Author Topic: Reader Case Study - Improvements/Thoughts?  (Read 1045 times)

Gratefruglly Content

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Reader Case Study - Improvements/Thoughts?
« on: December 31, 2018, 10:57:33 AM »
Hi!  I'm a long time reader of the FIRE blogs.  Started with Early Retirement Extreme about 10 years ago.   I was young and saved pretty well but I also went out and had some adventures.  Now I'm looking to settle down a bit and I'd love to be able to hit my FI by 2027.  I'm not sure I'm there and I would love your help!  Here's the info!

Life Situation:

35, no kids, live with significant other (looking to marry and have 1-2kids in next 5 years)

Gross Salary/Wages: Let's call it $45,000

- I don't currently contribute to any retirement accounts. I am functionally self employed so no work accounts or matching (thinking of opening/maxing out a ROTH IRA this year 2018)

Rental Income: $15,000/year in positive CashFlow

Adjusted Net Income: $40,000ish

Current expenses:

Rent: $550
Entertainment: $150
Food: $150
Utilities: $85
Charity: $75
Auto: $150 (I need my car for work)
Gas: $60
Clothes/Toiletries: $70
Travel Fund: $150
Health Insurance: $265
Gifts: $50
Work expenses: $100
TOTAL : $1855/month


Assets:
$285,000 Equity in investment properties
$35,000 in IRA
$50,000 Cash (Saving for down payment on next rental)
TOTAL - $370,000

I've made some smart real estate purchases over the years and that is where the majority of my wealth sits.  I don't make a ton of money but am happy with my current work/life balance.  I'm looking at marriage/kid(s) in the next 5 years and I'm terrified I'm going to lose momentum on my FIRE goals (Hoping to get there in next 10 years).  I don't see myself ER at 45 but would like to be FI.  I would really appreciate any comments/insight on how your financial life changed with spouse/kid and am open to any recommendations. 

I've also maxed out my ability to get a mortgage... I have the money for a down payment, the rents will more than carry the PITI payment, but my income level isn't high so I have Debt/Income issues.  Any information on how to navigate rental property investment would be a huge help!
« Last Edit: January 02, 2019, 09:51:22 AM by Gratefruglly Content »

Intrigue

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Re: Reader Case Study - Improvements/Thoughts?
« Reply #1 on: December 31, 2018, 12:35:06 PM »

Gratefruglly Content

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Re: Reader Case Study - Improvements/Thoughts?
« Reply #2 on: January 02, 2019, 09:49:07 AM »
I don't know much about rental properties but this post might help you :

https://forum.mrmoneymustache.com/real-estate-and-landlording/evaluating-a-rental-property/msg667278/#msg667278


Thanks for the link, I'll take a look and get a little more active in the real estate investment parts of the forum.

Finances_With_Purpose

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Re: Reader Case Study - Improvements/Thoughts?
« Reply #3 on: January 11, 2019, 09:16:32 PM »
Kids are a long-term investment.  Over the short-term, they're a huge financial drain.  They require time, money, spousal energy...you name it.  They're wonderful but will very likely impede your short-term financial goals.  (The expenses are many: childcare, education, health care, activities, etc.) 

marty998

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Re: Reader Case Study - Improvements/Thoughts?
« Reply #4 on: January 12, 2019, 03:17:59 PM »
I've made some smart real estate purchases over the years and that is where the majority of my wealth sits.  I don't make a ton of money but am happy with my current work/life balance.  I'm looking at marriage/kid(s) in the next 5 years and I'm terrified I'm going to lose momentum on my FIRE goals (Hoping to get there in next 10 years).  I don't see myself ER at 45 but would like to be FI.  I would really appreciate any comments/insight on how your financial life changed with spouse/kid and am open to any recommendations. 

This is a really awful outlook to have. Terrified of not getting there quickly enough? Terrified that a loving relationship with a spouse and children will stop you from this goal? My god, priorities man.

Obviously the ideal is to find a partner who is onboard with similar goals. However as mentioned by @Finances_With_Purpose kids are going to come with their own set of expenses. Perhaps allows for several hundred thousand more to cover the scenarios?

Curious to understand....what are your reasons for FIRE?

Freedomin5

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Re: Reader Case Study - Improvements/Thoughts?
« Reply #5 on: January 12, 2019, 03:36:36 PM »
Personally, I'd balance out the investments between real estate and the stock market (index funds). Can't help you out much on the debt/income issue. We started a limited liability company and put our RE investments under the company name. We do all our borrowing using the company. Using this approach, we've been able to qualify for a mortgage, as well as lines of credit against our current properties. This kind of debt-financing can be risky though.

Re: your worry about losing momentum on your FIRE goals. Make sure that your (future) spouse holds the same views towards living a frugal life and finances as you do. I've found that, after three years, our movement towards FIRE has largely been automatized, so the momentum remains. We haven't lost momentum, even though I have stopped focusing on it so much (in fact, we saved 30% more in 2018 than what we saved in 2017). And this is with a spouse, and with a kid in private school.