Case Study - What can I do Better?

[akfire]

Life Situation: Married with two kids (high school and junior high), United States (in central U.S. - smallish town, but real estate is inflated to match more urban areas close by).

Income: Total NET: $79,000 (Gross: $98,000 - $19K difference is roughly $8,000 in health insurance premiums, $1,000 in voluntary term life/dental, the rest in taxes.)

(We have term life insurance on each adult up to $350K)

Investments:
$65,000 - IRA: Maxed at $500/mo (Currently in money market account, will dump into VTSAX when market goes down.)

$20,000 - Post-Tax: Individual Investment Brokerage Account: $500/mo (Currently in money market account, will dump into VTSAX when market goes down.)

We also have employer paid retirement accounts with state education - eligibility for full retirement around age 70 for each of us - partial retirement available after vesting (in about 7 years). We don’t count this account in our planning as it will be minimal if we don’t work at the same jobs more than 20 years…and we won’t access it until we’re at least in our mid 60’s anyway.

No Other Income Currently: But looking at options for side-gigs.

Current Monthly Net Income: $6,500
Current Monthly Expenses: $4,750
Difference: $1,750 ($500 to IRA, $500 to Brokerage Account, Remaining $750 goes to save for planned large expenses.)

$600 - Groceries
$200 - Health/Beauty
$200 - Clothing
$150 - Healthcare (non-reducible at this point)
$300 - Auto Fuel
$100 - Auto Repair/Maintenance
$450 - Eating Out (Agree with some of the comments, this is way too high!)
$200 - Entertainment/Miscellaneous
$1,375 - Mortgage (P&I, Insurance & Taxes) (No PMI Insurance Requirement)
$185 - Auto Insurance
$180 - Piano Lessons for Kids
$100 - Cell Phone Plan (4 Phones, Unlimited, $25/line - Cricket Wireless)
$13 - Netflix
$12 - Amazon Prime (Note, used for online photo storage/backup and streaming video mostly)
$25 - Other Recurring App/Online Services
$160 - Orthodontics (Braces for child)
$100 - Natural Gas Bill
$42 - Term Life Insurance (2 Adults, $250K/ea)
$115 - City Utilities and Water
$85 - Internet Service
$150 - Electric Bill

Expected Expenses: We’re saving to purchase a car (around $5K most likely) for our oldest child. We’re looking forward to college and concerned about those expenses as well.

Assets:
House (owned): Value: $235,000 - Mortgage Balance: $182,000
Auto: (SUV): Value: $13,000 - Paid Off
Auto: (SUV): Value: $26,500 - Paid Off - Currently listed for sale, will replace with a $10K or less vehicle.

Liabilities:
No debt except the mortgage (@4.25%)

Specific Question(s):  I have two questions. First, what of our current situation would be a smart change (and why) to accomplish an early retirement goal? Second, can you recommend any resources other than MMM to help a reluctant spouse see the potential of these actions? She isn’t against it, just apathetic a bit. I think there’s a fear of the unknown when we start looking at bigger changes (like downsizing the house), which to me, seems like she’s just not bought into the idea strongly enough yet. I’m looking for something other than that cult of MMM that might validate the ideas a little better. There are a lot of individual videos and stories out there...I’m just looking for one or two really good resources that might allow her to buy in a bit more and be willing to make those big changes.

[MDM]

Specific Question(s):  I have two questions. First, what of our current situation would be a smart change (and why) to accomplish an early retirement goal? Second, can you recommend any resources other than MMM to help a reluctant spouse see the potential of these actions?

akfire, welcome to the forum.

1.  What makes up the $19K difference between gross and net?  Unfortunately there are many ways to define "net."  See Investment Order for the usual advice.
2.  Is spouse actively against, or just not interested in the details of, these actions?

[akfire]

Thanks for the welcome! I updated my original post with the details requested.

[Nc22]

(Currently in money market account, will dump into VTSAX when market goes down.) I would highly recommend reading jl Collins blog/book. Also why have that much money wrapped up in cars?

[MDM]

Thanks for the welcome! I updated my original post with the details requested.

Great!

How does the "usual advice" strike you?

Might be worth reading through How to Convert your SO to MMM in 50 Awesome Steps.  Can't give firsthand advice - we had similar inclinations from the start.

[englishteacheralex]

Hmmmm...

Some quick observations based on obsessive reading of these forums for years:

Cars are redic, way too much on food/restaurants ($1300+/month!?), why are groceries and health/beauty in the same category? Not remotely related! Why is eating out/entertainment both in the same category? Sort of related, but not really...

Those are the low-hanging discretionary fruit I see, and unfortunately hard ones to get spouse on board with as they require some lifestyle demotion (value of cars should not exceed $10k!) planning, skills, and practice.

Also just put your money into the stock market. Don't wait for it to go down. Noob move!

Of course spouse is having a hard time seeing the point if all the money is just sitting in a money market!

As far as spouse goes...this problem comes up constantly around here and the people I've seen have the most success try a gentle, steady process of small victories over time.

Get rid of those dumb cars. Can you drive less? $300/month on gas?

[Freedomin5]

Your eating out/groceries bill is 30% (!!!!!) of your monthly spending.

And why doesn’t your high schooler save up money to buy their own car? They will value it more and take better care of it if they had to earn it. If your teen can’t afford to get their own car, consider working with them to select an economical used car and split the purchase price with them. And I hope your expectation is that they will pay for insurance and gas and maintenance for the car rather than expecting handouts from you to pay for a vehicle that they cannot actually afford.

[akfire]

Your eating out/groceries bill is 30% (!!!!!) of your monthly spending.

And why doesn’t your high schooler save up money to buy their own car? They will value it more and take better care of it if they had to earn it. If your teen can’t afford to get their own car, consider working with them to select an economical used car and split the purchase price with them. And I hope your expectation is that they will pay for insurance and gas and maintenance for the car rather than expecting handouts from you to pay for a vehicle that they cannot actually afford.

Agree on the food budget...we end up eating out way too much (some of the grocery budget ends up paying for meals out even) - which we both hate doing...it's simple laziness really. Yes, the car will be around $5K purchase. And, yes, we're keen on making sure the kids don't grow up entitled! Thanks for the comments!

[ysette9]

Aside from the car situation, which it sounds like you are going to do better about, I think your biggest stumbling block on the path to FIRE is your market timing. The fact that you are holding cash and waiting for the market to correct is a recipe for something other than success. The market goes up about 2/3 of the time, which means you have a 66% chance of missing out by waiting on the sidelines a in cash.

More worryingly this indicates that you don’t have a solid investing strategy and would potentially make a bad decision during the inevitable future market downturn, such as panicking and pulling out.

You need to read the JL Collins stock series, as someone else suggested, ask whatever questions you need to feel educated and comfortable, and then invest everything in whatever asset allocation you decide is right for you. Invest early, invest often, and be 100% committed to staying invested through thick and thin. That is the path to financial success.

[legalstache]

As far as I can tell, you have 85k in liquid assets (unclear if you have an emergency fund).  Assuming you do have an EF and invest the 85k, at your current savings rate of 12k per year and current spending level it would take you ~30 years to be financially independent.

You say there is another $750 a month that you are saving for planned large expenses. I'm not sure what those are, but investing that $750 each month would speed up your retirement timeline by 6 or 7 years. To be blunt, unless you make big changes in your spending or increase your income, you're looking at working at least until a traditional retirement age.

The good news is, as others have suggested, there are areas to trim, including eating out. I would read as many of the MMM blog posts as you can and other posts about investing. My advice would be to get as much money into the market as soon as you can so you can get it working for you. 

[akfire]

Thanks to everyone for the feedback and advice. We clearly have some changes to make. As for my delay of jumping into VTSAX right now, after reading and learning as much as I can, I think the market is way overvalued and we're in for at least a correction in the coming months/years. I'm comfortable risking a delay but totally get why most of the advice here tells me to just jump in. Again, thanks for all the feedback!

[Freedomin5]

What you just described is called market timing and is not a good strategy. It’s akin to gambling (e.g., I feel like the next few years are going to be lucky...gonna bet all my money that the market will go down in 1 year, 4 months, and 3 days). What if you don’t actually own a crystal ball and it doesn’t actually go down for two or three years? Then you will have missed all that growth.

If you’re worried about a crash right after you put your money in, then consider using dollar cost averaging. Put half your money in now. Wait for a crash and put the other half in. Then if the market goes up, you win because you already have money in the market. If the market goes down, you also win because you have cash on hand to put in the market.

[Nc22]

You can not time the market. Where ever you are “researching/getting advice” I would highly recommend not listing to those people anymore. If you or anyone else that gives advice could time the market they would be Warren Buffet. It is so important to get out of the mindset of “timing” the market.

[englishteacheralex]

Ahem if you want to make everybody come running with popcorn in this forum just say anything that sort of resembles "Top Is In!!!!!"