Author Topic: Long time lurker, ready to get down to brass tacks  (Read 2747 times)

Sethmeister

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Long time lurker, ready to get down to brass tacks
« on: August 06, 2018, 05:36:08 PM »
I've been on these forums as a reader for a while and have posted very little.

I would say, that me and my wife are at the point where we could fire within ten years easily, but are brinking on some financial decisions that we could regret.

Our combined income this year, is 120k gross and my income will double next year, due to a completion of training.  Which will put us at around 175k.

I'm 27 and she is 28. No kids, and no debt other than our small mortgage.

We live in an extremely low cost of living area.

She is 2 miles from work and i'm about 20, being that my job is in the middle of nowhere.

Our home appraised for around 137k and we owe 109k at 3.75 fixed 30 yr

Our total monthly budget is approximately 3k, including extra principle payment on mortgage.

This gives us about 2k savings monthly.

I have 25% pre-tax going into my 401k and should max this year. My wife has 4 percent to match in a 407 of some sort and an additional 5 percent company contributed on her behalf to another retirement account.

Her total retirement accounts are around 12k
 My 401k is 27k
savings is 11k
IRA 5.5K

Possible error holes (lifestyle expansions):
Purchasing a larger home for around 250-300K
Having a child
Wife may go to part-time hours or stop working all together if we have a child.


With these assets, what am I doing right or wrong in the forum's opinion and what lifestyle expansions are dangerous?

I hope this isn't to vague.

Pretty much, If we were to buckle down, we could fire very soon, correct?

If we expand, what kind of consequences financially are we talking?

Thank you for any replies. I know I need to sit down and get more exact numbers and iron everything out. I'm just trying to get some input or encouragement in this task of purchasing freedom.

Penn42

  • Bristles
  • ***
  • Posts: 267
Re: Long time lurker, ready to get down to brass tacks
« Reply #1 on: August 06, 2018, 05:46:48 PM »
Having a more complete breakdown of the 3k monthly budget would be nice.  I'm guessing you guys could get that down a bit, even with the extra principle payment. 

With your income jump next year you guys should easily be able to save 6 figures.  Get your expenses down to around 20k and you can be probably be FIRE'd in 5 years. 

FIreDrill

  • Handlebar Stache
  • *****
  • Posts: 1096
Re: Long time lurker, ready to get down to brass tacks
« Reply #2 on: August 06, 2018, 05:53:26 PM »
There are so many variables here so everyone's advise will probably be different depending on what they value.

I would estimate your income, expenses, and savings rates in the different scenarios you have laid out, then calculate your time to FI under each scenario and do some soul searching on what you value most.  Quicker time to FI? Having a kid while your wife works at home? Maybe go hard for 5 years and then switch to family and stay at home mode?  You have a great opportunity right now to stache some serious cash over the coming years.  You're really going to have to weigh the pros an cons based on what you value and what your financial and life goals are.

Great job on getting to an amazing financial spot.  You're kicking butt.

Sent from my SM-G935F using Tapatalk


One

  • Stubble
  • **
  • Posts: 247
Re: Long time lurker, ready to get down to brass tacks
« Reply #3 on: August 06, 2018, 06:03:02 PM »
I'd stay in your house, make minimum payments. Invest the extra money. Keep lifestyle simple and wait 5 years for your wife to stay home and have kids.

StetsTerhune

  • Bristles
  • ***
  • Posts: 462
Re: Long time lurker, ready to get down to brass tacks
« Reply #4 on: August 07, 2018, 08:17:23 AM »
From the numbers you've provided, it looks like your net worth is $93k. Definitely a great start at your age!

Our total monthly budget is approximately 3k, including extra principle payment on mortgage.

This gives us about 2k savings monthly.

If you guys gross 120k, that's 10K a month. If you're spending 3k, that means you're saving 7k minus taxes monthly. Right? I'm guessing you're thinking of 401k etc. as not being "savings." Also I would not include extra mortgage principle payments in your budget. You're investing money in home equity instead of something else. That's an investing decision, not a budget decision.

My advice is to sit down and look at annual numbers and plan out how you will invest your money next year.

For example: 175k gross -36k spending - 30k taxes (you should calculate this exactly after you figure out your 401k contribution etc.) =109k to save somewhere.  Then you can best decide how to split that $124k. At that income level, you should likely be maxing all your pre-tax savings (401k, IRAs, 403b, HSA if you have it), then decide how and where to invest/save the rest.

You're young, make good money (I'm guessing great money for your area), no kids, have a modest house. Keep that lifestyle as long as you can. If you can put away $115k a year for a few years you'll be set up incredibly well for the whatever the future holds and whatever you and your family decide to prioritize.

mozar

  • Magnum Stache
  • ******
  • Posts: 3503
Re: Long time lurker, ready to get down to brass tacks
« Reply #5 on: August 07, 2018, 02:02:47 PM »
You don't have to buy a new house at all but you can also wait until the kid is at least born before you buy a bigger house.

Sethmeister

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Long time lurker, ready to get down to brass tacks
« Reply #6 on: August 08, 2018, 08:14:47 AM »
Having a more complete breakdown of the 3k monthly budget would be nice.  I'm guessing you guys could get that down a bit, even with the extra principle payment. 

With your income jump next year you guys should easily be able to save 6 figures.  Get your expenses down to around 20k and you can be probably be FIRE'd in 5 years.

Here is a more complete budget breakdown:
Mortgage: 690.00 with 300.00 Extra principle
990.00

Me and My Wife Each Take a personal allowance of 100.00 per week.  This is a way for us to simplify our budget without itemizing a ton of small categories.  This covers: gas; eating out; clothing; hair cuts; etc..
800.00

Utilities: 300.00

Groceries: 600.00

Pet Food: 100.00

Phones: 130.00

Internet and Streaming Subscriptions: 60.00

Also, various expenses such as Trugreen, Termite bond, and Car maintenance: annually apprx. 1200.00

Also, likely to add about 9k for not budgeted expenses, such as vacations, Holidays, etc....



mathlete

  • Handlebar Stache
  • *****
  • Posts: 2070
Re: Long time lurker, ready to get down to brass tacks
« Reply #7 on: August 08, 2018, 08:28:44 AM »
Given your age and net worth, I imagine that you probably have quite a few working years ahead of you. As such, I'd recommend putting the 300 extra going to mortgage towards investing instead. (Maxing out your wife's plan or starting her an IRA if she doesn't already have one)

If you're spending anywhere near $9K a year on vacations and holidays, it sounds like you could really benefit from travel hacking (if you don't do this already). This can save you thousands a year on travel, especially if you have two working adults in the early stages of points churning. Those thousands could go towards financial independence. Google "The Points Guy" or check out some of the threads here if this interests you.




Sethmeister

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Long time lurker, ready to get down to brass tacks
« Reply #8 on: August 13, 2018, 08:26:14 AM »
Well, it looks like my wife is going to have a baby.  Will, probably reorganize my savings strategy for single income and add in some extra housing costs and college savings.

I should be able to comfortably FI at 42 still and at that point, I will stay for another year and hit my 20 year mark for my pension which will start at 65.  The pension is about 1 % of annual gross salary per year of work.


FIreDrill

  • Handlebar Stache
  • *****
  • Posts: 1096
Re: Long time lurker, ready to get down to brass tacks
« Reply #9 on: August 13, 2018, 08:48:17 AM »
Well, it looks like my wife is going to have a baby.  Will, probably reorganize my savings strategy for single income and add in some extra housing costs and college savings.

I should be able to comfortably FI at 42 still and at that point, I will stay for another year and hit my 20 year mark for my pension which will start at 65.  The pension is about 1 % of annual gross salary per year of work.
Congrats!

Sent from my moto g(6) using Tapatalk


Dances With Fire

  • Stubble
  • **
  • Posts: 223
Re: Long time lurker, ready to get down to brass tacks
« Reply #10 on: August 13, 2018, 08:48:48 AM »
I'd stay in your house, make minimum payments. Invest the extra money. Keep lifestyle simple and wait 5 years for your wife to stay home and have kids.

Agree...Do you really "need" a 300K house in a low COLA area? Or is this more of a "want?"

FWIW...The "big" items is what delays freedom for many. Big House. Big car payments. Big "toys." etc. Lifestyle creep can be a trap for many.

Davnasty

  • Magnum Stache
  • ******
  • Posts: 2793
Re: Long time lurker, ready to get down to brass tacks
« Reply #11 on: August 13, 2018, 08:52:09 AM »
Having a more complete breakdown of the 3k monthly budget would be nice.  I'm guessing you guys could get that down a bit, even with the extra principle payment. 

With your income jump next year you guys should easily be able to save 6 figures.  Get your expenses down to around 20k and you can be probably be FIRE'd in 5 years.

Here is a more complete budget breakdown:
Mortgage: 690.00 with 300.00 Extra principle
990.00

Me and My Wife Each Take a personal allowance of 100.00 per week.  This is a way for us to simplify our budget without itemizing a ton of small categories.  This covers: gas; eating out; clothing; hair cuts; etc..
800.00

Utilities: 300.00

Groceries: 600.00

Pet Food: 100.00

Phones: 130.00

Internet and Streaming Subscriptions: 60.00

Also, various expenses such as Trugreen, Termite bond, and Car maintenance: annually apprx. 1200.00

Also, likely to add about 9k for not budgeted expenses, such as vacations, Holidays, etc....

If you really don't want to write all your expenditures down, the allowance isn't a bad alternative, but breaking things down into more specific categories does more than just give you a history to look at later. The real benefit I get from writing down every expense comes from the mental exercise of just doing it. I thought I knew where my money was going as I've always been frugal and paid attention but after I started accounting for every little thing, my spending habits changed without even trying.

To comment on utilities we probably need them broken out. Is that mostly electricity? Do you have gas? What kind of HVAC system? etc.

Grocery spend is high for a couple, especially if you're in a LCOL area. We spend $250/month for 2 people and we're in a MCOL area, although with the type of groceries we buy prices probably don't vary as much by location. Lots of good resources on here already so I won't go into detail but I'm guessing at $600 just switching to some generic products will probably make a big difference. Oh, and do you include alcohol as groceries? Highly recommend breaking that out into it's own category if you drink.

$100 for pet food seems high but again, need more info. How many, what kind, special diets, are you including all pet costs or just food.

Phones, for two people that seems high. Again, plenty of discussion on this topic and I'm no expert but I've researched options that would work for me if my current family plan situation ends. $20/month without data and $40/month with data shouldn't be hard to find.

Some people pay $60 for internet alone due to lack of options so that doesn't sound too bad. I wouldn't worry about canceling streaming services unless you want to cut back on TV watching or if the baby forces you to do so.

Is Trugreen a lawn service?
« Last Edit: August 13, 2018, 08:53:58 AM by Dabnasty »

 

Wow, a phone plan for fifteen bucks!