Author Topic: 32 - $1.2MM Net worth - Married with kid - Next steps?  (Read 6969 times)

JonAtkins57

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32 - $1.2MM Net worth - Married with kid - Next steps?
« on: November 09, 2014, 03:52:22 PM »
I'm super blessed to have a well paying job and have been diligent with saving.  Have had a high income the last few years but plan to cut back when not needed.
By the end of 2014 will have $1mm invested:  $415k Retirement + $465k Individual Stocks and mutuals and bonds + $120k Lending Club
https://www.networthiq.com/people/jonatkins57

While saving we live well but during the next couple years I'd like to pay off the house and / or find a smaller house.  We have a 15 year mortgage with a 2.75% rate but investments have been doing better than that so think it is possibly wrong to pay off the house instead of investing?  Currently putting $2k+ per week into retirement / savings and paying $3k / month on house (for a 2k mortgage).  Should I divert the continued investing to pay down the house or just keep on keeping on?  Or is there some other idea I've yet to consider.  Open to feedback and suggestions, thank you!

surfhb

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #1 on: November 09, 2014, 04:02:44 PM »
There's no wrong or right answer at your age, income and wealth

However, there is one known variable - the house will be yours.   That would mean a lot to me.  How much is it worth and what do you owe?

Pay it off.....you won the game!  Congrats!
« Last Edit: November 09, 2014, 04:07:55 PM by surfhb »

Wile E. Coyote

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #2 on: November 09, 2014, 04:10:36 PM »
I'd probably get rid of the credit card debt first, depending on interest rate. I wouldn't be in too big of a hurry to pay off the mortgage. I'd probably add a few investment properties if you are comfortable with that.  Otherwise, looks great!   Nice job!

daverobev

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #3 on: November 09, 2014, 04:22:14 PM »
Next step: FIRE.

You'll be good for $40k/year with no job related expenses. Lost here have FIREd on less!

Hotstreak

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #4 on: November 09, 2014, 07:20:55 PM »
Your house rate is really low, don't bother paying it off earlier.  Put all those extra funds towards investments instead.

fartface

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #5 on: November 09, 2014, 07:26:58 PM »
BRAVO Dude!

I'd like to FIRE @ 1.5 mill net worth (only halfway there at age 40). You're so far ahead of the game, you can totally call the shots. What a great position you're in.

I think I can retire on 1.5 b/c without my mortgage, expenses fall around 36K/year. I consider this highly mustachian for a family of five.

If you're only going to have one kid and your annual family expenses (assuming no mortgage) can be contained under 40K - then go ahead and FIRE. If you've got a spender lifestyle and/or big mortgage, you may want to delay to 2 mill?

What's your target FIRE age?  What's your annual spending?

CommonCents

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #6 on: November 09, 2014, 07:34:58 PM »
I'm just impressed you added $1 million to your net worth in less than 5 years.  :)

Pay off your credit cards.
Track your spending.
Calculate how it'll change in the future.
Then set a FIRE date.

I agree it may not make sense to pay off your house early right now.

Dicey

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #7 on: November 09, 2014, 07:41:27 PM »
When you downsize, do you expect the new house will cost much less than your current house will fetch? If so, I'd leave the mortgage as-is and continue to invest in equities. That interest rate is sweet. No real point in paying it off, and leaving it alone will give you more to invest sooner. I'd even advise that you take the 1k you're prepaying on the mortgage and put that in the market. Congratulations on your progress, very impressive.

My house is paid for and I still wish I had a mortgage when I see rates hovering around 4%. Being mortgage free is not the Nirvana that some expect it to be.

Ricky

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #8 on: November 10, 2014, 06:47:10 PM »
I'll echo the sentiments of others thus far by adding a tally next to the "stop paying off your mortgage" and invest in a rental or some other investment vehicle that will add diversification to your portfolio.

You're pretty much there anyway, and can afford the risk, so I would definitely be investing more and paying off less. Definitely treat any high interest loans like Ebola though.

MathNinja

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #9 on: November 11, 2014, 07:50:00 AM »
JonA - You are really killing it! The only thing you might want to consider is if your "retirement" bucket is a tax advantaged vehicle, you might consider changing all new savings to be in your other buckets as you might have difficulty getting to the retirement money sooner (there are strategies, but you are so far ahead of the game you don't need to employ).

One other note, you mention that you plan to cut back... I'd suggest doing this and making the adjustment to lower spending before FIRE-ing to see what your true long term spending will be.

@DianeC - Not that it would be my path, but you can get a mortgage on a house that is already paid off. Just refinance and take equity out. You can do up to 80% of your homes value without a problem. If you consider a 4% mortgage rate as being 3% post-tax and choose to use this leverage to invest at a higher rate - you can do well. Certainly not in my risk tolerance, but the math works!

MathNinja

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #10 on: November 11, 2014, 08:48:21 AM »
1) A NWIQ user created a better supported site, networthshare.com.  He can import your historic data if you want to move to it.  It's not overrun with spam posts and has a nice interface.  Worth the switch, IMO.

2)  Why do you have CC debt?

3) What are your financial goals right now?  How much are you spending per year?  (Thinking about your comment "super high income, but planning to cut back when not needed," trying to figure out when that will be....)

Tyler

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #11 on: November 11, 2014, 10:02:08 AM »
My favorite Bill Bernstein quote: "when you've won the game, why keep playing?"

You're in a great financial position and could likely be FI today, if that interests you.  I would take the opportunity to prioritize paying off all the debt.  However low one estimates the risk of investing on mortgage leverage in general at your interest rate and timeframe, one can still argue that in your personal situation it's time to end the interest rate arbitrage game and find new challenges. 

Numbers Man

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #12 on: November 11, 2014, 10:38:40 AM »
Asset allocation is important. I would continue on your current course.

rmendpara

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #13 on: November 11, 2014, 12:26:56 PM »
Seems you're not looking to quit work any time soon, so I'll ignore that part.

So long as the mortgage does not bother you to keep, I'd hang onto it. You're probably paying (after tax deductions) in the low 2.xx% range effectively on the mortgage, whereas almost any reasonable investment will likely outperform that over an economic cycle (even 10 yr treasuries would be close to that).

I'd keep your allocation and go forward with it. I think the 10% in p2p, and assuming you have 5-15% in bonds, you've probably got at least 75% equities... ignoring the value of your primary home... is perfectly fine for your position. You could very well hit 2mm within 5 years.

At this point, if anything, I'd be looking for ways to increase passive income, rather than just focusing on net worth.

A conservative calculation tells me you've got roughly 25k in passive income annually (465 * 3.25% and 120 * .08) on the low end. That's fantastic! A mixture of investing new money into p2p, bonds, dividend paying stocks, etc, could yield solid increases in passive investment income for the next few years. Depending on your abilities/preferences you could also venture into rental property. If you are so inclined, you are also on the brink of being able to get into "sophisticated" investments in private funds and the sort, however, that sort of defeats the purpose of being "hands off" and letting your money work for you. If you've already won the game, why keep playing?

In any case, I'd take some time to reflect on your risk appetite, 5 yr goals (income/net worth/personal goals/etc), and see how you can adjust to move in that direction. Financially, there's a lot of flexibility to be had right now, so congrats!

Good luck on whichever direction you choose.

Bob W

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #14 on: November 11, 2014, 12:59:38 PM »
Nicely done.   You might consider diversifying into real estate investments. If you live in the right area,  you should be able to find some properties with a total net after all expenses including management fees that would be around 10%.   Most of us don't live in an area like that though. 

The beauty of that is that you could turn 500K of investment into a 50K investment stream that self adjusts for inflations.   

Me thinks you probably won't retire anytime soon at all, so we can look forward to you posting in 10 years with a net worth of 5 million!   

webguy

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Re: 32 - $1.2MM Net worth - Married with kid - Next steps?
« Reply #15 on: November 11, 2014, 07:05:04 PM »
Great work saving all that dough! I'll be in a similar financial position to you when a turn 32 and also have a low rate mortgage and similar asset allocation. Sounds like you're doing great so my only advice would be to make sure your stock portfolio is well diversified globally and perhaps start thinking about some other investment options - such as managed real estate. Personally, I'd keep the mortage for as long as possible.