Background: I grew up in a poor rural area where most people lived at or below the poverty line. My family had its basic needs met, but my parents were VERY conscious of every dollar spent. I picked up this mindset, which was critical to making ends meet in college. My parents helped me out as much as they could, I saved from part time jobs, and I was fortunate enough to have significant scholarships. I ended up graduating with about $3,000 in debt. My first job after college was flight instructing, which I LOVED! However, it only paid about $12,000 per year. I managed to make ends meet and pay off the debt in under a year. My original plan was to build flight time and become an airline pilot, but I felt a call to serve and joined the military three years after graduating. My income quadrupled immediately, but I did my best to avoid letting my lifestyle increase with it. I found myself with the ability to start investing significant amounts of money. I received raises several times along the way, always trying to put 90% toward investments. My wife does not consider herself as frugal as I am, but she is quite reasonable and supportive. I arbitrarily set out to be FIRE by 40.
Life Situation: Married Filing Jointly, wife and I are 32, 2 kids (2.5 years & 1 month), 7.5 out of 20 years toward military pension, live in New Mexico.
Gross Salary: $115,968.68 (only $112,916 is taxable), including $35,000 retention bonus that I’ll get for the first time later this year
Individual amounts of each Pre-Tax deduction: $18.5K Thrift Savings Plan (similar to 401K), not eligible for HSA.
Other Ordinary Income: My wife and I inadvertently earn a combined $3k per year from hobbies (she teaches fitness classes, I flight instruct).
Adjusted Gross Income: $97,416
Annual Taxes:
FICA - $5,318
Fed – $4,429
State – $0
Current Monthly Expenses: $2,800 ($33,600 annual)- I know these are broadly categorized, but it’s the most accurate data I have. I’ll work on breaking down the expenses over the next few months.
$570 Groceries – Seems high to me, but my wife does the grocery shopping so I’m not sure where it all goes. I'll tag along and learn more.
$520 Car Payment – I could pay this off, but I’d rather invest.
$510 Charity – We believe in helping others first, paying our future selves second, and spending on ourselves last. This “expense” isn’t going down.
$300 Shopping
$179 Misc
$168 Flying – I’m a pilot by trade. This is the average amount I spend on aircraft rentals and associated costs per month for fun. Yes, I’m aware it’s less mustachian than driving an 18-wheeler for simple errands. More on this later.
$118 Restaurants – Very anti-mustachian here. It crept up over $250. My goal is to have it under $75 by the end of the year. Baby steps…
$110 Gas – Almost all of this comes from short trips we take for hiking etc.
$65 Cell Phones – 2x Republic Wireless phones
$60 Auto Insurance – Big discount for living on base and not driving much.
$50 Entertainment
$48 Private Term Life - $250,000 policies for myself and my wife
$38 Internet
$34 Military Life Insurance - $400,000 for me, $100,000 for my wife
$30 Family Dental Insurance
$0 Health Insurance
$0 Housing - We live in military base housing, which lets us cut back on driving. I walk or bike the 1.5 miles to work most days, my wife runs most errands by taking the kids in a stroller, and the majority of our friends live within a quarter mile. It also provides a big discount on car insurance. If we chose to live off base, I would receive a non-taxable housing allowance of $1,389 per month, but a comparable house + utilities and increased driving would be more than this, as well as pull my family away from the tight-knit community that we love.
Expected ER expenses: $45k would cover our current standard of living in the area we plan to retire. However, I’m considering building a bigger nest egg to fund some extras. More on this later.
Assets: $570k Total
Cash
$1k Checking
$5k Savings – I use this as an emergency fund. It’s a little under 2 months expenses, but I have tremendous job security, robust healthcare, am not responsible for home repairs, and live on less than half my salary. If something huge did come up, I could pull from investments as needed.
Investments - I max my TSP (no employer match) and our IRAs first, then everything else goes in the taxable account. I put enough in traditional to stay in the 15% bracket (12% now). I’ve transferred my GI Bill to my kids, covering over half of their college expenses. I want them to work/save some on their own to have a little skin in the game.
$79k Roth TSP – 50% Small Cap index, 25% S&P 500 index, and 25% International Stock index. All have sub-Vanguard expense ratios.
$89k Traditional TSP – Same allocation as Roth TSP
$58k My Roth IRA – 65% VSMAX, 35% VTIAX
$53k Wife’s Roth IRA – 100% VFIFX
$16k Wife’s Trad IRA – 100% VFIFX
$237k Taxable Account – 80% VTSAX, 20% VTIAX
Cars
$6k 2010 Corolla – I’ll drive it until the wheels fall off.
$26k 2017 Sienna – I hope this will be my 2-year old’s first car.
Liabilities:
$21,000 Sienna Loan - 3.5/4 years left at 1.99%.
Net Worth: $549k
Specific Questions:
1. Any problems stick out? Spending, investment choices, anything really? Face-punches welcome!
2. If I kick the bucket early, the life insurance + current assets would give my family enough to never have to worry about money again. Since my income potential is significantly higher than my wife’s, I want to keep my life insurance policies, but I’m considering canceling hers. That would save $27 per month. While her death would be emotionally devastating, I’d be able to afford daycare for the kids without any trouble. Thoughts?
3. Is hedonic adaption getting the best of me? If so, should I care? I ask because I’ve noticed our expenses starting to creep up more than necessary after having kids. The $33.6K we spend annually is far beyond what people lived on where I grew up, and it doesn’t even include any housing costs. My annual expenses would be just over $50K if you consider the free housing as part of my compensation, which I do. This bothers me at times because I feel like I’ve lost touch with my roots. I was a happy kid. Why do I need to spend more now to be happy? On the other hand, we’re still living on a fraction of our income and are on track to be FIRE about 2 years before my arbitrary goal of 40, despite my wife quitting work to stay home with our kids.
4. Let’s say I’m FIRE at 40. I could quit my job in the military and live a comfortable life on about $45k per year. Should I continue working until 45 to earn a military pension? Between the pension and the increased nest egg, I’d be able to live on closer to $90k per year in addition to having extremely low health care premiums for the rest of our lives. I can’t begin to comprehend how I would spend that much money, but it seems a little foolish to walk away from the military so close to earning a pension. It’s important to note that I genuinely like my job. It can be stressful at times, but I believe in what I do.
5. Let’s talk about my flying budget… I know spending $100-200 a month on renting aircraft for fun is about as anti-mustachian as it gets. In fact, I went cold turkey on recreational flying for budget reasons for about five years. During that time, my wife and I noticed I was getting into a bit of a funk, bordering on depression. I was drinking more, socializing less, and was irritable at times. My wife pushed me to get more involved in things that I enjoy, mainly flying. EVERY time I takeoff I grin from ear to ear. My stress melts away, and I come home feeling invigorated. It’s also a social activity for me. I fly with other pilots and share techniques or take friends and family up. It’s amazing seeing other people experience the joy of it for the first time.
Initially I was spending $400-500 per month but lighting that much money on fire caused me to freak out a bit. I brought my costs down by flight instructing (the student pays for the plane) and by volunteering to tow gliders at a local soaring club. Can the mustachian community forgive me for continuing to spend $100-200 per month on this luxury?
Going back to question 4, finishing out my 20-year military career would provide a HUGE surplus of retirement funds to fly as much as I want…
I appreciate your time and any advice you have!