Author Topic: A bit lost  (Read 2095 times)

Nostache

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A bit lost
« on: July 16, 2012, 12:05:53 AM »
I earn 170k plus 50-100k in bonuses. I own 3 cars outright, two sedans and a truck. I have about 120k in savings plus 125k toward a $550k house. I have $20k or more in student debt at a low %. I have a stay-at-home wife and a new baby.

I'm trying to be Mustachian.

I just put one of the cars on ebay. I cut my internet bill from $100+ / month to $60 by dropping everything I could down. I've never had cable TV. I've dropped my airline credit card for a cash back one. I'm trying to bike and bus to work, but it's 20 miles each way of hilly terrain that is not fun. Driving can be 30 minutes or so. Bike and then bus can take nearly 2 hours each way. I listen to podcasts and read, but it still sucks.

I've liquidated some of my old investments to kill off the student loan. I'm 31. We occasionally rent our spare room on AirBnB but it's tough with the baby. We are paying $125 / month for two cell phones I want to just use Skype for. Compared to a lot of people at my income level we are pretty thrifty, cook at home and don't have huge debts apart from the house. I've started a side-business to build some income outside of the day job.

The flip side is that we are paying for a horse to board at $700 / month. I'm learning to fly on the side; a lifelong dream that will soon be finished.

I don't know what my goal should be financially. Roughly, we want to move house to something in the 250-350k range in a different state which means losing this high-paying job. If we sell the house we'll probably lose $10k or more which would be painful and so I'm leaning towards renting it out.

I'd like to know what your points of view on this are.

gooki

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Re: A bit lost
« Reply #1 on: July 16, 2012, 01:04:34 AM »
It's really up to you want you and your family as to what your financial goals should be.

What do you/your wife want to do in:
2 years
5 years
10 years
20 years

Noting overly specific, but enough to set some income targets. Can be as simple as.

2 years - Be debt free
5 years - Scale back work, heat save 50% of income
10 years - Be self employed, pay for 1/2 of kids college
20 years - Travel, and vist grandchildren

Basically estimate how much you intended to spend on big ticket items (house, kids education) then estimate an average annual income you need to do what you want. Then figure out how much you need invested to allow for the above.

PS if the difference for me was a 2 hour ride + bus or a 30 minute drive, I'd do the drive (in an economical car), as that extra 3 hours a day is worth a lot to me with a family.
« Last Edit: July 16, 2012, 01:10:42 AM by gooki »

kolorado

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Re: A bit lost
« Reply #2 on: July 16, 2012, 08:22:38 AM »
It is hard to focus on potential goals several years in the future when you have small children. Things can change from your plans quite rapidly. I have three children and we had to choose to focus just on general frugality and saving after having to change specific goals time and time again. And even though I prefer to have specific goals, saving for nothing in particular is a good technique as well because the money and skills will be there when you eventually do need them.
If *I* was you, I'd be stashing every penny I could from my regular job and getting a nice nest egg together. With $500K saved, you can do almost anything you want almost anywhere you want. At your income level, I wouldn't be surprised if you could do this in less than 5 years. I'd enjoy my precious free time with my spouse(who really deserved as much as your time as possible after the draining work it can be caring for children full-time)and invest in my kids. There is no way I'd trade off any more time with my family for more income at the level you're already earning.
Have you considered buying a home now in the location you want to move to and renting that out? You stay at your current job for 3-5 years, paying off the new house, collecting rent and boosting your savings before you sell your current house and move. With someone who has as much coming in as you do, you should really explore the option of being a landlord to generate a passive income. I just read "Building Wealth One House at a Time" based on a recommendation I read here. Very interesting and something I really want to do even at our minor income level. We would only need about 6 houses rented to create enough passive income to live well on. With your horse and lessons you may need more like 8-10. Check to see if your library has a copy to learn more about investment properties. :)