Author Topic: Sanity check please for FI in 10 years and childrens legacy?  (Read 1812 times)

Kem

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Life Situation:
Married, Filing Joint  - 37/34. Children - 7/3. Live in Indiana

I optimize the budget and mind my GAP. I began planning finances around 2012 after growing disillusioned with the American Dream and have been tweaking that plan since.  A number of the savings below have been accelerated due to paying off higher interest silly debts incurred when I was but a child.  I have found that minimalism provides so much more joy than materialism.   

Wifey is a teacher who carries a few thousand in credit card debt.  Her $ responsibilities are Health Insurance, Hygiene costs, children clothes, most children extracurriculars, private school, her clothes.  She has no savings and about 10K in the Indiana Teachers retirement/pension/annuity from following the advice of fellow teachers.  I cover all housing, food, transportation, cellular, deductibles, etc. 

Outside of Health Insurance & Toiletries, my Wife has separate finances from I.  This is, for us, critically required. 

Gross Salary/Wages:
96K/year - 8,000/month Base
Plus 12-40K/Year Commission range (not in numbers below)
Wife’s - sadly not in scope of planning

Individual amounts of each Pre-tax deductions/month:
FSA:                100
401k:               160 (to max match of 2%)
Total:              260

Taxes/month:
Fed:                802
SocialSec:          492
Medicaid:           116
State:              252
County:              74
Tax                1736

Current expenses:
Mortgage/
Mortgage (P&I)     1061 @3.875% fixed
Mortgage MIP         90 *drops off March 2020, then to TOD
Estate Taxes        242
Insurance            73
Total              1466   *195 of 245K

Loan/
Student Loan        285 @5.01% fixed
Loan Extra          165 Extra paid to eliminate loan in 10 years
Total               450 *42 of 105K

Monthly Outflow/
Sewer/Water/Power   400
H20 Insurance         3
Dual Cell Service    78
Internet             60
vpn                   4 *enabled when banking/shopping
crashplan            10
Auto Insurance      119
Auto Fuel Max       150 *extra to TOD
Grocery Max         600 *extra to TOD
Restaurants          60
Other R&R            30
Term & AD&D          38
Spine DR             86
YMCA                 72 *Family Pool and Wife cardio
Martial Arts         65 *Eldest Child
Gym near office     145 *Only feasible way for me to lift heavy currently (long story here)
pandora               5
Netflix              29
Amz Prime            10
Consumer Reports     3   
Grass Care           36
Trash Pickup         15
Total              2018

To Ally at 2.2%/
Personal Play Money  50 *Clothes, tech, etc
B-Day Dinners        15 *for the 3 ladies
Wife Gift            30
Kid Gifts            10
Zoo                  10
Pet Maint            85
Auto Maint           50
Home Maint          200
Emerg               100 *small pre-Roth padding.  Interest rolls into this bucket
Total               550

Remaining Capital  1520
ROTH IRA            500
TOD Brokerage       720 *VTI
Fundrise            300
Total              1520

Base Monthly Investments including employer Match: 1,840 (or 22,080/year)
Note that all Commissions are now used to fund Taxable + Fundrise at 7:3 split.
So… I will expect to contribute between 33K - 50K / year into the seeds.


Assets:
Home            242,000
Cash              8,310 *includes ally funds.  Some BIG hits in 18 depleted reserves
401K             13,900 *expensive funds, limited selection
Fundrise          2,318
Taxable           4,682         
Roth IRA         62,649 *Main Emergency Savings pool
IRA              24,344
Total           358,203

Liabilities:
Checked yearly for potential refi savings. 
A reduction in fixed rate that results in a monthly payment will usually be sought.

Mortgage 2009
Original Loan of 245K
Balance of       195K
Fixed Rate     3.875%
Monthly        1466 *Payoff 2058

Student Loan 2005
Original Loan of 105K
Balance of        42K
Fixed Rate      5.01%
Monthly       285  *Payoff 2039
Extra Monthly 165  *Payoff 2028

Specific Question(s):
My goal is to in 10 years be able to sell my house, which assuming a static value post fees, for 81K net cash - and have at least 800K in investment seeds.  Given the current optimizations, does anyone note any glaring issues or commentary? 

With an 8% return I would expect to see 750K - 1MM in 10 years worth of investments.   
Our basic living costs post children/pets sans living/travel appear to be covered (at a 4% out) with 500K.

I will pull out my ROTH contribution with the home equity and buy 2 quads.  1 for my eldest daughter to live in and begin managing 3 tennents and 1 for us to do the same.  The eldest daughter will be paid for the management of the 3 tennents during those 4 years.  After 4 years of 6 tennents worth of income I want to gift the 1st quad to my eldest daughter, move out of the second quad and repeat the process for my youngest daughter.  At this point I would like to grow into a roll of traveling author and artist.   

As a side note, I’ve been crafting a book series to pass on these life lessons as a gift to my children and plan on providing these books for others’ education.

Our house is not expensive for our area.  We choose to live near our office/schools so that travel time is under 10 minutes.  In addition we have excellent parks and community entertainments.  My car is a 2002 220K mile honda accord - my wife’s car is a 2006 105K mile mazda 3 --- both are well maintained and kept free of cancer.     

Thanks ‘Stachers!
« Last Edit: April 23, 2019, 08:24:52 PM by Kem »

actonyourown

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #1 on: April 23, 2019, 09:56:15 PM »
Quote
I will pull out my ROTH contribution with the home equity and buy 2 quads.  1 for my eldest daughter to live in and begin managing 3 tennents and 1 for us to do the same.  The eldest daughter will be paid for the management of the 3 tennents during those 4 years.  After 4 years of 6 tennents worth of income I want to gift the 1st quad to my eldest daughter, move out of the second quad and repeat the process for my youngest daughter.

This is the most glaring issue I see.  Why are you planning your daughters' future?  That seems a bit excessive and assuming a lot.  I don't know of a lot of 17 year old landlords, and probably for a good reason.  I would keep it as a possibility but don't bank on their aspirations for themselves being the same as your aspirations for them.

ixtap

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #2 on: April 23, 2019, 10:00:49 PM »
Quote
I will pull out my ROTH contribution with the home equity and buy 2 quads.  1 for my eldest daughter to live in and begin managing 3 tennents and 1 for us to do the same.  The eldest daughter will be paid for the management of the 3 tennents during those 4 years.  After 4 years of 6 tennents worth of income I want to gift the 1st quad to my eldest daughter, move out of the second quad and repeat the process for my youngest daughter.

This is the most glaring issue I see.  Why are you planning your daughters' future?  That seems a bit excessive and assuming a lot.  I don't know of a lot of 17 year old landlords, and probably for a good reason.  I would keep it as a possibility but don't bank on their aspirations for themselves being the same as your aspirations for them.

I wasn't sure if I was more struck by this or by such a clear plan for one kid and no mention of the other.

Also, very unclear what life lessons you expect to pass on, especially if they are going to grow up seeing two very different money management styles.

marty998

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #3 on: April 23, 2019, 10:19:44 PM »
No use you rowing the boat left if your wife is trying to go right.

Putting her down as "not in scope of planning".... what does that ultimately mean for your plans together?

Also, love the old typewrite font. Throw back to the 1980s haha.


waltworks

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #4 on: April 23, 2019, 10:22:06 PM »
I would be hesitant to plan on 8% returns over the next decade. I mean, it *might* happen, but I'd be pretty surprised. I personally use 4% for my medium-term planning right now. Setting aside the house, you have a NW under $100k, so you have a long road ahead.

I don't know what to make of your quad-buying plan, but it's pretty weird. Why quads specifically? Why 10 years from now? Is the rest of the family on board with, or even aware of this plan? The kids are 7 and freaking 3! You know *nothing* about what they'll be like or what they'll want to do with their lives in 10-15 years. Pro Tip: They might not like following your plan as young/independent adults.

If you're at your FI goal at that point anyway, why do you want to get into managing real estate (before taking on the "roll" of a traveling author)?

Keep it simple. You're doing fine doing what you're doing. Keep plugging away and you'll have a decent shot at FI in 10 years if you get lucky with market returns. If you want to improve those odds take a hard look at some of your spending (none of it is outrageous, but the utlities and the gym membership... ouch). 

Assess your plans for RE investing or traveling-guru gigs when you get there.

-W


reeshau

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #5 on: April 24, 2019, 02:24:42 AM »
No use you rowing the boat left if your wife is trying to go right.

Putting her down as "not in scope of planning".... what does that ultimately mean for your plans together?

+1

Separate finances?  Not my thing, but OK.  Separate plan?  Um...do you think you will still be married?  You need to coordinate, at least, or you will be in a mess no matter what you do.

Kem

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #6 on: April 24, 2019, 05:29:40 AM »
Thanks folks!

My main plan is to have FI in 10 years (when eldest graduates high school) and the option for RE in 14 years (when youngest does so).

The secondary plan for the kids and RE plans are much more fluid... And a lot can change on these.

10 years is when the first daughter graduates grade school and I want the options that FI allows available by then so that I can help them in a way that I was not.  My eldest was born in 2012, and that's when I began planning and digging out of a great deal of debt.

The plan for both daughters is the same.  That is so far out that it may change and it relies a great deal upon market conditions.  If they have no interest, then I'll not force it upon them.  My hope is to start them out in life with their own businesses and free housing. 

For what it is worth, I sit down with my eldest monthly and go through finances at a high level.  We also look at how her UTMA has been doing quarterly since she was six.  When she is given gifts, she almost always chooses to invest the full amounts. 

My reason for wanting to help my kids in this way is because my parents / peers forced college as the only viable option to move up in life.  It wasn't worth it and in many of the required courses I ran circles around the prof assistants teaching for the day.  2 Aviation degrees in the early 2000s...
If kids want to go a different direction, I'll do what I can to prevent a debt buildup.

I plan on remaining married, hower my wife will not talk money.  Her single mom preached against the topic as evil.   Of course her mom is now facing relying upon social security for retirement with no savings or investment and a second mortgage on the house.  The biggest issue is that my wife is content in spending everything - she loves Starbucks, shoes, and clothes.  She is aware of my desire/plans and grows excited to hear about them.. Just isn't directly helping.   She is good with my budgeting of funds/family funds, but has zero desire to do so for her own.  I came to peace with this disparity a long time ago.  So, my planning includes covering her living expenses just as I do today - just not including her income.  She knows that she'll need to continue a form of work to fund her spending upon RE (in about 14 years).   *my hope* is that with the nastiest debts wiped out and investments accelerating... That she'll come around in the next year or two to open discussions of inclusion rather than just tax time status updates - but it is a hope and not an expectation.

In regards to quads, from the last few years of looking, an older depreciated house converted into a legal quad in my area appears to have the greatest roi.  Child interest and market conditions may sway this.

Utilities are about as low as I can get them (cool house in winter, warm in summer, LED bulbs, minimal electronics use, etc).  The water use is a bit high with 3 girls that each like baths over showers.   The biggest utilities are city fees and sewer.

Gym... High level.   In order to not take away evenings with the family I work out on the way to work.  The only gym with free weights and an ok to drop rule is expensive.  But... I broke my back in early 2000s and tore a lat....long story here, but by keeping up with heavy compound lifts I greatly minimize daily pain.   So, while expensive, the dual gym memberships are greatly valued in our lifes.  My wife does 4-5 hours of cardio per week (mostly rowing due to leg injuries from running) and my daughter's swim for 2-3 hours per week.

Cheers on the font.  It's a fixed width, so allows the numbers to line up nicely

4% on planning huh... Time to rerun some scenarios :)
« Last Edit: April 24, 2019, 06:14:19 AM by Kem »

Kem

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #7 on: April 25, 2019, 06:17:11 AM »
Digg:

Sewer is $80.  Our community is petitioning for the city to assume this service which, if successful, would save $50.  I just wrote a fresh letter.

City fees (water, street cleanup, parks, etc) are $60.  No sway without moving (and selling fees vs current equity is not currently a kind tradeoff).  Nothing like buying a house at the peak of the bubble.

Power/Gas is at $260.  This is on 12 month rolling a budget plan.   I replaced all our lights with LEDs and our 15 year old TV (for movies) with a budget LED model in the fall and our consumption has drastically dropped (current utility charges are $110 lower than the current bill) This fee should be going down in the near future - plus a good portion of credit for the following year due to these 'overpayments'

99% of my weekly cooking is done on Sunday via a ceramic charcoal grill.  I include that fuel cost in my grocery budget.

Looking at used rubber bumpers, a floor pad, and the metal bits it would take 2-3 years of free weights gym cost to recoup (ignoring lost opportunity costs).  If a stellar deal comes along, this may sway me.  For now, the 145 is a value add worth the pinch.....  I'd really need to pinch down to consider going cheap iron in the backyard... The mental game to keep up the regime in NWI winters... Well... It'd be tough.

Wrote a letter to boss in January and bumped my salary 14%. 
In 12 years, never asked for a raise before.
« Last Edit: May 16, 2019, 02:58:07 PM by Kem »

mistymoney

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #8 on: April 28, 2019, 06:04:37 AM »
I know you are planning on your own and waiting to get the wife onboard, but how much is the private schooling? And how much is that vis a vis your wife's teaching income?

I'm just wondering if she has the ability to do better in that scenario.

If you truly want to get her onboard, she can't be responsible for bills that are all/nearly all of her salary. If she is carrying credit card debt on a continual basis, it might help to start small and have her set her own monthly personal spending for her and the girls clothing and activities, and have you contribute or take over some of the other bills so that she is actually able to work on staying within budget.

And I'm putting that out there not as a way to instantly save money on a monthly basis. But for her to set some spending levels - even if those are high - and stick to them. This would develop some skill and attention to income/outgo even if it did not save money. It would also perhaps get her more interested if she felt a measure of contol - where she could save or splurge a little here and there.

Private school isn't cheap, girls clothing and activities are not usually either. And teaching in some location is not well compensated. Make sure that the distributions of expenses are fair given the income level.

Also - I wonder if this arrangement has sprung from different parenting style whereas you wife is advocating for a higher living standard for the girls than you want and the solution is to make her pay for it. That could breed some resentment down the line - and it would be better to make compromises from both ends than to exercise control via the finances because your income is higher.

Just some thoughts for you to consider.

Kem

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Re: Sanity check please for FI in 10 years and childrens legacy?
« Reply #9 on: April 30, 2019, 04:04:56 PM »
Thank you MistyMoney.  Hopefully you mind not my masticating upon your viewpoint for a couple of days.

Keeping in mind that for the first 12 years of our relationship I viewed money through a financially illiterate eye it would be most inequitable of me to now force upon my DW a mindset that she has not yet (and may never) fully embrace.  However I do hope.

Thankfully she has been open enough to set out what she views as a fair financial contribution to the household (and quickly lets me know when she believes otherwise).  The private schooling is not a large allocation of her paycheck as it is heavily subsidized by our time with the church (Lutheran school) and community contributions (we both coach state & nationally competitive academic teams).   Beyond this she is very uncomfortable discussing money (and that is 100% her mom talking). 

A number of times in the past I have paid off her credit cards with the agreement that she not carry a balance going forward – and yet they keep creeping back up to the threshold she is comfortable with.  I have not paid them off in the last 2 years due to this.   My suggestion early this year was, I would again pay them off on the condition that we sit down and set a budget that she would be comfortable maintaining and hold herself accountable to.
Even assuming her CC’s at a zero carried balance, DW’s monthly discretionary after her expense obligations is nearly equal to my investments allocation.  We are, thankfully, in an area where teachers are paid a higher than average salary.

My family pushed for college (at no consideration of the consequence), new off the lot cars every 100K, big vacations, etc – and they ended up in debt counseling shortly after I began adulating.  They were thankfully open to talking money, just too tied to the American Dream to look (or know where to look) for more fulfilling paths.

In regards to the lifestyle DW wants for the girls, I have yet to hold any of them back as I want their lives to be filled with varied and rich experiences and thus far I have not sensed any resentment. 

….

Now on the positive, without my prodding she has improved in her life in meaningful ways over the last 3-4 years. 

Rather than an entire trunkload of clothes going to goodwill on a yearly basis she is down to 2 large bags. 

After seeing the progress I made to my personal health (dropped 100 pounds of fat, put on muscle) she began following plans I tailored to her (tweaked as she progressed) and she has lost 40 pounds (and no, I didn’t push her into this decision via comments/jabs/guilt/etc). 

Her desire to pickup food out 3-4 nights a week has been curbed down to $60 worth/month for the family (shared) and she (and the kids) prefers my cooking (which I fully took over from her) to the point that her co-workers have some envy.

 Her car required shopping trips are down to 1 per week rather than 3-4 per week. 

And her CCs are down to a lower 4 digit number maintained rather than 5 digit one. 

The big enemies to getting her on-board (and contributing a portion towards FI) are not tracking/maintaining a gap, starbucks, and clothes (for all 3 girls)… or really not setting out a budget.