From 40 K to 200 K net worth in 2.5 yrs. How can I do better?

[AI_79]

Hi all, I’m a long time reader of the blog and forum but first time writing here and I must confess why : I’ve tried a few times to register but I couldn’t get the right answers to the 3 questions, so I just thought I do not deserve to be a forum participant until I’m able to get them right . But then I had the great idea to “cheat” and give a search on the blog and I finally made it 
I leave in EU, in one of the low-income (but still rather high cost of living) countries. 2.5 years back I read MMM for the first time and calculated my net worth. It was only 40 K USD after both me and my husband had been working good jobs for 12 years and our income having been on an upwards trend continuously during this time. I always had a “feeling“ we were not rich (as we lived in a house bought with mortgage, drove 2 leased cars, lived paycheck to paycheck etc.) but I had never had the inspiration (or gut?) to really put it down on paper and find the truth. What was sadder was that we did not even remembered where our money went, just the many small staff you buy every day plus lifestyle inflation. First month we manage to save about 500 USD and the very next day, first thing in the morning, we were at a supermarket and bought a bigger TV – we even had to wait for the shop to open – it was like we were terrified to be left with some money before the next paychecks came. The next attempts were more successful fortunately and we grew stronger. Since then, we started to control where our money goes and now, after 2.5 years, we have a net worth of ~ 200.000 K USD.
Here are our last year numbers:
net income (salaries + bonuses+ rental)                      135,684
mortgage (house we live in + 2 rental properties)              11,684
Food (groceries + eating out 1-2 times/week)              14,211
Car (gas, maintenance, insurance)                                3,763
Other (clothing, fun, donations)                                      12,000
House related expenses (utilities, security, taxes etc.)        6,316
Kids activities (afterschool, extra classes)                        4,737
Travel (mostly abroad)                                              16,579
Total spend                                                              69,289
Total saving                                                              66,395
Saving rate                                               49%

My questions are:
-   There are months (not very often) when we feel “tired“ of saving and of not “leaving up to our income”; (there is a stupid saying in our country that sounds like this: “if you save money, you invite poverty into your house” – this is hunting us now and then, as we grew up with it) - when we feel this, we usually book another travel and that’s why our travel costs were so high last year. How do I better overcome this “saving fatigue”? Is this feeling a sign that we are incurable spendypants and that frugality is not for us?
-   Where do you think we could save more? I realize travel in particular has been high, but for us it’s important to build memories with the kids and to offer them vacations that we never had (+ to escape often from our workplaces, to be honest). We are considering buying a van and travelling more within the country for a different, more off-grid, type of experiences.
-   Is it too late for us (my husband is 42, I am 38) to be able to achieve FIRE at a decent age (let’s say 50)? I used to think not, but my husband traveled recently to US where he overheard a conversation on FIRE (hot topic sounds like  ) where someone said that if you are in your mid-forties the only realistic investment you can make is your health, as it is too late to accumulate enough to FIRE.
This being said, I must say a big THANK YOU for all the life-changing perspectives I’ve found here.

[Calvawt]

Many would argue there is a lot of fat to trim on your expenses across most of the categories like food, other, travel, etc.  I, on the other hand, think you have found a savings level that works for your situation.  Going from saving essentially 0% to saving almost half is a tremendous lifestyle change and something you should be proud of for achieving.  If you think is sustainable, then you could try to improve a bit each year or decide to just maintain.  I think another 10-12 years of saving and you will be very close to FI.  Retiring at ~50 is definitely not out of the question, especially if the kids are close to getting out of the house at that point!

Congrats on the big turnaround!

[chickinyow]

I think you have done fantastic to save so much in just a couple years while still living a nice, enjoyable life with travel, etc. I can see you easily being able to FIRE in 10 years or so with this rate of saving. Congratulations on such good progress.

[Imma]

I definitely don't think it's impossible for you guys to retire in 10-12 years at all. Right now you add about 60.000 to your net worth every year, so that's an additional 600k-700k + interest/dividends on top of your current net worth. This will probably tip your net worth over 1 million USD by the age of 50 and I think you can easily FIRE with that amount of money in probably all European countries. By that time, some of your mortgages might be paid off so your costs could be lower. If you will receive some sort of company pension or state pension by the time you reach conventional retirement age, you will need less money to FIRE.

That being said, there's still quite a lot of fat you could cut out, if you wanted to. First of all on groceries. You spend nearly 1200 $ on food every month and eat our very often. You can probably cut this by half if you really, really wanted to. You could obviously cut back on travelling, maybe on car costs and the "other"  category can almost certainly be decreased a lot. If you could cut groceries, travelling and "other" by 50%, that would be another 20k a year (and you'd still be able to spend 8k on travelling!) which would be 200k-250k + interest/dividends by the age of 50.

[havregryn]

I would be curious to know where you guys live. You say it is a low income country, but your after tax income of more than 100 000€ per year would be a lot even here in Luxembourg. I.e. it would be way over the median.  This is the richest country in the EU and still not that many households have this much net income from work.
So you must be earning waaay more than pretty much everyone else around there which I guess in a way explains why you feel driven to spend a lot.

Your rentals, what are they and how much money do they bring in for you on top of what you spend on them?

[AI_79]

I definitely don't think it's impossible for you guys to retire in 10-12 years at all. Right now you add about 60.000 to your net worth every year, so that's an additional 600k-700k + interest/dividends on top of your current net worth. This will probably tip your net worth over 1 million USD by the age of 50 and I think you can easily FIRE with that amount of money in probably all European countries. By that time, some of your mortgages might be paid off so your costs could be lower. If you will receive some sort of company pension or state pension by the time you reach conventional retirement age, you will need less money to FIRE.

That being said, there's still quite a lot of fat you could cut out, if you wanted to. First of all on groceries. You spend nearly 1200 $ on food every month and eat our very often. You can probably cut this by half if you really, really wanted to. You could obviously cut back on travelling, maybe on car costs and the "other"  category can almost certainly be decreased a lot. If you could cut groceries, travelling and "other" by 50%, that would be another 20k a year (and you'd still be able to spend 8k on travelling!) which would be 200k-250k + interest/dividends by the age of 50.

Imma, we are contributing to state pension but have not considered that at all in my calculations as everyone is very pessimistic about how pension system will look like in 20 years from now. We would anyway be eligible for that pension no sooner than the age of 62-65. So far we invested everything in real estate, which is not very wise from a risk diversification perspective but it's what we know best and feel comfortable with. I agree in food section there is enough room to cut, especially that we both have weight issues, so sometimes we pay nutritionist as well, which is so stupid (face punches 100 times!)

I would be curious to know where you guys live. You say it is a low income country, but your after tax income of more than 100 000€ per year would be a lot even here in Luxembourg. I.e. it would be way over the median.  This is the richest country in the EU and still not that many households have this much net income from work.
So you must be earning waaay more than pretty much everyone else around there which I guess in a way explains why you feel driven to spend a lot.

Your rentals, what are they and how much money do they bring in for you on top of what you spend on them?

.
Havregryn, we live in Romania, where average net salary is 7600 USD per year, so yes, we are way above the average due to both working well paid jobs in IT. We have 2 rentals (small apartments) partially bought with mortgage, that bring a net return of ~4%; most of our income is represented by salaries. And it's damn hard sometimes not to spend this money lavishly, especially that we were raised in poverty (even though one would expect that when you overcome the poverty state you take good care of your money...)

[havregryn]

I get where you're coming from, I grew up in Croatia. While my family was never relatively poor in the context, they were terrible with money (as is everyone there) and I think we need to acknowledge that by modern Western standards, pretty much everyone in these post-communist places at that time was dirt poor anyway.

In my experience, young people brought up under these conditions who are now living in a more opulent contemporary setting developed in one of two ways. One group became very anxious about money and can't really relax spending it for fear of becoming poor. Investing also comes hard to them as they are very risk averse.
I belong to that category as do a lot of my friends as I feel we naturally grouped as it's a rather strong lifestyle determinant.
The other group is anxious about *not* spending money, it is more like what you describe you've been doing up until now. I think that's the people whose experiences were more marked by the instability of savings, losses etc that plagued our region in the 90s. My parents never saved any money so they never had anything to lose, but many people lost a lot to surreal bouts of inflation and other kind of crap that is difficult for the predominantly American audience here to imagine. But if you live with anxiety that your savings can disappear overnight it is difficult to feel content with foregoing something in exchange for a money stash.

I think there is also a bit of a cultural expectation in the post-communist world that you need to show your money. There is not much appreciation for the kind of protestant modesty that you would see in Germany/Scandinavia.
It is one of the reasons I moved. I am married to a  Swede now and we live in Luxembourg, which is a bit of afterthought but happened due to great job options.

But I definitely understand that in places like Romania there is a lot of social pressure to be the opposite of Mustachian. My mother openly insults me for buying second hand stuff to my kids and considers that to be something deplorable.
I still remember when I once found a dream bag that someone had thrown out back when I was a student. It had a small stain and I brought it home to clean it. She threw it away in disgust the minute I turned my head. I think to her the idea of me taking something out of someone else's trash is almost on par with me getting cancer. It is how she was raised and brainwashed by the society.

Anyway, I think you are doing really, really well and I don't see why you couldn't retire around 50. I expect us to be drowning in money by the time we are 50 lol, and we have slightly more income with slightly more expenses (at least until we get rid of childcare which costs us a major fortune here)and a similar savings rate.
And we need to plan for a significantly higher base cost of living as we need to live here or in Sweden, which are some of the most expensive areas of Europe in terms of housing and consumer prices.

[Imma]

I think @havregryn story makes a lot of sense. I'm from western Europe, but I have several friends who came here from eastern Europe and former Yuguslavia and I recognize the attitude. I also noticed they're more likely to save in cash or gold rather than savings accounts. I guess I never connected the dots until I read this.

You are well on track to retire by the age of 50. With a million in assets you can live lavishly in Romania. I understand why you want to invest in real estate only, and in a fast developing country like Romania real estate could be a really good investment. But of course there are risks involved too and I personally choose to invest in both my own country and abroad, and in both my own currency (EUR) and USD. I would personally always want to have a part of my assets in a different (and major) currency. But of course that's your own choice to make.