Hi! I'm new to the Mustache seen. I've always been somewhat of a personal finance geek (b/c I"m a numbers geek), but don't know if I'd ever heard of the concept of early retirement (other than the allusion to something of the sort in Dave Ramsey's mantra about living like no one today so you can live like nobody else tomorrow (or however that goes). I've been a pretty religious keeper of the budget using You Need a Budget's software (
www.youneedabudget.com if anyone is looking for something that has worked better than Mint for me). But, now I want to move forward from just getting by month to month, normally a little bit ahead, to actually demonstrating some badassity and living like a Mustachian. I was hoping that I could lay out my situation and then get some input on my prospects for FI and what you think my next steps should be.
Situation: I'm a scientist/engineer/software developer (in that order) who recently took a year out of the job market to work at a church. As such, the last year hasn't been filled with a bunch of huge paychecks and my wife and I didn't do a whole lot (i.e. any) savings over the last year. I recently took a job as a software developer, but in the transition in essence missed a paycheck.
Basic Life Facts: 28, married, 21 month old daughter, probably a second baby sometime in the next 10-15 months (and that will most likely be the last).
Income: $61k, take home = $3867/month (that is before any contributions to 401k).
Debt: ~$10k in student loans at 2.5%; ~$2.5k in credit card debt (might be closer to ~$1k as I'm waiting on all of my moving reimbursements from my employer to come in and not sure how that will all play out). The CC debt is mainly due to not getting a pyacheck in Feb. as I was transitioning jobs.
Savings: We have around $9k in cash sitting in an ING savings account. Most of it is "earmarked" for various things. We have a rental property (get to that in a minute), and about $3k is earmarked as a rental "slush fund", "$1k we're in the process of investing into a 529 for our daughter's college, and the other $5k is for a house down payment in theory.
Assets: My 403(b): ~$12k, 1 rental property (used to be our primary residence until we moved away for a year. Now we're back in the same city as we were previously, but are planning on keeping this as a rental and buying a cheaper property). Rental property's appraised value is about $160k (slightly above average for this part of the country; 4 years old, new section of town, 3BR/2BA house), ~$150k owed). PITI + PMI = $984, currently renting it for $1195, but paying 10% to a management company since we had been living out of state.
Spending: I could get a breakdown for you if it's helpful. I don't have the numbers beside me. I looked at our 2012 spending after finding MMM and remember thinking that our coffee + eating out was way too high (about $2200 together), our groceries weren't bad for a family of 3 ($4900, although we could do a little bit better), and we had the dreaded "Miscellaneous" category in the budget (everything from household items at Target to rent deposits) for $3100. I probably also spend too much on books.
From the macro perspective, what should I be doing at this point? Take some of the money from the house down payment earmarked funds to get rid of any and all CC debt? Would you keep renting out the house if you were in my shoes (I suspect rent could be a little bit higher given we had 3 applications and 10 people look at the house in the two weeks it was on the market last April). Would you ditch the management company? I'm a little fearful of missing something in the screening of applicants or not having the ability to market the house as well as a management company. We're currently in an apartment paying $685 in rent. I think we can get total expenses down to about $2500/month while we're here. We're also looking to buy a house (long story, but we're getting in a particular neighborhood, houses are about $110k...we're not going to have the 20% down, but at that price, 15 year mortgage at 2.875%, should only be paying PMI for 1.5-2 years even if we put 5% down).
Am I missing anything? Advice? Can someone with a household income of $60k and 28 years old hope to be FI in 15 years? I feel like I don't have the huge income to get the massive savings, although I can probably expect steady 1.5-3% pay raises each year plus a company guaranteed bonus. Should I always max out my 401(k) before doing any other savings (company matches 50% up to 6% of my salary; after a year, I'll have stock options which the company will match 25% of what I buy)? How does my 401(k)/403(b) balance count in my stash? Does it just get added to whatever I have in "normal" investment interests? What would you do if you were in my shoes with the rental property? My thinking is to keep it long-term. It's in an area of the city that is rapidly growing, great schools. It should appreciate over the next 5-10 years. If only I could get rid of the damn PMI on it.
Thanks so much for your help! I'm looking forward to being part of this community! And apologies for the novel of a first post.
Matt