Author Topic: FI in 12 years?  (Read 625 times)

twig21

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FI in 12 years?
« on: October 07, 2018, 07:31:49 PM »
Been lurking for awhile and want some advice on how I can be FI in less than 12 years or if I'm currently on track.   Don't necessarily want to stop working but I would like to know I have the option and that myself and family are financially secure.

Life Situation: me 38 wife 39 with 2 kids (1 and 5) - Med/High COL area in the southeast

Gross Salary: ~$150-160K Combined (I'm at $85k wife at $70K or so my wife's income varies a bit but that's about average)

Net Salary: ~$90K ($7,500/mo) Deductions: Medical, FSA, Dependent care, taxes, 403, 457, fsa
   Including employer matches about $40K goes into retirement accounts (403,457, cash pension)
   

Other Income: Basically n/a

Current Expenses:
$1,875 housing (mortgage, taxes, insurance, HOA) - $1,300 P&I roughtly
$500 utilities (gas, electric, internet, tv, phones)
$800 groceries
$800 auto ($200 and $300 loans, gas, tolls, insurance)
$150 restaurants
$500 shopping (gifts, clothes, hobbies, etc.)
$250 home maintenance
Total ~$5K/month

We've also been doing some updating to our house (bought a foreclosure a few years ago) that's not included in the above numbers.  I would expect will spend about $10K per year for the next 1-2 years fixing issues and updating.

The difference of $2.5K - $410 college savings, $200 vacations, the rest goes into savings to cover unexpected expenses, home improvement, or fund a Roth

Assets:
Home: $470K
Retirement Accounts: $270K ($40K of this is in Roth)
Cash $60K
Cars $15K
Total $815K

Liabilities:
Mortgage: $269K (4%)
Car1: $5.5K (2%)
Car2: $10K (2.5%)
Total: $284.5K

Net Worth: $530K


Looking to be financially independent by the time we are 50 or sooner (wife would like to stay home with kids asap).  I'm not necessarily looking to quit working until mid-late 50s but I do want to know that we are financially set by the time we are 50 in case something happens with our jobs, health, etc.  By my calculations I would need $1.5-2M in today's dollars depending how much cushion and how much travel, hobbies we would want to have.

If I left something out let me know.  Thanks.

lhamo

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Re: FI in 12 years?
« Reply #1 on: October 07, 2018, 08:00:04 PM »
You're probably fine in terms of your longer-term FI goal (since you don't want to retire that early), and doing better than the average family in the US in terms of spending/savings, but we try to do better than average around here. 

You are spending a ridiculous amount on food for two adults and two little kids.  We don't scrimp, just try to be mindful of buying what's on sale and planning menus accordingly, and I typically spend $600-700/month feeding two adults and two teens who eat like adults.

The auto-related expenses are also really high. 

"Shopping" is probably much higher than it should be.

Do you REALLY know what your expenses are?  The lack of granularity makes me doubt your numbers.  You say something about "college savings" but don't list any accounts.

Again, you are probably fine, but it looks to me like there are lots of areas where you could cut back without feeling much pain if you want to hit your FI number sooner.  For me, the peace of mind would be worth it, even if you choose to keep working longer.


chasedream2002

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Re: FI in 12 years?
« Reply #2 on: October 07, 2018, 08:15:47 PM »
I don't see any day care cost. Both of you are working and you may need 2000 dollars for day care.

Been lurking for awhile and want some advice on how I can be FI in less than 12 years or if I'm currently on track.   Don't necessarily want to stop working but I would like to know I have the option and that myself and family are financially secure.

Life Situation: me 38 wife 39 with 2 kids (1 and 5) - Med/High COL area in the southeast

Gross Salary: ~$150-160K Combined (I'm at $85k wife at $70K or so my wife's income varies a bit but that's about average)

Net Salary: ~$90K ($7,500/mo) Deductions: Medical, FSA, Dependent care, taxes, 403, 457, fsa
   Including employer matches about $40K goes into retirement accounts (403,457, cash pension)
   

Other Income: Basically n/a

Current Expenses:
$1,875 housing (mortgage, taxes, insurance, HOA) - $1,300 P&I roughtly
$500 utilities (gas, electric, internet, tv, phones)
$800 groceries
$800 auto ($200 and $300 loans, gas, tolls, insurance)
$150 restaurants
$500 shopping (gifts, clothes, hobbies, etc.)
$250 home maintenance
Total ~$5K/month

We've also been doing some updating to our house (bought a foreclosure a few years ago) that's not included in the above numbers.  I would expect will spend about $10K per year for the next 1-2 years fixing issues and updating.

The difference of $2.5K - $410 college savings, $200 vacations, the rest goes into savings to cover unexpected expenses, home improvement, or fund a Roth

Assets:
Home: $470K
Retirement Accounts: $270K ($40K of this is in Roth)
Cash $60K
Cars $15K
Total $815K

Liabilities:
Mortgage: $269K (4%)
Car1: $5.5K (2%)
Car2: $10K (2.5%)
Total: $284.5K

Net Worth: $530K


Looking to be financially independent by the time we are 50 or sooner (wife would like to stay home with kids asap).  I'm not necessarily looking to quit working until mid-late 50s but I do want to know that we are financially set by the time we are 50 in case something happens with our jobs, health, etc.  By my calculations I would need $1.5-2M in today's dollars depending how much cushion and how much travel, hobbies we would want to have.

If I left something out let me know.  Thanks.

twig21

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Re: FI in 12 years?
« Reply #3 on: October 07, 2018, 08:32:13 PM »
Thanks for the reply

I would love to retire earlier but FI is my main goal, knowing that I could.  My biggest fear is health insurance so even if I retire from my current job I would most likely want a PT job with benefits.

I'm pretty granular but didn't want to get too detailed here.  I keep a spreadsheet of every transaction for the past 3 years or so in order to drill down on categories.  Also, it seems like as much as you would like things to be easy to articulate on a monthly basis things change from month to month.  One month is always higher somewhere and lower somewhere else so I was trying to give a general picture of where our money goes.

As far as college savings we have ~$3k currently (plus another ~$3k from relatives) that I didn't include as I don't really consider it our money

I agree our food budget is a bit high, cooking is a big part of our lives and there is some beer and wine in there.  I have started making a weekly menu and shopping one day a week to try to help with this spending.

As far as auto we could have paid cash for our cars but at such low interest rates at the time I didn't think it was worth it.  Of the other $300 ($100 goes to insurance, $50 to tolls, and $150 to gas).  My wife drives around most of the day for work so that's a lot of gas and my commute is ~40 mi round trip.  My commute would almost double in time without the tolls an hour to 2 hours roundtrip, I consider this the price of new state income tax.  Don't really see how we could cut back here until the cars are paid off.  I have been considering paying them off but don't think giving up the liquidity making the same interest rate as the loans makes sense.

Shopping is pretty broad, I agree.  It includes everything from clothes, shoes, to furniture pads from amazon, a new coffee maker, etc.  Hard to pin point what it is each month but the total amount is pretty consistent.

Again thanks for the feedback, much appreciated.


twig21

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Re: FI in 12 years?
« Reply #4 on: October 07, 2018, 08:36:21 PM »
I don't see any day care cost. Both of you are working and you may need 2000 dollars for day care.


The 5 year old is in kindergarten and the 1 year old goes to "mommy morning out" 3 half days a week (which is included in the deductions "dependent care").  Luckily my in laws watch them the other times.  We pay for their cell phones, tv, and some food which is included in my expense section.  Very glad to have that help, although I did take a $30-40K/year pay cut to move near them.

chasedream2002

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Re: FI in 12 years?
« Reply #5 on: October 07, 2018, 10:23:47 PM »
It is a huge help from in laws. I am spending 20k on day care each year. I think you are on the right path to retire in 12 years.

But many things can happen in 12 years. If you get a huge raise, it may cut the number of years to less. I think your expense is modest for a family of 4.

Good luck and hope things go well!

I don't see any day care cost. Both of you are working and you may need 2000 dollars for day care.


The 5 year old is in kindergarten and the 1 year old goes to "mommy morning out" 3 half days a week (which is included in the deductions "dependent care").  Luckily my in laws watch them the other times.  We pay for their cell phones, tv, and some food which is included in my expense section.  Very glad to have that help, although I did take a $30-40K/year pay cut to move near them.

chasedream2002

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Re: FI in 12 years?
« Reply #6 on: October 07, 2018, 10:33:03 PM »
I did a quick calculation using an investment calculator. Totally you will have about 1.7 million dollars investment in 12 years assuming:

1. You have 7% rate of return after inflation
2. You save about 50k per year
3. You never had a raise during these 12 years, which is very unlikely
4. You are saving something into college fund and your kids are not going to expensive schools

1.7 million can generate about 51k-68k based on 3-4% withdrawal rate.

I think it is enough to cover your cost based on your current expense level. Most likely you will get raises in these 12 years, so I think you should be able to reach FI in less than 12 years. If you get a modest raise of 5k per year each of you, you can reduce the number to 8-10 years.

You also mentioned you are planning to work part time and it can reduce the withdrawal rate even further to 2%. If your part time job can generate some decent income (30k or more), you can quit full time less than 8 years.

Maybe I am wrong, but just my two cents.

Thanks for the reply

I would love to retire earlier but FI is my main goal, knowing that I could.  My biggest fear is health insurance so even if I retire from my current job I would most likely want a PT job with benefits.

I'm pretty granular but didn't want to get too detailed here.  I keep a spreadsheet of every transaction for the past 3 years or so in order to drill down on categories.  Also, it seems like as much as you would like things to be easy to articulate on a monthly basis things change from month to month.  One month is always higher somewhere and lower somewhere else so I was trying to give a general picture of where our money goes.

As far as college savings we have ~$3k currently (plus another ~$3k from relatives) that I didn't include as I don't really consider it our money

I agree our food budget is a bit high, cooking is a big part of our lives and there is some beer and wine in there.  I have started making a weekly menu and shopping one day a week to try to help with this spending.

As far as auto we could have paid cash for our cars but at such low interest rates at the time I didn't think it was worth it.  Of the other $300 ($100 goes to insurance, $50 to tolls, and $150 to gas).  My wife drives around most of the day for work so that's a lot of gas and my commute is ~40 mi round trip.  My commute would almost double in time without the tolls an hour to 2 hours roundtrip, I consider this the price of new state income tax.  Don't really see how we could cut back here until the cars are paid off.  I have been considering paying them off but don't think giving up the liquidity making the same interest rate as the loans makes sense.

Shopping is pretty broad, I agree.  It includes everything from clothes, shoes, to furniture pads from amazon, a new coffee maker, etc.  Hard to pin point what it is each month but the total amount is pretty consistent.

Again thanks for the feedback, much appreciated.