Author Topic: Kindling the FIRE - Where to start?!  (Read 3122 times)

BriArrange

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Kindling the FIRE - Where to start?!
« on: December 18, 2014, 01:03:31 PM »
Hello all Mustachians!

I have recently just stumbled upon this wonderful site and have become an avid reader of the blog and forums. I have since told my husband about it and he is addicted just as much as I am. :) We are a young married couple (I'm 22, hubby's 23) who have both recently graduated from college and have become homeowners. We have always been very careful on what we spend our money on, but reading more and more about retiring early has made us open our eyes on how materialistic our lives have become. So because we want to become awesome mustachians like you all are, we would like some advice on where/ how to start. (There may be similar scenarios to ours already that I have not yet read on this forum, if there is one like ours out there, please let me know so I can read what you all had to say.)

INCOME:
Husband - Full time job 51K / yr
Farming on family farm ~ 20K /yr (we keep this seperate from our monthly income/expenses because he gets paid in a lump sum once a year and it is always different)
ME: Part - Time Job - ~12,000 / yr (Searching for another part time/side job or full time job)

Totals to ~ 3800 a mth (with out the farming income)

Expenses:
Mortage: $1600 / mth (Mininmum payment is $1281 on a $127,200 ten year loan @ 3.9%, but paying more to pay it off faster)
Health/Dental Insurance: 250
Utilities: 150
Phones: $90 (switching to republic wireless once our contract is up next summer)
Fuel: $150 (husband has to commute 1hr one way to the family farm every weekend)
Grocery: 150
Dog:30
Car & home Insurance: 120
401K contributions: 200 / mth
Student Debt: 200 mth (husband graduated from engineering school debt free! But, I unfortunately have $7,000 @ 3.8% in school loans to pay off.) 

EDIT: We don't have a set budget for home/car/plane  improvements and maintainence or furnishings, in the past we just paid it out of necessity out of our savings and never set aside a specific budget for it monthly.......but looking to set a specific amount once we figure out what it should be.

Totals to ~ $2700 a month (give or take)

We dont have cable or internet. No Credit Card Debt.

Assets:
2001 VW Jetta TDI(53mpg!! with 330,000 Miles on it!)
2010 Dodge ram (For farm use - I drive it to work 4 miles when needed)
1949 Cessna Airplane (Hubby is in the process of getting his pilots license)

All these are paid off in full.

Also, we do not have any children, but plan on starting a family in the next couple of years.

With all this given, we would like some advice on where we can cut back/ save and if we should stop paying extra on the mortgage and put it into the 401k or elsewhere?

Thanks in advance for any input!
« Last Edit: January 12, 2015, 02:03:40 PM by BriArrange »

MDM

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Re: Kindling the FIRE - Where to start?!
« Reply #1 on: January 04, 2015, 11:43:56 PM »
You might have a case for prepaying a 3.9% mortgage instead of making a taxable investment.  See http://forum.mrmoneymustache.com/ask-a-mustachian/what-is-the-magic-pay-down-your-mortgage-rate/ for various thoughts on that subject.

But 401k vs. mortgage?  No contest - get the tax advantage of the 401k!  Particularly if there is any employer match, but even if not.

Hey It's Me

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Re: Kindling the FIRE - Where to start?!
« Reply #2 on: January 05, 2015, 02:23:35 AM »
You might have a case for prepaying a 3.9% mortgage instead of making a taxable investment.  See http://forum.mrmoneymustache.com/ask-a-mustachian/what-is-the-magic-pay-down-your-mortgage-rate/ for various thoughts on that subject.

But 401k vs. mortgage?  No contest - get the tax advantage of the 401k!  Particularly if there is any employer match, but even if not.

Agreed. Additionally, it seems like you have roughly a $900 surplus monthly. Would you mind sharing where that's used, if not the retirement accounts?

skunkfunk

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Re: Kindling the FIRE - Where to start?!
« Reply #3 on: January 05, 2015, 12:43:26 PM »
Hello all Mustachians!

I have recently just stumbled upon this wonderful site and have become an avid reader of the blog and forums. I have since told my husband about it and he is addicted just as much as I am. :) We are a young married couple (I'm 22, hubby's 23) who have both recently graduated from college and have become homeowners. We have always been very careful on what we spend our money on, but reading more and more about retiring early has made us open our eyes on how materialistic our lives have become. So because we want to become awesome mustachians like you all are, we would like some advice on where/ how to start. (There may be similar scenarios to ours already that I have not yet read on this forum, if there is one like ours out there, please let me know so I can read what you all had to say.)

INCOME:
Husband - Full time job 51K / yr
Farming on family farm ~ 20K /yr (we keep this seperate from our monthly income/expenses because he gets paid in a lump sum once a year and it is always different)
ME: Part - Time Job - ~12,000 / yr (Searching for another part time/side job or full time job)

Totals to ~ 3800 a mth (with out the farming income)

Expenses:
Mortage: $1600 / mth (Mininmum payment is $1281 on a $127,200 ten year loan @ 3.9%, but paying more to pay it off faster)
I'd almost suggest sending this money to either retirement accounts or your student loan (paying this off will free up cash flow faster than paying the mortgage.)
Health/Dental Insurance: 250
Utilities: 150
Phones: $90 (switching to republic wireless once our contract is up next summer)
Fuel: $150 (husband has to commute 1hr one way to the family farm every weekend)
Grocery: 150
Dog:30
Car & home Insurance: 120
401K contributions: 200 / mth
Student Debt: 200 mth (husband graduated from engineering school debt free! But, I unfortunately have $7,000 @ 3.8% in school loans to pay off.) 

Totals to ~ $2700 a month (give or take)

We dont have cable or internet. No Credit Card Debt.

Assets:
2001 VW Jetta TDI(53mpg!! with 330,000 Miles on it!)
2010 Dodge ram (For farm use - I drive it to work 4 miles when needed)
1949 Cessna Airplane (Hubby is in the process of getting his pilots license)

All these are paid off in full.

Also, we do not have any children, but plan on starting a family in the next couple of years.

With all this given, we would like some advice on where we can cut back/ save and if we should stop paying extra on the mortgage and put it into the 401k or elsewhere?

Thanks in advance for any input!

Seems like you're doing fine. You can do the math and try to optimize to increase net worth ASAP, but you've got the most important bits which is saving money and doing something better than buy more expensive shit than you need. I'm assuming the money unaccounted for isn't just spending money.

I don't see anything in there for repairs and maintenance, or other more frivolous endeavors. Is this accurate?

neo von retorch

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Re: Kindling the FIRE - Where to start?!
« Reply #4 on: January 05, 2015, 01:07:07 PM »
Re: Phone

What is your ETF? Have you checked the math to ensure that it's not cheaper to switch to a cheaper provider now?

Also, have you read the guide? I'm personally not a fan of Republic, though I went with a little pricier option (though hoping to save with multiple lines in the future.)

BriArrange

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Re: Kindling the FIRE - Where to start?!
« Reply #5 on: January 12, 2015, 11:29:27 AM »
Thanks everyone for your imput!

Moe_Rants: Any extra that we have left over ~700-900 goes into our emergency fund/farm fund....there can be a lot of break downs and unforseen expenses with farming. So, we try to have a good emergency bumper for when things go down hill. Forgot to put that into the case study...thanks for noticing!

Neogodless: I have checked and it would cost us a lot extra to try and get out of our contract early...we are also on it with my sister in law, so it would also effect her greatly if we switched right now. So we are waiting a few months till our contract is up and then we will be switching.
 

ColorOfCash

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Re: Kindling the FIRE - Where to start?!
« Reply #6 on: January 12, 2015, 12:45:19 PM »
Some items for you to think about:

- You said there can be lots of break downs, unforeseen expenses with farming. I'd recommend looking at all the costs you have had the past 2 years, divide by 24 and start having a set amount for it. Also will give you the true net income from the farm. These should be numbers you have for tax purposes as well to reduce your taxes on the income. (I've had a farm business in a past career.)

- Plane expenses: Nothing in your budget listed show costs related to the plane (eg: husband's license). Even if it's just a fund for covering upkeep on a 60+ year old plane, it should have a spot in the budget.

- Car maintenance: With a vehicle going on 14 years old, you should have budgeted an amount for repairs or at least a fund for replacing it

- Home maintenance/furnishings: Nothing in the budget listed there either, hard to decide what to cut or where things are going if complete picture not there.

- Gifts, vacation, entertainment, vices: Not listed either


You said you plan on having kids in the next few years, I'd recommend looking at that and deciding if you are going to stay home with kids, what ways you can do a side hustle from home using your degree. For both of you, best would be to look at each of your fields and see what the job requirements are for someone making $100k+ and use that as a guide to follow. I did that when my first child was born and went from $36k -> $100k in 5 years. If you each can make $100k, yet live on $30k, you'll do awesome.

I'm not going to do any slapping, but a question your husband has to think about is the plane, is the cost for it going to be worth the enjoyment out of it, is he planning on making it a side hustle that will pay for itself. I've got my own toy (electric car on a lease), but I counted the costs and have found ways to pay for itself (eg: free charging at work).

nereo

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Re: Kindling the FIRE - Where to start?!
« Reply #7 on: January 12, 2015, 01:04:32 PM »
Hello there, and glad that you found us.

A few thoughts: 
401(k) contributions are very low, especially given you have a ~$900-1,100/mo surplus and are overpaying your 3.9% mortgage each month. 
Likewise I didn't see anything about having an IRA. I'd highly recommend having one.

Overall you seem to be doing very well well.  Outside of your mortgage and 401(k) contributions you have about $24k a year in expenses, which is respectable.
 I'd strongly recommend taking better advantage of your tax-deferred options