Author Topic: Just started playing with FI/RE  (Read 1277 times)

rubberguard

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Just started playing with FI/RE
« on: December 29, 2017, 09:37:59 AM »
Life Situation:
Married, not having kids, both file single, 33 and 32 years old, both have paid for BAs, live in what I think is MCOL area(Tampa within city limits)

Gross Salary:
90-100k depending on OT and 55k or 150k total

Pre-Tax Deductions:
My 401k-10k/year(10%, 75% matched up to 6%)
Wifes 401k-2k/year(4% match at 100%)
health care total-around 2k/year

Adjusted Gross Income:
135k

Taxes:
Mine are 24.5k/year
Not completed sure of the wife's, would guess around 11k
No state taxes

Current Expenses:
Mortgage 15,400(No PMI)
Property Tax 2,200
Home Insurance 1,600
Home Maintenance 1,500
Groceries 9,000
Car Payment 3,600
Alcohol/craft beer 3,000
Work Fees(union dues, gym membership) 3,000
Dining Out 2,500
Car Fuel 2,100
Cell Phones 2,100
Vacation 2,000
Electricity 1,500
Gym membership(crossfit) 1,440
Lawn Service 1,440
Auto Insurance 1,400
Internet 900
Water 750
Clothing 600
Entertainment(HBO/Netflix/Hulu) 600

Assets:
My 401k 116k
Wife's 401k 35k
My Roth IRA 10k
Wife's Roth IRA 5.5k
Home Equity 100k
Emergency Fund 44k
Checking Account 5k

Liabilities:
Mortgage 15 year@3.35% fixed with 14 years remaining 177k balance 285k value
Car loan 3 years@2.25% with 10k balance

As far as the Roths go we just started them since we had the option of contributing for 2017 and 2018 and I rolled a small amount over from 4k balance I had with State farm.

Sitting down and writing things out has opened my eyes to the mindless spending habit and the power of what could be if we just altered out habits.  We are starting a written budget in 2018 and going to focus on increasing our SR.  Actionable items that will carries out as of the first of the year include:
  • Setting monthly budgets
  • Heavy reduction in drinking/buying beer
  • Cancelling lawn service-I have the equipment, just lack the motivation at time
  • Reducing my 401k down to the 6% match to allocate more towards other investment areas like the Roth
  • Cut back on eating out

One question is should we go ahead an use the over-inflated emergency fund to max out the Roth IRAs early this year?

Would ultimately like to retire in our early 50's and work something part-time that is more fulfilling.  Hopefully we are on track for such.

Thanks in advance for the input, and let me know if there is any info I missed.

« Last Edit: December 29, 2017, 11:43:19 AM by rubberguard »

myrrh

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Re: Just started playing with FI/RE
« Reply #1 on: December 29, 2017, 11:30:22 AM »
Categories that may have been missed:
Home insurance, HOA, home maintenance
Medical (not only premiums, but copays, prescriptions, glasses, dentist, etc)
Clothing
Haircuts/grooming
Vacation
Gifts

Definitely go ahead and add $11k to the Roths for 2017 (if you haven't already) and next year $11k for 2018. The contributions
 (not growth) can be withdrawn in an emergency. I think of my Roth as a Tier 3 or 4 emergency fund.

Now for constructive criticism (facepunches?)
$750/month for groceries? plus $200+ for eating out? You have a LOT of wiggle room here. Hint: Having a weekly plan is your friend. If that is too much, try a three day plan each week and then go back to what you were doing before. The next month, try a four day plan. Increase each month. You already know about the alcohol.

$175 per month for two phones is insane to me. Granted my family doesn't use much data, but with Ting a plan for three phones is usually less than $50 per month. Check out Google Fi, Ting, Republic, etc.

I'm going to guess you are a two car family given the insurance and gas amounts each month. How far away are you from your jobs? Have you gotten insurance quotes lately? How long do you keep your cars? Have you (seriously) considered carpooling, public transportation, or biking?

You already know about the lawn care, but when you are not feeling it, try considering it necessary exercise with an added benefit of keeping the yard looking good.

Is there a real benefit to filing single? If you are actually married I'm not sure that's even allowed. Married filing separately is almost always worse than married filing jointly.

wordnerd

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Re: Just started playing with FI/RE
« Reply #2 on: December 29, 2017, 11:40:40 AM »
Assuming all of your expenses are accounted for below, you are currently saving ~45% of your income. According to the Shockingly Simple Math
(http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/), you are on track to retire in 19years (if you were starting from zero). Since you already have a net worth north of $200K, you're in great shape.

BUT, I have a sneaking suspicion that you're missing a lot of categories of spending (travel, clothing, haircuts, gifts, random household items, out-of-pocket health expenses, entertainment other than eating out and TV, car maintenance, etc.). If you're not tracking your spending, start now. People love YNAB. We just use Excel. Whatever works for you.

Your action items for the next year are on point. I would also recommend looking into cheaper cell phones. We pay $40/mo for two lines with very nice Androids with Republic Wireless. I can't find Daley's cell phone guide right now (it used to be pinned on the forum), but there are a lot of other low-cost options, like Ting. Do you need Crossfit and your work gym? If Crossfit brings that much value to your life, keep it, but do examine that choice. Your grocery budget is also high at $750/mo for two people. For reference, our family of 2 adults and a toddler spends about $250/mo. Maybe shoot for $500/mo to start with and see how it feels.

You're in a great position to build your net worth very quickly if you choose to. Best of luck!


wordnerd

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Re: Just started playing with FI/RE
« Reply #3 on: December 29, 2017, 11:41:50 AM »
Is there a real benefit to filing single? If you are actually married I'm not sure that's even allowed. Married filing separately is almost always worse than married filing jointly.

There's an NYT calculator for that: https://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html

rubberguard

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Re: Just started playing with FI/RE
« Reply #4 on: December 29, 2017, 11:51:41 AM »
Luckily I cut my own hair and have laundered uniforms for work and spend little on clothing, but will definitely add that.  Vacations will be up for discussion now that we are chasing a higher SR, but we do have travel miles to cover the flight/car and friends to room with for the first vacation of the year. 

The eating out will be address, plus I enjoy cooking/smoking/grilling anyhow.  Never really shopped phone plans before now, but will certainly be looking into that...and $175 is with my company discount, ridiculous.

I am very close to work, the wife is about 15 miles from work.  Public transport is not good here, I mountain bike regularly(hour drive), and work nights in a high crime area...no chance I'm biking home.  Did you happen to see the recent serial killer in Seminole Heights?  That's where I live.  Could discuss it with the wife, but it would be a hard compromise.

Going to look into the filing status again this year, we check on a yer-by-year basis and last year it worked out better that way.

Thanks for the advice, can't wait to put these items into action.

Categories that may have been missed:
Home insurance, HOA, home maintenance
Medical (not only premiums, but copays, prescriptions, glasses, dentist, etc)
Clothing
Haircuts/grooming
Vacation
Gifts

Definitely go ahead and add $11k to the Roths for 2017 (if you haven't already) and next year $11k for 2018. The contributions
 (not growth) can be withdrawn in an emergency. I think of my Roth as a Tier 3 or 4 emergency fund.

Now for constructive criticism (facepunches?)
$750/month for groceries? plus $200+ for eating out? You have a LOT of wiggle room here. Hint: Having a weekly plan is your friend. If that is too much, try a three day plan each week and then go back to what you were doing before. The next month, try a four day plan. Increase each month. You already know about the alcohol.

$175 per month for two phones is insane to me. Granted my family doesn't use much data, but with Ting a plan for three phones is usually less than $50 per month. Check out Google Fi, Ting, Republic, etc.

I'm going to guess you are a two car family given the insurance and gas amounts each month. How far away are you from your jobs? Have you gotten insurance quotes lately? How long do you keep your cars? Have you (seriously) considered carpooling, public transportation, or biking?

You already know about the lawn care, but when you are not feeling it, try considering it necessary exercise with an added benefit of keeping the yard looking good.

Is there a real benefit to filing single? If you are actually married I'm not sure that's even allowed. Married filing separately is almost always worse than married filing jointly.

rubberguard

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Re: Just started playing with FI/RE
« Reply #5 on: December 29, 2017, 11:54:49 AM »
Is there a real benefit to filing single? If you are actually married I'm not sure that's even allowed. Married filing separately is almost always worse than married filing jointly.

There's an NYT calculator for that: https://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html

Very cool!  Clears up a lot of the vagueness on the topic, turns out we are in the 0 bonus zone.

rubberguard

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Re: Just started playing with FI/RE
« Reply #6 on: December 29, 2017, 12:00:45 PM »
Very exciting.  We are exploring the idea of dropping crossfit since she can use my work gym for $5/month and get a punch card for classes and go once in a while.  I had no idea such cheaper cellphone options were out there, very interesting.  The food budget is a huge issue, and the spreadsheet with help immensely I'm sure, a little more planning will be better than going and just picking up whatever sounds good.  Lifestyle creep has really caught us off guard. 

Thanks for the feedback.

Assuming all of your expenses are accounted for below, you are currently saving ~45% of your income. According to the Shockingly Simple Math
(http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/), you are on track to retire in 19years (if you were starting from zero). Since you already have a net worth north of $200K, you're in great shape.

BUT, I have a sneaking suspicion that you're missing a lot of categories of spending (travel, clothing, haircuts, gifts, random household items, out-of-pocket health expenses, entertainment other than eating out and TV, car maintenance, etc.). If you're not tracking your spending, start now. People love YNAB. We just use Excel. Whatever works for you.

Your action items for the next year are on point. I would also recommend looking into cheaper cell phones. We pay $40/mo for two lines with very nice Androids with Republic Wireless. I can't find Daley's cell phone guide right now (it used to be pinned on the forum), but there are a lot of other low-cost options, like Ting. Do you need Crossfit and your work gym? If Crossfit brings that much value to your life, keep it, but do examine that choice. Your grocery budget is also high at $750/mo for two people. For reference, our family of 2 adults and a toddler spends about $250/mo. Maybe shoot for $500/mo to start with and see how it feels.

You're in a great position to build your net worth very quickly if you choose to. Best of luck!

wordnerd

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Re: Just started playing with FI/RE
« Reply #7 on: December 29, 2017, 12:14:51 PM »
Is there a real benefit to filing single? If you are actually married I'm not sure that's even allowed. Married filing separately is almost always worse than married filing jointly.

There's an NYT calculator for that: https://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html

Very cool!  Clears up a lot of the vagueness on the topic, turns out we are in the 0 bonus zone.

Of course, the tax bill probably completely changes the calculation. :)

2Birds1Stone

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Re: Just started playing with FI/RE
« Reply #8 on: December 29, 2017, 12:36:45 PM »
It's my understanding that if you are married you have to file married, whether it's jointly or separate is up to you, but you can get smacked on the wrist for filing single.