Author Topic: high income right now, spending is also high, want option to retire soon  (Read 5045 times)

jimbooker

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I'm married, with a pretty high income at the moment. We have two kids, one just started college, the other starts in five years.

I'm 55, wife is 53.

I'd like to have the option to retire pretty soon, at a similar standard of living. I don't want to stop working, but would like to have the financial security to have the option to quit my job and try a somewhat risky startup idea (using investors money, not mine).

We have a pretty big home renovation underway right now, finishing up in a month or so.

College is the only other big expense we're anticipating.

I realize we spend a lot of money on crap. We live in a fairly expensive suburb just outside of Boston.

We get an excellent health care plan via my employer (I'm pretty scared to ever stop working for them for that reason).

Our mortgage has another 25 years or so on it, which is a little worrying. But we like our house.

With the college expenses, it's hard to see how I could  afford to stop working for the next ten years at current spend rates.  If I did the startup route, our family income could probably drop to 75% of current income or even less.

May be some arithmetic errors below, I didn't use a spreadsheet, and made some updates by hand. But the big picture is roughly accurate.







INCOME                 ANNUAL   
Taxable.............   $257,128

PRE TAX SAVINGS        ANNUAL   
401k................   $32,000
HSA.................   $2,200

TAXES                  ANNUAL   
Federal..............  $44,395
State................  $12,512
total Taxes.........   $56,907
                 
POST TAX SAVINGS    ANNUAL   
Schwab..............$50,400
         
FIXED EXPENSES      MONTHLY   ANNUAL   
Mortgage payment....$3,400    $40,800      We're 5 years into a 30 year 3.625% mortgage, with $400K balance remaining
Charity.............$200      $2,400
Cell Phone..........$160      $1,920
Electric............$120      $1,440
Gas.................$186      $2,235
Water...............$100      $1,200
Internet............$50       $  600
Spotify.............$10       $  120
Amazon..............$10       $  120
Netflix.............$10       $  120
Life Insurance......$280      $3,360
Home Maint..........$1,000    $12,000
total Fixed.........$5,240    $66,315

           
VARIABLE EXPENSES   MONTHLY   ANNUAL   
Auto Ins............$230      $2,760
Groceries...........$600      $7,200
Gifts & Community...$250      $3,000
Restaurants.........$775      $9,308
Travel..............$1,800    $22,000
Crap................$500      $6,000
total Variable......$3,689    $50,268




ONE TIME EXPENSES

                     ANNUAL
College Kid#1......  $72,000    for next five years
College Kid#2......  $80,000    in four years, for four years
Home Renovation....  $160,000   now

Total one time costs:  $768,000

Total Savings Right Now:

401K................. $200,000
Taxable Investments.. $1,000,000
Cash................. $50,000

================================================================
Total savings + cash... $1,250,000
Home est. value........ $1,300,000
Mortgage remaining..... $  400,000

Approx. Net Worth.......$2,150,000


Income         $257,128
- Taxes        $56,907
- Savings      $81,165

===========================
SPENDING       $119,056








« Last Edit: June 19, 2017, 11:14:30 PM by jimbooker »

Sydneystache

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Why are your renovations so high? $160K?!!! Are you getting gold taps or something? Will you be even able to enjoy your renos?

Also, a 25 year mortgage means, worst case scenario, you'll be 80 when you finish paying it off. Pay it off man and enjoy life or this is going to be a millstone around your neck.

Sorry but you're a consumer-sucka. *facepunch*

Edit: Ok, you actually have the investments to pay off the mortgage but yeah, those renos, the restaurants...I think you know where to trim the fat off.
« Last Edit: June 19, 2017, 11:16:42 PM by Sydneystache »

jimbooker

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Why are your renovations so high? $160K?!!! Are you getting gold taps or something? Will you be even able to enjoy your renos?

Also, a 25 year mortgage means, worst case scenario, you'll be 80 when you finish paying it off. Pay it off man and enjoy life or this is going to be a millstone around your neck.

Sorry but you're a consumer-sucka. *facepunch*

We had the entire ground floor redone, kitchen, living room, first floor laundry, and two upstairs bathrooms fully updated, entire attic is now a beautiful apartment. Yeah it's expensive, but we do really love the house. after this renovation is done, we're not going to want to leave home much , which should actually save some money.  Anyway, its a sunk cost, we're not anticipating any other major home expenses except maintenance for next couple decades.

I have included ~$1k / month in home maintenance costs forever in our budget... that covers repainting a couple of times and fixing exterior woodwork, etc, for 1890's house over next couple decades.


jimbooker

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yeah the eating out is out of control. We have to do something to cut that down. I think we need to set a fixed budget for the month, and when that's used up, no more eating out.


Sydneystache

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I'd tackle all those things you have listed under your Variable Expenses as they are pretty much low-hanging fruit. Travel is excessive unless they include one overseas trip, business class once a year.

I presume the college fees are non-negotiable and with your net worth, do you really need life insurance?

ixtap

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You currently have enough in savings to live on about $50k a year. That is, less than half what you are currently spending, slightly more than your mortgage payment. Even including your home equity as part of your portfolio, you come up $20k short.

At your current rate of savings, you *might* be able to retire to this lifestyle at 65, if you forego the one time expenses you have planned. That is, you basically seem to expect to channel what you are currently saving to college expenses, so you will not have any additional savings over the next eight years.

You have more control than you think over a number of items in your "fixed expenses." However, your biggest controllable expense right now is travel.

trashmanz

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Yeah, with your solid net worth seems excessive to have life insurance unless you have other dependents or really want to provide a windfall.

msilenus

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If you want to retire soon, you need to sell your house and move somewhere cheaper.  You can pay cash for a downsized home that costs zero for mortgage and less for water, electricity, gas, maintenance.  This is the biggest thing you can do.  It would zero out $40k of your $66k in fixed, shrink another 20k of it, and probably increase your investments, too.  The impact could be bigger than zeroing out variable, which isn't possible because you put literally all your food in variable. 

You don't have to do that now.  Personally, I plan on doing it when my kids are in college.  Maybe for you it's an "if I retire" thing.  I use cFireSim to simulate the effect of that distant-future downsizing and backtest it against market performance, sort of like a personalized Trinity study.  You're also close enough to normal retirement age that SS might cause an uptick in your SWR.  cFireSim could also help you figure that out.

There's a neat piece of fiscal alchemy you can do with your charitable contributions: while you're working, contribute about $60k to a DAF, perhaps spread over a few years.  (This is 25x your annual charitable gift, enough to annuitize it forever under the 4% rule.)  Make your charitable contributions out of that going forward.  Eliminate charity from your line items on the one hand, but subtract the $60k contribution from your net worth on the other.  This would be break-even under a 4% SWR, but: now add about $25k in tax benefits back to your net worth.  You come out ahead on your FI calculations because the post-retirement tax benefit of charitable contributions is near zilch, and $25k > zilch.  (By approximately $25k.)  You can cut me a check for whatever you think is fair*.  This is some reading on DAFs and how they work:
    http://jlcollinsnh.com/2012/02/08/how-to-give-like-a-billionaire/

Your taxable savings are very large relative to your sheltered savings, so you probably aren't taking full advantage.  I'd start doing backdoor Roth conversions, and mega backdoor Roths if your 401(k) plan allows them.  You aren't maxing your HSA even though it's the best account you have access to.  Mass allows you to deduct $1k a year for contributions to a 529, and you can take that free money for a while.

But again: by far your biggest ROI in terms of financial optimization will come from rethinking your relationship to your current house.  Second up is the stuff that's obvious under "variable."  Most of the rest is kind of frittering about the edges.  They might be worthwhile on their own, but would make a much bigger splash percentage-wise if the bigger items were figured out.  Good luck.

* Just kidding.
« Last Edit: June 20, 2017, 02:05:30 AM by msilenus »

Feivel2000

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Aren't there tax free saving accounts for education purposes?
Not an expert, but pretty sure I heard about them.
« Last Edit: June 20, 2017, 04:01:00 PM by Feivel2000 »


dmac680chi

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Aren't there tax free shaving accounts for education purposes?
Not an expert, but pretty sure I heard about them.

I don't believe so according to this:
https://www.quicken.com/how-choose-between-tax-free-college-savings-accounts

Typically people start 529 accounts when their children are born.


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Feivel2000

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Aren't there tax free shaving accounts for education purposes?
Not an expert, but pretty sure I heard about them.

I don't believe so according to this:
https://www.quicken.com/how-choose-between-tax-free-college-savings-accounts

Typically people start 529 accounts when their children are born.


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Yes, 529 college savings plan. That's what I meant.

https://en.m.wikipedia.org/wiki/529_plan


okits

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You back-out numbers showing your annual spend at ~119k, but your itemized expenses are only about $8900 a month. There's ~$1000 a month missing.

Quote
I'd like to have the option to retire pretty soon, at a similar standard of living.

This would certainly be nice, but the truth is, you haven't earned it yet.  You like your expensive house and renovations, which is fine, as long as you're willing to keep working to pay for them.  Your food spending (almost $1400 on groceries and restaurants) is eye-popping.  Some families live on your annual travel budget, alone.  The monthly $500 on crap and $1000 unaccounted for are both areas ripe for improvement.

You haven't mentioned your wife's wishes in all this.  Does she want to downsize your lifestyle so you two have the option to retire and pursue the start up?  You need to be on the same page.
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former player

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okits said it for me too: what does your wife think?  You are not going to cut any of those expenses unless she is on board.

Travel $22k a year?  WTF?  How much of the earth's ozone layer is that removing?

$160 a month on cell phones is stupid.  Why do you need all three of Spotify, Netflix and Amazon?  Have you price checked your car insurance? (And is that very expensive house insured at a value that takes into account those eyewateringly expensive renovations?)

Personally I'd nix the life insurance: if you die you wife could sell the house and be rolling in it anyway.  You have a bigger need of disability insurance, in case something happens to you that stops your income while leaving you with big ongoing expenses.

Your budget allows for future home maintenance but not for other future capital expenditure such as replacement cars, computers and appliances.  Sorry: your budget just went up again and your retirement date just went further into the future.
Be frugal and industrious, and you will be free (Ben Franklin)

dycker1978

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Your math does not add on your house.  You said you pay $3400 a month, have 25 years left, but only owe 400000. 

This doesn't make sense, at $3400 a month that is right around 10 years to pay $400k

index

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Your math does not add on your house.  You said you pay $3400 a month, have 25 years left, but only owe 400000. 

This doesn't make sense, at $3400 a month that is right around 10 years to pay $400k

??? You can't just take 400k/3400.  400k for 25 years @ 4% is $2100, add taxes and insurance on a 1.3M dollar house and you get to $3400 really fast!

dycker1978

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Your math does not add on your house.  You said you pay $3400 a month, have 25 years left, but only owe 400000. 

This doesn't make sense, at $3400 a month that is right around 10 years to pay $400k

??? You can't just take 400k/3400.  400k for 25 years @ 4% is $2100, add taxes and insurance on a 1.3M dollar house and you get to $3400 really fast!

$3400 has been said to be the mortgage payment.  Here at least insurance and taxes are not included in that.  At 3.65% it amortizes out at just more then $2000 a month.  The insurance I have here runs at $600 a year on my $300,00 house so $2400 a year on 1.3 million aprox.  That leaves $1400 a month in property taxes to make this make sense.  $16, 800 a year in property tax.  I would move.

index

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Your math does not add on your house.  You said you pay $3400 a month, have 25 years left, but only owe 400000. 

This doesn't make sense, at $3400 a month that is right around 10 years to pay $400k

??? You can't just take 400k/3400.  400k for 25 years @ 4% is $2100, add taxes and insurance on a 1.3M dollar house and you get to $3400 really fast!

$3400 has been said to be the mortgage payment.  Here at least insurance and taxes are not included in that.  At 3.65% it amortizes out at just more then $2000 a month.  The insurance I have here runs at $600 a year on my $300,00 house so $2400 a year on 1.3 million aprox.  That leaves $1400 a month in property taxes to make this make sense.  $16, 800 a year in property tax.  I would move.

He didn't have property taxes or insurance in his expenses. 1% property tax on 1.3M is 13k/yr. Using your rate of $2 per $1000 of insurance, his house costs $2600/yr to insure. That is $1300/month between the two.

shawndoggy

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Dang man this is exactly why I told my kids that I wasn't paying for high dollar undergrad.  one goes to a state school, the other got a scholarship to private school.

Quote
With the college expenses, it's hard to see how I could  afford to stop working for the next ten years at current spend rates.  If I did the startup route, our family income could probably drop to 75% of current income or even less.

With your current income, I don't see how you can maintain your current savings rate and pay for kid #1, let alone kid #2.  Basically all the money you are currently saving for retirement will be going to college expenses?

RidetheRain

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I'd like to have the option to retire pretty soon, at a similar standard of living.
But we like our house.

I think you know what needs to happen for you to retire soon. Your requirements limit what can be done to change your financial situation. By saying you want a similar standard of living we can't make recommendations to reduce spending because it would change the way you are living. I hate to say it, but it sounds like you were hoping to be told that Surprise! you can retire right now and not do anything different. Suprise! You can't. If you're willing to make a change I would recommend this one:

Stop spending so much on dining out. If you go to a restaurant with four people at roughly $25/person (typical for the family-restaurant dine-in model) tack on a bit of tax and gratuity and you're spending $125 per meal. You're spending $775/month - that's more than once a week!

You have three options here:
1. Stop it! *facepunch*
2. Reduce it - get down to maybe every other week you go out to dinner. I bet you can even keep your grocery bill roughly the same.
3. Don't retire soon. You can just keep going at the rate you are going.

Another option is not to pay for 100% of your kid's college expenses. My parents agreed to pay for half of my expenses and I have an interest-free "loan" with them. This is obviously a hugely personal decision, but since you have conflicting goals it's something you might want to consider.

You really need to figure out what you want to prioritize. Is going out to eat that often, living in that house, traveling that much really worth the amount of time it will take you to retire? Talk with your wife and crunch some numbers. What is retiring worth to you?
« Last Edit: June 21, 2017, 12:31:12 PM by RidetheRain »

omachi

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That must be a nice house, but it's killing the budget and is over 40% of your net worth. The eating out and crap lines of the budget are ridiculous, but the house is the elephant in the room here. If you could deign to live in a house worth only $900k, you could be without that mortgage and still have a crazy amount of your net worth be tied up in property. I'm guessing property taxes are part of the mortgage line, but you could cut your spending by roughly a third without that one line. Maybe maintenance and energy costs go down enough to offset the taxes and insurance that are included.

Your investment funds should generate $50k at 4%, so after that there would only be $30k of annual expenses to cut to be FI, not counting the one time things. Cut eating out, travel, and crap in half, plus kill the life insurance and you've got about $21k of it. You can go on very nice vacations for $10k per year, honest. Save up another $225k and you'll have the remaining $9k per year covered with a 4% withdrawal rate. If you axe the $71k of annual expenses and save that money, plus keep saving your $81k, you're saving $152k per year and are FI in a year and a half if you're accurate in your expenses, not counting your one time expenses.

If you're FI but still working, you can use both what you'd been saving and your investment returns towards the one time expenses without eroding your stash. So your effective amount of money to toss around after the year and a half to get to FI would be $152k + $59k = $211k. This chews through your one time expenses in 3.6 years. Then you can go about earning nothing and still be good.

Total time is 5.1 years, which puts you at 60. Maybe that's not fast enough.

You could reduce your one time expenses, though that will be difficult with one kid starting private college already. They aren't going to want to transfer to a public school when they've been presumably promised the prestigious private school. The second kid isn't going to want to go to public school if the first one got to go to private school. Which is too bad, because all costs paid for a public four year degree should be under $100k and would save you almost 2 years of time. And no scholarships from the kids to offset some of this?

If you could slum it and live in a $500k house, you'd kill the mortgage and liberate a lot of your net worth that's tied up in property to invest. So still reduce the spending as above, generating $152k in savings. Add $225k of the proceeds to the stash to cover the rest of the spending. Put $160k towards the prior renovations cost. Then you're FI not counting the college costs. So you'd have the $211k money each year to go towards tuition and you're done in three and a quarter years. Done in a year if you can convince the kids public school is fine.

Of course, that all assumes your budget above is accurate, and I'm not sure it really is. You have no categories for replacing vehicles. Auto insurance but no funds for maintenance or gas. No health insurance costs aside from the HSA, which wouldn't cover premiums. Even if it's really good through work now, you have to account for what you get after you leave. No clothing budget. Some of the small stuff may be rolled up into the crap category, fine, but the big stuff that doesn't occur regularly or even yearly looks like a blind spot.

index

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Honestly, your house is the problem. If it is worth 1.3M and you are making ~300k it is still 4x your gross income. I know you only have 400k left for 25 years but it looks like tax and insurance on the place is 15-16k, utilities are 5k, and maintenance is 12k. That is 33k for your your house without a mortgage.

What will your expenses in retirement be on your current course?
-Will maintenance go down once retired when you can do more work yourself?  5k? (-7k)
-Groceries will naturally be less - 4.5k (-3k)
- Restaurants will naturally be less - 6k (-3k)
-Travel - would be less if you do the same amount with two people are the same if you travel twice as much. -14k (-8k)
-Auto Insurance will be less - 1.5k (-1.5k)
-Cell phone will be less. - 1k (-1k)
-Get rid of Life insurance - 0k (-3k)

So the kids moving out at your current standard of living save you 26.5k or has you spending about 90k. You need 2.25M to support that.

Once the kiddos move out, if you sold the house and move into a paid off 600k condo - you are looking at expenses of 30k vs your 57k (utilities, tax, insurance, mortgage) and cut out the rest of the 5k in maintenance. So your liquid cash is sitting at 2.2M with 60k in expenses at 60! You could up your spending to 75k-80k and still leave a nice nugget for the kids.








jimbooker

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Thanks so much for the thoughtful analyses and replies! There's a lot there to think about !

Actually I realized after writing this that the home renovations are actually mostly already done, so that 160k is a sunk cost , and remaining work is more like 15k at this point. It was such a big cost that I was mentally still adding it in as a debt, but that money actually went out the door over the last year or so.  So  I can take about $150k of that out of our future 'one time costs'.

 But as someone pointed out, I also have overlooked a number of other costs that add up, like gas and maintenance on cars (although we both work from home so there's not that much fuel cost and wear and tear on vehicles).

As people figured out, the mortgage cost I quoted cost escrow for property tax and home insurance. Yeah the property taxes are over $10k/ yr.

So the biggest recurring cost is certainly the house. That's a hard one, which will take some soul searching. We've started renting out a room for airbnb sometimes, which brings in a couple of hundred dollars a month, though not every month, so that's helping a little bit.

I'm going to start today on a budget for all eating out, trying to keep it to under $250/month. And take some of those other suggestions to eat away until I've planned to save at least $10k a year over our current burn rate, for starters. Travel expenses were high this year due to installing kid#1 in college all the way on the other coast, so likely will be considerably less on average going forward.

The health insurance we get is quite good, it's a PPO plan with $2k deductible, but where the company deposits $2k into our HSA each year to cover that, and we can add more if we like.  As someone said, if I stopped working, the cost of health insurance to replace this would be a really big expense, until we qualify for Medicare.   It's a large consideration in making me stay at my job. I really wish we had a single-payer healthcare system like France or Canada.









CloserToFree

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Hi!  Am I reading this right -- you're planning to spend between $70k-80k PER YEAR for each kid's college education?  So eight years total of that annual cost?  Is that what sticker price is these days?  What kind of colleges are these?  Top 10? 20? lower?

tag

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You state that you love your house a few times. Do you love it more than retiring soon?

Paying a mortgage until 80 sounds really depressing IMHO.

shawndoggy

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Hi!  Am I reading this right -- you're planning to spend between $70k-80k PER YEAR for each kid's college education?  So eight years total of that annual cost?  Is that what sticker price is these days?  What kind of colleges are these?  Top 10? 20? lower?

That's definitely the sticker price on private schools these days.  Out of state public schools can definitely approach $50k/yr.  There are bargains to be had, but that's definitely the rack rate.  And I'd expect at the OP's income that the EFC exceeds the cost of attendance (meaning no grants, no subsidized loans, very limited kid-only loans, so the only ways to pay are out of pocket or parent-guaranteed private loans)

jimbooker

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Hi!  Am I reading this right -- you're planning to spend between $70k-80k PER YEAR for each kid's college education?  So eight years total of that annual cost?  Is that what sticker price is these days?  What kind of colleges are these?  Top 10? 20? lower?

That's definitely the sticker price on private schools these days.  Out of state public schools can definitely approach $50k/yr.  There are bargains to be had, but that's definitely the rack rate.  And I'd expect at the OP's income that the EFC exceeds the cost of attendance (meaning no grants, no subsidized loans, very limited kid-only loans, so the only ways to pay are out of pocket or parent-guaranteed private loans)

Yeah kid#1 is at (out of state) Univ. of Calif, one of the top tier ones, and it's estimated total attendance cost is $55K, and I'm being 'conservative' and factoring in extra expenses that may appear. It may end up being closer to between $60k if we're lucky, but I want to have some headroom there.

Dee18

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I am not suggesting you encourage kid #1 to transfer, but for your kid #2, and for other readers, recognize you have a child in the most expensive college education situation: as an out of state student at a state university that probably does not award significant  funds for out of state students.  I discovered this 2 years ago when my daughter was in the search process.  With an expensive private school, very few students actually pay the "rack rate."  But many state schools understandably reserve their dollars to finance in-state students.  Steer child #2 toward a private school that will discount tuition (meaning child should be in top half of that school's applicants for GPA, and SAT or ACT) or toward a state school in your state. 

shawndoggy

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I am not suggesting you encourage kid #1 to transfer, but for your kid #2, and for other readers, recognize you have a child in the most expensive college education situation: as an out of state student at a state university that probably does not award significant  funds for out of state students.  I discovered this 2 years ago when my daughter was in the search process.  With an expensive private school, very few students actually pay the "rack rate."  But many state schools understandably reserve their dollars to finance in-state students.  Steer child #2 toward a private school that will discount tuition (meaning child should be in top half of that school's applicants for GPA, and SAT or ACT) or toward a state school in your state.

... or steer #2 towards one of the many out of state schools that are trying to attract higher caliber students and/or make it easy to get residency.  My oldest is at the University of Utah, which gave her a full tuition scholarship for her first year, and also allowed her to get residency by the beginning of year two.  She gets the benefit of going out of state but the cost is the same as if she stayed in state.  There are many others, the UofU is just an example.  None are in California, tho.

In our experience the privates that discount tuition don't end up being substantially less.  Most are at 45-50K for tuition and 10-15 for housing.  If you get half off on tuition, you are still looking at 33-40k (which I guess is a lot better than 80, but still not by any means "cheap"). 

ysette9

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Is kid #1 at The University of California (i.e. Cal) or another one in the UC system? Cal Berkeley requires students to live in campus housing for the first year, but after that you are on your own. That means that after year #2 your kid should be able to establish residency and therefore reduce the cost of tuition to in-state. Look into that. Also, once he/she is out of the dorms, make sure that kid is looking for shared rooming situations in an apartment somewhere to save on housing costs. Make the kid look into part-time work study jobs or set the expectation that summers are spent working with the $ being saved to go to tuition.

I highly recommend you make/encourage both kids to take classes at junior college. For #1, this can be done over the summer if a good job opportunity doesn't pop up. Just make sure to do the research and pick classes that will transfer. For kid #2, you still have the opportunity to have that kid do the first two years at junior college and then transfer. This will save a tremendous amount of money. Heck, what about kid #2 looking into a nice local place like MIT and living at home?

I live in the Bay Area and we just bought a $1M home (~1000ft^2, for reference), so I completely understand high housing costs and the desire to stay where you are. However, you cannot do everything so you have to make some choices. Personally I'd stay where you are at geography-wise if that is valuable to you. I have no idea if your house is reasonable or ridiculous and price alone won't tell you that. The college sticker price stands out to me as being beyond ridiculous, and one that you can easily reduce significantly without impacting the quality of education that your kids get. I went to Berkeley and Stanford with no debt and my parents didn't come close to paying $70K TOTAL for my education, let alone per year. It can be done.

Good luck with your soul searching.
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tyort1

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Cutting back on an elevated lifestyle is hard, because your family is accustomed to living in a high level of luxury.   But to continue in this manner actually is a dis-service to them, particularly your kids. 

If your kids see you spending a lot of money on a fancy house and eating out all the time is going to be their "normal" and they will try to emulate that ASAP when they are on their own.  Which will leave them poor for a long time. 

On the other hand, if they see that money is mostly to be saved and that it's not necessary to have a super fancy lifestyle, they will have less emotional attachments to stuff and more likely to be able to make good decisions.  Remember, they will model your behavior.  So dialing down the luxury is actually one of the best examples you can set, IMO.
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shawndoggy

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Is kid #1 at The University of California (i.e. Cal) or another one in the UC system? Cal Berkeley requires students to live in campus housing for the first year, but after that you are on your own. That means that after year #2 your kid should be able to establish residency and therefore reduce the cost of tuition to in-state.

hahahahaha if only it were that easy.

https://students.ucsd.edu/finances/fees/residence/criteria.html

ysette9

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Interesting on the residency requirements. I hadn't looked into it before because I am a native CA-ian. We have a friend who transferred from an east coast school to Cal and was able to establish residency, but it never occurred to me to ask how he did that. It is at least worth a look.
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jimbooker

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That is so true!  For the first time that "luxury is a weakness" slogan is actually sinking in;
It is a lot harder to dial back the lifestyle than to dial up, that's for sure.



Cutting back on an elevated lifestyle is hard, because your family is accustomed to living in a high level of luxury.   But to continue in this manner actually is a dis-service to them, particularly your kids. 

If your kids see you spending a lot of money on a fancy house and eating out all the time is going to be their "normal" and they will try to emulate that ASAP when they are on their own.  Which will leave them poor for a long time. 

On the other hand, if they see that money is mostly to be saved and that it's not necessary to have a super fancy lifestyle, they will have less emotional attachments to stuff and more likely to be able to make good decisions.  Remember, they will model your behavior.  So dialing down the luxury is actually one of the best examples you can set, IMO.

dess1313

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INCOME                 ANNUAL   
Taxable.............   $257,128

PRE TAX SAVINGS        ANNUAL   
401k................   $32,000
HSA.................   $2,200

TAXES                  ANNUAL   
Federal..............  $44,395
State................  $12,512
total Taxes.........   $56,907
                 
POST TAX SAVINGS    ANNUAL   
Schwab..............$50,400
         
FIXED EXPENSES      MONTHLY   ANNUAL   
Mortgage payment....$3,400    $40,800      We're 5 years into a 30 year 3.625% mortgage, with $400K balance remaining>>>>>FYI its 14500 in interest every year.  that could be a pretty decent vacation if repurposed

Charity.............$200      $2,400>>>>>>>>really?  is this a very necessary thing?  I know some believe in tithing but that is a lot a year
Cell Phone..........$160      $1,920
Electric............$120      $1,440
Gas.................$186      $2,235
Water...............$100      $1,200
Internet............$50       $  600
Spotify.............$10       $  120
Amazon..............$10       $  120
Netflix.............$10       $  120
Life Insurance......$280      $3,360
Home Maint..........$1,000    $12,000
total Fixed.........$5,240    $66,315

           
VARIABLE EXPENSES   MONTHLY   ANNUAL   
Auto Ins............$230      $2,760>>>>>>any chance of calling or changing insurance groups to get cheaper?
Groceries...........$600      $7,200
Gifts & Community...$250      $3,000
Restaurants.........$775      $9,308>>>>>
Travel..............$1,800    $22,000>>>>>>>These 3 categories alone are more than 60% of my income.........DAMN!
Crap................$500      $6,000>>>>>>>

total Variable......$3,689    $50,268
[/font]

I get that you want a nice house, but part of this is deciding what is really important.  vacations, stuff, eating out, or retiring and enjoying that house that you're putting so much emphasis on, despite working so much and staying away from it to make money to afford to escape on vacation.
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DarkandStormy

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FIXED EXPENSES      MONTHLY   ANNUAL   
Mortgage payment....$3,400    $40,800      We're 5 years into a 30 year 3.625% mortgage, with $400K balance remaining
Charity.............$200      $2,400 - Would you consider giving less to charity? $100/month?
Cell Phone..........$160      $1,920 - Is this for 2 phones, 3, or 4?  Would you consider Virgin Mobile or Project Fi?
Electric............$120      $1,440
Gas.................$186      $2,235 - I assume this is car + home gas?
Water...............$100      $1,200 - $100/month?  I realize you probably can't do anything about it (other than cut back on water) but that seems high to me.
Internet............$50       $  600
Spotify.............$10       $  120
Amazon..............$10       $  120
Netflix.............$10       $  120 - Do you need all three of the above? Can you deal with some ads and cut Spotify?  I'd pick Amazon OR Netflix, not both.  Small, but could save you $240 annually.
Life Insurance......$280      $3,360
Home Maint..........$1,000    $12,000 - Will the reno cut down the maintenance costs in the future?
total Fixed.........$5,240    $66,315

           
VARIABLE EXPENSES   MONTHLY   ANNUAL   
Auto Ins............$230      $2,760 - How many cars?
Groceries...........$600      $7,200 - Is there for 2 or 4 adults?
Gifts & Community...$250      $3,000 - Is this separate from the charities above?
Restaurants.........$775      $9,308 - This is a killer.  Can you cut back?
Travel..............$1,800    $22,000 - This is more killer.  Not to pry, but can you reduce the # of vacations per year (if it's family vacations) or consider alternatives that aren't so pricey?
Crap................$500      $6,000 - What?
total Variable......$3,689    $50,268

Maybe I read too quickly, but do you have vehicles?  If so, are they paid off?

Travel + Restaurants + "Crap" are killing you.  That's over $37K/year on luxury.

monstermonster

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Wow. I travel to ~9 countries a year, and I've never spent in a year on all my living expenses combined as much as you do on travel. Even accounting for four family members, what kind of travel are you doing?

My entire cost of living is less than your monthly food budget.

Here's the thing: You have a killer net worth. You have an amazing income. You could be retired tomorrow, if you were willing to sacrifice and downgrade your extremely out of control living standards.

So, like we all have to do, regardless of income, you need to decide what your core values are and put your money where your mouth is. If you want to do a startup because you are excited about the potential, you need to make some choices to cut (I did the same thing when I started my business, but at a much smaller scale.)

If you want to cash-flow your kid's college + all their living expenses and also do a startup and also live in a financed million dollar home and also spend $800 a month on food and $22,000 a year on travel and also retire in a few years, you can't. You have to make choices. Examine your values, make choices according to them, and the rest is easy.
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SimpleCycle

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I cringe when people suggest cutting charity.  OP makes north of $300k/year, so his charitable giving rate is less than 0.8% of income.  Certainly he could cut the $500/month on "crap" before cutting the token amount he gives to charity.

craiglepaige

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I'm not trying to be sound like an ahole but if my math is correct, you bought a $650k+ home - 5 years @40k + $400k still remaining + a good down payment, let's say $75k - and then added another $160k in renovations? How much equity will you have now that the renovations are almost done?

Good thing for you is you have a great income stream, so as long as you cut back on your wasteful ways, you could get on top of this mortgage and be debt free in a few years.
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fuzzy math

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Your income is so high that you are paying a high marginal tax rate.
You are over 50 and can contribute extra to your 401k, and HSA plans. You ought to be doing that and you will pay less in federal and state taxes.

Other people have pointed out your obvious spending sins, but you really do have to decide just how high your standards need to be. If you run out of money, would you rather downgrade your lifestyle at that point, or make proactive changes now to prevent that?

I have a coworker who is obsessed with luxury. Marble bathrooms etc, high end finishes and shit in every renovated room. meanwhile that person does not live in their home because they were forced to take a job in a different city to support the lifestyle of that home. I just don't get it.

smallstache

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This one is easy. With that much saved up and that much equity, you could retire the day after you sold the house. I'm sure an 1890s house is super cute, but I t is a sacred cow. Do like I did--sell it, pay cash for a super cute place on the Florida beaches for 1/3 the value, pay no income tax and low property taxes, and live happily ever after. Buy a vacation home too if you like.

$80k per year is ridiculous for college. All that does is pass on your high-cost, high-stress, high-tax lifestyle to your kids.

Essentially you work for the house, the tax (income & property) man, the college man, and the healthcare man. You don't work for yourself or your future.

Fishindude

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Cutting back on an elevated lifestyle is hard, because your family is accustomed to living in a high level of luxury.   But to continue in this manner actually is a dis-service to them, particularly your kids. 

If your kids see you spending a lot of money on a fancy house and eating out all the time is going to be their "normal" and they will try to emulate that ASAP when they are on their own.  Which will leave them poor for a long time. 

On the other hand, if they see that money is mostly to be saved and that it's not necessary to have a super fancy lifestyle, they will have less emotional attachments to stuff and more likely to be able to make good decisions.  Remember, they will model your behavior.  So dialing down the luxury is actually one of the best examples you can set, IMO.

Good response above /\

This case is pretty simple barnyard economics.   Due to your lifestyle choices; housing, entertainment, college, etc. most everything you make is going out the door in payments.
You have managed some decent savings, but not near what you need for this lifestyle to continue without working.  Either need to make more and increase the savings or drop some items from your spending and increase the savings. 

Some really basic Dave Ramsey type behavior changes would go a long way here.  I'd think seriously about cheaper housing and cutting way back on the kids education spending.



theotherelise

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I cringe when people suggest cutting charity.  OP makes north of $300k/year, so his charitable giving rate is less than 0.8% of income.  Certainly he could cut the $500/month on "crap" before cutting the token amount he gives to charity.

This exactly. $80k/year on fancy pants west coast school, but can't afford to give away $2k/year in charity is not a place I'd feel comfortable. I get it that people don't understand tithing and recommend pulling back on that when people are in hair on fire emergencies. But this is not an emergency, it's a lifestyle.

smallstache

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I just did a quick tax estimation on turbotax.com. I calculate that the taxman, house, and college consume 82% of OP's income.

tyort1

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I'm sorry, there's no freaking school worth $80k per year.  If you MUST send them to a place that ridiculous at least make them get jobs and contribute. 
Frugalite in training.

brooklynmoney

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Do both spouses work or just one? If you want to have such a high burn rate maybe time for both to kick in if you aren't both earning now.