Author Topic: Case Study: How many years to FIRE? Help me make a plan :)  (Read 3829 times)

jasminegeekface

  • 5 O'Clock Shadow
  • *
  • Posts: 43
Case Study: How many years to FIRE? Help me make a plan :)
« on: March 06, 2015, 09:15:53 AM »
Hello! I'm a relatively new Mustachian trying to figure out how soon I can realistically FIRE and make a plan. For some background, I'm 21 years old and started working my first full time job back in September. My main reason for wanting to FIRE is just to have the freedom to spend more time with family and friends, both future and current, and to explore personal interests.

Income: $54000 annually, before taxes or any other deductions. After taxes, health insurance, and 20% contribution to 401k, about $31000 annually or $2583/month.

Current expenses (monthly):
Rent + utilities: $500 (fixed, just one all-inclusive rent check)
Groceries: $150-170 (variable, I'm working on bringing this down...it was closer to $150 last month)
Gas: $80-100 (variable, mostly because of gas prices fluctuating. I use up about 35 gallons each month)
Car insurance: $60 (basing this on last six-month payment, but it has tended to be variable)
Cell phone: $35
Restaurants/cafes: $50 (approximate and variable, I generally only go out to eat socially, but my periodic latte/dessert/lazy fast food vices are included here, too)
Netflix: $8
Savings for new car: $500 (my current Honda Civic is nearing the end of its life with about 250,000 miles on it. I plan to buy used and in cash, probably another Civic, early next year)
Miscellaneous: $60 (includes random small car repairs or maintenance, social activities that don't involve eating, gifts for people, and the occasional gift for myself...)
Total: $1483
Remaining income ($1100-1140) mostly goes to investment accounts.

Assets:
Vanguard taxable account: $10,711 (VTSAX)
Vanguard traditional IRA account: $9,957 (VBIAX)
Saturna taxable mutual fund: $1100 (probably closing this and moving the funds to Vanguard...expense ratio is kind of high and the only reason I ended up with this was because my dad suggested it before I started taking any interest in investing myself)
Employer 401k: $1120 (this is low because until a month ago I was only contributing 5%, and a couple months before that it was 0%, and I've only been employed for 6 months)
Checking/Savings/CD with negligible interest: $12,300 (I know I should probably put a good amount of this into my index funds, but I keep hesitating because I haven't decided how much to leave here as an emergency fund)

Liabilities:
No current debt, but I do plan to buy a house a few years down the road once my boyfriend and I are married.

Specific Question(s):
I need help coming up with a realistic FIRE plan and timeline. I have my current expenses pretty stabilized, but I know they're going to change and I'm not sure how to account for all the changes in my long-term plan.

For one thing, I have a slightly better paying job lined up in the Albany, NY area (currently in Syracuse, NY area), so I will probably be relocating in the next couple of months. My housing expenses are likely to go up then because it's unlikely I'll find, or really want, another arrangement like the one I have now (living mostly alone, but landlady who is here 3-4 days a week at most is technically living with me and sharing a kitchen and living room). My boyfriend is graduating in May, and if he finds a job close to mine (he probably will, there's plenty of opportunities), we will likely start living together and splitting costs, so that might offset the housing cost increase. We also plan to get married within the next couple of years and also want to have children. Buying a house is also on the table somewhere in there. All of this will obviously shake up our expenses.

I think I have a handle on the math for FIRE in general; I just have no idea how to account for so many variables and still come up with a plan. I'd really appreciate any advice, especially from those of you who have been through these life transitions and know how they influence FIRE plans.

P.S. Any thoughts or advice on optimizing my current spending/saving/etc would also be appreciated.
« Last Edit: March 06, 2015, 12:18:42 PM by jasminegeekface »

RexualChocolate

  • Stubble
  • **
  • Posts: 222
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #1 on: March 06, 2015, 09:35:08 AM »
Great start, you're super far ahead of the game. You can minimize that car expense as well (500/mo for how many months? 10?)

I don't know what you do, but if you're in a good field, expect your salary to go up a ton as you get experience. The growth in years 1-10 of your working career are pivotal, esp if you only want to work 10 years 8)

Do not buy a house- remain mobile until you find something that has a fast track of upward potential. Moves you to ER a lot faster by making 20k more than it does to save 200 more a month.

BBub

  • Pencil Stache
  • ****
  • Posts: 774
  • Age: 34
  • Location: Deep South
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #2 on: March 06, 2015, 10:08:44 AM »
Nice work so far.  Keeping things super simple & back of the napkin, it will take you 7-10 yrs.

Current Assets:  $35k
Ann Savings: $29k*
Base expenses: $1k/mo
FV required at 4% SWR: $300k

Assuming a 7% return, you'll have:
$300k in 7 yrs to generate $1k/mo.
$450k in 10 yrs to generate $1,500/mo.

Edit after more thoroughly reading initial post: There was a good MMM post a while back about how generalized assumptions usually work out as planned because positives & negatives along the way tend to cancel each other out.  Who knows exactly what'll happen, or where you'll end up.  But in the early stages - keep doing what you're doing.  Just accumulate the stash, then you'll be in a strong position to pivot and tweak plans as life conditions change.

*assumes $900/mo plus max 401k of $18k... are you maxing?  wasn't clear


« Last Edit: March 06, 2015, 10:50:02 AM by BBub »

affordablehousing

  • Bristles
  • ***
  • Posts: 292
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #3 on: March 06, 2015, 11:09:39 AM »
This sounds like great and very informed planning already at 21. Awesome! I would add one aspect to this, and say it seemse like you already are on a path to retire, like the above poster said by 30 or so. So what do you want to do for the 60 years after that? Once you and your BF marry and income doubles then triples then quadruples before you retire, I think oneo f the additional challenges is dialing in on what makes you super happy. You'll have 60 years to do it! I think some folks on here sometimes use anxiety to go well past what they need to retire, because they don't have something that they are retiring...to do that they like better.

I'll leave the calculations to all the other spreadsheeters here but in my mind your retirement sounds a lot closer to me than you might be realizing. Starting from a blank slate of no debt, and being determined as a huge leg up. MMM only took 8 years, and part of what impressed me so much is he knew exactly what he wanted to retire to go do. I don't think he lost sight of that.

teacherwithamustache

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #4 on: March 06, 2015, 11:17:06 AM »
This sounds like great and very informed planning already at 21. Awesome! I would add one aspect to this, and say it seemse like you already are on a path to retire, like the above poster said by 30 or so. So what do you want to do for the 60 years after that? Once you and your BF marry and income doubles then triples then quadruples before you retire, I think oneo f the additional challenges is dialing in on what makes you super happy. You'll have 60 years to do it! I think some folks on here sometimes use anxiety to go well past what they need to retire, because they don't have something that they are retiring...to do that they like better.

I'll leave the calculations to all the other spreadsheeters here but in my mind your retirement sounds a lot closer to me than you might be realizing. Starting from a blank slate of no debt, and being determined as a huge leg up. MMM only took 8 years, and part of what impressed me so much is he knew exactly what he wanted to retire to go do. I don't think he lost sight of that.

*2
  Make sure boyfriend is on board with your life style.  Maybe look at doing a project together like a housing redo where you live in it fix it up and sell it 4 years later.

Wait for children until 30-32.  At your savings rate one of you could FIRE while other works for another 7-8 years then joins you.  Without knowing boyfriends situation 1 of you FIRE at 30 watch kids until 40 then both FIRE would be ideal.  The world is your financial oyster.

kib

  • Stubble
  • **
  • Posts: 197
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #5 on: March 06, 2015, 11:23:47 AM »
I'm also impressed, nice going!  One thing I've learned is that you really can't map out a life plan for 10-50 years in tremendous detail, no matter how much you try.  You have a good idea of what you're shooting for, and you're doing what you can to get there, which sounds just about spot-on to me.  As long as you stop and consider what you're doing and what you hope to accomplish in the long term as new situations and opportunities arise, you seem to be in an ideal position to reach your goals, so I wouldn't stress out too much about things you won't have details on til they happen. 

rpr

  • Guest
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #6 on: March 06, 2015, 11:32:03 AM »
Wow -- I am amazed at how with it you are! Good job!

BTW, $31000 annually is $2583 per month. You have an extra $200 now. Did I miss something?

jasminegeekface

  • 5 O'Clock Shadow
  • *
  • Posts: 43
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #7 on: March 06, 2015, 12:17:13 PM »
Thank you all for your replies and encouragement! :)

rpr: Whoops, you're right, the number I used was the sum of two biweekly pay periods, so I wasn't counting two whole checks out of the year. I'll fix the original post; thanks for pointing that out.

RexualChocolate: I'm working as a system engineer for a defense contractor right now, and moving on to compliance engineering at a nuclear lab probably in a couple months (I need a security clearance first, hence the uncertainty). My bachelors was in physics, not engineering, so upward mobility is limited unless I go back for a more relevant masters degree, which I would consider in a couple of years because both my current and future employer offer a tuition reimbursement program after one year with the company. The house is not a plan for the very near future, just a goal in the next several years. How far into a career would you consider mobility to be less of an issue?

BBub: Not maxing my 401k right now, but I will start doing that for next pay period. My only reason for not doing it until now was lack of knowledge (up until a couple weeks ago I had no clue it was possible to access 401k money before 60).

affordablehousing: That it definitely one huge thing I need to figure out. I've never really been sure of what I wanted to do with my life, and my academic and career decisions so far were all based more on aptitude and potential earnings, and less so by actual passion. I'm not even sure where to start finding out what I want to do, except I know it's not really what I'm currently doing, so if you (or anyone else) have any recommendations on this at all, I'll be really grateful.

teacherwithamustache: This is another big consideration. My boyfriend is older than me; it's taken him a good number of years to get his life together and he is finally set to graduate and go into mechanical engineering. He feels passionately about the field and wants to have a full career, so I don't think he has much interest in an early retirement for himself. Although I haven't gone into great detail about my FIRE thoughts with him yet because it's only been coming together in my own mind in the last few weeks, I have talked about wanting to retire early in general before and he was supportive of that. (Also, anyone have advice on how to introduce him to full blown Mustachianism? I'm not sure I trust myself to not make it sound insane.) We both want children and although I'm perfectly happy with that being either now or later on, once again since he's older I think waiting another 10 years wouldn't be ideal to him.

frufrau: Thank you for the encouragement! I think part of me keeps questioning that this is even possible and that makes me overthink the details, so it's nice to get some affirmation from people on here.

Guesl982374

  • Pencil Stache
  • ****
  • Posts: 501
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #8 on: March 06, 2015, 12:34:12 PM »
As you aluded to in your initial post, you know your expenses will change over time based on life changes (getting/being married, moving, kids maybe, travel, etc).

Just keep focusing on your savings rate, make sure you are your boyfriend have aligned money goals/behaviors, enjoy each moment and try not to focus on the finish line. The amount of money you'll have by 25 or 28 or 30 will be vastly better than the average American. You should feel blessed every day that you have and will have so much freedom.

As far as a plan, determine what asset classes are best for your goals in life and temperment (passive, low cost index funds, real estate, individual stocks/bonds, etc) and funnel money toward it. You can't optimize life and you can't always plan for what life has in store for you. Just keep saving and investing and you'll be FI before you know it!

jlajr

  • Stubble
  • **
  • Posts: 232
  • Location: Modi'in, Israel
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #9 on: March 06, 2015, 12:46:47 PM »
That last post beat me to my point: If you can avoid expense traps and pitfalls along the way and keep that savings rate high without you or your boyfriend/future husband feeling like its a sacrifice, then you should be set up pretty good for early financial independence, which could very well end up looking much different than retirement for you.

For example, the buying-a-house-in-a-few-years goal. I'd look at that a little closer, especially if it will significantly affect your savings rate. Do you want to invest that capital in a not-so-liquid asset? Could you be comfortable thinking of housing as a monthly utility-type expense as opposed to an investment upon which your financial well-being is largely dependent?

jasminegeekface

  • 5 O'Clock Shadow
  • *
  • Posts: 43
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #10 on: March 06, 2015, 04:34:07 PM »
As you aluded to in your initial post, you know your expenses will change over time based on life changes (getting/being married, moving, kids maybe, travel, etc).

Just keep focusing on your savings rate, make sure you are your boyfriend have aligned money goals/behaviors, enjoy each moment and try not to focus on the finish line. The amount of money you'll have by 25 or 28 or 30 will be vastly better than the average American. You should feel blessed every day that you have and will have so much freedom.

As far as a plan, determine what asset classes are best for your goals in life and temperment (passive, low cost index funds, real estate, individual stocks/bonds, etc) and funnel money toward it. You can't optimize life and you can't always plan for what life has in store for you. Just keep saving and investing and you'll be FI before you know it!

Thank you so much! I'm honestly very grateful for how blessed I am to even have the option to do any of this, and it's easy to lose sight of that while getting caught up in the finer details, so it's good to be reminded of that :)


That last post beat me to my point: If you can avoid expense traps and pitfalls along the way and keep that savings rate high without you or your boyfriend/future husband feeling like its a sacrifice, then you should be set up pretty good for early financial independence, which could very well end up looking much different than retirement for you.

For example, the buying-a-house-in-a-few-years goal. I'd look at that a little closer, especially if it will significantly affect your savings rate. Do you want to invest that capital in a not-so-liquid asset? Could you be comfortable thinking of housing as a monthly utility-type expense as opposed to an investment upon which your financial well-being is largely dependent?

I'm going to invite possible face punches here and admit that at least a small part of the goal of buying a home vs renting for me is more emotional than financial. Financially, I'd probably be perfectly comfortable with housing just being a permanent monthly expense. Emotionally, though, because my parents were all over the place when I was growing up and we moved so much that I never really had a childhood/family home, I really want a long-term house that we own for my future family. I might be being completely irrational about this, and I won't mind being told that if that's the case, by the way :)

As for how it might affect my savings rate, I'll have to do a lot more research into houses in the area I'd be looking to really know that, but from what I know of people who have bought a house in the area, besides the initial investment for the down payment/closing costs/etc, overall monthly costs for renting versus owning weren't remarkably different. Again, I still have a lot of research to do here, and I haven't even fully explored the ongoing renting/owning debate around here yet.

jlajr

  • Stubble
  • **
  • Posts: 232
  • Location: Modi'in, Israel
Re: Case Study: How many years to FIRE? Help me make a plan :)
« Reply #11 on: March 07, 2015, 11:44:46 PM »
I'm going to invite possible face punches here and admit that at least a small part of the goal of buying a home vs renting for me is more emotional than financial. Financially, I'd probably be perfectly comfortable with housing just being a permanent monthly expense. Emotionally, though, because my parents were all over the place when I was growing up and we moved so much that I never really had a childhood/family home, I really want a long-term house that we own for my future family. I might be being completely irrational about this, and I won't mind being told that if that's the case, by the way :)

As for how it might affect my savings rate, I'll have to do a lot more research into houses in the area I'd be looking to really know that, but from what I know of people who have bought a house in the area, besides the initial investment for the down payment/closing costs/etc, overall monthly costs for renting versus owning weren't remarkably different. Again, I still have a lot of research to do here, and I haven't even fully explored the ongoing renting/owning debate around here yet.

I live in a country made up of a lot of immigrants, and almost all of my friends here decided to move here because of an emotional tie to our culture and our people, but even more so THE LAND. Even the non-immigrants are also, for the most part, "insanely obsessed" on purchasing their primary residences (and other real estate). Every day, seemingly, are news articles on the high cost of doing so (and complaints about "What is the government going to do about it?!?!").

So, yes, it can be an emotional decision, but as long as you acknowledge that it is for you, then you take that into account and move forward in the most mustachian way possible, correct?