Author Topic: Case Study: Five Finger FACE Punch...to the Face  (Read 3403 times)

copernicus

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Case Study: Five Finger FACE Punch...to the Face
« on: July 27, 2016, 11:49:21 PM »
Mustachians, I am a formerly frugal yuppie, attempting to recover from lifestyle inflation.  I have been lurking here for a while. But I realized I needed help from you all after discovering that I way overpaid for my way oversized house. And I am seriously burning out on work. I have decided to post this case study as an introduction/cry for help. 

The situation: I am a high earning sole breadwinner for my homemaker wife and two small children. We own a 2yr old townhouse and one Toyota highlander. We live in the south.

The numbers:
Income=375K before tax (about 262.5 after)=21875/mo.

Expenses=6385/mo
Mortgage = 3400/mo = 500 T&I + 260HOA + 2640 P&I(15yr with Remaining principle 260K at 3%APR)(Purchased 2y ago at 425, now worth 320)
"Misc" = 2000 (includes food and a heavily-negotiated stipend for my spendthrift wife)
Student Loan payment = 530 (Remaining principle 105K@2.62%)
Electric = 220
Car Ins = 100 (One paid-for Toyota Highlander. Previously owned an economy car, but couldn't fit two tall adults and two car seats in it)
Internet = 100
RepublicWirelessx2=35

401K=49K, IRA=45K, Spousal IRA=15K, HSA=13K, Taxable=121K

Expected ER expenses: 2100/mo
Housing = 300 Property taxes+HOI in yet-to-be found post-FI house; paid off, with a large garden, and a roof covered in warrantied, grid-connected solar panels ;-)
Cell phone, Internet, Car insurance = 300
Health Insurance Premium = 300
HI Max Out of Pocket/Food and Misc. = 1200
(Alternatively, a silver plan with 600/mo premium and 600/mo max out of pocket. This would lower my absolute total expenditure, but also lower my flexible miscellaneous expenditure)

The question is straightforward. How and how fast can I get out of the rat race? I am aware of at least two glaring obstacles in the expense list above. I am happy to get advice on how best to handle those, as well as the feasibility of my Post FI budget. Thank you in advance for punching gently.

JLee

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #1 on: July 28, 2016, 12:02:52 AM »
Your listed net income minus expenses results in a differential of $185,880/year...where's all that going?

$2100/mo is $630k at 4%.   You have $365k in debt, $243k in various investments, and an alleged $185k/yr surplus of income.

At the 4% rule, you only need $387k (and to erase $365k).  Napkin math says you could be done in four years given the numbers you provided.  Fortunately, you have a rather ridiculous income to work with.

However, I am a bit skeptical that your "spendthrift wife" is going to be pleased if you have a total FI expenditure of $100/mo more than what you currently spend just on food/etc...is she on board with this plan?  That may be your trickiest thing to solve!

Also, get a new car insurance quote - $100/mo is really high.

zolotiyeruki

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #2 on: July 28, 2016, 07:47:00 AM »
I'm guessing the $100mo car insurance includes comprehensive/collision/etc.

If DW's "food + allowance" budget is $2k/mo, there's no way you can expect to live on $2100/mo in ER.  For a family like yours, the grocery budget shouldn't be more than $5-600/mo.  What is DW spending all of that money on!?  There's definitely some how-hanging fruit in your budget, but unfortunately, 1) picking that LHF is gonna be painful, since it's DW's stipend and your mortgage/HOA/taxes, and 2) it won't make a big difference, since you have a very large amount of spare income.

You have total debt of $365k.  Assuming you've paid all your debts before you ER, your spending will be a bit lower--subtract out $2640 for the mortgage and $530 for the student loans.  That leaves you with $3215/mo in spending, $38.5k/year.  You'll need somewhere in the neighborhood of $1 million to retire, so you have a total of $1,365,000 to save up.  Assuming 7% returns, you're looking at about 5 years.  You might be able to optimize that a bit by maxing out a 401k ($18k/year), which will free up several thousand more dollars per year to invest, and that'll knock a few months off.

These are all rough, back-of-the-envelope calculations, though, and don't include things like health insurance.  The bigger issue is getting DW on board with the plan.

jwright

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #3 on: July 28, 2016, 10:33:10 AM »
You should have $15K left over each month; where is it going?  Did you just get an enormous pay increase recently?  Otherwise, your budget must be inaccurate as your savings numbers don't add up.

The house isn't the issue; I was expecting much worse.  You need to use Mint or another tool to figure out exactly where your money is going.

copernicus

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #4 on: July 29, 2016, 08:23:55 AM »
Thanks for all responses. Yes, the remaining 15K goes to Vanguard *usually*. The past year, much of it has gone toward extra principle payments for the house and medical costs. Those, hopefully, won't be recurring. Since I've confirmed that the house is a losing investment, I am likely going to put more toward savings than I was before.

I am probably too optimistic about getting my spouse on board with not having her "allowance" before getting to FI.  I've read through many of the threads about this topic, and haven't found an approach yet that would work for me.  What does she spend it on? It varies considerably. Any given month, there is some holiday or birthday or special event that *requires* some gift or travel expense. I welcome advice on this, too. Although, I acknowledge that this is not a marriage counseling board ;-)

Car insurance is liability only. Its the best I could find for such a large vehicle. The previous, smaller vehicle was insured for as low as 48/mo at one point.

jwright mentioned Mint, which I was using a while ago. I stopped because it grouped together misc. expenses in a way that I didn't find useful. Like, food+health+fitness all together or something like that, which doesn't help me figure out where to focus.

JLee

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #5 on: July 29, 2016, 08:29:22 AM »
Have you tried different insurance companies?  Quotes vary wildly between them.

bacchi

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #6 on: July 29, 2016, 09:12:02 AM »
I am probably too optimistic about getting my spouse on board with not having her "allowance" before getting to FI.  I've read through many of the threads about this topic, and haven't found an approach yet that would work for me.

It takes times, maybe years. As you live the life you want*, one day the spouse will suggest, "You know, let's not do buy that/eat out; let's save the money instead." You will be stunned and wonder if your spouse has been replaced by a pod person.

* Avoiding the upgraded phone, living with your beater car because it works fine, fixing things instead of tossing and buying new, etc.


Also, your internet is too high. Speeds as low as 15Mb can handle 2 streaming devices.

ZiziPB

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #7 on: July 29, 2016, 10:53:32 AM »
Thanks for all responses. Yes, the remaining 15K goes to Vanguard *usually*. The past year, much of it has gone toward extra principle payments for the house and medical costs. Those, hopefully, won't be recurring. Since I've confirmed that the house is a losing investment, I am likely going to put more toward savings than I was before.

I am probably too optimistic about getting my spouse on board with not having her "allowance" before getting to FI.  I've read through many of the threads about this topic, and haven't found an approach yet that would work for me.  What does she spend it on? It varies considerably. Any given month, there is some holiday or birthday or special event that *requires* some gift or travel expense. I welcome advice on this, too. Although, I acknowledge that this is not a marriage counseling board ;-)

Car insurance is liability only. Its the best I could find for such a large vehicle. The previous, smaller vehicle was insured for as low as 48/mo at one point.

jwright mentioned Mint, which I was using a while ago. I stopped because it grouped together misc. expenses in a way that I didn't find useful. Like, food+health+fitness all together or something like that, which doesn't help me figure out where to focus.

Track your expenses religiously for a few months.  It seems like a lot of your money is going places other than savings, and you have no idea where it's gone.  Tracking to a penny has been an eye opening experience for me.  I do it with pen and paper, it's really not that hard :-)

Tyson

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #8 on: July 29, 2016, 11:12:25 AM »
Remember that it's a process.  Track your expenses, focus on the recurring expenses first (get them down as much as possible), then focus on the "one-time" expenses as they come up.  I know you are in crisis and wanting to fix everything NOW, but take a breath, fix the areas where you have full control, and start to work on the areas where you don't have full control, over time.

Dollar Slice

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #9 on: July 29, 2016, 11:22:49 AM »
jwright mentioned Mint, which I was using a while ago. I stopped because it grouped together misc. expenses in a way that I didn't find useful. Like, food+health+fitness all together or something like that, which doesn't help me figure out where to focus.

Spend a little more time learning how to use Mint. The categories are fully customizable - you can have a category for anything you want. For example, I created a category for "concert tickets" because that is something I wanted to track, and one for "medical stuff" to include all co-pays, prescriptions, orthotics and special shoes not covered by insurance, etc.

copernicus

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #10 on: July 29, 2016, 11:31:19 AM »
I'll have to take another look at Mint. I admit that I didn't realize the categories were so customizable.

I use a rewards credit card, and I have tracked spending more closely in the past using it. I asked my wife to save receipts for a month once and painstakingly itemized the grocery budget. Turns out the single largest category was baby food. My kids are pretty picky, and what they like is liable to change at any time, so I didn't put much effort into addressing that.


notactiveanymore

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #11 on: July 29, 2016, 01:07:06 PM »
We paid off our debt and got our spending together through the Dave Ramsey budgeting method. His budget app is called "Every Dollar" because you tell every single dollar where to go. I know people around these boards typically don't go for that kind of budget, but I find it liberating. Looking back at receipts and then trying to spend a little less overall is just not going to get most people very far towards cutting expenses. Especially if they're not naturally frugal.

My husband and I will sit down this weekend and decide where every dollar of our takehome money is going. That means thinking ahead to know that we have 2 niece/nephew birthdays, a wedding and bachelorette party that both require gifts and gas but not lodgings, and we are making food for church group on the 15th, so we need a little extra in groceries. If something unexpected comes up, we decide what to do - avoid the cost or take money from another area.

Some people prefer to set up sinking funds for things like gifts or trips and just put a set amount in each month like a cafeteria plan.

I will just never be able to stomach husbands talking about their wives' "stipends" or "allowances" or whatever. You two have clearly decided together on you working and her staying home and taking care of the kids. A such, it's not your income and her stipend. It's your joint income.

copernicus

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Re: Case Study: Five Finger FACE Punch...to the Face
« Reply #12 on: July 29, 2016, 01:42:35 PM »
My wife also hates the term "allowance," so I just refer to the "miscellaneous household budget." That way, I can't criticize her individual purchases.  When she runs out of money, she has to wait until next month.  Like I said in the OP, there have been many negotiations leading to this point. She would prefer that I just pay for everything without concern for cost. Overall, she is very disinclined to think in terms of budget, so I have to.
Couples fighting about money is a huge cliché. We haven't found our *answer* yet.