I don't understand the investment condo -- it sounds like you make a net $2K in income each year, but you are throwing in $3600/yr over and above the mortgage, etc.? Or is that $5600/yr gross income - $3600 contributions to get to the $2K net?
My big-picture advice would be to be very careful about accounting for your businesses as businesses.
E.g., you seem to be using the startup business as an excuse to be non-Mustachian in certain areas -- you're subsidizing phone, rent, utilities, etc. with that income, which enables you to avoid really scrutinizing whether those costs in and of themselves are reasonable. If that startup is a truly viable business, would you not get a better return on the money it throws off by putting it back into the business instead of helping to subsidize better phones/internet?
E.g., you seem very interested in real estate as an investment, but have you looked at the profitability of your current rental on an ongoing basis? Have you estimated how much that inlaw suite would bring in in rent? My (potentially mistaken) impression from what you wrote here is that you are "investing" in these properties in the hope of future appreciation, without really looking at whether they are profitable in the short-term. A good rental property should more than pay for itself in the short term; sure, you hope it appreciates over time, but at least that way your worst-case scenario is that you got paid to own an asset for years. Price appreciation is just the cherry on the sundae.
The other thing is to double down on the expense tracking -- which, again, is especially crucial when you are trying to track multiple businesses along with your personal expenses. Glad you have started this. The secret bad news is that there's always something waiting out there to suck up any free money that you have floating around -- and if you don't already have a plan for that little guy, it's really, really easy to convince yourself that XYZ is a good idea, and before you know it you're blowing $1K+ each month and don't feel like you have anything to show for it. Get a handle on that now, both to confirm that all of your businesses are as profitable as you'd like to think they are, and to keep your own self in check.
Finally: if you want to have kids in the next couple of years, what are your plans for parental leave, daycare/SAH, etc.? You have some slop in your budget right now, but not enough for either of you to quit work -- and certainly not enough if your DW wants to SAH and you want to quit your day job and run your business. You need to weigh all of these 800 different ideas out against each other; you can't just look at one issue in a vacuum without paying attention to how that decision affects all of your other goals.
Tl;dr: You've done a good job amassing a starter stash and have many interesting opportunities in front of you; what you seem to need more than anything else is a list of priorities and a plan to achieve them.
You are right, this is a little unclear. I will try to clarify this above.
The summary is, we are using the condo as a savings account. It is cash flow negative but highly Equity positive, and I did a poor job of communicating this. We are focusing on paying off the mortgage rather than using it as a cash flow vessel at this time.
Business Expenses:
- The benefit of using our business to pay for these items is the tax savings as we are using pre-tax dollars, but subsidizing a small enough amount that it will not impact our personal income. It is almost a way of extracting money from the business in a tax free manor. (More complicated than this, but that's why I have an awesome accountant who is good at balancing corporate expenses and personal income)
- The cell phone and internet are the current best deal we can get, and absolutely necessary for what we are doing. We have no had any lifestyle creep in these areas and are constantly re-evaluating these expenses every 4-6 months to see if we can lower them)
- The business is not cash flow hungry, so it is of no determent to pay for some of these expenses vs. realize a profit. We are 'making due' where it makes sense and investing into the business where we get the highest return.
VERY GOOD POINT! it is very easy to start to justify spending money when you classify it as business expenses. Definitely an easy trap to fall into and we do our best to navigate this :)
Real Estate investing:
- Our house currently doesn't have a garage. Our estimated cost to build a non-suited garage the way I want it (So I can work on our vehicles and feed my DIY hobbies) is approx. 18-20K . No demolition or fancy pants "this would be nice" dollars wasted.
- Differential to build the suite 10-20K more, with rental approx. 1100/mo, has my payback within 3 years. Unknown factors from this would be increase in property tax and utility increase. This is a shallow dive, but I would recon this is a reasonable short term payback, and a potential cash flow earner.
- Investment in the current condo property as stated above is cash flow negative but hugely equity positive. We could restructure to change that, but neither me or my investment buddy are cash flow starved so we are using this for deffered gain. Capital Gains on this is just a bonus :) This allows us to minimize the interest paid on the mortgage in the long term by paying it down quickly. i.e. 20 year mortgage amortization, have owned it 7 years, and only have 8 years left. We knocked off 5 years by overpaying the mortgage for the last 5 years.
Misc and spending tracking:
- 100% agreed. That which gets measured gets managed. The business is completely separate and self contained and analysed quite nicely, but our personal spending has been neglected.
- We usually go through and categorize all of our spending in an excel sheet every month, but have neglected this for the last 4-6 months.
Child care:
- This scares me haha. If I ignore this it will handle itself right? jk. Wife will go on maternity leave at 60% salary for 1 year which means I have to pick up the slack. This means things get tighter.
- Bonus, she will be able to run a portion of the business during mat leave and we can use our corporate dividends to offset lost salary and continue to save!! YAY! I have to consult my accountant as to what the ramifications are and how to ensure we don't get screwed, but this should work nicely.
THANK YOU FOR ALL THE ADVICE! a priority list is exactly what we need right now, with what our financial requirements are for each priority. This should allow us to stay focused and not let the XYZ drain our bank account.
YOU ARE A ROCK STAR. Thank you for taking the time to type out that response, and take an honest look at my situation. I hope my response doesn't seem defensive or justifying the expenses, I am just trying to think logically through the points and type out a response.