Author Topic: Case study: FI by age 30 (in 5.5 years)?  (Read 8374 times)

icefr

  • Bristles
  • ***
  • Posts: 325
Case study: FI by age 30 (in 5.5 years)?
« on: February 11, 2013, 11:33:18 PM »
So, here's the deal. I love software, but I'm tired of the time sink of working and commuting. I've been trying to cut down my expenses where possible the last few months and I'm making progress, but I'm hopeful that maybe you guys can help me cut them down a bit further.

According to the Shockingly Simple Math Behind Early Retirement, I need to save 80% of my net income to retire in 5.5 years, at age 30. I think that I should be able to have a green card by then, but I'm not sure that I can save 80% of my net income. An option is to get close to FI and find a part-time job once I have a green card that would cover my expenses instead of withdrawing from the 'stache.

Here's what my net worth looked like as of January 31st. All numbers are in USD unless otherwise specified.
  • $2.5k Cash savings (CAD)
  • $9k Checking account aka cash flow account
  • $33k Online savings accounts
  • $2.5k Small inheritances, in online savings accounts
  • $1k Set aside in cash for 2012 Roth IRA contribution, will make once I know my 2012 MAGI for certain
  • $42.5k Traditional 401(k)
  • $4.5k Roth 401(k)
  • $11k Roth IRA
  • $8k RRSPs (CAD), all in long-term certificates of deposit
  • $12k Vanguard taxable account
  • $360k Condo value (two bedrooms, two bathrooms)
  • -$253k Mortgage balance (2.5% 5/1 ARM, refinanced in December)
  • $78k Investments
  • $233k Overall net worth

I saved about 64% of my net pay in 2012 and increased my net worth by about $80k despite the expenses listed below. Assuming that I stay with my current employer through the end of this year and receive no raise (to be conservative), I should net somewhere between $120,000 and $140,000. (The range uses my employer's 52 week low and high for my RSU vests.) I'm expecting next year's net pay to drop down to between $105,000 and $120,000 and then about $85,000 in 2015.

Now for expenses. You guys are going to shoot me for some of the 2012 ones, but that is in the past now and I'm working on fixing it for 2013.

2012 Total2013 Forecasted TotalNotes
Clothing$3,252.08$1,444.69trying to cut this down...
Entertainment (Overall)$2,479.73$1,800.00Budgeting $150/month for 2013. I used to budget $300/month, but this is going down!
Entertainment: Cash$452.71I don't really track cash, that's why it's in Entertainment
Entertainment: Books$170.81trying to get e-books from the library instead of using my Kindle
Entertainment: Cinema, Movie Rentals, Netflix & Music$135.63
Entertainment: Pandora$36.00$36.00could probably nix this... nixed!
Entertainment: Dropbox$99.00$99.00backup of files and such. I don't buy external hard drives anymore and this is really awesome with multiple computers
Entertainment: Social eating out$1,386.16$82.222013 is January only. This has been going down the last few months.
Entertainment: Remember the Milk$25.00$25.00could probably nix this... nixed!
Entertainment: Other$289.92$54.102013 is January
Tax return preparation$435.40-Did my 2013 taxes myself
Food: Eating out$621.64$701.59set budget to $70/month, most likely will spend closer to $0/month
Food: Groceries$1,518.59$2,246.36Trying to bring my lunch to work, so this is hard to budget for. This is for ~1.5 people as boyfriend pays for food out and I pay for groceries.
Food: Work lunches$2,062.40$929.22Working to cut this down. Making progress!
Gifts and Donations: Charitable donations$650.00$720.00
Gifts and Donations: Presents$1,070.75$735.96 $400.00Parents paid for my university education, so I try to buy them nice presents each year.
Cell phone$802.60$505.85cut down to $35/month+taxes with Ting. I'm trying to stick to the $3 data bucket. If I can't and it's due to work, I'll expense the data portion.
Internet$706.85$604.08 $414.08currently paying $50.34 $31.34/month for cable internet
Renter's/condo insurance$139.64$206.94
Rental deposits and fees$392.00-Not moving in 2013!
Apartment building utilities$390.69-Rolled into HOA dues
Electricity$333.12$1,234.55Programmed thermostats. Turning lights off more. That should hopefully help for the rest of 2013. Will turn heat off completely ~May. No A/C. No idea how accurate this budget will be, so I'm trying to overbudget for now. My bills so far have been all over the place.
HOA dues$1,518.75$3,645.00stable through end of 2013
Mortgage payments$6,096.10$11,300.52
Moving expenses$4,051.57-Not moving in 2013!
Property taxes$1,329.64$2,739.06Don't have 2013 bill yet, so estimated 3% increase from 2012
Rent$9,821.28-No longer renting
Household goods-$240.00
Eyebrow waxing$223.40$250.04
Hair cuts$177.00$309.72hah, I'm too lazy. $177 is probably more likely than $309.72. I get my hair cut 2-3 times per year.
Make-up$124.83-No more budget. I stopped wearing make-up.
Other bathroom stuff$235.61$240.00
Spa$112.60$178.14
Sport #1$610.00$610.00
Sport #2$1,319.78$200.00 $130.00prepaid for a year in late 2012. will likely buy at most one punch card in 2013.
Sport #3$205.00$255.00may end up being $0 due to time
Sports equipment$265.56$41.10
Sports tournaments$60.00$155.00 $120.00
Amazon Prime$79.00-Each year I try to cut this and then I'm peer pressured back into it
Electronics$421.94$19.99
Electronics: TiVo lifetime service-$437.99My plan is to pay for this and then never buy another TiVo. I'm kicking myself for not just paying for this back when I bought it, so I'm fixing that now.
Furnishings$103.27$84.49using small inheritances for this
Car insurance$1,469.62$1,457.35Hopeful that it will go down with my 25th birthday, but we will see. (Cheaper than 2012 because of owning condo versus renting.)
Car maintenance$71.35$131.08
Car repairs insurance deductible$1,000.00-Insurance deductible - car was vandalized last year and quite a pricey repair job
Fuel$462.01$562.20usually 3/4-1 tank used per month, this is probably an overbudget
Parking$735.52-2012 was in my apartment building
Umbrella insurance$297.20$346.00This should go down with my 25th birthday, but do I really need it?
Vehicle tabs$134.75$138.79This seems to go up every year by more than my 3% estimate...
Travel$4,372.65$4,139.11This gave me many trips in 2012. I'm planning on a much smaller number this year. Not sure if this budget is too much or not. I will throw leftovers at the mortgage if so.
Total with mortgage & rent$50,269.42$37,784.84I know 2012 was expensive. The moving and everything else just added up. 2011 was much, much cheaper and I think that I can do better in 2013 for sure.
Total without mortgage/rent$34,352.04$26,484.32

Where can I cut the fat?

I'm planning on switching to a HDHP/HSA plan and maxing that out during open enrollment. I max out my 401(k) and get a small match from my employer. Our premiums are pretty cheap for dental and health insurance. I unfortunately have a life insurance of a multiple of my base pay that is a group policy from my employer and they impute my income to cover it. (Unfortunately because I have no dependents and it just makes me pay a bit more in income tax.)

I have the Amazon.com cash back card and a 1% card. I use a rewards checking account.

FI projections:
  • $77,638.20 Investments as of 1/31/2013
  • 2.93 Years expenses saved @ $26,484.32/year (2013 without mortgage)
  • 25.00 Years expenses needed in investments
  • $662,108.00 Investments needed to be FI
  • $120,383.27 Annual investment contributions needed to hit FI in 5.5 years

After maxing out the Traditional 401(k), the HSA, and the maximum I can put in the Roth IRA through the front door, I am paying the mortgage down aggressively. My hope/plan is to pay it off within 5 years, before the rate resets. Based on current income projections, the payoff date is November 1, 2018. If I do get RSUs for 2015, that should come in. I would also like to pay off the mortgage in full before I get married since I live in a community property state.

I know that I could get a roommate and probably cut expenses by ~$800/month or $9,600/year, but the only roommate I would consider having is my boyfriend and we're not there yet. We're aware of how much money we would both save by moving in together, but the life decision hasn't made sense yet and I don't want to rush that. I'm also worried that since we're in a community property state that could cause weird issues if he lived in the place I own?

All face punches are appreciated.
« Last Edit: February 12, 2013, 02:29:07 PM by icefr »

marty998

  • Walrus Stache
  • *******
  • Posts: 6492
  • Location: Sydney, Oz
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #1 on: February 11, 2013, 11:46:59 PM »
It's a long list but there's not many big unnecessary items on there.

One man's "not required" is a girls "must have otherwise the planet will explode" item, so I won't face punch for the eyebrow waxing. Kudos for no makeup. I've always thought girls (freckles and all) are more beautiful without the fake face mask on.

You've currently got 5 cash accounts, surely you only need 2? A transaction account and a high interest savings account. Or one perhaps, just a transaction account and all remaining cash goes to paying off the mortgage or investing.

Sport expenses are good to see. Keeps you active/fit/social and is a preventative health measure.

Cutting work lunches to nil is the 1st place to start. Imagine having $1000 cash in your pocket at the end of the year.

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #2 on: February 12, 2013, 12:43:58 AM »
One man's "not required" is a girls "must have otherwise the planet will explode" item, so I won't face punch for the eyebrow waxing. Kudos for no makeup. I've always thought girls (freckles and all) are more beautiful without the fake face mask on.

I've tried to cut the eyebrow waxing time and time again, but my compromise was to cut facials to once per year and I don't drink. I'd much rather get my eyebrows waxed (super relaxing - my eyebrow lady is awesome, small business, and I've been seeing her for almost since I moved here) than go drinking.

I spent a lot of money on make-up in 2010, 2011, and 2012. Then I realized that it never all came off with any make-up wipes I could find, sometimes the mascara got in my eyes, and it was just so much effort. I'd rather read these forums than put on make-up :P I can still pass for a teenager, but make-up made zero difference in that. So here's to a 2013 with no make-up!

You've currently got 5 cash accounts, surely you only need 2? A transaction account and a high interest savings account. Or one perhaps, just a transaction account and all remaining cash goes to paying off the mortgage or investing.

  • CAD cash account - I've been using my Canadian credit card when I'm in Canada and slowly draining this to pay the visa bill. I haven't decided yet if I will stop doing that once it's empty to make things simpler. Plus, then I won't have to file the FBAR anymore! On the plus side, my Canadian accounts are super simple: 1) savings account, 2) credit card, and 3) RRSPs, all at one institution. I was trying to keep some semblance of Canadian credit history in case I move back there some day.
  • USD checking account - this is a necessity.
  • High-interest savings for Roth IRA - this will be gone soon, once I finalize my MAGI...
  • High-interest savings for small inheritances - this is a sinking fund. My parents like to know what I spend the money they give me on, so I've been keeping this separate for better tracking. I've been using this to pay for furnishings in the condo and then used my own money to pay down the mortgage. As the amount decreases, I may move it into my budget spreadsheet to simplify things.
  • High-interest savings account for general purposes. I know Mustachians are a fan of the HELOC, but I'm hesitant to open one in case I want to refinance again. I have a feeling most people would face punch me for keeping that much in cash, but I'm mostly concerned that if I lose my job, it may take more time to find one with needing a work visa.

Sport expenses are good to see. Keeps you active/fit/social and is a preventative health measure.

I think that most software people don't spend nearly enough time on fitness. I walk ~30 miles per week on top of the sports. I could try biking to work to cut down the commute time a bit (it's about 2 miles), but I'm worried about biking on the roads with cars. Perhaps I'll try that in the summer.

Cutting work lunches to nil is the 1st place to start. Imagine having $1000 cash in your pocket at the end of the year.

Definitely working on that! I made good progress in January which was my first month trying to bring my lunch - spent < $50 on work lunches. That's the least amount I've spent in my three years working! I'm starting by allowing myself to go out for lunch on Fridays and bringing lunch for the other days, plus my whole team eats lunch together on those days and I think spending some non-computer hours talking with my coworkers is good for peer bonding. I think I can get it down to < $350/year even with eating out once a week. It's so hard because even eating out every day at the cost now would be ~$150/month, which my friends think is nothing (I think they tend to spend closer to $300/month).

sulaco

  • 5 O'Clock Shadow
  • *
  • Posts: 72
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #3 on: February 12, 2013, 07:10:04 AM »
To me, these are the obvious ones (some you've called out):

  • Clothing
  • 50/month internet
  • 150/month in entertainment after subscribing to many subscription services (and not including social dining out)
  • 85/month on sports
  • Umbrella Insurance - what does it cover that your other insurance is not covering?

It wasn't clear to me if this budget was just for you, or for both you and your BF. Either way, there is a lot of fat in every category which can be cut.

Clothing I've worked in software for the last 10 years. Unless I was consulting, no one care what I wore. Of course, I'm a guy, so I can where t-shirt, jeans, and an optional hoodie without being questioned. While my wife was a teacher (her work required professional dress) our combined clothing spending for the year was typically around $600 year. With a new toddler in the house, that only went up to $622 for the three of us.

Internet Call your cable company and get the $30-$40 unadvertised rate. It will be 3Mb/s and will work great for just about everything you need - including YouTube streaming (but not HD streaming). TiVo supports a lot of offline viewing, so you can get HD content that way (or through RedBox). That's $120-$240/year in your pocket.

Entertainment $1800/year in miscellaneous entertainment is really high considering you also have a thousand dollars in sports (which is not entertainment, but I would consider liesure activity). As a rough estimate, you are spending $8 a day to entertain yourself and your friends. And that's not including vacation. You shouldn't need a constant stream of distractions to fill fulfilled. If it's peer related spending (activities with friends), continue to go out with your peers, but opt for cheaper options when possible. A night at home with a book or movie from the library costs $0 and provides as much entertainment value as acquiring that same book or movie from a paid source (though might not be as timely).

Sports Being part of sports clubs isn't bad, but as mentioned above, it sounds like you are over paying for your liesure activities. I think this falls more into personal choice than an area to definitely cut back on, but you can spend a lot less to stay active. Even gym memberships are cheaper than your 2012 expenses for Sport #1 and #2.

Umbrella Insurance If you don't know what it covers, why have it? As far as I'm aware, my employer has always provided fairly comprehensive insurance in addition to the medical policies. In my case I get 2x salary life insurance policy with no out of pocket expenses, and my medical policy covers short and long term disability. Between that and your renter's insurance, what coverage does your umbrella policy give you that you can't afford out of pocket if necessary? If it doesn't cover anything additional or significant and the statistical likelihood of you filing a claim is low, then you are just gambling.

If you haven't already, look at MMM's 2012 spending. Not only is a good baseline, but it's actually not that hard to beat. We have a similar family size (2 adults, 1 kid), and our total last year without mortgage was about $5,000 less than MMMs budget (which included living in a more expensive city and $4,000 of student loan repayment). I consider our lifestyle fairly lavish (two nice cars, iPhones, organic food, gym membership, dine out twice a week (in addition to lunches out), new clothes whenever we find something we like (at a price we like), etc.).

I think the big thing is reducing across the board. You can probably cut 10-20% of your non-housing related spending and still live lavishly. That also means 10-20% less that you have to make to sustain FI and 10-20% more you can contribute to your goal.

SunshineGirl

  • Pencil Stache
  • ****
  • Posts: 749
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #4 on: February 12, 2013, 07:21:44 AM »
Two quick things that come to mind --

Are you sure your parents really want you to spend that much on them for gifts? As a parent, it's not how I'd want my kids to spend their money. Of course, I have no idea how much of a sacrifice that was for them financially.

It looks like you want to have your mortgage paid off within five years. Others may disagree, but sometime within that five-year period, if you took 12-18 months and ONLY focused on that, stopped funding retirement accounts, that would take you far in terms of reaching that goal.

unpolloloco

  • Stubble
  • **
  • Posts: 185
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #5 on: February 12, 2013, 07:33:03 AM »
Umbrella Insurance If you don't know what it covers, why have it? As far as I'm aware, my employer has always provided fairly comprehensive insurance in addition to the medical policies. In my case I get 2x salary life insurance policy with no out of pocket expenses, and my medical policy covers short and long term disability. Between that and your renter's insurance, what coverage does your umbrella policy give you that you can't afford out of pocket if necessary? If it doesn't cover anything additional or significant and the statistical likelihood of you filing a claim is low, then you are just gambling.

Umbrella really isn't a bad idea.  It's excess liability coverage.  Car or homeowners insurance will cover most tort situations, but only to a certain point.  Umbrella bumps up this coverage to a higher number.  If you're in a car accident with injuries and you're deemed at-fault, it's not unlikely that costs will exceed normal liability coverages.  For that matter, if someone trips on the sidewalk in front of your house, costs will likely exceed homeowner's insurance liability limits.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28030
  • Age: -999
  • Location: Seattle, WA
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #6 on: February 12, 2013, 07:42:23 AM »
5.5 years is probably a bit ambitious for where you're at.  Check some of the FI calculators, like networthify.  I'd estimate at least 7-8.  But no time like the present to get started, then sooner you knock these numbers down the better!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #7 on: February 12, 2013, 09:21:31 AM »
It wasn't clear to me if this budget was just for you, or for both you and your BF. Either way, there is a lot of fat in every category which can be cut.

The only one that sort of covers both of us is groceries. We spend more time at my place and he prefers to pay when we go out to eat (which we've definitely cut down on), so I pay for the groceries and he pays when we go out. I think it evens out somewhat or at least it drops my eating out budget completely to zero quite easily since I never go out to eat by myself anymore.

Clothing I've worked in software for the last 10 years. Unless I was consulting, no one care what I wore. Of course, I'm a guy, so I can where t-shirt, jeans, and an optional hoodie without being questioned. While my wife was a teacher (her work required professional dress) our combined clothing spending for the year was typically around $600 year. With a new toddler in the house, that only went up to $622 for the three of us.

Yeah...I used to spend so little money on clothing in college. I'm starting to find ways to spend less and when I'm buying more expensive stuff, keeping it for longer. More buying at Target, 50% sales, etc. It's been a bit of a process, but the biggest help has been that I've lost so much time that I don't have time to shop anymore. Maybe I can get it down lower than the $1,400ish listed in the budget above, we'll see. Maybe I should try setting goals for "No clothing spending in X month" or at the beginning of the month, tell myself what I'm allowed to buy.

Internet Call your cable company and get the $30-$40 unadvertised rate. It will be 3Mb/s and will work great for just about everything you need - including YouTube streaming (but not HD streaming). TiVo supports a lot of offline viewing, so you can get HD content that way (or through RedBox). That's $120-$240/year in your pocket.

Called them as I continue to respond to your post! Bumped it from $48.95 to $29.95 per month, which is not a promotional price. That was super easy. The rep didn't even try to convince me to keep my more expensive plan. Thanks! I don't use Netflix, so I'm not really concerned about streaming. For the number of movies that I watch, Redbox is far cheaper and there is one within a 10 minute walk. (I walk pretty much everywhere except to my parents' house and for sports.)

Entertainment $1800/year in miscellaneous entertainment is really high considering you also have a thousand dollars in sports (which is not entertainment, but I would consider liesure activity). As a rough estimate, you are spending $8 a day to entertain yourself and your friends. And that's not including vacation. You shouldn't need a constant stream of distractions to fill fulfilled. If it's peer related spending (activities with friends), continue to go out with your peers, but opt for cheaper options when possible. A night at home with a book or movie from the library costs $0 and provides as much entertainment value as acquiring that same book or movie from a paid source (though might not be as timely).

Sports Being part of sports clubs isn't bad, but as mentioned above, it sounds like you are over paying for your liesure activities. I think this falls more into personal choice than an area to definitely cut back on, but you can spend a lot less to stay active. Even gym memberships are cheaper than your 2012 expenses for Sport #1 and #2.

This has definitely gone down as I've spent more time playing sports. I've been borrowing e-books from the library and I'm not a big movie person, my boyfriend is. I spent most of last year single, so I spent more time playing sports because I far prefer that than going to a bar with friends since I don't really drink. If I don't use up my entertainment budget (which I don't usually), it goes to savings. What I've been trying to do is to reduce this for a few months in a row and then reduce the budget (since I save whatever is leftover).

Sport #1 is not cuttable and unfortunately isn't the cheapest sport around. For Sport #2, I was paying $65/month with taxes for the first 9 months of the year and then I decided to switch to an annual pass ($657), but I really should have just switched to a 10 visit punch card. Since I have the membership, I don't go to any other venue to do the same sport to avoid day pass fees. With the timing of when my annual pass will run out this year, I doubt I'll buy more than one punch card in 2013, so the 2013 spending should really be $130, not the $200 I listed above. I've adjusted my budget accordingly.

I have a feeling that I'll cut Sport #3 this year. I just don't have enough time. I'm leaving it in the budget for now, but I'll zero it out and send the money to savings if I don't end up doing it.

Umbrella Insurance If you don't know what it covers, why have it? As far as I'm aware, my employer has always provided fairly comprehensive insurance in addition to the medical policies. In my case I get 2x salary life insurance policy with no out of pocket expenses, and my medical policy covers short and long term disability. Between that and your renter's insurance, what coverage does your umbrella policy give you that you can't afford out of pocket if necessary? If it doesn't cover anything additional or significant and the statistical likelihood of you filing a claim is low, then you are just gambling.

I have 2x base salary life insurance and short and long term disability at 60% pay as well. The umbrella insurance is to increase the liability on the car/homeowner's insurance. My dad was concerned since the liability limits on car insurance were so low here (compared to Canada) that someone might sue me for more than my assets and I end up paying out of future earnings.

If you haven't already, look at MMM's 2012 spending. Not only is a good baseline, but it's actually not that hard to beat. We have a similar family size (2 adults, 1 kid), and our total last year without mortgage was about $5,000 less than MMMs budget (which included living in a more expensive city and $4,000 of student loan repayment). I consider our lifestyle fairly lavish (two nice cars, iPhones, organic food, gym membership, dine out twice a week (in addition to lunches out), new clothes whenever we find something we like (at a price we like), etc.).

I'll take a look at that more closely, thanks. MMM definitely makes me feel a bit lavish when my non-mortgage budgeted expenses add up to theirs with a kid!

I think the big thing is reducing across the board. You can probably cut 10-20% of your non-housing related spending and still live lavishly. That also means 10-20% less that you have to make to sustain FI and 10-20% more you can contribute to your goal.

Before posting, I cut about $200/month out:
  • $50 Switched from Sprint to Ting, cutting my monthly bill from $85/month to $35/month without buying a phone or reducing service. If I use Google Voice on my home computer to call my family in Canada instead of using my cell phone, I could cut that down to $25/month.
  • $100 I've started trying more heartily to bring my lunch to work / reduce my daily spend if I do eat out. My old coworkers were super un-Mustachian and wanted to spend $20/day on lunch. My new coworkers prefer to spend < $10/day on lunch, so it's working out better even if I do eat out. I've been following MMM's suggestion of keeping a stash of food in the office.
  • $30 I had been planning on buying a Nexus 4 and switching to T-Mobile prepaid. The Ting ETF giveaway and the fact that they would let me port my Nexus S from Sprint convinced me to switch to them instead. I turned off data on my phone as an experiment awhile ago and I really don't need email on the go. If work wants me to have it (e.g. on work trips), I'll expense it. I don't want to switch to a dumbphone because it's still great to have on wi-fi, including the contacts sync and threaded text messaging and I don't really have to pay for data with Ting. I've zero'd out my "buy a new cell phone" line item.

Part of the problem I think is that I split things up into small categories, so it doesn't look like money is disappearing quite as easily as it would with bigger categories. Based on the amount I've cut from March's budget from zero'ing out categories, I should be able to throw an extra $1,200 or so at the mortgage in addition to the regular extra payments of ~$2,000/month AND I should be able to reduce my checking account direct deposit from $2,500/month to $2,300/month. I think I should be able to get it down even further, we'll see. Making these changes cut about 5 months off of the mortgage with the existing extra payments forecasted! And there would be enough in savings to wipe it out 5 months earlier than that, so right at the 5 year mark.
« Last Edit: February 12, 2013, 09:26:15 AM by icefr »

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #8 on: February 12, 2013, 09:35:55 AM »
Are you sure your parents really want you to spend that much on them for gifts? As a parent, it's not how I'd want my kids to spend their money. Of course, I have no idea how much of a sacrifice that was for them financially.

It wasn't *that* much of a sacrifice for them. You're right, I should probably cut those down. I don't need to do any more spending on presents until Christmas again, so that gives me some time to play with the budget and think about it. I've initially cut it down to ~$400/year and I'll see how things play out.

It looks like you want to have your mortgage paid off within five years. Others may disagree, but sometime within that five-year period, if you took 12-18 months and ONLY focused on that, stopped funding retirement accounts, that would take you far in terms of reaching that goal.

I'm also considering when my balance gets down to ~$100,000 to "refinance" to the PenFed HELOC, if it's still at 1.99%. I would also do a no-cost refinance again if I can get a lower rate.

How would you choose when to stop funding retirement accounts? I probably won't be eligible for a regular (i.e. non-backdoor) Roth IRA again, so that makes that an easy one to not do after the ~$1,200 I'll put in this year for 2012. But I'm firmly in the 28% tax bracket, so isn't it worthwhile to save on the taxes?

Is it worthwhile to max out an HSA when that's $2000 that I could have thrown at the mortgage this year? I could stick with the HRA health plan (open enrollment opens soon) since it has a lower stop loss and same monthly premiums as the HDHP.

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #9 on: February 12, 2013, 09:40:27 AM »
5.5 years is probably a bit ambitious for where you're at.  Check some of the FI calculators, like networthify.  I'd estimate at least 7-8.  But no time like the present to get started, then sooner you knock these numbers down the better!

Agreed that 5.5 years is a bit ambitious. I don't know about you, but I'm far more motivated by ambitious goals than easily attainable ones!

My boyfriend and I have joked that while we could both probably retire by 35 easily by ourselves, it would probably be immediately brought in by years if we combined our savings and spending. (I have no idea how much he actually has in savings or spends really.)

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28030
  • Age: -999
  • Location: Seattle, WA
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #10 on: February 12, 2013, 10:16:22 AM »
Sure, might as well shoot for some stretch goals, but I'd also suggest looking at something that's ambitious yet realistic, so you can track progress that's feasible (even if a reach).
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #11 on: February 12, 2013, 12:08:13 PM »
Sure, might as well shoot for some stretch goals, but I'd also suggest looking at something that's ambitious yet realistic, so you can track progress that's feasible (even if a reach).

What I've found over the last couple of years is that I've set goals and then I've gotten larger raises than expected, more RSUs granted, and my employer's stock price has shot up. In early January 2012, I estimated that my net worth at the end of the year would be $XXX,XXX. It was actually $30,000 higher than that. So it's really hard to set goals when the income affects them in such large ways. That's why I'm trying to focus on my spending for now and then every 6 months, re-calculate how far I am from (a) paying off the mortgage and (b) from being FI.

You're right that 7-8 years seems more realistic right now. On the flip side, I also don't want to put myself in the position of income increasing and then 5-6 years looking realistic, but continuing to track towards 7-8 years. All of my calculations right now assume base pay only in 2015, 2016, 2017, and 2018 since I have no RSUs scheduled to vest in those years.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28030
  • Age: -999
  • Location: Seattle, WA
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #12 on: February 12, 2013, 12:19:39 PM »
You're right that 7-8 years seems more realistic right now. On the flip side, I also don't want to put myself in the position of income increasing and then 5-6 years looking realistic, but continuing to track towards 7-8 years.

You should recalculate every year, at least.

I like to know what I'm on track for, and then set goals to improve on that.  It's nice when your projected FI time adjusts downward.  (Recent events in my life, for example, have shaved my projected time from 5 to 4 years.)

Just what I like to do.  If your way works for you (picking a time and shooting for it, even if it may be a bit unrealistic, because that's motivating), go for it.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

mpbaker22

  • Handlebar Stache
  • *****
  • Posts: 1095
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #13 on: February 12, 2013, 01:51:30 PM »
A few thoughts - take em or leave em.  Some of my suggestions might be things you aren't ready for now, but you might grow in to.  Some of them might be great immediate changes.

Clothing - Your monthly budget is about as big as my yearly budget.  I had some clothes get rip, tattered, and torn, so starting in March of 2012 I bought exclusively from thrift stores.  I put an entire wardrobe (button downs, slacks, and leather shoes + some sweaters and polos) together for no more than $100.  I also understand things may be different for a female, but maybe worth a shot?

Leisure - I don't use pandora, dropbox, sports, etc.  I do get access to a grade school gym once every two weeks, so some friends play basketball, soccer, etc.  For you to think about, I bet there's some free pick up soccer, basketball, softball leagues and/or individual, informal get togethers in your area.  If you aren't set on being in an official league, this might be a good item to look at.

Good Luck!

Food - I made lunch specific sandwiches for a while.  They were boring and not very good.  I started to make really large dinners, and I save half for leftovers.  My go to meal is a form of sauteed vegetables (peppers, mushrooms, garlic, tomatoes, etc.) and some form of meat mixed with pasta.  It's quick, creates multiple meals, and is TASTY!  If motivation is the problem, look into cooking multiple meals at once.

Cars - this is interesting.  I'm not sure what car you have, but I drive a ~150K mile honda civic hybrid. I budget $55/month for service/repairs, but I haven't spent this in 3 or 4 months now.  My insurance is $67/month.  I don't carry comprehensive because it's already been totaled by hail.  Maybe look to increase your deductibles and insure yourself.

Electricity - this seems high.  Maybe double check, and if it's correct look for ways to make serious efficiency headway.

Waxing and Hair Cuts - I'm a guy and I don't need these.  If you could wean off of them, you'd save some cash, but probably not the first thing to look at.

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #14 on: February 12, 2013, 02:46:33 PM »
A few thoughts - take em or leave em.  Some of my suggestions might be things you aren't ready for now, but you might grow in to.  Some of them might be great immediate changes.

I'm trying to do this slowly a bit so it's not too overwhelming. Seeing how much I spent last year for a single person (> $50k) is a bit of a face punch in itself and has helped prompt me to re-evaluate my budget. I'm trying to pick out at least one thing a month to fix. The internet suggestion that sulaco made was an easy win that I even did while responding to his post and will save $20/month without switching providers!! The cell phone switch was a somewhat easy win as well. With other things, I'm trying to ease into the changes, like with my lunches. That's making it a lot easier to stick to.

Clothing - Your monthly budget is about as big as my yearly budget.  I had some clothes get rip, tattered, and torn, so starting in March of 2012 I bought exclusively from thrift stores.  I put an entire wardrobe (button downs, slacks, and leather shoes + some sweaters and polos) together for no more than $100.  I also understand things may be different for a female, but maybe worth a shot?

Last year, I put together a clothing budget for the year (and then promptly blew it). I should try to do that this year to at least have something to strive for.

Leisure - I don't use pandora, dropbox, sports, etc.  I do get access to a grade school gym once every two weeks, so some friends play basketball, soccer, etc.  For you to think about, I bet there's some free pick up soccer, basketball, softball leagues and/or individual, informal get togethers in your area.  If you aren't set on being in an official league, this might be a good item to look at.

I've cancelled Pandora and Remember the Milk. I don't have many friends who are athletic, so an organized league is easier in general. Good food for thought though, thanks.

Food - I made lunch specific sandwiches for a while.  They were boring and not very good.  I started to make really large dinners, and I save half for leftovers.  My go to meal is a form of sauteed vegetables (peppers, mushrooms, garlic, tomatoes, etc.) and some form of meat mixed with pasta.  It's quick, creates multiple meals, and is TASTY!  If motivation is the problem, look into cooking multiple meals at once.

I actually love sandwiches. The problem is that it's really only cost effective to bring one every day or no day with how often I use bread living by myself. I've been bringing the stuff in on Monday and then using that to make a sandwich each day, which is way more awesome than a soggy one brought from home. I've been following your idea for dinners though and it's working great!

Cars - this is interesting.  I'm not sure what car you have, but I drive a ~150K mile honda civic hybrid. I budget $55/month for service/repairs, but I haven't spent this in 3 or 4 months now.  My insurance is $67/month.  I don't carry comprehensive because it's already been totaled by hail.  Maybe look to increase your deductibles and insure yourself.

I have a 2011 Ford Fiesta hatchback (bought with cash). I only put about 5,000 miles on it a year so it should last for many, many years. I get oil changes every 6 months, but I'm wondering if every 12 months isn't sufficient?

The deductible on my insurance is $1,000. I'm under 25, unmarried, and own a condo. After the one vandalism act last year on my car while parked in the garage of my condo building, I'm hesitant to raise the deductible any further - I was almost contemplating lowering it.

Electricity - this seems high.  Maybe double check, and if it's correct look for ways to make serious efficiency headway.

It is high. My bills since moving to the condo have been all over the place: $45.38 $16.16 $60.94 $238.77. It's bimonthly billing, so I won't see another bill until late March. I think the culprit was that the thermostats weren't programmed properly, so that should help with the next bill. I'm also turning fewer lights on, leaving them on for shorter periods of time, and turning off power strips when they're not needed. I've budgeted $3/day for now through the end of March, November and December and then $2/day for the rest of the year. Hopefully that will be an overestimate, based on the previous three bills and I can adjust my budget down. This is hard to budget for since you don't see a bill until over two months after the fact sometimes.

Waxing and Hair Cuts - I'm a guy and I don't need these.  If you could wean off of them, you'd save some cash, but probably not the first thing to look at.

I've been weaning myself off the hair cuts since I don't like it that short anyway. Found a place that is $45 per cut and will try some other places. I've had bad experiences at places like Supercuts.

Also, hah to the comment of "I'm a guy and I don't need these." My boyfriend spends far more than me on hair cuts and products. Apparently to him it's not so bad because most girls spend $180 each trip to the hair salon??? That seems crazy to me. I love my natural hair colour.

TomTX

  • Magnum Stache
  • ******
  • Posts: 3609
  • Location: Texas
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #15 on: February 12, 2013, 05:40:57 PM »

Yeah...I used to spend so little money on clothing in college. I'm starting to find ways to spend less and when I'm buying more expensive stuff, keeping it for longer. More buying at Target, 50% sales, etc. It's been a bit of a process, but the biggest help has been that I've lost so much time that I don't have time to shop anymore. Maybe I can get it down lower than the $1,400ish listed in the budget above, we'll see. Maybe I should try setting goals for "No clothing spending in X month" or at the beginning of the month, tell myself what I'm allowed to buy.

Shoot, I don't even consider clothing really "on sale" unless it is at least 75% off, preferably better than that (or stack 75% off with an additional coupon) - and I'm talking clothing from your basic Target, Dillards, JC Penney stores.

TomTX

  • Magnum Stache
  • ******
  • Posts: 3609
  • Location: Texas
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #16 on: February 12, 2013, 05:44:33 PM »

I've been weaning myself off the hair cuts since I don't like it that short anyway. Found a place that is $45 per cut and will try some other places. I've had bad experiences at places like Supercuts.

Also, hah to the comment of "I'm a guy and I don't need these." My boyfriend spends far more than me on hair cuts and products. Apparently to him it's not so bad because most girls spend $180 each trip to the hair salon??? That seems crazy to me. I love my natural hair colour.

I trim my wife's hair myself. She won't trim mine, so I go to the beauty school and pay $7 for a haircut. And apparently that includes a shampoo. Odd experience the first time, but I don't mind if they need the practice. Gets some of the loose hairs anyway. After shampoo & dry, the instructor comes over to inspect, then final touchups.

Anyway, the $7 haircut was at least as good as the SportClips or whatever, though it did take longer.

bluecollarmusician

  • Bristles
  • ***
  • Posts: 362
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #17 on: February 12, 2013, 08:05:44 PM »
Congrats on your goals, and plans to achieve them!

Try logging on to your electric companies website...many allow you to monitor your activity.  Ours actually let's us monitor down to the hour.... I can actually look at the last week and see when my wife took a shower or was watching tv by monitoring usage.  That is A handy tool for seeing when and what are your big drains.  Also, if that is not an option, your electric meter can easily tell you day to day how much you are using. Just read it at the same time each day to calculate your usage, so you don't have to wait 2 months.  Good luck!

Lauran75

  • Stubble
  • **
  • Posts: 151
  • Age: 43
  • Location: NE
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #18 on: February 12, 2013, 08:42:42 PM »

I actually love sandwiches. The problem is that it's really only cost effective to bring one every day or no day with how often I use bread living by myself. I've been bringing the stuff in on Monday and then using that to make a sandwich each day, which is way more awesome than a soggy one brought from home. I've been following your idea for dinners though and it's working great!


I'm also single and don't eat a lot of bread. What I do is when I buy a loaf of bread, I put half of it wrapped up in the freezer. Then use the first half. When I'm down to the last 2 - 3 slices, I take out the loaf from the freezer to thaw. It works great, and has helped to reduce the amount of bread that was going stale or molding on me. (I also keep my bread in the fridge, which helps a lot as well.)

Fuyu

  • 5 O'Clock Shadow
  • *
  • Posts: 58
  • Age: 29
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #19 on: February 12, 2013, 08:47:18 PM »

I've been weaning myself off the hair cuts since I don't like it that short anyway. Found a place that is $45 per cut and will try some other places. I've had bad experiences at places like Supercuts.

Also, hah to the comment of "I'm a guy and I don't need these." My boyfriend spends far more than me on hair cuts and products. Apparently to him it's not so bad because most girls spend $180 each trip to the hair salon??? That seems crazy to me. I love my natural hair colour.

I trim my wife's hair myself. She won't trim mine, so I go to the beauty school and pay $7 for a haircut. And apparently that includes a shampoo. Odd experience the first time, but I don't mind if they need the practice. Gets some of the loose hairs anyway. After shampoo & dry, the instructor comes over to inspect, then final touchups.

Anyway, the $7 haircut was at least as good as the SportClips or whatever, though it did take longer.

Is there a Chinatown near where you live? You can get a pretty nice haircut for $10 there.

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #20 on: February 12, 2013, 09:21:54 PM »
Try logging on to your electric companies website...many allow you to monitor your activity.  Ours actually let's us monitor down to the hour.... I can actually look at the last week and see when my wife took a shower or was watching tv by monitoring usage.  That is A handy tool for seeing when and what are your big drains.  Also, if that is not an option, your electric meter can easily tell you day to day how much you are using. Just read it at the same time each day to calculate your usage, so you don't have to wait 2 months.  Good luck!

Interesting idea, thanks! I went and checked out my electricity company's website, but no dice, as I expected. It's a pretty rudimentary website. I would love to have the level of detail you do on yours! I'm hopeful that the thermostat changes I made should get my bill back closer to the $60.94 that I saw in November versus January's $238.77. But I won't know for another month and a half or so.

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #21 on: February 12, 2013, 09:25:01 PM »
I'm also single and don't eat a lot of bread. What I do is when I buy a loaf of bread, I put half of it wrapped up in the freezer. Then use the first half. When I'm down to the last 2 - 3 slices, I take out the loaf from the freezer to thaw. It works great, and has helped to reduce the amount of bread that was going stale or molding on me. (I also keep my bread in the fridge, which helps a lot as well.)

Thanks, I'll give that a try the next week I'm in town for the work week! That's actually what my parents do. They buy two loaves at a time from Costco and put one of them in the freezer. I'm hesitant to try it with sandwiches, but it's worth a try. There's even a freezer at work, so I could just put half of my loaf of bread in there and then thaw it over the weekend.

happy

  • Walrus Stache
  • *******
  • Posts: 5313
  • Location: NSW Australia
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #22 on: February 13, 2013, 03:32:41 AM »
If its sliced bread, you can put the whole loaf in the freezer, and then just take off 2 or 4 slices (depending how much you eat) every morning to make your sandwiches. It will be thawed by lunch.

NestEggChick (formerly PFgal)

  • Stubble
  • **
  • Posts: 238
  • Location: Boston-ish, MA
    • Nest Egg Chick
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #23 on: February 14, 2013, 03:43:47 PM »
As for the clothing budget, I suggest you ask yourself why you feel the need to buy new clothes so often. I used to shop often and finally realized that I had a lot of clothes I wasn't wearing much, if at all. Given how much you spent last year, my guess is that you shouldn't need to buy any new clothes at all this year. For inspiration, check out this site: http://theproject333.com/getting-started/

I suggest you read through others' posts of their expenses on this forum to get more ideas of what to aim for. You're making a great start.

Good luck!

icefr

  • Bristles
  • ***
  • Posts: 325
Re: Case study: FI by age 30 (in 5.5 years)?
« Reply #24 on: February 14, 2013, 04:57:33 PM »
As for the clothing budget, I suggest you ask yourself why you feel the need to buy new clothes so often. I used to shop often and finally realized that I had a lot of clothes I wasn't wearing much, if at all. Given how much you spent last year, my guess is that you shouldn't need to buy any new clothes at all this year. For inspiration, check out this site: http://theproject333.com/getting-started/

My first poke at an answer to this is that I have always had a really hard time finding clothes that fit me properly, so when I do, I just bought them. I'm starting to find clothes that fit me more easily, so that's much more of a problem than it was. In college, shopping was far away and less convenient than it is today. I've readjusted my clothing budget to something that isn't too restrictive, but should be closer to more appropriate.

With weight shifting, some items have to be bought because stuff just doesn't fit anymore. I don't think I should have to buy any new clothes at all this year either. I have plenty of long-sleeved shirts, 3/4-length shirts, t-shirts, sleeveless shirts, cardigans, jeans, underwear, socks, bras, skirts, and coats. I think I'm good. I can go weeks without doing laundry, so that's probably a sign that I have more than enough clothes...

I've been meaning to try and sell some of the shoes I bought last year that didn't work out, but I didn't return for various reasons. That could probably gain back almost $100. Not a huge portion of last year's clothing spending, but still something.