Case Study: Weighing my options, 1st world problems

[A440]

Topic Title:  Weighing options--what would you do?

Life Situation:  Married, in our 40s, young children

Gross Salary/Wages:
Her: $250,000 salary, some side work/dividends
His: Working for equity at a start up

Pre-tax deductions:
$18000 in 401k (her)
~$9000 for health insurance
$6750 for HSA
$8900 to solo 401k (this will vary with the side work income)

Post-tax savings:
$5500 each for back door Roth
$4000 for 529 (we get state income tax deduction)
$6000 for Coverdell ESA
$80000 to taxable account



Other Ordinary Income:
35,000 which is partly consulting and partly dividends from similar organizations.   May vary. 

Qualified Dividends & Long Term Capital Gains: $10,000 this past year.  I don’t think these are regular occurrence.  This is from stock in a privately held corporation related to my employment.

Adjusted Gross Income: Roughly indicated above. 

Taxes:
Fed: $50000-- this was with-held, but actually owed another $10,000 or so (I had made some significant donations the year before and didn’t have as much side-gig income then either.)
FICA 7000
MEDICARE 3800
State W/H 18200

Current expenses:
Past year 85000

Kids: 26,000 (this is almost all daycare)
Food & Dining (also includes Costco): 12,000
Home: 10,500 (includes home insurance, projects, cleaning)
Financial (life and disability insurance): 6500  (this actually includes 2 years of disability insurance because of how the dates fell on mint.  So in a calendar year would be more like $3900)
Gifts and Donations: 5300
Health (Doctor and Dentist): 3900
Shopping: 3200
Utilities/Cell phone: 3200
Cars (gas, insurance, maintenance): 2900
Travel: 1100
Pet: 500
Entertainment: 200
Personal care: 200




Expected ER expenses:  Aiming for $60k/yr with paid off house.  I know my parents are also saving in 529 for the kids.   

Assets:
House--paid for.  Purchased for $220k, hopefully could be worth somewhat more.
2 paid for cars
Solo 401k (hers): 203k
Solo 401k (his): 165k
Roth (hers): 148k
Taxable account: 90k
Roth (his): 32k
529: 21k
401a: 4k
Work 401k: 36k
HSA: 23k

Liabilities:
Revolving credit cards being paid off each month.

Specific Question(s):  We are very fortunate to have my income.  My husband had a regular job when me moved to our present location to be closer to family, and his previous employer were agreeable to his working remotely.  His employer was then bought by another company, and his job eliminated.  We had hoped it would be relatively easy for him to find remote work, but it was not, and now he is working full time but not making any money.  He does get stock options,and if all goes well, might get paid by the end of the year.   I support his desire to use his professional skills, but at the same time a lot of money is going out the door in order to support this--we have full time daycare.

In the next year, I will be eligible to be a partner at my current employer.  I have mixed feelings about it.  I like my partners, but sometimes the office can be disorganized.  Sometimes there are big emotional disagreements among the staff, and I absolutely just don’t have time and energy for it.  If I am a partner, I would probably gross about $50-100k more. It could be more or less.  My work would be about the same.  I would have more flexibility to take time off, if I want.  This is a big financial disincentive if I wanted to stay in the same town, and not work with my current employer.  I do work a lot.  I am on call a lot--sometimes 4-5 days in a row with people call me for any number of important reasons or completely ridiculous stuff.

I do like being close to family, and we are fortunate to live in a lower cost of living area.  Our home would certainly cost a least twice as much in higher cost of living areas in our state.  There are probably still some projects that we would like to get done, but I really enjoy our house, and being in a small town there is minimal commuting.  I have definitely considered being more mustachian by biking, but have to be across town on a moment’s notice, so it is not going to happen yet.

Our kids would probably be in private school, at least through 8th grade, if we stay in this town.  I always felt that I was a supporter of public education and went through public schools here myself, but I look at my oldest, and just think he will really benefit from the small class sizes and type of education.   It is possible the younger ones may be different.  It is about $5500 per year right now.   Also the big benefit for us right now is that the kids’ daycare is affiliated with the private school, so there is only one drop off and pick up per day.

Options:
1. Just stop working.   Husband will need to get current start-up to pay, or find another job elsewhere.    He thinks the start-up will pay by end of the year anyway.  But he is sometimes ridiculously optimistic.  He thinks they will be paying $125k/yr.  Health insurance or other benefits not yet clear.

2. Look for new job and move the family there.  No guarantee that I would better off, although could probably negotiate the call situation better.  May be able to find a more regular hour 9-5 sort of job or more of a shift work situation where at least hours would be predictable.  The thought of moving makes me overwhelmingly nauseated.  I am happy with the kids’ daycare/school situation for now, although I would be happy to get them into a good public school at some point.

3. Try to find temporary work where I would go and work for a week or a month and then be off until the next gig.  That may be hard to find and somewhat unpredictable.  Husband is not very excited about me being gone for long periods.

4. Stay at current job, try to take more time off to avoid burnout as needed. 

5.Try to do something else is current town, and do whatever legal wrangling it might take to accomplish that.



 Also I realize our spending could be more mustachian, so feel free to throw the face-punches.  I think a big thing is convenience food and eating out.

[KungfuRabbit]

We certainly can't answer your main question - you need to decide what your goal is.

The most mathematical would be for you to make partner, save money until you reach your numbers, and then retire. You are saving over $100k / year not counting any of your husbands equity. At your goal rate of spending that would take like 6 or so years (I didn't do the detailed math...) - not counting the husband at all.

What is the probability of success in this start up?  Is the goal to back pay salaries?  Is there a goal of a company buyout so your husband would get a big payday?  In my opinion the only reason to work for free and only get equity is to gamble on a buyout. Would I work for free for two years for a shot at at $5,000,000 check when the company is bought?  Maybe. Would I work for free for two years to maybe get my $100,000 salary paid to me later?  $&@ no.

[Scortius]

Just chiming in as another tech worker.  You probably know this even better than most of us, but playing the start-up lottery is a great way to work yourself to the bone for no compensation.  90-95% of tech start-ups don't even make it to Series A?  Further, those that are grounded pay their employees.  It's normal for the co-founders to not take a market salary.  It's pretty much unheard of for a start-up to not provide any salary for their employees.  This actually is a big red flag for the start-up itself.  If it can't function based on sound business principles like paying a small salary to its employees on top of some equity, how does it intend to transition to profitability?  It usually takes a decade before any of the unicorns out there realize their 'hockey-stick' growth, and most start-ups (those of the 5-10% that don't immediately fail) actually experience more of a linear growth curve.  In my opinion, working for someone else's company for zero salary and the promise of future value is a scam.  If your SO is capable with industry experience, he should be able to find a more boring but regular job with a decent salary almost anywhere.  I would encourage him to look up both the statistics on start-up success rates, and also the early financial histories of start-ups that did make it.

[plog]

I know you put all your finance information in that post, but I don't think your issue has anything but a tangential relation to money.  You sound not happy with everything in your life and fearful that you won't be able to find happiness.

I think you need to talk to your husband, friends and family and determine what will make you happy.  Sure you piss away some money and things could be fine tuned, but you really sound on the verge of hopeless--none of your 5 options seemed like they inspired you. 

You are going to get money-skewed advice on this forum and I don't think that's what you need.  It needs to be considered, but I fear your issue is larger than just that.  Good luck and don't despair too much, you will end up happy--you just have to find out what that is and how to get there. 

[A440]

I appreciate all of the above.  Plog has probably hit the nail on the head, although I would tend to use exhausted instead of unhappy.  But, unhappy may be more accurate.

My husband and I talk about this frequently.  He has a tendency to talk around things so that I never feel we actually get anywhere or decide anything.   But I will try again and maybe take some days off and have more time to think. 

[waltworks]

You've got ~$700k in various forms of investments and a paid off house, you are somehow spending $85k/year, including $26k of childcare, and you're burned out at work?

Crap, quit yesterday. Even a vague attempt to cut back on spending and continuing side consulting for your $35k/year makes you done. Young kids don't stay that way. Go make some memories.

-W

[Hargrove]

Your husband's input matters, and, you alone are both making the money and paying the price. It does not necessarily sound fair that he is chasing a pay-nothing fuzzy-feeling job, and you are hugging a grenade for the family's income. But do you need anything like that much income?

As plog said, you waste a lot of money. A boat that carries boats carrying boat figurines all stuffed with cash and sinking to the bottom of the ocean. But you already have enough to retire if you can cut your expenses, and the other good news is that your expenses would drop like 30% if you stayed home. You could work two more months to cover the family's expenses for almost a year for your husband to figure out his gig or get a paying one, then take whatever time off you need or get a job paying 60-100k and still be extremely well positioned to retire whenever you felt like it.

Figure out your primary goal. You have all the info you need to make the call. Good luck.

[farfromfire]

(worked at a startup in another life)

If your husband is not one of the first 5 at this company and he's not getting paid, that's a bad sign. Is anyone else at the company pulling a salary while enticing other workers to work for options only? Unfortunately this type of scam does happen.

Also, does he know what type and quantity of stock options he's receiving as 'compensation'? *Even if* this startup hits the jackpot and lands a big investor, his shares will be diluted.

This is all to say - if both of you are OK with him working full time as a hobby without expecting any compensation, that's fine. But if not, I think this fairly probable scenario should be addressed sooner rather than later.

[Malum Prohibitum]

Current expenses:
Past year 85000

Kids: 26,000 (this is almost all daycare)
Food & Dining (also includes Costco): 12,000
Home: 10,500 (includes home insurance, projects, cleaning)
Financial (life and disability insurance): 6500  (this actually includes 2 years of disability insurance because of how the dates fell on mint.  So in a calendar year would be more like $3900)
Gifts and Donations: 5300
Health (Doctor and Dentist): 3900
Shopping: 3200
Utilities/Cell phone: 3200
Cars (gas, insurance, maintenance): 2900
Travel: 1100
Pet: 500
Entertainment: 200
Personal care: 200

  No house payment, and you still have $85,000 in expenses?  On what?  The expenses you show add up to $72,900.  Where is the other $12,100 going (that's over a grand a month).

If you stopped working in a year or two, you would no longer have to pay $26,000 for child care.  That means the expenses you list would total only $46,900.  Selling one of the cars would reduce insurance and maintenance.  $500 a year on a pet?  I won't even ask.  Food and dining could definitely be reigned in, especially if you will be willing to be at home cooking.  $10,500 on the paid for house?  "Cleaning?"  "Projects?"  That is a lot of money.  Not sure what is in the lavish gifts and donations, but $5300 might be a lot.

There are a lot of ways to remove this stress from you life and retire early, if you made some cuts and maybe worked just a couple years longer to give yourself more of a cushion.  You are in a great financial situation due to the high income and the fact that you are saving a six figure sum each year.  MMM retired on about what you have right now.

[A440]

To answer questions:

I knew I would end up messing up stuff on mint with my expenses.   I tried to go back and figure out what happened, but I think it has recategorized items inappropriately.  If I look at a different set of previous 12 months, then I got 73,000 in total expenses, so I may have started with one set of 12 months and by the time I got through going through the transactions and looking things up it may have been a different set of last 12 months.   Sad to say it took me months to get this done, and it still isn't right.

For the $10,000 on house expenses: cleaning lady $60/week, we bought a shed kit for husband's office, then drywall, insulation, lighting, electrician to hook up to house.  Replaced bathroom floor as tiles were cracked--multiple tiles with cracks across the entire tile.   Landscaping--replacing lawn, so bought seed, rented some equipment to scoop up lawn, then had to dispose of dirt--so needed trailer and dump fees were expensive (should have found a person to take dirt!) .   Multiple trees were purchased.  Barkmulch.   Closet doors.  Unfortunately they were removed before we first moved in, but that is another story.   Much of this is not my idea, although I was in agreement with him having a shed to work in.  Husband's feeling is that house is going to be hard to sell in the condition it was in.  (But we bought it, right?)   I do feel closet doors on closets is a feature people expect.

Regarding the start-up thing, it seemed like an okay idea at the time.  Husband is very optimistic that he will be getting paid by the end of the year.  I am just skeptical in general.  From what he tells me, which is of course what the CEO/founder tells him, is that there will be paychecks by the end of the year.   (Hopefully sooner, like in the next few months)  No one else is getting a paycheck either.  It does seem like his working is a hobby to me, and this bothers him to some extent, but realistically for him to get a job, we would have to pick up and move.  And I am so unenthused about that.  There are about 5 of them working at this more or less full time.  I don't have all the details about it. 

After a weekend of sleeping through the night, I have a bit more positive attitude.  Also, in 2.5 years, all the kids will be in school, so that will help significantly. 

The $5300 is mostly charitable contributions--to a variety of community organizations.  I guess it could be considered a lot, but my marginal tax rate is probably ~40%, I would not get to keep all of that anyway.  Honestly, I think people with my income should be contributing at least that much.

We do need to work on eating at home more. 

Husband is willing to support (at least in theory) if I quit when current contract ends, but I think realistically getting all the kids into school in 2.5 years is probably the way to go. 

I know $500 seems like way too much for one pet, but she had one sick visit at the vet that was more than half of that, and the rest is food and litter.   So usually not that expensive. 

For waltworks, the side gig income I can only do if I kept my current job.  It's complicated.  But, yes, otherwise that would be great. 

[Laura33]

So FWIW, from my own experience:

1.  Being the sole provider is a major added stress.  DH and I both worked in professional careers and have traded off who makes more/less at any given time; we kept our fixed expenses to what we could cover on a single income, so we didn't worry much.  But the @ 2.5 years after we had our daughter we really *needed* his income (I was telecommuting part-time very long distance) was kinda miserable, and he has told me since then how hard that was for him.  So part of your stress may be just the weight of carrying the entire family while crossing your fingers that your DH will get paid at some point.

2.  Don't feel bad/guilty that you are not happy even though you have what look like a bunch of awesome options.  Stress is stress; first-world problems are still problems to the people living them.  Look at Charles Murphy (the Wall Street banker who recently committed suicide).

3.  Figure out your own goals and priorities.  Like everyone else has noted, we can't tell you what matters most to you.  Once you know that, figure out which option best aligns with your priorities.

4.  Understand and accept that there is no perfect solution, because every decision has a tradeoff.  Faster FI means more immediate stress; getting DH a paying gig means moving away from family; cutting back now means delayed RE; etc.  This is not meant to be depressing, but empowering, because it eliminates "the grass is always greener" syndrome.  When I get stressed and unhappy at my job, I remind myself that I chose this path as the best path to our mutual goals, and that I can make another choice at any time if it is no longer working for me.  Then I re-evaluate the decision, doing the best I can to get an honest, objective picture of both the pros and the cons of the alternative options.  So far, every time I have done this, I have realized that my current choice is still the best option to get us to our goals.  That helps me stop fantasizing about blowing everything up, and instead focus on smaller tweaks I can make right now to make life more enjoyable in the interim.  YMMV, of course. 

[A440]

 
Thanks Laura33,  I appreciate your thoughts. 

[Platypuses]

For your income your travel budget is pretty low. One thing that might be worth trying is to go on more vacations. Not family vacations, but weekend getaways with your husband. Do you have any family in town that can help watch the kids for a few weekends a year? Always having a vacation planned (even a one night hotel stay a few miles from the house) helps us to recover, reconnect and realize the fruits of our labor.

[randompants]

Are you in medicine? The hours and work commitments sound very familiar (my wife's in medicine).

Would you be able to influence call schedule and hiring once you're a partner? Maybe that could make it easier. Especially if you can make sure, long-term, that you're not being called in for stupid stuff.

If you're a partner, I think you'd be able to contribute to your solo 401k with the higher contribution limit. Slightly lower effective tax rate. Not sure if AMT will make this less valuable though.

Your expenses look very reasonable in my opinion. Food is a little high but if you have no time to cook because you're on call and working all the time, then not much you can really do. Your savings rate is 40% of your gross and cutting down food in half would give you a another 2-3%; have to make a personal call if that's worth it.

The main issue is child care. Once your children are old enough to go to school, finding the right school will probably be an even more important issue. Good public schools will tend to be in areas that are expensive and may have their own property tax to pay for said schools. Alternative to that is private school.

I would not even consider retiring until you know where your children will go to school and if your income/savings could comfortably pay for their education. While you have assets, a lot of them are not liquid and/or in retirement accounts.

[researcher1]

Travel: 1100
Entertainment: 200

You make more than 95% of the US population.  You have a husband and two young kids. 
Yet you only spend $1300 on travel and entertainment in an entire year? 
This is sad!

Why is this number so low?  Why aren't you enjoying the fruits of your labor?
As another poster mentioned, you may become a happier/more fulfilled family if you started enjoying yourselves more. 
This would give you a chance to reconnect, recharge and have fun.

Why not go to Hawaii for 2 weeks, a road trip to explore a bunch or national parks, or whatever floats your boat?
$200 for entertainment is depressingly low.  That would barely pay for a family visit to the zoo.

Also, I know this is the MMM forum, but please ignore the people nit-picking your budget.
Giving 2% of your gross income to charity, or spending 0.2% on a family pet, are things you shouldn't even think twice about.

[A440]

With 3 young kids (2 not completely potty trained), we just haven't felt like it is actually fun to go places with the kids that require being very far from a toilet.  And we could put them in diapers, but then I don't want them to regress. 

And we don't have great options for going away overnight and leaving the kids with family or a baby sitter right now, but I think as the kids are more potty trained, family would be more willing. 

And when we have gone away, it is for family events, that are not necessarily fun, but more of an obligation. 

We actually do do a lot of free local stuff with the kids--parks, short hikes, a petting zoo which is essentially free (just give up some quarters for goat food). 

I think taking some time off will be key.  And I will have more say when/if I become a partner. 

And I am thinking more about calling and saying I just can't come in to the office if I have been up most of the night.  And people will have to deal.