the total miles you drive per year over your annual transportation costs and it can really open up to you what your actual need for a car is.

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #5 on: October 01, 2014, 03:09:04 AM »
Re 4) staying home with a child - as you say, that's a personal choice ultimately but many people find a pretty strong draw to, at least for a year or so (the 'they're only little once' thing, cliche but true.) Others are happy with different approaches. P/T after a year or three off can be a good option.

Re the rest - kudos! Out of my league ;)

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #6 on: October 01, 2014, 03:55:05 AM »
I'm not understanding your asset allocation for your current circumstances: you are in the accumulation phase, which means you are investing for growth not income and that of necessity you have a high percentage in real estate.  It will rebalance over time and as you get nearer to FIRE, but at the moment I think trying to maintain a 60/20/20 split on assets is doing you no favours at all.  In particular, I see no point in you having bonds, unless you are getting a significantly high percentage income from them that is better than you are paying in mortgage interest and which you wouldn't be able to replicate by going back into the bond market in the future (and this will not be true unless you are carrying a lot of risk in those bonds, in which case sell them anyway).

I would suggest selling all the bonds and putting the whole $85,000 into your mortgage.  If you also put in a significant amount of your cash holdings (on which your return will also be less than your mortgage interest rate) plus whatever you save from your dual incomes between now and the baby being born, you could near as dammit halve your mortgage debt.

Assuming you go down to one income after the baby is born, you will still be doing fine.  Your current budget shows that on a half-income of $6,000 your monthly savings will still be $1,800 in mortgage principal plus $500 headroom in the budget plus whatever pre-tax amounts you are putting into your 401K, HSA and stock purchase plan plus whatever your equities are bringing in ($365K invested in equities at a 4% return will grow your stash at $1200 a month).  So on an income of $6,000 a month your savings are still over 50%, no sweat.

Congratulations on putting yourselves into such a good position, and best of luck to mama, papa and baby.

chasesfish

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #7 on: October 01, 2014, 05:08:02 AM »
Is your income portable to another lower cost of living area?

I would say basically you're on track, all you have to do now is to work hard and let the math come to fruition.   I'm in a similar position and any tweaks I make really don't change that 42 month FI date by more than a month either way. 

I'd keep the 15 year 3.375% mortgage.

RichMoose

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #8 on: October 01, 2014, 06:55:40 AM »
I think you're doing great! I'm always amazed at these really high Bay Area incomes. Here are some points that caught my eye:

- Your cash holdings are extremely high, even for someone going through your life changes. I would say that $30 - $40k should be lots.
- If your current area isn't good for real estate investing I would consider putting that portion of your assets to stocks for now and have a 80/20 AA
- What is your income split? How much each person takes home?
- I'm guessing you're a Canadian. If you still have citizenship and residency ties, consider opening a self-directed TFSA in Canada. For residency ties, look at this webpage: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/lgbl-eng.html The TFSA is a great Canadian spin on the Roth IRA.
- I really like that garage rental idea. Something you should investigate more I think as it will offset your high housing costs.

FrugalSpendthrift

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #9 on: October 01, 2014, 02:26:11 PM »
Assuming you go down to one income after the baby is born, you will still be doing fine.  Your current budget shows that on a half-income of $6,000 your monthly savings will still be $1,800 in mortgage principal plus $500 headroom in the budget plus whatever pre-tax amounts you are putting into your 401K, HSA and stock purchase plan plus whatever your equities are bringing in ($365K invested in equities at a 4% return will grow your stash at $1200 a month).  So on an income of $6,000 a month your savings are still over 50%, no sweat.

Congratulations on putting yourselves into such a good position, and best of luck to mama, papa and baby.
That's what I was thinking, even if the income is cut in half, the listed expenses are still covered.  Cash flow will certainly be tighter, but it won't be negative.  If the income drop is temporary, then there is no need to incur the costs of refinancing.

4alpacas

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #10 on: October 01, 2014, 03:42:12 PM »
I'm a few miles away with a similar mortgage payment (for a 30 year mortgage though).  In your shoes, I would:

- Mortgage: $3500 : I wouldn't refinance in your shoes.  You have an attractive rate.  If you cut back on other areas, you'll continue to pay down your house without the added costs associated with refinancing. 
- Health: $400 : I assume this will go down after the baby (not sure)
- Travel: $400 : This could use improvement.  This category might shrink organically when you have a baby to contend with. 
- Home renovation & maintenence: $300 : If this isn't spent, then I think you can remove it from your budget.
- Groceries: $350 : We've successfully cut our grocery bill (includes toiletries, paper products, cleaning products and alcohol) to $200/month.  I would recommend looking into grocery delivery (Safeway and Walmart).  We're able to easily comparison shop, avoid our horrible impulse buying urges, and can easily edit the cart based on our cabinets (not from memory).
- Transportation: $150 : This should decrease quickly when you cut the travel. 
- Restaurants: $150 : Try to cook "fancy" meals at home.  We've started to do all of our celebration dinners at home.  We cook a special meal (usually with more expensive ingredients) together instead of sitting around a group of strangers. 
- Utilities: $80
- Internet: $60
- Pets: $75
- Misc: $125 :  Start tracking this area much closer.  I think you'll be able to reduce it quickly when you pay attention to your spending. 

Good luck!!

CanuckExpat

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #11 on: October 04, 2014, 01:28:12 PM »
I think you're doing great! I'm always amazed at these really high Bay Area incomes. Here are some points that caught my eye:
- Your cash holdings are extremely high, even for someone going through your life changes. I would say that $30 - $40k should be lots.
- If your current area isn't good for real estate investing I would consider putting that portion of your assets to stocks for now and have a 80/20 AA
Yes, your right. This somewhat happened "by accident" as a result of liquidating assets to make a down payment and closing costs, there was a bit more than needed, then with everything going on it became easy to let the procrastination snow-ball, and we ended up with the large amount. We're still toying with the idea of out-of-state real estate investing, but if we don't make a decision soon it probably will be better to go back to our desired (or new) asset allocation, or at least throw some of the extra funds at the mortgage instead of paying interest. 

Quote
- What is your income split? How much each person takes home?
- I'm guessing you're a Canadian. If you still have citizenship and residency ties, consider opening a self-directed TFSA in Canada. For residency ties, look at this webpage: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/lgbl-eng.html The TFSA is a great Canadian spin on the Roth IRA.
- I really like that garage rental idea. Something you should investigate more I think as it will offset your high housing costs.

It's roughly 55/45, but can vary quite a bit depending on bonuses, etc.

You are right, we are Canadian, and that link is very interesting, thank you but we have given up residency ties so I think if we make any contributions it's subject to a 1% monthly tax. The other downside is that I think unlike an RRSP, the Canada-US tax treaty doesn't recognise TFSAs. I might have to revisit that link if circumstances change.

I had forgotten about the garage rental idea until the conversation here brought it up, that is the nice thing up bringing up a dialogue! I guess I will have to get around to cleaning all our un-needed junk out of there first..

Is your income portable to another lower cost of living area?
Possibly. At least one of ours would be for sure, the other might be with a bit of work, and then we'd have to hope the stars align to solve the two-body problem (though it has always worked out for us in the past). The more immediate concern is being Canadian as TuxedoEagle brought up. While it is relatively easy for Canadians with jobs to move around in the US, it would probably re-set the green card process. Moving somewhere else with a lower cost of living to speed up FIRE but subsequently increase the amount of time required for permanent residency might be a bit counter productive.  So the plan for now is to stick around, but be open for any amazing opportunities in great locations, if they happen to come up.

The other option might be to return to Canada, where we have a larger network (family, friends), from what I have heard, some people have said that might be helpful with having a child (I could go either way), but that would probably mean moving to a roughly equivalently high cost of living area, but with lower salaries and "different" weather.

CanuckExpat

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #12 on: October 05, 2014, 12:48:59 AM »
I'm not understanding your asset allocation for your current circumstances: you are in the accumulation phase, which means you are investing for growth not income and that of necessity you have a high percentage in real estate.  It will rebalance over time and as you get nearer to FIRE, but at the moment I think trying to maintain a 60/20/20 split on assets is doing you no favours at all.  In particular, I see no point in you having bonds, unless you are getting a significantly high percentage income from them that is better than you are paying in mortgage interest and which you wouldn't be able to replicate by going back into the bond market in the future (and this will not be true unless you are carrying a lot of risk in those bonds, in which case sell them anyway).

I would suggest selling all the bonds and putting the whole $85,000 into your mortgage.  If you also put in a significant amount of your cash holdings (on which your return will also be less than your mortgage interest rate) plus whatever you save from your dual incomes between now and the baby being born, you could near as dammit halve your mortgage debt.

The short answer is we are/were conservative. Also, when we combined our finances and got our investing act together a few years ago, we knew we might need some money in the short to mid term (mortgage, travel, buy a boat or something), so we had decided on 60/40 and it's worked well for us so far. Even at this relatively conservative allocation, in a "bad month" we can "lose" more our salaries due to a stock-market glitch; we aren't likely to panic and sell everything, but we notice it, so the allocation gives us a bit of peace of mind, even though I know it's probably less than ideal.
That being said, your point about shifting some money from bonds to mortgage pre-payment is something I hadn't considered. I had thought about pre-paying the mortgage mainly in terms of opportunity cost in lost exposure to the markets, but since total bond is yielding less than we pay than we pay in interest, I don't see any obvious reason not to think of doing that (besides losing a strategic default option in the future). Something about treating mortgage prepayment as a bond alternative seems a little odd to me, but I am definitely going to consider it, along with slightly increasing our equity exposure.

I don't want to jump too quickly from asset allocation to asset allocation, so I don't mind taking my time to decide. Thanks for pointing out that option and way of thinking about bonds vs. mortgage pre-payment. It is too easy to keep doing what we'd been doing all this time without re-assessing. 

Edit: I did some calculations and the effective mortgage interest rate after tax deductions is between 2.2%-2.4%. All the bonds funds are held in tax advantaged accounts and yield not too far below that. So prepaying mortgage instead of buying bonds isn't looking that attractive.
« Last Edit: October 11, 2014, 06:12:59 PM by CanuckExpat »

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #13 on: October 05, 2014, 08:31:07 AM »
Outside of groceries, which won't go down with a new mouth, but could stay the same with optimization, your biggest soft areas are vacation and restaurants. I think these will naturally go down with a little one. They certainly did with my wife and I.

I'd keep the mortgage at 15 years. Don't recast. Recasting does nothing useful. There's a whole long thread about it somewhere.

If your wife works from home a lot, infants definitely require work, but maybe she could arrange some sort of PT arrangement with her current job that could be squeezed in during naps, evenings, etc. Unless her work requires being on call and lots of telephone work, when my kids were little I could easily squeeze in half a day's work without ignoring them or becoming frazzled. This depends greatly on having a non-colicky baby, however. With colick, Godspeed.

If you're not married to the Bay Area and your income is portable, there are lots of other cool towns and cities with lower COL that could accelerate, so I'd research how/if that does affect your green card.

CanuckExpat

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #14 on: October 11, 2014, 06:48:52 PM »
Thanks for the input everyone. I did try to dig into the numbers of the categories that some of you pointed out, to see if I could understand where it was going. Restaurants we aren't too concerned about (there waste to cut, but the planned spending we budget for and enjoy)

Groceries is a bit trickier, I might have to see if I can find receipts, or keep a better eye going forward. I think just the act of being conscious about the spending will go a long way. If over the last six months, we spent ~$2000 in groceries, that was about ~$1000 at Costco, and $500 at Safeway/Sprouts with miscellaneous at other places (some luxury spending at Trader Joes at about $100).
Costco is probably a source of a lot of the leakage. We do use it to stock up for entertaining, but probably buy a few more luxury convenience items than we should (12 pack of croissants pretty darn often). I think we've also had some problems with spoilage, so that is an area to keep an eye on. I am going to keep digging.

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #15 on: October 12, 2014, 07:00:57 AM »
CanuckExpat,

Based on your income/expense numbers I think you are doing an amazing job. Your expenses are already pretty low for the values they provide, I feel any potential improvement on groceries and entertainment might be slight. Perhaps the focus should be on how to generate more income to offset the expense ratio even further (ie, rent room or garage like others and you have mentioned).

That being said, renting a room or spare garage might cause small inconveniences to you and your families. To me, you are in a position to be able to afford your current lifestyle without doing it, but it's entirely up to you.

p.s. Manatee, just read your thread, amazing job as well. More importantly, cool name, I like manatees :)

 

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #16 on: October 12, 2014, 10:54:40 AM »
I wouldn't refinance for sure. Stay with the 15 year. I also don't think in the big picture of things you food is that over the top. I would get out of the "conservative mode" though and have a higher allotment outside of bonds.  And i always struggle with the real estate thing too. I like where we live, its convenient but we pay more so that's a decision you need to make based on how fast you want to fire as well as I wouldn't rent out a room with a new born on the way.  Your ahead of the game so like someone else mentioned with your income just let the math do its thing overtime and avoid stupid larger purchases or getting caught up with the jones's .

rmendpara

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #17 on: October 12, 2014, 02:31:01 PM »
I'd focus on staying on budget and continuing to invest. You have around 450 invested now and roughly 70 in free cash flow each year. 5 years of maxing your 401k, investing your remaining cash, will get you very close to 1mm. 6-7 years almost guaranteed to hit your goal.

Your budget is very reasonable. Personally, I'd suggest reducing your bond allocation as your mortgage is a "safer" investment that will save you at least 2.5% in interest each year compared to most bonds which barely earn that and have little room to rise in price (already near highs and interest rates will likely go up with 1-2 years).

In any case, if it helps you sleep at night then it's not really s problem. Just be careful not to be too safe with your investments. There's no such thing as risk free.

CanuckExpat

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Re: CASE STUDY: Think we're doing well, how do we do better?
« Reply #18 on: December 21, 2014, 12:48:26 AM »
Hello everyone,

I appreciated all the feedback and wanted to give a small update if anyone was curious. The responses in this thread had started me thinking that I had been a bit too concerned about the cashflow situation and I wasn't worrying about it anymore. But shortly after, I happened to hear that mortgage rates had dropped so we investigated our options quickly and found we were able to refinance at no cost to a seven year ARM at 3.25%. This improves our cashflow by over $1000/month and saves $100/month in interest so it seems like a win-win. Seven years should also hopefully coincide well with when we will either be  ready to move, or pay off the house.

We'd also been getting rid of some of that extra cash and coming back to our desired allocation so all the recent turmoil happened to be good timing for that as well (that is just dumb luck coinciding with our plan).

So now it's just letting things continue as they are and wait for baby to come turn everything upside down :)
My wife is starting her maternity leave early soon and looking forward to a long break, so perhaps it was good timing that we improved the cash-flow situation. I think it will make the bills seems less daunting in case she decides she would enjoys the no work for an extended period..
« Last Edit: December 21, 2014, 12:51:00 AM by CanuckExpat »