Author Topic: Need help with our 5 year plan  (Read 2348 times)

MissCheapo

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Need help with our 5 year plan
« on: June 04, 2013, 07:58:31 PM »
Hi everyone,

I just found the MMM blog about a month ago and the whole philosophy has clicked with me instantly. My husband and I have started making some aggressive moves to start saving more and our goal is to retire in the next 5 years. We've always been pretty frugal but I know we need to take our saving and investing plan to a new level if we really want to make this happen. I'd like to disclose our current financials to get some suggestions on how we might improve.

We are both 31 years old.
No kids but would like to have two in the near future.
Current salaries - $190k combined
We own 2 properties:
Apt #1- value of $250k with $140k left on 10 yr mortgage (currently renting out for $2300). Cash flow of $600 per month.
Apt #2 - value of $ 600k with $450k left on 30 yr mortgage (currently renting out for $3350) . Cash flow of $350 per month
We live in an expensive city, so it's hard to get the 1% rule
We are renting an apt. for $1800 per month.

We have a retirement stash of IRAs and 401ks that are about $280k. It's a mix of mutual funds, index funds, and individual stocks. We're currently maxing out contributions to 401k and iras.

We have about $60k in cash right now. We're thinking of buying another property with it or would like to put it to good use. Let me know if you have any suggestions.

In terms of monthly expenses:
Car payment is $319 (3 years left but its at 0%)
Gas $100 (just switched to a job 3 miles away and hubby works at home. Don't think I can bike.. Too dangerous)
Restaurants $300 (will be hard to decrease this. Eating out is a hobby for us)
Groceries $200
Phone $50 (another year to go on my contract)
Internet $50
Pet insurance $35
Utilities $125
Misc shopping $100 (we haven't used this expense in a while but I think it's a fair guesstimate for things like clothes, shampoo, and other random things)

I think we need about $1 to $1.5 million to retire. I'm a big worry wart and would be more comfortable with about $50k in passive income.

Do you guys think we'll have enough in 5 years given the above summary and is there anywhere we can optimize? All ideas are welcome! We're especially looking for some ideas on how to invest better and how to generate more passive income. Thanks in advance!



nktokyo

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Re: Need help with our 5 year plan
« Reply #1 on: June 05, 2013, 04:35:57 AM »
Hi there,

Have you costed out your retirement? Where do you want to live? What will you do? Nothing? Or will you have some side-gig to keep you both sane?

I like property but $600k is a lot for one investment. Does your rental income have to come from the same city you live in? Why not redeploy that where you can make a higher yield and buy 2-3 places?

Nick

matchewed

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Re: Need help with our 5 year plan
« Reply #2 on: June 05, 2013, 06:17:57 AM »
You currently have expenses of 3095 per month from your breakdown. That would be about 37k per year. Assuming you have no desire to reduce your expenses (hint you can retire very early if you did reduce your expenses, sell car with payment buy used,how the hell are you spending 100 a month in gas for a 6 mile round trip commute, walk/bike/run/public transportation to work 3 miles are you kidding me, reduce eating out and treat it like a reward not a right) you would need roughly 925k to FI. That does not take into consideration your current income streams.

With your current income stream of 950 a month (can one of the landlords who know more than I step in if I mess this up and correct me, you don't do any hedging based on vacancies it's built into your rent I believe so you take cash flow at value?) the 3095 goes to 2145 or 25740 per year. Meaning you would need 645k to cover your remaining expenses at a 4% SWR.

You're much closer to FI than you think. If you were to pay more attention to your expenses, determine you plan like nktokyo suggests, reduce some of those expenses you can easily do it in five years. Kids will change the picture for your expenses but it is up to you how much that picture changes.

Also it's a great opportunity to learn how to cook healthy food and be there for your future kids now if you start not going out to eat as much.

dinkhelpneeded

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Re: Need help with our 5 year plan
« Reply #3 on: June 07, 2013, 02:35:53 PM »
Do you mind if I ask which city you live in? 250K house renting out for $2300 is pretty attractive.