I need a Checkup, 10 years into my investing journey

[davef]

Hi, I'm Dave. I'm 38 Wife is 36, and we have 2 boys ages 2 & 4. I spent every penny I earned until I met my wife, about 10 years ago. Since then I have been reading this site and tracking my expenses. We have no plans to actually FIRE, but hope to start our own business someday.

Our household income rose gradually from  70k to 102k over the 10 year period and jumped to 150k in early 2020.

I have trended net worth over the past 10 years, here is how it looks.

Year   Net Worth by year                                Change $ (Year)                            Change % (Year)      Notes
                     
1/1/2011    $112,000.00             
1/1/2012    $140,000.00                                    $28,000.00                                             25%      
1/1/2013    $168,752.00                                    $28,752.00                                       21%      
1/1/2014    $278,443.90                                    $109,691.90                                      65%                  Sale of rental property
1/1/2015    $326,090.21                                    $47,646.31                                            17%      
1/1/2016    $344,750.81                                    $18,660.60                                             6%      
1/1/2017    $413,239.24                                    $68,488.43                                       20%      
1/1/2018    $491,735.41                                         $78,496.17                                       19%      
1/1/2019   $541,302.00                                    $49,566.59                                       10%         
1/1/2020   $637,323.23                                    $96,021.23                                       18%      
1/1/2021   $835,000 Estimated                                $198,000                                             31%


The breakdown is as follows
Cash on hand $6,000
Emergency fund, $10,000
Brokerage account - Stock $21,232 mostly in my company.
Roth IRAs (Mine) $74,277 (about 70% ETFs the remainder Amazon Stock) did really well this year
Roth IRA (Wife) $60,897 (about 70% ETFs the remainder Costco Stock) that the part she picked.
401k (243,556) About half is in a S&P index fund, the other is a mixture of low-cost funds. Contributing 8% (employer matches 3%)
UMTA #1 16,395 (I use this to pay for his preschool $350/Month )
UMTA #2 3,119 (I gift stock with 1,000$ worth of gains from the brokerage to each UMTA each year)
College Savings #1 $25,893 (not a 529)
College Savings #2 $7110.15 (not a 529)
HSA $10,450

Our only debt is our house, worth approx 520k, still owe 220k@3.875 I have been paying an extra 1,000 each month and plan to pay it of by 2026

Am I missing any opportunities?
Diversified enough?
I would love to hear your thoughts!

[Dicey]

Holy shit, yes! Refi the house immediately!

We can wait to have the DPOYM conversation until after the re-fi closes.

Otherwise, great progress report!

[KYFIRE]

While I'm far from an expert I'm gonna second Dicey's advice. 

I just did a refi from 3.25 to 2.49 for only $2,200.  It's less than a 2 year payback for me, should be way less for you by saving $254/month in interest if you can get to the 2.49.

Great job on progress too.

[davef]

I planned to do that. I checked in may and again in October. Chase, Rocket and my credit union . The best I could get was 3.0 with 4,500 in costs. That didn't seem worth it to me. There is a fairly good chance we move in the next few years.

[Dicey]

I planned to do that. I checked in may and again in October. Chase, Rocket and my credit union . The best I could get was 3.0 with 4,500 in costs. That didn't seem worth it to me. There is a fairly good chance we move in the next few years.

Check again. With your credit and assets, you should be at 2.5% now. Sure the fees hurt if you don't shop hard, but you said you were shooting for a payoff in 2026, so you would still come out ahead, especially because you will be investing the full difference immediately, right?

[KYFIRE]

I'm surprised getting those rates with your stats.  I started in October timing and closed mid November at the 2.49%, seemed (s) like it's plateaued there.

Even at 3% and $4500 closing you'd be around a 28 month ROI on the interest costs.

[cincystache]

Agree with the Refi advice, however with you planning to pay off the house in 6 years it's not nearly as important as if you were planning to carry the mortgage for 30 years.

The single exposure to amazon, costco, and your company is not something I would do but it's worked out great as you've said, just have an exit strategy and realize you are kind of gambling.

You have really kicked ass in the last 10 years especially while making 70-102k per year. Is that your household income or does your wife work as well?

I'd say keep doing what you're doing and you'll probably cross the million mark in another year or two. Congrats!

If you're dead set on paying off the mortgage then go for it, but you could consider doing a cash out refinance and taking out a bunch of that equity out and investing it, especially if you can get a 2.5% interest rate. Again, not a recommendation but at least something to think about and discuss with your wife.

[davef]

Thank you.
Yes that is household income. My wife has not worked outside the house since she was due with #1 in 2015. Even when she did, it was about 15-20k per year.
We do not like debt.  So yes, paying off the house soon. Especially now that you can't deduct mortgage interest. Ill try again on the refi.

[Dicey]

Thank you.
Yes that is household income. My wife has not worked outside the house since she was due with #1 in 2015. Even when she did, it was about 15-20k per year.
We do not like debt.  So yes, paying off the house soon. Especially now that you can't deduct mortgage interest. Ill try again on the refi.

There is bad debt (unsecured) and good debt (secured). Good debt offers opportunities for leverage, inflation protection and compound interest. All three work in your favor. Feel free to spend a little time over at the DPOYM Club. Costs you nothing to learn and I promise, we don't bite.

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

And while I'm suggesting things, are you familiar with JL Collins? https://jlcollinsnh.com/stock-series/ Your portfolio composition is far riskier than it needs to be. Balancing that is a far more strategic move than prepaying the mortgage.

BTW, if you really hate the mortgage, the safest move is to accumulate the extra money in other investments and then pay it off in lump sum. The bank doesn't care if you're ahead, they just want a payment every month. Prepaying offers little to no protection. (<--This fact is for US based mortgages, because that's where the OP lives.)

[Beach_Stache]

I agree regarding the refinance, we were at 3.875% on a 30 year in 2013, we had paid down a good chuck and then refinanced in Nov 2019 to 2.25% at 15 years, but paid some points down to do it, so had a good amount of closing costs.  At the rate we were pre-paying the house would have been paid off in 8 years at 3.875%, and with the refinance it didn't make sense to continue paying down the house as aggressively, so we shifted the delta into post-tax investing which has been a good move, and I imagine over the next 14 years we'll come out ahead.  I would just make sure that if you refinance you do the break even math and determine if it's worth it, which will depend on how long you plan on staying in your house.  If the closing costs are low I imagine the break even point will also be pretty low, so still probably worth it.

[iluvzbeach]

Check rates with PenFed Credit Union.

[davef]

According to Penfed's website. I can do a 15 year fixed at 2.5 (2.58APR) with $3700 in closing costs. That sounds good to me. Waiting on a call back from them.

[formerlydivorcedmom]

I'd be a little worried if my brokerage account was primarily my employer's stock.

If the worst happens and your company goes belly-up, you lose your only source of income and all your non-retirement investments.

[Fuzz]

I'd encourage to refi the house and put the extra $1K month to the brokerage account instead of the mortgage payoff. That's more of a preference thing.

If you have a choice between 50K in a brokerage or 50K less in a mortgage, I think you are better with the money in the brokerage. It gives you more options to respond to an opportunity or an emergency. On the other hand, a HELOC does the same thing.

But you have all the pieces right. I didn't see you mention term life or disability insurance, which is good for working folk with kiddos.

[davef]

Thanks guys. I locked a 30 year fixed at 2.75 at Penfed. They waived the appraisal so I am looking at about 3,000 in total costs. I plan to put more in the brokerage, but will also be setting some aside for home improvements.

We have term life 500k for myself 100k for my wife. In addition to that my employer has an employer paid life 2x salary, and 4x if you die on the job.

My company is a fortune 250 company who’s stock went up 70% this year. The upside is worth the risk on a small portion of my finds

[iluvzbeach]

Glad the PenFed rates work for you.

[ChpBstrd]

Looks like you're doing well, but it's hard to tell for sure when we don't know annual expenses. E.g. you're many years closer to FIRE if your annual expenses are $50k than if they are $100k. If you are unsure, use mint.com.

[davef]

My expenses are not so good, So I am likely going to get roasted here but remember I do not actually plan to retire early.

Mean Monthly Income $8240
For a family of 4, Monthly expenses

Fixed Monthly - $2188 (average for 2020)
$1750 House Payment with taxes and Insurance
$106 Electricity
$68 Gas
$130 Water/Sewer
$24 Waste
$210 Internet, Cable, and Security (i know, its crazy but our house was burglarized and my wife cant sleep without it

Variable monthly - $976 (average for 2020)
$270 house and yard maintenance (had to replace the privacy fence this year
$215 Insurance (auto and Life, umbrella)
$45 (Health Care in excess of premiums)
$96 (2 Phones)
Both cars paid off this year
$350 3 days a week preschool

Discretionary monthly 2459 (average for 2020)
$375 Restaurants
$1520 Groceries (includes all essentials) Both kids are allergic to dairy and we try to eat healthy so its not cheap.
$231 Auto Repairs and gas
$50 Entertainment
$116 Gifts/charities
$47 Pet Expense (Dog)
$120 Clothes

Total monthly =5623
8240-5623 =2617
I had been putting 1000 toward the mortgage principle each month and investing the rest.
Following the refinance, house payment will drop to 1450 a month. so I will be able to invest the entire 2917 monthly, all things the same going forward

[ChpBstrd]

A 35% savings rate is very respectable.

You could hit 40% with some grocery/restaurant/etc. maximization, but you're otherwise doing well.

[davef]

I also make about $5,000-20,000 per year in other income (bonuses, tax returns, side gig, and gifts), when you add that income and include the mortgage principal it's more like 42%.

Looking differently over the past 10 years I have had 1,071,092 in post-tax income. Net worth has increased by 768,326 over that time.
that's like 72% bad-assidy.

[FIREby35]

36 year-old father of three over here. Spent the last 10 years doing stuff very similar to you. Looks to me like you are crushing it :)

I know this article helped me be cool about keeping saving and living in balance: https://frugalvagabond.com/the-point-of-retirement-inevitability/