Author Topic: Case study - New to MMM with high income. What next?  (Read 3730 times)

Megs193

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Case study - New to MMM with high income. What next?
« on: June 30, 2018, 01:11:46 PM »
I discovered MMM a few months ago and binge read his entire blog. I tried to get my DH interested but no matter how many articles I share with him he remains uninterested in changing our lifestyle. I am making whatever cuts I can but I walking a fine line between saving more and making sure he doesnít feel ďdeprivedĒ.

I am 35 and my DH is 39. We have 2 kids (6 and 8)

I donít have access to his pay stubs so I only know take home and how much we contribute yearly to retirement accounts.

Each year we contribute $39,000 between 401k and profit sharing. We also contribute the max to an HSA and have dependent care and charitable contributions taken out.

My husband also gets a yearly bonus.  It is generally around $75,000 so we see about $45,000 after taxes.  This has previously gone straight into savings and then we slowly add it to our Investment account. I am considering putting 20k of it towards our mortgage this year.

Total take home $18,500 (most of this is DH, I work per diem to keep my foot in the door in case I ever need or want to go back full time)

Expenses:

Mortgage - 6k (This is rounded up about $500)
Gas - $150
Electricity - $150
Water - $75 (new grass so lots of watering, should go down)
Phone, internet - $180
Cell - $80
Cleaning person - $200
Groceries - $700
Restaurants - $400
Gas (car) - $160
Car Insurance - $150
Household supplies - $100
Hair cuts - $50
Fun Money $200
Kids activities $250
Gifts $150
Clothes $100
Landscaper $140
Vacations - $1000
529 plan savings - $700
We also pay 6k for camp once a year which I didnít factor in. We pay with a dependent care account which cover 5k of it and just bankroll the other 1k by putting less towards the mortgage and investments.

Total expenses - around $11,000 which leaves us with $7,500 leftover.

Assets:

401k - $710k
Investment account - 142k
Savings account - 294k (I know. It was even higher and we are slowly moving it into investments)
529 plan - 92k
House - estimated value of 950k
2 paid off cars ( I donít really count these since they are ways depreciating)

Liabilities - 30 year fixed mortgage - 474k remaining at 4.125%

Net Worth - 1.238k without equity, 1.711 with equity

1.  How do I calculate our savings rate taking into account the bonus?

2.  I need to make changes slowly so as not to scare my non-MMM spouse.  What things would you change first?

3.  I am interested in paying of my mortgage as quickly as possible.  I know it is not the best financial decision but I hate owing money.  How much of the excess would you direct towards the mortgage instead of investments?  We plan on selling this house when we retire and significantly downsizing.  I would like to buy that in cash and never have a mortgage again.  I would expect to spend 400-500k on that house.)

4.  My DH has no desire to retire anytime soon. He loves his job and itís a big part of his identity. Would this change how you proceed?

YttriumNitrate

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Re: Case study - New to MMM with high income. What next?
« Reply #1 on: June 30, 2018, 01:36:28 PM »
We owe 720k at 4.125% on a house worth 960k.  We don't have any other debts.

Liabilities - 30 year fixed mortgage - 474k remaining at 4.125%

Holy crap! Well done!

I have no suggestions other than to just keep on going the way you are.

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #2 on: June 30, 2018, 01:44:25 PM »
We owe 720k at 4.125% on a house worth 960k.  We don't have any other debts.

Liabilities - 30 year fixed mortgage - 474k remaining at 4.125%

Holy crap! Well done!

I have no suggestions other than to just keep on going the way you are.

We actually sold our old house and put 200k towards it all at once. I have been working hard to pay off as much as I can but the majority of it was from the profits of that sale.

ZMonet

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Re: Case study - New to MMM with high income. What next?
« Reply #3 on: June 30, 2018, 03:10:24 PM »
If you think your husband will continue this job indefinitely at this salary, what is the purpose of cutting back?  What would you be saving for?  I'm not saying it is wrong to try and better value what your money is being spent on but I'm wondering if you know, what for you, would be the purpose.  Is it a need for security (e.g., that you can make it even if your husband's job was lost), or something else?

With that said, your current spend is 11,500/month when you factor in camps.  To be able to meet that spend, you would need approx. $3.5 million using the 4% rule.  I don't think you would need all of that at retirement IF you downsize and are no longer putting money towards a 529/college.

The thing that jumps out most to me in your budget is the $1k/month on vacations.  I love vacations, but that seems a bit high.  Could you learn to travel hack a bit to subsidize that?  It really can be quite fun and with your spend meeting the credit card bonus spend (like $4k in 3 months) shouldn't be hard for you guys.

Good luck and good job on the saving to date!

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Re: Case study - New to MMM with high income. What next?
« Reply #4 on: June 30, 2018, 03:14:12 PM »
1. The way I would do it is divide the take-home from the bonus by 12 (45000/12=3750), add in your savings from your standard take-home pay (3750+7500=11250), and add in your 401k contributions (maybe some people would disagree with this? So 11250+3250=14500), then divide that by your monthly take-home pay+take-home bonus+income you are putting directly to your 401k untaxed, i.e. total income you get to spend or save (14500/(18500+3750+3250)? Or is the 18500 with the bonus?). So by my calculations your savings rate is either 57% or 67%.

2. This depends on your values and willingness to do labor yourself. The one that sticks out most to me is the $1000 in vacations per month, because it's so different from my own spending. With this kind of spending, you could probably get major flight and hotel points to reduce your costs in those areas for other vacations. Or you could evaluate whether $1000 per month for vacation is necessary to have the same amount of enjoyment.

The other thing I would look at is your cleaning and lawn service and your restaurant spending. Can you reduce or eliminate this without much pain? The rest of your expenses look pretty reasonable considering your family size and what I assume is a high cost-of-living area.

Also, you say that you plan on selling and downsizing when you retire. Since your house is such a massive part of your budget, I want to know why that isn't something you would downsize earlier. Are you waiting for the kids to go to college? Would it leave you far from husband's work? It's about 30% of your take-home pay, which is a tad high. If you can downsize earlier, this may have the largest potential impact on your overall budget.

3. I'm a mortgage-payer-offer too. It depends on how quickly you want to pay it off, in part. Do you want to be mortgage-free ASAP? Just by the time you retire? We want it gone ASAP, so after the emergency fund and 401k contributions, everything goes to the mortgage. But some people would strongly disagree with this strategy.

4. This makes it so that, with your current assets, liabilities, and expenses, if this holds true, you'll be ready to retire before your husband wants to retire. This makes me think that maybe the best thing to put you in a more stable position may be life/disability insurance. While you could definitely make strides toward being FI very early by becoming very frugal, it would suck to have to do so in the event of losing an income.

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #5 on: June 30, 2018, 05:04:15 PM »
If you think your husband will continue this job indefinitely at this salary, what is the purpose of cutting back?  What would you be saving for? 

This is actually my husbands exact arguement for not wanting to make any changes. I guess I secretly hope that once the money is in the bank he will change his mind and realize he doesnít love working as much as he thinks he does. He has a very demanding job and I spend a lot of time parenting by myself and trying to be 2 places at once so neither kid misses any activities. I think that is also the reason I place a lot of value on vacations because we all get to spend time together.

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #6 on: June 30, 2018, 05:19:04 PM »
1. The way I would do it is divide the take-home from the bonus by 12 (45000/12=3750), add in your savings from your standard take-home pay (3750+7500=11250), and add in your 401k contributions (maybe some people would disagree with this? So 11250+3250=14500), then divide that by your monthly take-home pay+take-home bonus+income

1.  This is really helpful and makes me feel much better about how we are spending. I tried to figure it out on my own and was getting about 30% so I was way off.

2.  I know our vacation spending is a little crazy. We go on 2 vacations a year and fly to see family twice a year.  If my husband came home and told me he wanted to retire in 5 years I could cut this way back. Right now I prioritize vacation because we donít get to spend a ton of time as a family.  The landscaper would be hard to get rid of because my husband has minimal free time and I am allergic to grass. Maybe once our oldest gets a little older he can take over. I have been considering trying to clean my house myself. I am intimidated but I think I will try it for a few months and see if I can keep up. Iíve also been slowly chipping away at the restaurant budget. We were spending double that 2 years ago!

When we retire we plan on moving to a different state. We live in a HCOL area but itís where my husbands job is and we live in an excellent school district.  We could live in a cheaper house here but we do love our house and it has lots of room for everyone.

3.  I would like it to be paid off ASAP.  At a minimum I would like I to be paid off once my oldest enters college so that we can easily cover his monthly living expenses. Right now Iím putting all extra money except 2k a month which we are investing. We are also slowly moving savings into investments but are hesitant to do it any quicker because of how high the market is.

4.  Right now our life insurance and disability are through my husbands work but I recently read that isnít the best idea but the price is so much lower. He has 2 million of life insurance and I have 250k which is what we calculated the cost of childcare to be if something happened to me.  I am going to look into whether we need to have a plan that is separate from his job.

red_pill

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Re: Case study - New to MMM with high income. What next?
« Reply #7 on: June 30, 2018, 10:58:23 PM »

. Right now I prioritize vacation because we donít get to spend a ton of time as a family. The landscaper would be hard to get rid of because my husband has minimal free time

I find this sentence literally terrifying. 
« Last Edit: July 01, 2018, 10:00:10 AM by red_pill »

gpyros85

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Re: Case study - New to MMM with high income. What next?
« Reply #8 on: July 01, 2018, 12:35:34 AM »
So the yearly savings amount is;

39k for 401k & Profit Sharing
75k Bonus (45k after tax) to savings

Where is the extra 7,500/month going to? This is 90k/year


Other than your mortgage your spending is not out of control!

The cleaning person sound strange considering you do not work.

gpyros85

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Re: Case study - New to MMM with high income. What next?
« Reply #9 on: July 01, 2018, 12:49:36 AM »
Given your current net work and ability to work until you are 62 (Sounds like your husband is willing to do this). You could be thinking about having a net worth of $10-12M+... consider you are able to save 135k/year

This $10-12M would spit off 25k-30k a month!!

Keep up the good work and continue the slow and stead pace.

Curiosity has gotten to me, may I ask what industry your husband is in?

former player

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Re: Case study - New to MMM with high income. What next?
« Reply #10 on: July 01, 2018, 05:45:45 AM »
There's this thread on How to Convert your SO to mustachianism which you might find useful -

https://forum.mrmoneymustache.com/ask-a-mustachian/how-to-convert-your-so-to-mmm-in-50-awesome-steps/

That said, in your situation I would go pretty gently on that one - there are a few cases of a spouse going hard on mustachianism and leaving their partner behind, with poor results.  I'd suggest that your start with the things that are entirely within your control and which your spouse does not notice - that phone and internet charge looks high to me, as do your home gas and electric.

You know you have too much in savings, and you hate your mortgage debt, so that looks like another easy win to me  - keep moving savings into investments at the rate you are comfortable, and maybe match that with overpayments into the mortgage as long as you can do so without penalty.


Given your earnings and savings rate, I wouldn't cut back on the cleaner or landscaper: you are providing employment and I agree that as you are time poor as a family then keeping what family time you do have free from chores is worthwhile - it's a cost of having that high salary coming in.   On vacations, although I wouldn't cut back on the time together I would look at flying less.  You have young children.  I'm guessing you would rather they lived their lives in a stable climate that provides enough food to eat and isn't actively trying to kill them, so reducing your carbon load is the way to go for that (see also reducing the amount of energy your home expends).

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #11 on: July 01, 2018, 06:09:06 AM »
So the yearly savings amount is;

39k for 401k & Profit Sharing
75k Bonus (45k after tax) to savings

Where is the extra 7,500/month going to? This is 90k/year


Other than your mortgage your spending is not out of control!


The cleaning person sound strange considering you do not work.

We have been building a house and then finishing the basement once the actual construction was done so the majority of that money over the last 2 years has gone towards that. Since then I have been putting most of it toward the mortgage and some of it towards investing

I justify the cleaning lady because I still work once a week and bring in about $600-$800 a month.  I have time to clean by myself, I just dislike it but Iíve been toying with the idea of trying to do it myself. I do clean the basement by myself which is about 1500 square feet because I didnít want to increase the cost.

And my DH works for a large consulting firm.  The pay is great but there isnít much balance. If he would walk away in 5 years I would be making every cut I could.

SilveradoBojangles

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Re: Case study - New to MMM with high income. What next?
« Reply #12 on: July 01, 2018, 08:31:48 AM »
I too have a spouse who will never retire (he's in academia), so I have adopted the MMM philosophies where I can. I approach our finances from a tax minimization standpoint, and continue to build our nest egg because, hey, people change, and who knows what life will throw at you? I want that security and flexibility, and while my husband doesn't really get scrimping and saving when he has no interest in retiring, he does understand my desires for having money that allows us freedom.

When my husband was still in grad school I did a lot of budget optimization. Now that we are both working full time I have focused more on spending less on big ticket items (smaller house, 1 paid off car) and tax minimization, and worry less about the rest of the budget as long as we stay under a general spending floor. We live off my husband's base monthly salary, and use my income (which is highly variable as I am self employed, but is on average equal to his) and his summer salary (sort of like a bonus for Professors that comes from grant money) for extra savings, home improvements, and big trips.

It sounds like, because your husband works a lot, you have a lot of control over your monthly spending. So, if this is something you are interested in, there are a bunch of ways to reduce that spending. Your food spending is a bit high - you could do some work to bring this down (shop around, eat seasonally, better meal planning to use up everything, less restaurant spending). You could do the cleaning yourself (though your house sounds large, so this could take a lot of time). You could buy less clothes, reduce your energy/water consumption, spend less fun money, drive less. But you should only do these things if you like optimizing those kinds of things (or are looking to reduce your environmental footprint). Because the combined savings would likely only be ~6-9K a year, which is minimal compared to your total savings.

Do you do freelance work? Are you taking advantage of all possible tax savings from that? I am self employed and there are many potential avenues for tax advantaged savings via that.

I second what everyone else says about credit cards for airline mileage. We have taken ~1 international trip a year, paid for by miles, for the last 7 years or so, and we spend way less than you guys do. My current favorite milage card is the Chase Sapphire preferred, because it seems to accrue miles at a healthy clip, and has many different ways to use them (ie, transferring miles directly to an airline often gets you better value).


pbkmaine

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Re: Case study - New to MMM with high income. What next?
« Reply #13 on: July 01, 2018, 08:58:06 AM »
Whatever changes you make, involve the kids. (I am not suggesting involving your husband at this point because of his schedule.) They need to learn how to clean, cook and do laundry - those are critical life skills. One of my friends used to put on dance music and everyone would tidy while dancing before dinner. Then the kids would chop vegetables, make salads, and help to assemble dinner. Once a week, each kid would plan a meal.

For cleaning, what some of my friends do is use a hybrid approach, rather than getting rid of the cleaning service cold turkey. As I said above, involve the kids. Get the house to a reasonable level of picked-up tidiness each day. Add to that a certain task - like cleaning one bathroom, or vacuuming one room every day. That approach should enable you to reduce the frequency of the cleaning service. Then you use the cleaners to do a periodic deep clean.

If you like systems, I recommend FlyLady. http://www.flylady.net

Hirondelle

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Re: Case study - New to MMM with high income. What next?
« Reply #14 on: July 01, 2018, 09:57:26 AM »
I'm surprised how people on these forums say "your spending is not out of control" to someone spending $11k/month.

Regarding your husband not wanting to FIRE, there's lots of other reasons to practice frugality other than getting to FI as fast as possible:
- More flexibility in case of a job loss/health problem/changed economy/changed desire to work
- Environmental reasons (less flying, less driving, less fancy gadgets, less stuff overall)
- Physical fitness (homecooking vs takeout, driving vs biking)
- If you have kids - being a good example; I've met quite a few people from rich families who're just totally used to superspendy lifestyles and if they don't manage to get into equally paid careers they're in big trouble unless parents support them endlessly.
- Being able to give more; even if you're not interested in saving more for yourself, it can be worthwhile to cut out a little spending and direct this to charitable giving.
- Being more mindful; I just personally hate mindless spending/unnecessary spending which has to do with my desire to optimize things (kinda what MMM describes a lot as well). So if I realize I'm leaking $10/month towards a subscription I don't use, I can't stand it anymore no matter how insignificant the amount of money might be.
- Being in control; kinda relates to the former one. If I'm very aware of where my money goes and that this is rather optimized + some frivolous areas I also know where to cut when SHTF and can act on it immediately without the need to figure it out first.

Regarding your budget, the items standing out most to me are:
Phone, internet - $180
Sounds high, any way you can get a better rate?
Cell - $80
Same comment.
Cleaning person - $200
You're only working 1 day/week, so there's certainly more time to do some cleaning yourself. You don't have to cut the cleaning service entirely, but maybe reduce the frequency? Like once/month deep cleaning while you do regular vacuuming yourself.
Groceries - $700
Eeks. That's a lot. You're only 4 people of which two small ones! Go visit the Less than $200/month on groceries for 4 people thread for some inspiration.
Restaurants - $400
That's a lot. But good job on already halving this in the last months/years.
Gas (car) - $160
No clue about your cars and driving habits, but any ways to reduce car use or get better mileage?
Household supplies - $100
So this was not included in groceries, which makes the grocery number look even worse. What kind of household supplies do you need that are $100/month?
Hair cuts - $50
Experimenting with cutting your own hair can be fun. Reducing frequency of haircuts by a bit could also lower this number.
Fun Money $200
Could be reduced, depending on what it's used for. Not extraordinarily high though.
Kids activities $250
What kind of activities are the kids involved in? Are there options to pick cheaper ones?
Gifts $150
Sounds like a lot, but this depends on the size of your family.
Clothes $100
Buy more 2nd hand clothes for the kids as they outgrow them quickly anyway. Also buy less clothes for yourself, 2nd hand whenever possible.
Vacations - $1000
That's the worst number. Just like Red_Pill I found that sentence about family time due to your husband working so much a bit terrifying. Now do realize that family time doesn't have to be a fancy vacation. $3k/person/year on vacations is really outrageous and that's coming from someone who considers travel her one and only splurge. Use travel hacking to reduce the costs for flying to family. For the other vacations, try cheaper options. Camping in some nature park in your own state can be just as/even more fun than any fancy trip.

YttriumNitrate

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Re: Case study - New to MMM with high income. What next?
« Reply #15 on: July 01, 2018, 12:53:47 PM »
I'm surprised how people on these forums say "your spending is not out of control" to someone spending $11k/month.
To be fair, $700 of that is investing in a 529 plan, and $6,000 is going towards a paying down a mortgage. With only 474k left on the mortgage, my guess is a good chunk of that $6,000 is going towards principal, so I consider that a form of saving too.

Hirondelle

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Re: Case study - New to MMM with high income. What next?
« Reply #16 on: July 01, 2018, 01:35:35 PM »
I'm surprised how people on these forums say "your spending is not out of control" to someone spending $11k/month.
To be fair, $700 of that is investing in a 529 plan, and $6,000 is going towards a paying down a mortgage. With only 474k left on the mortgage, my guess is a good chunk of that $6,000 is going towards principal, so I consider that a form of saving too.

Sure, that's a big chunk of the spending. However, depending on the COL of the area and the size of the house, a house with that mortgage could also be considered high spending because you're living in it and it doesn't make you any money unless you're planning to sell and move into a smaller place.

It's not irresponsible spending thanks to the high income, but it's still a lot and certain areas seem quite out of control to me. And ofcourse paying of the mortgage and saving in a 529 plan aren't parts of the out of control part :)

gpyros85

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Re: Case study - New to MMM with high income. What next?
« Reply #17 on: July 01, 2018, 04:46:27 PM »
I'm surprised how people on these forums say "your spending is not out of control" to someone spending $11k/month.


Because mortgage is on track to go away, and the 529 also will go away. Also, they mentioned about selling and downsizing eventually.

Also, they are on track to be worth $15M by the time husband is 62. If they want to splurge a little let them! At some point, the money isn't worth negotiating....

Trifele

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Re: Case study - New to MMM with high income. What next?
« Reply #18 on: July 01, 2018, 05:13:39 PM »

. Right now I prioritize vacation because we donít get to spend a ton of time as a family. The landscaper would be hard to get rid of because my husband has minimal free time

I find this sentence literally terrifying.

This is what stands out to me too...

Also, how secure is your DHís job? How impacted by the economy is it? Would he be able to find work easily if he were to be laid off, injured, experience a trauma, or if for some reason a kid/the kids had an issue that required more time from him, etc.

I am not a fan of spending based on current cash flow, it doesnít really spell out the entire picture. When our income was well over 300K, we were still only spending ~40K because we still had debt and that was only the second year of my career, so I was making a huge salary, but in the big picture, I still hadnít actually made a lot of money.

If something were to end my career early on, a few high earning years wouldnít really matter that much in the long run, especially if I didnít save the vast majority of it.

If thereís one thing Iíve learned, itís that life happens, especially when people have kids.
The higher your annual spend, the less flexibility you have, the less ability to pivot, and the more risk of making a stressful income losing situation a hell of a lot more stressful.

Others have pointed out that your spending is within reason considering your DHís intention to keep working for a very long time; however, that presupposes that your husband will be *willing* AND *able* to continue working at this intense level and pace for decades, and that presupposition holds a lot more risk than can be implied from his current *willing* AND *able* 30-something, healthy, healthy family position that heís currently in.

I would personally not be willing to inflate my spending to match a single high income in the relatively short term.

Between now and his retirement is a long fucking time for everything in your life to go as planned.
Maybe it will, but what happens if it doesnít?

+1 to everything Malkynn said.  Personally I would be very uncomfortable setting the family spending to match one spouse's high earnings.  I make a high salary (just a tad less than your DH) but we spend much less.  Enough less that I could go part time, or my DH (currently a SAHD) could get a job to take care of us, or a period of total unemployment would be doable by dipping into savings. 

Good for you for thinking about all this!  And kudos for approaching it thoughtfully, from the point of view of what you can do. 
« Last Edit: July 01, 2018, 06:44:33 PM by Trifele »

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #19 on: July 02, 2018, 11:53:30 AM »

Regarding your budget, the items standing out most to me are:


Thanks for the tips. The phone and internet includes cable and Netflix. I should have been more specific on that one. I know a lot of people donít have cable but reality tv is my guilty pleasure.

Cell - I will definitely look into it. This is just for one cell because my husbands is paid for by work so Iím sure I can do better.

Cleaning person - Iíve been dragging my feet on canceling this because cleaning sucks but it is $2400 a year of saving a so I should just suck it up and do it.

Groceries - I already shop the sales and buy in bulk. Iím always amazed that people feed their familes for so much less. I read through the $200 grocery thread and my family eats very differently. My husband and my oldest would not be happy with a meat free meal and we try to eat mostly while foods and minimal carbs.

Restaurants - Iím working on this. Iím usually dissapointed with most take out but usually end up giving in when the rest of my family wants to go.

Gas - I was planning on asking for a bike for my birthday because there are definitely some places I could be biking that Iím currently driving.

Household supplies - this is essentially target. I need to track this better because I always spend more than I planned or need to at target.

Hair cuts - I tried to convince my DH that I could cut the kids hair at home and he thought it was a ridiculous idea. I may try to borrow clippers from a friend and see if he notices.  I get my hair cut 3 times a year so very little of this is mine.

Kids activities - My oldest is on a travel sports team which cost us about $1500 a year plus a few other sports and activities for him and swim lessons and activities for the kids. I like my kids being involved in things that will keep them out of trouble when they get older so I am willing to spend the money.

Gifts - this is a mixture of a lot of people to buy for and a lot of kids parties. I donít think I could lower this without turning down invites.

Clothes - I do buy my kids clothes on sale but I have 2 kids that wear them and then they go to my sil who has 2 kids that wear them so I justify new clothes by knowing they will be worn by 4 kids.

Vacations - I am definitely going to look into this. We fly 3 times a year and use miles for 2 of the 3 flights. Because we are booking 4 tickets on miles they go fast. We also take one trip to a location within  driving distance. Our next vacation is California and so far we have spent $400 on a rental car, $1800 on 9 nights of hotel (hotels are pricey in California but I will own the fact that I have a 3 star or above requirement) and $1200 on tickets to Disneyland and legoland. Iím sure we will spend another $1500 on food and small activities. That makes the total $4900 and we used miles for the airfare. It seems like a ton but somehow we end up spending it every year. That is one of those things that I would gladly cut if my husband would FIRE but I keep it now to make life more fun.







Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #20 on: July 02, 2018, 11:58:51 AM »
Malkynn - because of his line of work I donít think I could ever say his job is totally secure but he has been with his company for 17 years and has been a ďhigh performerĒ every one of those 17 years so I would consider it fairly secure. I also work in healthcare so if he lost his job K could get a full time job easily because of the demand in my field and make about 100k. Obviously not enough to support our spending but that is why I have been making so many extra payments on my mortgage because that is $5400 every month (I have the autopay rounded up to $6000 but I also pay extra on top of that right now)

Hirondelle

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Re: Case study - New to MMM with high income. What next?
« Reply #21 on: July 02, 2018, 01:43:19 PM »
Thanks for the clarifications and I really like your attitude and willingness to make changes. I guess you could look at 2-3 items that are easy to adjust now. You could start small by aiming to lower grocery spend by $100, you don't have to go all the way down to $200 :). Same goes for all the other points like the cleaning lady (you can always re-hire her or another one) or the travel (you don't have to do Disney AND Legoland in 1 trip - one of them is plenty).

Dicey

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Re: Case study - New to MMM with high income. What next?
« Reply #22 on: July 02, 2018, 04:51:05 PM »
Right now I prioritize vacation because we donít get to spend a ton of time as a family. The landscaper would be hard to get rid of because my husband has minimal free time

I find this sentence literally terrifying.
I am 35 and my DH is 39...I donít have access to his pay stubs so I only know take home and how much we contribute yearly to retirement accounts.

Red_pill, I don't know which one is scarier, your quote or this one.

pbkmaine

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Re: Case study - New to MMM with high income. What next?
« Reply #23 on: July 02, 2018, 06:03:40 PM »
Right now I prioritize vacation because we don’t get to spend a ton of time as a family. The landscaper would be hard to get rid of because my husband has minimal free time

I find this sentence literally terrifying.
I am 35 and my DH is 39...I don’t have access to his pay stubs so I only know take home and how much we contribute yearly to retirement accounts.

Red_pill, I don't know which one is scarier, your quote or this one.

I am not terrified, but I am concerned. You can’t do real financial planning for your family without access to his pay stubs. Why don’t you have access?

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #24 on: July 02, 2018, 07:19:46 PM »
Right now I prioritize vacation because we donít get to spend a ton of time as a family. The landscaper would be hard to get rid of because my husband has minimal free time

I find this sentence literally terrifying.
I am 35 and my DH is 39...I donít have access to his pay stubs so I only know take home and how much we contribute yearly to retirement accounts.

Red_pill, I don't know which one is scarier, your quote or this one.

I am not terrified, but I am concerned. You canít do real financial planning for your family without access to his pay stubs. Why donít you have access?

Itís all online and I donít know the password for the company website. I manage all of our finances but Iíve never needed to look at the pay stubs and know the tax info. I would rather he didnít know I was posting on these forums because he has already made it clear that he is happy with our life and doesnít want to make any cuts. I think I will be able to make a lot more progress with him if I just start living the life and not talk about it with him and he can see that we donít feel deprived.

bocopro

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Re: Case study - New to MMM with high income. What next?
« Reply #25 on: July 03, 2018, 03:48:54 PM »
Hello!

I'm newer to the forums, and a bit younger but similar situation to you all (maybe you guys a half decade or so ago? 26/29, no kids, high income, fairly high but "reasonable" spend - bit less than you guys, our assets are right at 1.2M right now - but we too have $500k owed on house.) I had a few tidbits to share that haven't been shared too widely yet:

- you all have the income thing down! I am wondering if or when you desire to return to more employment? certainly you don't require the money (neither do we - husband is cracking $350 this year, and I'm up at a mere $100) but it does provide some mental reassurance that all is not lost if a single job is lost - that's one of my reasons for continuing (also, i like my career!). I know how it feels to feel like your income isn't worth much compared, and that it's a bit futile, but I encourage you to think of yourself as an equal contributor if you'd like to be - $100k is NOT something to sneeze at.

- you have a TON of money in cash!! whew. to be very, very full-disclosure with you - our taxable/retirement accounts are at about $900k right now - last year, they made $156k (part of this is due to company bonuses, held in a FANG stock which has exploded - currently in a sell-off plan for those). why i'm telling you this is that we joke about "the third earner" in our marriage - our money. it is a force of nature once you get up in the 6-800k mark - you are losing those gains with that HUGE TERRIFYING SUM in a cash account! anyway, I encourage you to put that somewhere, anywhere useful. your house is even a better investment than cash (the 4% interest return is guaranteed). how much cash you keep as an emergency fund is up to you (i have about $20-30k at any time, which is 5  mortgages)

- your mortgage is higher than average on these forums, but you back it up with income and probably a HCOL area. how are you allocating the extra cash every month? i encourage you to come up with a percent split, regardless of the market, and stick to it. you definitely have room to do both investing and early pay-off, in whatever divide you like. (for example mine is: salary - max401k = take home. pay off credit cards/mortgage, then remainder in checking goes 2/3 to investments, 1/3 to principal of house.)

- I wouldn't worry TOO much about your spending - you do make quite a bit of money and are saving quite a lot of it, although a tad inefficiently right now. in that same light, tax efficiency would be a GREAT thing to look into at your age/income/house/etc. If you can save $5000 on taxes, which is reasonable given you're probably paying north of $100k/year, you can buy a LOT of haircuts. which is good news, since I could not tell you to cut your hair at home, since i'd be a huge hypocrite if i did. :)

- Lastly, a tiny note on your marriage/partnership: it does worry me a bit that you don't know much about the salary/pay stubs of your dear spouse. Can you work toward more transparency about that stuff (women who have a lot less income and a lack of transparency have a history of getting blindsided and robbed in the sad event of a divorce.) I hope that's not a factor for you guys, but you should know who brings in what, exactly, all the time. Over time, it makes money literally a utility - you sit down, calculate the spreadsheet once a month, and move on. it's fun (more fun with wine), a good check-in about goals, and no one fights about money (okay, usually...).

- I can't really nitpick your spending here or there, since it's so well backed up and you likely run in similarly affluent circles. But, do consider values-based spending - just make sure it's not waste and that you like what you buy. you certainly don't have to eat rice and beans (whole foods for the win!) but just consider marginal utility a bit.

Sounds like you're doing fantastically and I'm really impressed by your numbers and your initiative in making changes to the family plan! Way to go, and keep us posted on what you decide on all of it. Cheers!

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #26 on: July 03, 2018, 08:26:18 PM »
Hello!

- you all have the income thing down! I am wondering if or when you desire to return to more employment?

- you have a TON of money in cash!! whew. to be very, very full-disclosure with you - our taxable/retirement accounts are at about $900k right now - last year, they made $156k

- your mortgage is higher than average on these forums, but you back it up with income and probably a HCOL area. how are you allocating the extra cash every month?

- I wouldn't worry TOO much about your spending - you do make quite a bit of money and are saving quite a lot of it, although a tad inefficiently right now. in that same light, tax efficiency would be a GREAT thing to look into at your age/income/house/etc.

- Lastly, a tiny note on your marriage/partnership: it does worry me a bit that you don't know much about the salary/pay stubs of your dear spouse. Can you work toward more transparency about that stuff

- I can't really nitpick your spending here or there, since it's so well backed up and you likely run in similarly affluent circles. But, do consider values-based spending

Sounds like you're doing fantastically and I'm really impressed by your numbers and your initiative in making changes to the family plan! Way to go, and keep us posted on what you decide on all of it. Cheers!

Thanks for the comments. I quoted you but edited it down to just the questions so it didnít take up so much space. I wish I would have discovered MMM when I was your age but Iím glad I eventually discovered it!

-Iíll probably never go back full time but I do plan to go back part time in the next few years. I wasnít expecting to enjoy being home wth my kids as much as I do. I like being the one to pick them up every day, being able to attend all of their event and volunteering at their school. I know in a few years they will no longer want me around all the time so I am soaking it up while I can.

- amazing job savings and on the performance of your investments!  We know we have way to much cash. We were just lost on how to invest before I found MMM and itís been a slow process convincing my husband that all we need are some total market index funds. We are slowly moving it into the market. We have been so conservative for so long that we couldnít bring ourselves to do it all at once.

- My husbandís 401k gets maxed every year along with his profit sharing and our HSA.  After that we have been adding 2k to investments and the rest to the mortgage. We are also transferring 5k from the saving into investments. Prior to building our house it was going into savings which we used for a down payment so we wouldnít have to sell our old house before we moved into the new house and upgrades.

- Any recommendations on how to learn about tax efficiency?  I do feel like we pay a ton in taxes and arenít doing a great job minimizing that.

- I actually manage all the finances and we do the taxes together. His pay stubs are on his company website ans Iíve never had an interest in looking at them before. He has no interest in MMM or FIRE so Iím trying a different approach of just living by example. I donít want him to think that I am pushing him to do something he doesnít want.  1 year ago I would have told you we were already saving more than most people and were doing great so I can understand where he is coming from. I would love for him to change his mind but I also donít want to force it.

- Values based spending is exactly what Iím after. I like the idea of saving in every area that doesnít add value to our lives but am willing to spend the money on things like vacations and activities for my kids.





Gremlin

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Re: Case study - New to MMM with high income. What next?
« Reply #27 on: July 04, 2018, 12:28:02 AM »
Whilst you talk about values based spending as what you are aiming for, your posts paint a different story...  In that, you and your husband donít seem to agree on shared values at all.  You appear to be describing values associated with family time, even if they are expensive to achieve, whilst your husband is valuing his career and the opportunities (and traps) that provides.

Itís very hard to have a values based approach to spending when your values are not aligned.  If you arenít aligned, the best you can hope for in cutting out meaningless spending is mindfulness in spending.  Thatís not a negative outcome in its own right, but may not give you what you want.

SavinMaven

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Re: Case study - New to MMM with high income. What next?
« Reply #28 on: July 04, 2018, 07:25:59 AM »
Quote
I guess I secretly hope that once the money is in the bank he will change his mind and realize he doesnít love working as much as he thinks he does.

I mean this to be helpful, and wish the internet had a "tone of voice" button so this sounds helpful, as intended, and not critical, as I fear it might. But after reading through, I think you have a reverse-spendypants situation going on.

A common spendy-pants scenario in the US is that people get used to throwing money at an emotional problem. Feeling inadequate? Buy a clown car. Unfulfilled? A huge house will fix that. Lonely? Instagram from famous landmarks around the world! People can spend themselves into oblivion, and it never gets at the root of the problem.

You sound fundamentally dissatisfied with they way time in your family is currently allocated. Could you be feeling that your husband is choosing work over family, and be feeling hurt and undervalued? Driving you to want to save money to 'buy back' his time for you and the kids, "earning" his attention? While saving always seems noble, throwing savings at an emotional problem won't fix the root cause either.

There's such a stigma to marriage counseling, it's a darn shame because we know most things need tune-ups: cars and houses need maintenance and bad things happen when we skip it. We know we need regular check-ups for our physical health. Remember when Jay-Z and Beyonce went for marriage counseling before they were even married, just to make sure they got off to a strong start? A good marriage counselor can do preventive maintenance that makes a good thing even better.

Thank goodness there's plenty in the coffers to pay for counseling, and it would actually get at the root of the problem here. Please consider it. You can't save your way out of an emotional issue any more than you can spend your way out of one.

Moonwaves

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Re: Case study - New to MMM with high income. What next?
« Reply #29 on: July 04, 2018, 07:52:46 AM »
- I wouldn't worry TOO much about your spending - you do make quite a bit of money and are saving quite a lot of it, although a tad inefficiently right now. in that same light, tax efficiency would be a GREAT thing to look into at your age/income/house/etc.

- Lastly, a tiny note on your marriage/partnership: it does worry me a bit that you don't know much about the salary/pay stubs of your dear spouse. Can you work toward more transparency about that stuff

- amazing job savings and on the performance of your investments!  We know we have way to much cash. We were just lost on how to invest before I found MMM and itís been a slow process convincing my husband that all we need are some total market index funds. We are slowly moving it into the market. We have been so conservative for so long that we couldnít bring ourselves to do it all at once.

- My husbandís 401k gets maxed every year along with his profit sharing and our HSA.  After that we have been adding 2k to investments and the rest to the mortgage. We are also transferring 5k from the saving into investments. Prior to building our house it was going into savings which we used for a down payment so we wouldnít have to sell our old house before we moved into the new house and upgrades.

- Any recommendations on how to learn about tax efficiency?  I do feel like we pay a ton in taxes and arenít doing a great job minimizing that.

- I actually manage all the finances and we do the taxes together. His pay stubs are on his company website ans Iíve never had an interest in looking at them before. He has no interest in MMM or FIRE so Iím trying a different approach of just living by example. I donít want him to think that I am pushing him to do something he doesnít want.  1 year ago I would have told you we were already saving more than most people and were doing great so I can understand where he is coming from. I would love for him to change his mind but I also donít want to force it.
Working on your overall tax efficiency is a good reason to ask him to give you access to his payroll information. That is, if you need a reason other than "I'd like to take a look at our income steams in full".

Even if you're nervous about putting all of your cash straight into investments, at least paying off your mortgage would save you a ton of interest, wouldn't it? Since that is something that you really want to do and there is definitely an emotional aspect to doing it, perhaps he (and you) would be able to get behind the idea of paying off another chunk of your mortage before investing. Doesn't make mathematical sense but makes more sense than keeping that money in cash.

I'm curious as to whether your husband is really happy at not getting to spend a lot of time with family. Are there ever any moments where he feels like it might be nice to not have to work another full day if the alternative is to get to the park in the afternoon and play and hang out and then have a picnic for dinner? It sounds a bit like at the moment, apart from holidays, you live fairly separate lives. When he is at home, is he really present and happy to be there? Not looking for an answer to that, but it might be useful to think about. As Gremlin said, it seems like you have different values at the moment. Might be worth spending some time working on that.

Finally, don't forget that RE does not necessarily have to come with FI. If he is happy to keep working until he is in his sixties, that's fine. That's not necessarily a concrete reason to not aim for FI, though.


bocopro

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Re: Case study - New to MMM with high income. What next?
« Reply #30 on: July 05, 2018, 11:39:31 AM »

Thanks for the comments. I quoted you but edited it down to just the questions so it didnít take up so much space. I wish I would have discovered MMM when I was your age but Iím glad I eventually discovered it!

-Iíll probably never go back full time but I do plan to go back part time in the next few years. I wasnít expecting to enjoy being home wth my kids as much as I do. I like being the one to pick them up every day, being able to attend all of their event and volunteering at their school. I know in a few years they will no longer want me around all the time so I am soaking it up while I can.

- amazing job savings and on the performance of your investments!  We know we have way to much cash. We were just lost on how to invest before I found MMM and itís been a slow process convincing my husband that all we need are some total market index funds. We are slowly moving it into the market. We have been so conservative for so long that we couldnít bring ourselves to do it all at once.

- My husbandís 401k gets maxed every year along with his profit sharing and our HSA.  After that we have been adding 2k to investments and the rest to the mortgage. We are also transferring 5k from the saving into investments. Prior to building our house it was going into savings which we used for a down payment so we wouldnít have to sell our old house before we moved into the new house and upgrades.

- Any recommendations on how to learn about tax efficiency?  I do feel like we pay a ton in taxes and arenít doing a great job minimizing that.

- I actually manage all the finances and we do the taxes together. His pay stubs are on his company website ans Iíve never had an interest in looking at them before. He has no interest in MMM or FIRE so Iím trying a different approach of just living by example. I donít want him to think that I am pushing him to do something he doesnít want.  1 year ago I would have told you we were already saving more than most people and were doing great so I can understand where he is coming from. I would love for him to change his mind but I also donít want to force it.

- Values based spending is exactly what Iím after. I like the idea of saving in every area that doesnít add value to our lives but am willing to spend the money on things like vacations and activities for my kids.

Good on you for recognizing you like staying at home/working part time! That's a wonderful choice to have and make - I was just double checking since at times, if you have a wide income gap, you wonder why you're trudging off every morning for little real addition. 

That's a big step with the investments - it's tough to dump it ALL in at once. Maybe a big chunk every month? (Also, those big bonuses are fun to drop in all at once, too, when you get slightly braver. which you will.) Even if you took 10k per month, put half into the house and half into the market, big wins all around! glad to see you're starting and know that you'll be braver as you go. in february, when i "lost" ~40k of "fake money" in a single day - it was a relief to know it was still in the market, and all i had to do was leave it there and it'll keep growing. it hurts the first time, but then you really do de-sensitize in a good way.

Actually - it's a bit ridiculous for me to mention tax efficiency as I'm still learning about it myself (it was a 2018 goal to get better). A few things I'm mulling over/implementing/etc are: check on filing joint/seperate - sometimes this rules in your favor either way, making sure to itemize - count all kids, mortgage interest, etc., maxing out 401k and then starting backdoor/mega backdoor Roth if you can, seeing if either of your employment allows you to buy some things pre-tax (metro cards are a common one, gym memberships, etc.) starting a business that spends and earns money that is deductible, starting a donor advised fund and putting a chunk of money in there, and of course, having kids. I haven't found the perfect tax advisor yet - but if any of the pros on the forum have advice, chime in! (There is really not a ton you can do with your income - the IRS knows you make a ton of money and do want some of it. a lot of it. but, maybe small things we can do)

Lastly, on values. Glad you think of it this way. Be sure not to fall into the (largely income-based) "I value luxury stuff" values - this is really just inflation. As you can tell, for a lot of us on the forum, this isn't really about money - it's about being intentional in designing your life around your time and your general personal composition. For many, it includes a partner - and if you go at it from the "I want to live our best life ever..." angle, not the "probably should fight over if we buy organic bananas (or other inane thing)) angle, it is much more receivable.

Also, +100 on personal and marriage counseling. i think it's way more common than people let on. also, it works and it is amazing.

Allie

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Re: Case study - New to MMM with high income. What next?
« Reply #31 on: July 05, 2018, 12:21:44 PM »
I read through your case study, thought about posting, waited, read again, thought about it, waited, the read it again.  I was hesitant to chime in, in part, because any advice I would give seemed like it was based on my situation, which is very similar to yours.  So, I think instead of giving you advice I'll just let you know what I do and you can apply what may work.  Then, maybe it won't be preachy and emotional.

I have a very similar life set up to what you guys have.  My husband is the high earner and, until recently, was completely in love with his job and never wanted to quit.  He works long hours and travels frequently.  I work on a random, super part time, schedule in my former profession, just in case.  Our kids are 5/7.  When I started reading mmm, my husband was not on board.  I just started cutting back on things for the kids and I and advocating for making better choices for things that were for my husband or the whole family.  Why wouldn't he want all this amazing stuff, he works hard and is a well earning professional! Is what I heard a lot.

It was just a slow process and after 4 years he is drinking the kool aid.  It started with little sips (finding that a used whatever is just as good as a new one, seeing the balance sheet grow, enjoying a homemade whatever, enjoying the fruits of my travel hacking, etc) and then he took a few weeks off to just slow travel and live with us and pursue his hobbies (and it turns out he still likes us!) and he started guzzling.  He still enjoys his job, and if I wasn't nagging encouraging him to appreciate how amazing living and being self sufficient is, he would still have no desire to move on.  But, having the ability to see that working on his terms (through a contract or a project or whatever) would be nice and not needing to work would be amazing was really eye opening.  He could appreciate that without his job he still had purpose and would be valued. 

So, for now, our spending is super high, especially for this forum.  We have a big house that needs to be maintained and cared for and paid for, obligations related to my husband's work, and "obligations" related to the area we choose to live and social stuff (which is a mix of joneses and social network that impacts the husband's work reputation).  When we hit our goals, we will move to a lower col area and no longer need to worry about work related things.  I try very hard (and, admittedly, often fail) to ensure that our spending not related to the house/work stuff is as low as possible.  The kids clothes are second hand, as are mine for the most part, our groceries are lower due to diy and economized shopping, Craigslist provides most of our other stuff, etc.  I'm hoping that when we do pull the plug, this will set us up for lower expectations and it won't seem like a punishment. 

So, if I were to give advice, it would be to encourage you to help your husband get a taste of what it would feel like if he weren't just identifying as a successful _____.

Megs193

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Re: Case study - New to MMM with high income. What next?
« Reply #32 on: July 05, 2018, 04:00:01 PM »
Quote
I guess I secretly hope that once the money is in the bank he will change his mind and realize he doesnít love working as much as he thinks he does.

I mean this to be helpful, and wish the internet had a "tone of voice" button so this sounds helpful, as intended, and not critical, as I fear it might. But after reading through, I think you have a reverse-spendypants situation going on.

A common spendy-pants scenario in the US is that people get used to throwing money at an emotional problem. Feeling inadequate? Buy a clown car. Unfulfilled? A huge house will fix that. Lonely? Instagram from famous landmarks around the world! People can spend themselves into oblivion, and it never gets at the root of the problem.

You sound fundamentally dissatisfied with they way time in your family is currently allocated. Could you be feeling that your husband is choosing work over family, and be feeling hurt and undervalued? Driving you to want to save money to 'buy back' his time for you and the kids, "earning" his attention? While saving always seems noble, throwing savings at an emotional problem won't fix the root cause either.

There's such a stigma to marriage counseling, it's a darn shame because we know most things need tune-ups: cars and houses need maintenance and bad things happen when we skip it. We know we need regular check-ups for our physical health. Remember when Jay-Z and Beyonce went for marriage counseling before they were even married, just to make sure they got off to a strong start? A good marriage counselor can do preventive maintenance that makes a good thing even better.

Thank goodness there's plenty in the coffers to pay for counseling, and it would actually get at the root of the problem here. Please consider it. You can't save your way out of an emotional issue any more than you can spend your way out of one.

Iíve never thought of it this way but you are absolutely right.  When he says he doesnít want to retire early because he likes his job and feels fulfilled the message I hear is that his job is more fulfilling than his family.   When he is home with us he is present so I am thankful for that. I agree that marriage counseling is great. It really helped us after we had kids and had some things to work out so maybe we need a refresher.

lhamo

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Re: Case study - New to MMM with high income. What next?
« Reply #33 on: July 07, 2018, 10:49:21 PM »
Re: Life insurance -- before you purchase more, check and see what your Social Security survivor benefits would be.  Kids who have a parent who dies young get benefits up to age 18 or when they graduate from high school, and the caretaking parent can get benefits, too, up to when each child turns 16.

Re:  Busy family life, please reconsider how many activities you put your kids in.  Does an 8 year old really need to be in a travelling sport?  That seems insane to me.  I know it is expected in some circles, but it isn't necessarily healthy -- my nephew was in competitive soccer until he ended up with screwed up knees.  I guess if you have a kid who is so good at it they might be world cup material some day, and they are begging to do it, maybe it is worth the time/money/energy.  But it isn't necessary to succeed.  We only did school based activities for our kids -- the school they were in at the time had an activity bus that would bring them home a couple hours later than normal, so it was really easy on everyone.  My daughter ended up being a talented artist, so that is what we focus on (she did do volleyball this spring and enjoyed it, and may do ultimate in the fall -- we support both as it is good physical activity for her).  My DS was very into all things computers and chess, and ended up getting into a special early entrance program at the university.  My kids were not stressed or overly busy when they were young -- had a lot of time to explore their interests and talk with us at home.  I was definitely going against the grain with this -- their childhood was spent in China where kids are even more overscheduled than here -- but I felt pretty strongly about not pushing them into every single activity, especially if they weren't particularly interested.  It turned out well in our case.  I wish more families would try it rather than being swept into the tide of "do everything at a high level or you might not get into Yale."

Where you are with things now I think continuing to max out retirement (including for you) and paying down the mortgage make good sense.  Once you no longer have that huge mortgage payment you will have a lot more options open to you.  We bought an expensive house in Seattle last year (using profits from cashing out our condo in Beijing), and are enjoying our FIREd lifestyle in it, but if push came to shove and we needed the cash we would sell and downsize.  You may find that as your asset base grows and your mortgage dwindles, your DH will re-evaluate how important work is.  Spending at least one of those vacation periods you have each year closer to home in a "staycation", enjoying all the amenities of your own local area, might be one way to show him how rewarding and inexpensive a different lifestyle might be.