Reader Case Study - Boring Bay Area Family FIRE in 2 years with magic
Married filing jointly (ages 36 & 39). 2 kids, ages one and four. Bay Area, California. My husband works full time and I am taking some time off to stay at home with our young kids. Iíve had contracting work here and there, so it is difficult to estimate future income. My husband has a business background, and I do software & analytics. He is working at a start-up and expects it to go public in 2 years.
8,333 / mo
Individual amounts of each Pre-tax deductions:
FSA is 417 / mo
What I see comes in from his paycheck in Mint is 5640.40 / mo. Some is taken out for medical insurance.
Other Ordinary Income:
Last year I made 21,500 but I donít plan on working this year unless something interesting pops up. Childcare is really hard to find. It would be more than $2,000 a month for both kids to have a nanny or daycare. So I donít feel it justifies the stress of me having to be the full time parent and work. Iíve had some temporary part-time gigs which I love but they are hard to find and then also hard to find temporary childcare.
Qualified Dividends & Long Term Capital Gains:
I donít know what this is so we probably donít have it.
Rental Income, Actual Expenses, and Depreciation:
We have a rental house house which brings in:
1,735 / mo
Adjusted Gross Income:
5,640 / mo + 1,735 / mo = 7,375 / mo
I donít know how much income tax we pay because my husband does them. I know he works his magic and we pay about 5% (combined state/fed) because of our mortgages. I will just assume the ďcorrectĒ amount gets taken out for each of his paychecks. Last year we "broke even" & owed federal but got back state.
Current expenses (by month, using Mint averages):
Rental taxes: 412
Rental insurance: 44
Rental utilities: 100
Home mortgage : 2,356
Home taxes: 637
Home insurance: 50
Home elec: 75
Home water: 33
Home trash: 19
Preschool (9 hours/week): 366 (city-run preschool & cheapest, all but $50 is pretax)
Personal repayment: 500 (for home down payment, 0% interest)
Phone: 0 (company phone for him, my parents cover mine and I use used phones)
Public transport: 160 (my husbandís commute to SF is 10 minute bike, 40 min train, 10 min walk)
Misc 2.5%: 116
We have about $586 ďextraĒ per month that we could throw into in Roth IRA or use it to fix up our house for when we plan to sell it. It is definitely a fixer-upper so lots of areas of improvement.
Rental house: 473,000
Honda Fit 2008: 5,000
Financial planner (husband) is a mustachian and has invested in low-cost funds.
Rental loan: 261,131 (27 more years at 3.12%)
Home loan: 513,810 (refinanced so 30 years at 3.6%)
Personal loan: 25,000, paying 500 / mo (0% interest borrowed from family for down payment)
My husband believes his start-up will go public in 1.5-2 years. He got in early and has some stock and will make about 200,000 minus taxes hypothetically. I know what youíre thinking, that we canít bet on this. That is the way I think too, but he is confident and one of those people that good things happen to all the time because he projects positive energy and enthusiasm to the world and it rewards him with good karma.
So in ~2 years we are looking at a big change. Sell our current house (we have been making improvements and we live in a very desirable area). Pay off our rental house loan. Then we will have $21,000+/yr. We can easily live off that (without housing), we are Mustachians through and through. However we will need a place to live. We are wondering where to move: Davis (where our rental house is), Truckee/Tahoe, Minneapolis (we have family), Oregon. Boulder/Longmont makes the most sense because we could both find fun part-time good-paying jobs/consulting in our field while the kids are in school to top out our Ďstash. We love the Bay Area and would like to stay but canít afford it if we want to FIRE anytime soon. My husband loves his job and would probably want to continue working in his field (the outdoors). Our rental house has such a low mortgage and easy to find renters but would be hard to manage out of state so we would probably sell it. We could also move there. I would love to live in Davis. It is expensive though.
From writing all this I think my question is: where should we move? Readers, you canít probably answer that! But maybe you can give some advice as to how we can FIRE as soon as possible? I do think my husband wants to work for an employer but I DO NOT. EVER. NEVER EVER. I am willing to live as frugally as possible so I can spend time with my family and pursue my own interests (these days, with 2 little ones, it is sleep).
I got married because I liked spending time with my husband but I can't imagine him wanting to spend all his time with me & the kids because he loves his job so much. And once the kids start school I can't imagine what I would do all day if I wasn't working! The whole FIRE thing is empowering but really scary to me: will I get bored? All my friends will be working. What if my husband still wants to work?