Getting our feet wet…. our FI journey in VHCOL (SoCal)

[didshejust]

Life Situation:
Spouse (36), Me (32), 2 kids (3 and 3.5 months)

Gross Salary/Wages:
Spouse - $258k total comp ($165k base + bonus + long term incentive plan)
Me  - $165k total comp ($150k base + bonus)

Monthly take home after taxes/maxing out 401k,etc (not including yearly bonuses - which go straight into our IRA and brokerage accounts each year) - $14,800

Current Stats:
401k - $177k
IRA - $36k
Taxable Brokerage - $122k
Checking/Savings - $40k

Mortgage:
$803k - current mortgage owed
$1.3-1.5mil - current value of home

Current Expenses (monthly):
$5,183 - Mortgage/PITI
$2,200 - Nanny ($500/wk)
$1,600 - Preschool
$250 - Utilities (electric/gas/water/internet)
$385 - Car Payment
$170 - Car insurance
$300 - Student Loans
$435 - Groceries ($100/wk)
$215 - Gas ($50/wk)
$215 - Eating Out (~$50/wk)
$125 - Diapers/wipes
______
$11,078 - TOTAL

 - - - - - - - - - - - -

We do plan on eliminating nanny and preschool costs once both kids are in school, which will bring our monthly costs down to around $7,278/month.

Ultimately, our fire goal is $2.5million, with a lean goal of $2.0million (selling/downsizing home), and a fat goal of $3.0million for a cushion.

Right now I feel as though we are a bit behind on our journey, especially since we just started maxing out our 401ks and IRAs just a couple years ago, when we first discovered fire. We also just opened a brokerage account last year where we now put our bonuses in. I would love to retire or at the very least go part time when I am 40, in 7-8 years. My husband loves his job and would love to retire when he is 50, working 4-5 years longer after I retire/go part time.

Please point out any glaring issues with our plan or if there are things we should be adjusting to get to our goal.

[blingwrx]

I think the major thing is the house. Any reason you couldn’t downsize now instead of waiting until FIRE? It looks like you’d be able to cash in around 600k in equity. That’s enough to buy a smaller home in cash in some decent neighborhoods or since rates are very low now I would say a mortgage is still worth it and invest the rest of the cash. This will cut out most of that 5k expense. I’m sure your utilities would also be lower as well. The excess cash could also be used to pay off the student loans if the rate on that is high.

Your compensation is very high so you should be able to get to lean FIRE quicker if you could live below your means for the next few years. Other expenses look fair but there is a bit of a discrepancy between your listed 11k expenses and 14k take home, some 3k misc spend. It’s a good idea to track every last dollar so you can get a better picture of where money’s going and figure out what you can cut out. 

168k a year in expenses is pretty extravagant spending, more in line with Fat fire. If you want to make it on 2 mil for lean fire that’s about 80k a year at 4% withdrawal, so you’d have to cut your spending in half or maybe more since you have to also factor in healthcare costs after you both FIRE which could be upwards of 20k a year for a family without subsidies.

I know once both your  kids are school aged you’d be able to save more, but expenses will also go up in other areas nullifying those savings. Like saving for their college educations, after school/weekend sports/activities, cars, clothes, electronics, cell phones, allowance ect. I’d say downsizing is a must at some point unless your fine to keep working until you get to 3-4mil+ so then you can retire with everything you want.

I’m also family of 4 living in a VHCOL coastal city but with 1/4 of your income. My expenses are also a quarter of yours at around  40k annually. So I think there’s a whole lot of fat you can trim on your expenses to get you to FIRE faster.

[engineerjourney]

Check if the mega backdoor roth would be an option with your 401K plans!

[tamuaggie2011]

As other people have mentioned downsizing or at least moving to a cheaper house would be the most significant change to your FIRE path.

There are some other questions though such as: What is the $385 car payment for? With a combined income of over 400k you should not have a car payment. That loan should be paid off ASAP.

The student loans as well, you list a monthly payment but not total balance remaining. I would get those paid off immediately as well.

Whether you choose leanFIRE, FIRE, or fatFIRE all of those goals will 1. have you being debt free and 2. It will be so much easier to reach each of those targets once the debts are paid off.

I would recommend making an actual spreadsheet that lists out EVERY monthly expense and also figure where the aforementioned 3k difference between take home and expense is going.

[Sanitary Stache]

The posts above have good suggestions.  Your budget looks idealized and not the result of tracking your spending closely for 1 year.  Which you should do.  I manually enter each purchase every month into a spreadsheet.  Other people have recommended more practical software like YNAB or Mint.

I have been trying to nail down this idea that kids don't stop being expensive.  We are paying about 25% of take home to child care right now with 3 kids at daycare 5 days a week.  I tried projecting out known expenses until college age and figure that once the kids are all in public school, then child care expenses drop about 50% to 13% of take home. 

My mostly uninformed assumption about your lifestyle is that private school is a consideration, in which case you could plan on kid related costs ballooning rather than shrinking.  If our kids need to go to a private school, then our FI plans will need to be adjusted significantly.  Of course, our FI plans are so far out that they are just a direction and some driving rules at this point.

A less significant comment is that you can get really high quality cotton reusable diapers that both kids can use for their whole diaper careers for about 3 months of your current diaper budget.  The older kid might be out of diapers, but when they are both out of diapers then you give the diapers to the first family member/neighbor who gives birth.  A truly mustachian baby necessity.

[Calvawt]

I don't understand where all your money is going.  You have a huge income, but less than 1x of your annual wages saved (not including home equity).  Did your income recently take a huge jump?  If not, you must be spending $10,000 more a month on other stuff.

You are also missing tons of other costs like home repairs and maintenance, vacations, clothing, fun money, car maintenance and repairs, furniture or other home goods/renovations/projects, birthdays, donations, etc.

Here is the good news, you can save more in a year than most people make pre-tax and still have fun and take vacations, have a nanny, etc.  Good luck!

[marty998]

I don't understand where all your money is going.

Holidays, furniture, home repairs, phones, dentist visits, subscriptions, professional registrations, public transport fares, clothes & shoes, hobbies & sport, gym? etc etc

There's a LOT of normal expenses that are not listed in the OP's budget.