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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: fefifofum on May 06, 2016, 11:05:55 AM

Title: Case Study: help us throw some more wood on the FIRE!
Post by: fefifofum on May 06, 2016, 11:05:55 AM
Hello Mustachians!

Near the beginning of 2015, my family had a large (about $100,000) windfall. I wanted to make sure I did the best possible thing with this good luck so I started doing a lot of research on investment. In my research I discovered this site and was awakened to the possibilities of FI and early retirement.

My family has never been especially big spenders, and I would say that up until this point we had been moderately financially aware. We managed to avoid many of the worst pitfalls without really focusing on it: weíve always had used cars, avoid debt, avoided blowing money on cable TV, took (partial) advantage of savings plans at work, etc. But just becoming aware that FIRE was a possibility suddenly made me extremely motivated to turn our good fortune into a jump start on early retirement, so 2015 and early 2016 was spent plucking the low-hanging fruit for reducing our expenses, reading tons of blog posts, and making over-complicated spreadsheets.

Part way through 2016, Iím taking a fresh look at our position and Iíd like to ask the community to take a look at it too to help me determine where I should focus my efforts next to accelerate my retirement.

So hereís the summary of our situation:

We are a family of 5. My wife and I are both turning 40 this year; the 3 kids range from 2 to 8. I work, but my wife has been a stay-at-home mom since our first was born. She might go back to work at a low stress job in 4 years when our youngest enters kindergarten.

My home is roughly 15 miles from my workplace (facepunch!), but otherwise very conveniently located to all the schools the kids will attend, groceries, doctors, etc. This results in a daily round-trip commute time of 1 to 2 hours depending on traffic. My daily commute is something Iíd of course like to reduce or eliminate, but prices nearer my workplace are significantly higher than where we are now and public schools are not as good.

MONTHLY INCOME

For some entries below Iíve got two numbers divided by a slash. First number is base salary, second number includes my usual annual bonus (averaged over the year).

FINANCIAL ASSETS: $433,000 retirement assets

The total listed above includes all retirement assets, but not the cash in the bank (some of which is allocated to yearly expenses like property tax) or the college savings plans.

TANGIBLE ASSETS

DEBTS

AVERAGE MONTHLY EXPENSES: $4400

Home and Garden ($1690):

Food ($1250, or about $8.25 per person per day):

Utilities and Services ($440):

Transportation ($440):

Everything Else ($580):

MONTHLY SAVING: $3534

So, this year it looks like our savings rate is:

Thatís the scenario. Our goals are pretty simple:

Some ideas around this that Iím kicking around:

Iím ready to accept any facepunches! Where should I optimize next? How far away from making this work am I, really? And, thanks in advance for your time!
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: mamagoose on May 06, 2016, 11:31:20 AM
You spend $200/month maintaining your cars? What is that?

I came from a big family, and my mom (mostly a SAHM until we were all school age) didn't get her nails done, and she cut all of our hair (even got paid to cut other kids hair when we had playdates). Those are the obvious ones for me.
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: fefifofum on May 06, 2016, 11:51:52 AM
Regarding the $200/month for car maintenance: this is a guess coming from a position of ignorance. Until March 2015 we really didn't track our expenses in any kind of detail, and I haven't dug through our service records to build up a more detailed picture. Looks like our average through 2015 was about $80 a month, but this year so far our average is $230 (due to hitting a major maintenance interval for the Sienna). The Leaf has been very low maintenance so far (no oil to change!), but I know I'll need to replace its tires shortly. Assuming nothing else comes up, it looks like that number might look more like $120/month for this year. How much have you typically found yourself spending on maintenance?

The haircuts are a good point. Don't think that my wife will give up a professional haircut for herself, but we might be able to do the kids ourselves at least and who knows, I might look good with a buzz cut. :-)

The "nails" in that category name is a bit of a red herring, I put it there because at the time I was making this spreadsheet that month's expenses included an expensive mani/pedi trip that my wife went to with her mother. That happens less frequently than once a year, so it's probably not an expense I need to worry about too much.

Thanks for the feedback!
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: meandmyfamily on May 06, 2016, 04:37:38 PM
We spent $90 for all of 2015 for haircuts, nails, etc.  We have 4 kids and 2 adults in our family.  I think that could go down.  Also the misc. spending needs to be broken up.  Does it include Christmas?  If so then $250 is reasonable covering all that.  School lunches could definitely be cut especially with $200 already going to eat out.  They could get a few special treats in their lunches for $100 a month!
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: fefifofum on May 06, 2016, 05:14:05 PM
I will work on the haircuts for the kids and for myself! For diplomatic reasons I think I'll continue to let my wife do what she wants when it comes to her own hair, though.  :-)

The misc spending will include birthdays and Christmas (including gifts purchased for non-family members in some cases, party expenses, etc). However, the number I'm using is based on our average so far for 2016 (which has had a few birthdays but no Christmas, of course!). This category also includes stuff like hobby-related purchases, crafting supplies, etc.

The trend here is definitely very positive. 2016's average is about $250/month over the first four months; there was NO MONTH in 2015 that was below that. The average for 2015 was $540/month! Now that we seem to have plateaued at a new lower level, I will try to break it down further to look for more things to cut.

I've been thinking of the school lunches as a relatively benign expense - it's $2.90 a meal. I suppose I can do quite a bit better than that if I can overcome my natural laziness when it comes to food preparation. :-) What do you budget for an average school lunch?

Thanks for the ideas!
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: fefifofum on May 06, 2016, 07:37:04 PM
A few more details. In my original post I neglected to discuss my investment approach. Luckily I'm taking a super-simple approach so it won't take long to sum up.

Here's my asset allocation:


The 2% cash is also intended to act as part of our emergency fund.

When the market goes south I partake in a little tax-loss harvesting by exchanging VTSAX for VLCAX, then swapping it back if things continue to get worse by the time I can switch back while avoiding a wash sale.

I intend to rebalance once a year on my birthday.
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: meandmyfamily on May 06, 2016, 07:43:23 PM
I absolutely agree that your wife can do what she wants with her hair!  Just suggestions!

If your wife likes blogs, I really am inspired by this one:  http://www.frugalwoods.com/

For school lunches I would play around with a couple easy options and get the kids involved.  See how much it costs vs. paying for it.  Then go from there.
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: fefifofum on May 07, 2016, 08:31:15 AM
I've enjoyed the Frugalwoods myself -- but then I've been going on a FI blog binge, basically just finding a new one I like and then reading everything they post before moving onto the next one. :-) My wife is a heavy reader but hasn't caught the blog bug yet. Thanks for the suggestion, though... I'll see if I can find the right opportunity to introduce her to it.

Packing lunches is now on the "things to experiment with" list. Thanks!
Title: Re: Case Study: help us throw some more wood on the FIRE!
Post by: fefifofum on June 16, 2017, 01:07:03 PM
Hello Mustachians! Itís been about a year and a month since I originally posted this, and I thought it would be fun to make an update.
 
Looking back at this thread, I have to confess that I donít think weíve made any giant lifestyle adjustments since then. In a way, not much has changed. But we were already on a reasonably good track and our progress has continued. So here we are halfway through 2017:
 
We are a family of 5. My wife and I are both turning 41 this year; the 3 kids range from 3 to 9. I still work at the same job, and my wife is still a stay-at-home mom.
 
Still making a roughly 30 mile round trip commute, but the fact that Iím driving a LEAF at least makes it cheap monetarily even if itís expensive in time. Iíve been working from home a bit more often than I used to which has been nice.
 
MONTHLY INCOME
 
For some entries below Iíve got two numbers divided by a slash. First number is base salary, second number includes my usual annual bonus (averaged over the year).

FINANCIAL ASSETS: $530,000 (up $97,000 since last post!)
 
The total listed above includes all retirement assets, but not the cash in the bank (some of which is allocated to yearly expenses like property tax) or the college savings plans.

TANGIBLE ASSETS

DEBTS

AVERAGE MONTHLY EXPENSES: $4632 (up $232 over last year)

Home and Garden ($1700):


Food ($1140, or about $7.50 per person per day):


Utilities and Services ($443):


Transportation ($385):


Everything Else ($964, UP almost $400 since last time):


MONTHLY SAVING: $4343 (up $809 over what I reported last time)


I think this all puts our savings rate at about 45% right now. This is a few percentage points higher than last year at this time. I computed this using:

((Takehome + 401k contrib + 401k match) - spending) / (Takehome + 401k contrib + 401k match)

Going through this exercise, I feel like weíre holding fairly steady or making moderate progress in most categories, with the obvious exception of the ďEverything ElseĒ category at the end, which to be honest kind of took me by surprise.

I looks like a big part of that increase was due to unplanned medical expenses that were not really under our control, but another big part of it was due to an increase in spending on kidís activities (fees for participation, etc) and just plain old shopping. Iím going to have to focus more on paying attention to those things over the next year.

All that said, I still feel like weíre on a good track:

It's hard to believe how much progress we've made in just one year!