Hi all,
I'm rapidly approaching a trial FIRE date. I keep debating about what (if anything) I should do to make the first couple of years of FIRE a higher probability of success.
Life situation: Married, me 35 DW 37. First child due in October. To date, both have been working full time.
All dollar figures are in Australian dollars, as that's my local currency. If it matters, the current exchange rate is approx AUD$1=USD$0.80
Plan is to both take 6 months off after the arrival of kid 1.
Following that, my wife is returning to her job, we are being posted to Europe for 3 years, and I'll be playing daddy daycare. I'd like for us to both FIRE after the end of the posting, but my wife is yet to be convinced.
Income
Current:
(gross/pre-tax): Me $214k/year, wife $130k/year, investment income (shares dividends/rents) $130k. Total ~$474k/year
Future:
Wife: $130k/year + free accommodation (3 years), investment income $160k (includes additional rent from PPOR). Total $290k/year
Assets:
Stocks (in taxable / trust accounts): $1,815k
Property: $1,500k (approx $1m in PPOR which will be rented for the posting time, $500k investment apartment)
Superannuation (think 401k): $628k, mostly stocks
Other investments: $100k
Cash $60k
We don't count cars/personal effects etc
Total assets: $4,103k
Liabilities:
My investment loans: $500k
Wife's investment loans: $120k
Total liabilities: $620k
Net worth: $3,483k.
Our expenses are high in absolute terms, but low relative to income. Expenses last year were $110k post tax between us, but this included about $50k in abnormal costs (wedding, surgery, pre-baby bucket list travel etc), for a steady state spend of about $60k of consumption. We also spend about $25k on investment loan interest. Our savings rate has been in the 60%-75% range the last 5 years.
There is more info on my part of the expenses and assets in my journal for the voyeurs.
On paper, we can live off our investment income or my wife's salary alone, and will still have an effective ~50% savings rate. In practice, we are stressing about the reduced income and reduced savings rate - my wife more than I.
Our investments have been self made, so I'm comfortable with our general psyche that we will spend less than we earn. There is also a safety net that we don't count, we are both likely to have moderate ($500k-$1m) inheritances at some stage.
Worries/questions:
1. We are worried about a substantive reduction in savings rate. What coping mechanisms have others used for this psyche?
2. We are worried about future unknown costs. The costs of kids is an unknown to us, and I have a degenerative medical condition that will cause some disability at some stage in future, timeline unknown.
3. My wife thinks that we should reduce investment exposure for the next few years - kick the investment loans, increase cash holdings. I'm of the view that our future savings rate is still likely to be in the ~50% range with me not working, or about $100k post tax. With a continuing savings stream, I see that as our buffer, along with the ~$60k in cash, which is about a year's expenses.
Any feedback for us? Apologies if this seems like a bunch of first world problems.