Author Topic: 7 years in - Review and looking ahead for the next 7.  (Read 3487 times)

davef

  • Stubble
  • **
  • Posts: 221
  • Age: 36
  • Location: Wilsonville, OR
7 years in - Review and looking ahead for the next 7.
« on: July 23, 2015, 02:16:00 PM »
Hello. I'm Dave.
in 2008 at the age of 26 I realized I was in a career I didn't like making a high five figure salary but spending every penny in sports cars and eating out.
So I hit reset.
I went back to school for 2 years, lived super frugally while I paid my way through school. In 2010 I emerged from school debt free in my new career with a net worth of about 10k.
I bought a house, then I got my dream job on the other side of the country 6 months later. I moved across the country met a girl, got married, rented the other house, bought a new one and found MMM.   
I have since grown my income, and our household income is right about 100,000. I recently sold the rental property (I was a pain to monitor from 2,000 miles away)

Here is where we stand today.
Net Worth 336,000
63,000 in 401K invested in Spartan index funds FXSIX & FSEVX (Currently at a 15% contribution with a 3% match)
24,000 (12,000) each in Roth IRAs split equally between FBSOX FMEIX FSPHX FSTMX Putting in max every year
30,000 Post tax investments Half in FSTVX and FCNTX the rest in individual stocks.
Our house is worth about 390K (we paid 314k) and we owe about 260k at 3.125%
Our 2 paid off cars are worth about 10k each
Currently we have about 75k in liquid funds due to the recent sale of our other house.

HOWEVER, about 20k of that 75k is earmarked for some overdue maintenance on our house here, like a new roof (quotes range from 10,200-15,400), furnace, and 1,200 Sq feet of wood flooring.
AND I've been considering getting rid of my gas guzzler for a new Subaru crosstek hybrid (gotta carry my kayak) would be another 20k after trade in.

Unlike many on this site, my goal is not to retire early, I love my 9-5, and my side job is my own business. I may quit the 9-5, but then I would likely go full time in my own business, so my goal is not to retire early, but to achieve FI through frugality on a modest salary.

In a recent bump in the road, last month our house was burglarized. They made off with about 2k (including my wallet, DSLR and ipad doh!) and my wife insisted we get a security system, which is costing an extra $50 a month.

Our current budget allows for about 27k worth of our net income to be invested in the ROTH IRAs and investment account.

I've set a stretch goal for us of achieving 1,000,000 net worth by my 40th birthday (7 years away)

I would love to hear any thoughts or suggestions on how to plan/achieve this

velocistar237

  • Handlebar Stache
  • *****
  • Posts: 1422
  • Location: Metro Boston
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #1 on: July 24, 2015, 08:36:43 AM »
Hi Dave. Your timeline is pretty similar to mine. If you keep your savings rate above 60%, you'll likely reach 1 million net worth in 7 years. At some point, it becomes all boring basics: prioritize putting savings into income-generating assets and try to avoid lifestyle inflation. Would you consider looking for a 2013 Crosstrek? I'm pretty sure you can carry a kayak with any vehicle.

Abe

  • Handlebar Stache
  • *****
  • Posts: 1115
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #2 on: July 24, 2015, 09:18:14 AM »
Hi Dave, good job on the efforts so far. You mention your income as $100k annually, and are saving 27%. Do you have a breakdown on what you are spending the rest on? What percentage is going to taxes (federal, state, SS, Medicare, real estate), and what things are the rest spent on? That will give us more information to help.

Regarding buying a new car: are you sure the gas savings will be worth the extra cost? If you are buying for non-financial reasons, consider buying a 2-3 year old car of the same model.

davef

  • Stubble
  • **
  • Posts: 221
  • Age: 36
  • Location: Wilsonville, OR
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #3 on: July 24, 2015, 09:57:14 AM »
Abe, that 27% is post tax savings. If you at the 15% 401k savings and the principle on our home loan we are at 45-50% total savings according to mustachian principles. It was over 50% in 2014 but this has been a rough year.

Budget goes something like this.
After 15% 401k
Federal taxes
Oregon state taxes medicare etc
our net income is about 6k per month
Mortgage - $1,625 (incl taxes and insurance)
Electric averages $70/ month
Gas averages $ 80 per month
Water$100 per month (damn sprinklers) yes they are aimed correctly
Trash $21/ month
now its $180/ month for Comcast Internet/TV/Security. (I hate it to. my we got robbed while we were asleep, and I'd loose my wife without it, that an neither of us would sleep)
We spend an average of $80/month on house and yard maintenance
$157 a month on insurance Auto/Home/life
$230/month on health care expenses
About $600 month on food and grocery store items. Including all cleaning products and toiletries
About $200/ month on restaurants. I travel for work, so much of this is unavoidable.
$337 / month on gas
$95 per month for cell phones
About $100 per month on pet related expenses (dog)
About $100 per month of late in clothes. (this is mostly me actually. I lost 40lbs and none of my clothes fit, I have been buying new stuff as I see good prices...


Those median totals come out to $3895 monthly. Our monthly budget is actually $4000
with a goal of saving at least 24,000 per year.
Last year we did 27k so we beat our budget a bit. 

JustGettingStarted1980

  • Bristles
  • ***
  • Posts: 377
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #4 on: July 24, 2015, 11:35:23 AM »
Hi,

A couple questions:

1. Are you maxing out the full 18K in your 401K? If not make sure you use those liquid assets in a manner that allows you to max that out. Good job with the Roths for you and spouse.

2. Does your wife work? And is she maxing out her 401K (does she have access to one?) -if so, time to max that out this year as well... 100% deduction from her paycheck, and use the liquid assets to cover immediate needs for the next couple years.

This could lead to 18K + 18K + 11 K Roth = 47 K Savings per year, 36K of which is pretax.

I agree with posters above in regards to buying a 3-4 yo Subaru instead ...let someone else pay for the depreciation. If you are worried about reliability, you can pay 1K extra for an extended warranty (if you must), and still make out like a bandit.

davef

  • Stubble
  • **
  • Posts: 221
  • Age: 36
  • Location: Wilsonville, OR
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #5 on: July 24, 2015, 12:08:19 PM »
No, I've chosen not to max my 401k. I never actually plan to retire, and given the state of our country's current finances, I will likely be never subject to a lower tax rate than I am today. As a business owner, I will have an Dividend income (likely six figures) even if I am working part time in my 60s and 70s. The 15% I contribute amounts to about 13k with the 3% match. My wife works, but only part time right now and is looking for something better.

After driving a few new cars yesterday and discussing with my wife we've decided to just fix my current car (an 07 Nissan Xterra) and keep it a few more years. 18/22MPG is good enough when I only have a 7 mile commute. I actually only drove 4,000 miles in my personal vehicle last year. At least 10,000 in work vehicles and rentals!

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2191
  • Location: EastCoast
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #6 on: July 24, 2015, 12:47:31 PM »
When you say "new" car you mean new to you right? Not new-new? I don't see $1 million+ net worth and financially independent in your post so why would you consider a brand new car??

And do you need a 4WD hatchback thing to carry your kayak (the crosstrek)? You can get few year old prius for $15k, before trade in, and get 50 MPG vs 31 with the subaru! I did whitewater and had 5 kayaks on top of a golf, so "hauling capacity" is no excuse..
« Last Edit: July 24, 2015, 02:17:59 PM by Scandium »

davef

  • Stubble
  • **
  • Posts: 221
  • Age: 36
  • Location: Wilsonville, OR
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #7 on: July 24, 2015, 01:49:21 PM »
Scandium, as a former mechanic, I know that buying used cars have hidden costs usually due to lack of maintenance, and in some cases abuse. I'm ok with spending a little extra to have a new, or nearly new car and use it for 10-12 years before I swap it for another one. I've decided to keep my other car so that's a moot point.

Prius! did you read I drive 4k miles/year. And almost all highway. Hardly worthwhile. Having spent a lot of my live in places where it snows, and having had AWD save my butt on numerous occasions, I wont buy a car that is not 4wd or awd. Its something that I have determined to be well justified in my case.

forummm

  • Walrus Stache
  • *******
  • Posts: 7358
  • Senior Mustachian
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #8 on: July 24, 2015, 02:20:55 PM »
You may have signed an alarm contract. But there are a lot of cheaper security system options. Maybe look into some of those.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2191
  • Location: EastCoast
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #9 on: July 24, 2015, 02:28:08 PM »
Scandium, as a former mechanic, I know that buying used cars have hidden costs usually due to lack of maintenance, and in some cases abuse. I'm ok with spending a little extra to have a new, or nearly new car and use it for 10-12 years before I swap it for another one. I've decided to keep my other car so that's a moot point.

Prius! did you read I drive 4k miles/year. And almost all highway. Hardly worthwhile. Having spent a lot of my live in places where it snows, and having had AWD save my butt on numerous occasions, I wont buy a car that is not 4wd or awd. Its something that I have determined to be well justified in my case.

You're a mechanic and consider a car with more than 48k miles "done"? Eh sure ok.. I drive a subaru with 2x that number of miles and have had very few rapairs, but whatever.

Even if true (which I don't think it is); that car would cost you at least an extra $1,500 the first year in depreciation (plus opportunity cost etc). I hardly think you'd pay that much in repairs on 50k mi car for a long while. I don't agree with people here recommending 150k+ mi cars, but new is never a good idea in any situation

davef

  • Stubble
  • **
  • Posts: 221
  • Age: 36
  • Location: Wilsonville, OR
Re: 7 years in - Review and looking ahead for the next 7.
« Reply #10 on: July 24, 2015, 02:32:26 PM »
4/5 cars with 48k miles are fine, but its hard to tell which ones were abused without tearing them apart.
Its a gamble, and I'm willing to spend the money on something new or nearly new to get a known history. I've seen cars with 30k with 10k worth of damage due to neglect. It happens.