Author Topic: case study: high-income earner, low cost of living  (Read 4147 times)

maki

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case study: high-income earner, low cost of living
« on: April 29, 2014, 03:29:37 PM »
hey guys!

i've lurked mmm's site for about 6 months now (seriously, it's one of the best things i've ever found on the internet), and i feel like i'm only now beginning to digest the information and philosophies contained therein. in other words, the principles this site is based upon have finally begun to sink in my brain. 

these expenses are (monthly totals):

rent: $1,600
food: $800
shopping: $70
utilities: $120
cell: $180
gas: $180
personal care: $100
health/fitness: $70
other: $100

total: $3,220 ($38,640/yr)

i live in hawaii (born & raised). you guys would not believe the rent here. i don't have any debt, but i also do not have any assets. i'm looking at purchasing another rental property or two this year (i already have 2), as well as opening a portfolio with both vanguard and lending tree/prosper (although i have to admit, i'm in a bit of a quandary with regards to figuring out what ratio of my total overall income i should put into each).

i actually think i don't have to change much of my lifestyle in order to 'retire' soon, but does anyone have any tips? i know i spend a lot on food, but i really don't have the time to cook (which should change once i don't have to work anymore...).

sincerely,

m






« Last Edit: August 27, 2014, 03:16:36 PM by makistar »

Thegoblinchief

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Re: case study: high-income earner, low cost of living
« Reply #1 on: April 29, 2014, 03:39:36 PM »
The biggest thing will be avoiding as much tax burden as possible. I'll defer to others on that.

Food you realize, but the cell bill seems quite expensive as well.

What is the $100 for personal care getting you? Seems like a lot too.

griffin

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Re: case study: high-income earner, low cost of living
« Reply #2 on: April 29, 2014, 03:48:02 PM »
Looks like you're in pretty good shape. With that salary, you can live extravagantly and still have an excellent savings rate.On the flip side, 40k a year for one person is quite a bit! Almost twice what MMM spends on his whole family (granted, they don't pay rent).
Some thoughts of mine:

Rent: ouch! thats brutal; are there really no cheaper options? Definitely worth investigating...

Food: $800 is pretty crazy; thats $25 a day! I know you say you don't have much time to cook, but are you sure about that? I make a big batch of lunches (and sometimes dinners) every Saturday and eat it for the week. Takes about 4 hours. With that, you could lower your spending per month by about $600 - almost 20%!

Shopping: I'm assuming this category is for clothes? Do you need ~$850 of new clothes every year? (Please correct me if i'm wrong!)

Utilities: This includes internet, right? Looks pretty decent (I think? Not especially familiar with this category).

Cell: Whaaaat??! $180 per month?? I have no idea what coverage is like in Hawaii, but that number seems absurd! Even when I had verizon I was only about $80/mo...

Gas: Ride a bike :p (seriously though - with rent so high you must live close to work, right? If not, could you move?)

Personal care: Not sure what falls in this category.

Health/fitness: Gym membership? If so, you could probably get that number much lower.

Other: Shopping/personal care/other is nearly $300/mo...where is this money going?

Just thoughts I had; I may have misunderstood some categories though!

MDM

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Re: case study: high-income earner, low cost of living
« Reply #3 on: April 29, 2014, 05:31:53 PM »
i make $350,000/year, am single, and have $40,000 in total annual expenses.
...
i don't have any debt, but i also do not have any assets.
...
i'm looking at purchasing another rental property or two this year (i already have 2),
Missing a bit of the story?  E.g. rental property is an asset, and even with ~$120K/yr in payroll taxes you should have had ~$190K/yr to invest after expenses...?

ch12

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Re: case study: high-income earner, low cost of living
« Reply #4 on: April 29, 2014, 07:37:23 PM »
i make $350,000/year, am single, and have $40,000 in total annual expenses.
...
i don't have any debt, but i also do not have any assets.
...
i'm looking at purchasing another rental property or two this year (i already have 2),
Missing a bit of the story?  E.g. rental property is an asset, and even with ~$120K/yr in payroll taxes you should have had ~$190K/yr to invest after expenses...?

+1

Plus rental cashflow

maki

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Re: case study: high-income earner, low cost of living
« Reply #5 on: April 30, 2014, 04:53:18 PM »
ahh, sorry. i didn't clarify the rental property situation. the two i own, i just purchased. they will each cash flow +$500 from may onwards.

and i have been contemplating switching over to republic wireless, but am not sure how their coverage is in hawaii...more research is required from my end on this. also, cooking batch meals on saturday is a great idea.

Eggman111

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Re: case study: high-income earner, low cost of living
« Reply #6 on: April 30, 2014, 05:03:14 PM »
I'm not sure about Republic Wireless' coverage in Hawaii, but there must be some better options. Are you using huge amounts of data? I've personally been able to get my data usage way down just by paying attention and using wifi often.

That's really what stands out to me, besides what you mentioned yourself.

Overall, great for you for keeping your expenses way below your salary!

Lans Holman

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Re: case study: high-income earner, low cost of living
« Reply #7 on: April 30, 2014, 05:10:02 PM »
opening a portfolio with both vanguard and lending tree/prosper (although i have to admit, i'm in a bit of a quandary with regards to figuring out what ratio of my total overall income i should put into each).



When you buy vanguard index funds you're investing in basically every company in America.  When you invest in lending tree you're basically investing in the ability of some random person somewhere in America to pay you back.  I know which one makes me more comfortable.  Not to say you couldn't throw a couple % of your investments that way, but I wouldn't make it the foundation of my investments. 
As great as all the different ways of cutting your spending are, with the gap you have between your income and spending the most important thing seems to me to be just getting started saving and investing a whole bunch.  For a start that means maxing out IRAs, 401ks, HSAs, whatever you have access to.  Then just set up some automatic withdrawals and start piling it up in Vanguard.  You seem a little hesitant about that, are there any concerns that have been standing in your way?

kkbmustang

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Re: case study: high-income earner, low cost of living
« Reply #8 on: May 01, 2014, 11:08:18 AM »
From a reducing your tax due as much as possible standpoint, are you:
  • Maxing out an employer-sponsored 401(k) or, if you are self-employed, a simple 401(k) or other type of IRA?
  • Maxing out an HSA, 125 plan, etc. if applicable?

I can't speak to rental related tax deductions, but with that rate of income your deductions will be phasing out anyway.