Author Topic: Case Study: Not sure I can grow a mustache  (Read 9225 times)

BluegrassMustache

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Case Study: Not sure I can grow a mustache
« on: October 17, 2016, 03:22:08 PM »
Sadly, both literally and figuratively.   My wife and I are not saving what we could, however we make fairly high incomes and have set aside a fair amount of money.  I think my wife views my discussions about early retirement as amusing, but I'm going to get a better grip on our spending and work collaboratively with her on how we get there.

Life Situation:
IRS filing status: MFJ
Number & ages of dependents: 2 kids (7 year old boy, 9 year old girl).   Boulder, CO
Gross Salary/Wages: Before any deductions
Ages (Me 42, wife 40)

Pre-tax deductions: 6000 IRA for Matching (we have largely stopped pre-tax deductions because we are heavily weighted on that side - feedback is this may not make sense)

Other Ordinary Income: None

Qualified Dividends & Long Term Capital Gains: Minimal

Rental Income, Actual Expenses, and Depreciation: None

Adjusted Gross Income: 365000

Taxes: Federal: 83000 & State: 15000

Current expenses: Provide breakdown and relevant details.  Aim to have “Miscellaneous” somewhere ~2.5%.  Much lower and you may be providing too much detail, much higher and you have an obvious problem of not understanding your spending.

Mortgage   $2,158 
Property Tax   $708
Home/Rent Insurance   $267
Beauty Shop   $167
Car, fuel, Car Maintenance, Registration, etc.   $333
Charitable contributions   $250
Children: music lessons, recreation, clothes, toys, basics   $750    
Clothing/Shoes   $583     
Dining (Lunch/Dinner/Etc.)   $583
Gifts (not charitable contributions)   $83 
Electricity, Gas, Water, Sewer for 2 homes:   $500            
Groceries   $1,417 
Household; Maintenance   $1,833
Internet, Wireless, Voip at two locations   $167    
Life Insurance   $83
Medical (Doctor, Hospital, etc.)   $83    
Miscellaneous   $83    
Pets   $83
School Tutition/Books/Etc.   $167
Sports/Recreation   $83
Travel/Vacation   $250 
Non-mortgage total   $8,475
With mortgage total       $10,633



Folks have identified some discrepancies here... I'm in the process of re-calculating, but it's relatively close
Assets:
Primary House: 1,150,000
Second Cabin: 290,000
Civic: 6K
Honda Pilot: 25K
Own land outright valued at 125K (prop taxes included with mortgage expenses)

Taxable Savings:  400,000 (250K of this is in form of equity at firms, 50K cash)
Tax Deferred: 1,100,000 (highlights:  we stocked away a fair amount in 401K/IRA.  We have one family lending arrangement with an industrial property that has worked out well with self-directed retirement accounts and we will receive 6K in interest per month for the next 4 years, with 400K tied up in deal but principal paid down monthly and completely paid off in 2.5 more years.   It is backed by collateral so actually fairly low risk.  Another 200K is in S&P Index funds, 100K in equity that is not easily extractable but appreciating on paper, 200K in lending for a real estate developer at 12% interest.   13K in 529 for both kids (not enough).   Understand this isn’t the typical blend of investments and carries more risk.
HSA: 23K

Total investable savings is roughly: 1.5M
Less likely to sell property at this point in time, but that's around 1.5M

Liabilities:
Owe 326K on Primary, 4th of 30 year fixed, 3.375% - Pay $2221 monthly (620 in principal)
Owe 137K on Second home, 4th of 7 year arm at 2.75% - Pay $938 monthly (340 in principal)
Total: -463,000

Specific Question(s):
My wife would probably prefer to keep working another few years and makes 220K now.  I would like to stop my current form of work by EOY 2017, with part time gigs from then on, that interest me.  Our net worth is going up at over 400K a year right now between savings, interest, a wave of strong property appreciation, etc.   This feels achievable, especially since we have so many opportunities to reduce spending.  I'm working to develop a plan to reduce our outrageous spending to bring our savings into better alignment with financial independence.

Commence punches to face, etc

I appreciate any and all advice, education.
« Last Edit: October 20, 2016, 11:45:03 AM by BluegrassMustache »

humbleMouse

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Re: Case Study: Not sure I can grow a mustache
« Reply #1 on: October 17, 2016, 04:03:38 PM »
lol

pbkmaine

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Re: Case Study: Not sure I can grow a mustache
« Reply #2 on: October 17, 2016, 04:53:48 PM »
It is, as Mr. Money Mustache himself has said, astonishingly simple math. If you spend $11,000 per month, you will need, at a 4% withdrawal rate, $3.3 million to retire.

ender

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Re: Case Study: Not sure I can grow a mustache
« Reply #3 on: October 17, 2016, 05:02:57 PM »
What are your goals?

With income like you have, you could trivially retire early in only a few years.

Also most of those categories are astronomically high for most on these boards, you know what ones they are - I would suggest going through and noting how many thousand you can save simply by scaling back luxuries. But if your goal isn't to live a more modest life, you need to decide that.

Ultimately, you guys make a huge income -- and live a lifestyle that requires a huge income. We can't fix this, but you and your wife need to talk it through and figure out what to do.

onlykelsey

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Re: Case Study: Not sure I can grow a mustache
« Reply #4 on: October 17, 2016, 05:04:56 PM »
It is, as Mr. Money Mustache himself has said, astonishingly simple math. If you spend $11,000 per month, you will need, at a 4% withdrawal rate, $3.3 million to retire.

Agreed.  I don't plan on a barebones FIRE life, but 11K monthly is pretty insane, especially since you're not in San Fran/London/NYC/etc. Unless you can get investments or gains of 2.5 million in the next few years, you can't both stop working in a few years.  I didn't plug your line items in to a calculator, but is it possible there's an error?  It doesn't look like you should be totalling to 11K monthly.

If you can redirect more of the earnings firehose you have towards investments, you'd obviously be in great shape in no time.  It seems like you could also be great candidates for half-time or project-based work while you let your nest egg grow.

MDM

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Re: Case Study: Not sure I can grow a mustache
« Reply #5 on: October 17, 2016, 05:27:01 PM »
Pre-tax deductions: 6000 IRA for Matching (we have largely stopped pre-tax deductions because we are heavily weighted on that side)
But your marginal savings rate is ~42% now, correct?  Do you expect your marginal withdrawal rate to be that high?  If not, pre-tax is still best.

Quote
Mortgage   $2,158
Owe 326K on Primary, 4th of 30 year fixed, 3.375% - Pay $2221 monthly (620 in principal)
Which is it?  Also, monthly payment on a 30 year 3.375% mortgage for $350K is only $1547.

PharmaStache

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Re: Case Study: Not sure I can grow a mustache
« Reply #6 on: October 17, 2016, 05:41:39 PM »
What the heck is this?
Household; Maintenance   $1,833

Your maintenance is almost as much as your house payment? 

SKL-HOU

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Re: Case Study: Not sure I can grow a mustache
« Reply #7 on: October 17, 2016, 05:56:20 PM »
You spend $1800/mo on household/maintennace, $750 on kids activities but only $250 for travel?? What activities are the kids doing? 1400+ groceries in addition to almost $600 eating out?

lhamo

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Re: Case Study: Not sure I can grow a mustache
« Reply #8 on: October 17, 2016, 06:23:58 PM »
Dont forget $500 in electricity.   Do you light/heat the whole block?

Knitwit

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Re: Case Study: Not sure I can grow a mustache
« Reply #9 on: October 17, 2016, 06:38:36 PM »
You spend $0 on Water/Sewer and cell phones?

SKL-HOU

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Re: Case Study: Not sure I can grow a mustache
« Reply #10 on: October 17, 2016, 06:48:43 PM »
Dont forget $500 in electricity.   Do you light/heat the whole block?

I knew i missed one :)

Mattzlaff

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Re: Case Study: Not sure I can grow a mustache
« Reply #11 on: October 17, 2016, 06:50:31 PM »
That feels like the most complete yet incomplete breakdown of expenses I have seen.

If this isn't a troll you need to figure out what's costing you 1800$ in maintenance, 500$ in electricity, and 1400$ in groceries and look at scaling that back. I also desperately hope you're not spending 600$ a month on clothing either. That can be cut back substantially. start by going out less 600$ is a lot of money monthly for dining out especially when you spend 1400$ on groceries...hell that's more than my mortgage alone...

You have a lot of scaling back to do as said before 11k a month spending you're going to need some 3M+ in your stash

BluegrassMustache

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Re: Case Study: Not sure I can grow a mustache
« Reply #12 on: October 17, 2016, 08:02:02 PM »
That's fair - was expecting some hazing...

I'm not a troll, for whatever it's worth.   I lumped household projects under that maintenance item, as my Quicken items didn't line up with the ones in the MMM xls.  Last year included a deck rebuild to our cabin (I did the work, but materials were high as it spans 3 sides of the cabin, a fix to well and sewer lines, etc)   I have buckets like "utilities" in Quicken where I put electricity, gas, water, sewer for both homes vs breaking them all out, so I was just mapping them to a near item in the MMM xls (e.g. electricity)

Let me go through and relabel them more clearly, although probably won't result in much less shock factor in all areas because the total spend is still there.   Groceries are organic, Whole Foods, where my wife likes to shop - can add up.  Clothes is primarily my wife.  However, for a working, professional who brings in the income she does, she also has the choice to spend and continue working to pay for it, whether you or I think it's too high or not.   We certainly have discussions, but it's not her goal to retire so young. 

I'm new to the forums, but one thing that does surprise me is that you don't see more posts far more extreme than mine.  Families with extremely high end cars, kids at high end private schools, etc.   They could spend my annual outflows on those two buckets alone.  Or perhaps, people like that don't come to a MMM forum.

I do appreciate the feedback, and regardless of the hazing it provides insight for me.   I'll clean up my numbers tomorrow.   

bacchi

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Re: Case Study: Not sure I can grow a mustache
« Reply #13 on: October 17, 2016, 08:11:22 PM »
I'm new to the forums, but one thing that does surprise me is that you don't see more posts far more extreme than mine.  Families with extremely high end cars, kids at high end private schools, etc.   They could spend my annual outflows on those two buckets alone.  Or perhaps, people like that don't come to a MMM forum.

As it turns out, many of the high rollers, often "Master of the Universe" types, have thin skins. Any critiquing of their lifestyle choices is met with major defensiveness.

Do you really pay $167 for internet or is that also a bundling of VOIP and cable and internet and alarm?

BluegrassMustache

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Re: Case Study: Not sure I can grow a mustache
« Reply #14 on: October 17, 2016, 08:55:43 PM »
Yes, that too will be bundling of all my communications.   We don't have cable, but we do require 2 voip lines as we work from home a fair amount, it's internet at two locations as we need to work some days at cabin etc.   I'll re-label as I mentioned.

A440

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Re: Case Study: Not sure I can grow a mustache
« Reply #15 on: October 17, 2016, 09:16:38 PM »
Certainly, you have multiple opportunities to cut back.  But the question is, is your wife willing to do this?  If this is not her goal, does she want to support you financially to essentially be a stay at home dad?  Is being a SAHD what you envision retirement to be?   




RosieTR

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Re: Case Study: Not sure I can grow a mustache
« Reply #16 on: October 17, 2016, 09:27:38 PM »
This sounds a lot more like a marital issue than it does a financial issue. It might be best to start with that-you need to meet with each other or possibly with each other and a third party, and really figure out what your common goals are. You may each need to compromise, and/or do some separation of finances, if she wants the high-spend lifestyle and you don't. Not saying you can't work something out, but the nugget in all this isn't whether you spend $900/mo on groceries vs $1400. If you both don't want to spend $1400, you can easily change that.

BluegrassMustache

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Re: Case Study: Not sure I can grow a mustache
« Reply #17 on: October 17, 2016, 09:40:06 PM »
Yes, thanks.   I'm going to take down the post.  Spend October, November, December tracking our expenses closely and then talk it through with my wife.  She's not as I may be portraying in a few blurbs.  In all sincerity, I think our view has been that we spend less than most of our friends and have saved a lot.   I do appreciate the feedback, and will repost a corrected breakdown and path forward in a few months.

incognito

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Re: Case Study: Not sure I can grow a mustache
« Reply #18 on: October 17, 2016, 10:20:55 PM »
 

I'm new to the forums, but one thing that does surprise me is that you don't see more posts far more extreme than mine.  Families with extremely high end cars, kids at high end private schools, etc.   They could spend my annual outflows on those two buckets alone.  Or perhaps, people like that don't come to a MMM forum.


I think you're exactly right about that. Big spenders don't typically seek out places like this.

When I started looking at your numbers, I was sure that I was going to see $5k/mo in car payments for 2 Audi sedans. But, I was pleasantly surprised to see you have 2 relatively reasonable vehicles that are paid for. Nicely done. I think there's hope.

There's one compliment, now here's one critique.

Considering your income and expenses I think your charitable giving number of $250/mo is weak. You want to live a nice life and have some nice things, fine, but give back man! We give 10% of our monthly expenses number every month (it's not a religious thing). Our typical monthly household expenses are $4k/mo, and we donate $400/mo to various charities. With your monthly spending of $11k, you should be giving $1,100/mo to charity. Make sure you include your kids in the process and maybe let them choose the charity once in a while. They'll love it and hopefully they'll continue the giving tradition when they grow up.

On a good note, at least you do have a charity number in your expense budget. I've noticed that charitable giving as a line item on a monthly expenses report seems to be a rarity in this financial independence space.

It looks like your combined take home income is around $22k/mo and spending is around $11k/mo, so around a 50% savings rate which is not too bad, but could be a lot better. Check out this article to see how your savings rate impacts how quickly you can reach financial independence.
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

As for getting your wife on board, I would just tread lightly at first. If you come on too strong with your ideas she'll likely just shut you out on the subject completely.

Good luck!

Mmm_Donuts

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Re: Case Study: Not sure I can grow a mustache
« Reply #19 on: October 18, 2016, 01:38:07 AM »
FWIW, I can relate to your situation. We were also a high income couple, until I pared back my work, and DH lost his job. We've always been more frugal than our peers, but way less so than most on this board.

Our expenses are now down to $60k a year, and we're more or less retired. I still like working, and will do some occasional gigs.

I don't have much input on your expenses, but I was confused by your assets. You say you have over $1M in investments and over a $1M house, and other savings and properties yet your total is only $1.55M?
« Last Edit: October 18, 2016, 01:39:46 AM by Mmm_Donuts »

former player

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Re: Case Study: Not sure I can grow a mustache
« Reply #20 on: October 18, 2016, 02:12:01 AM »
I'm guessing your $1.550M figure is your income-producing assets, so ignoring the capital value of your primary and secondary homes that you live in?  In which case, yes, at your current expenditure levels you need another $2M in assets to meet the 4% rule.  You say your net worth is currently going up by $400k a year: you need to take off whatever of this is coming from increased equity in your primary and secondary home to get an idea of how long it would take you under current living patterns to reach the 4%.

Congratulations on having such high incomes.  You clearly want to stop working, clearly your wife doesn't.  That's not a problem provided your wife is happy to continue working while you don't and you are happy not to work while your wife does.  Is that something you can agree between the two of you?   If so, you would still be able to cover your current expenses and you might be able to put some work into lowering expenses (eg by taking over grocery shopping and cooking).

I would suggest talking to your wife not in terms of early retirement but in terms of "FU money" and "time with the kids in their teenage years".

Villanelle

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Re: Case Study: Not sure I can grow a mustache
« Reply #21 on: October 18, 2016, 02:41:46 AM »
You can't retire right now, nor can you retire about  year from now, unless you make changes.  Whether that's worth it to you and your wife is a conversation between the two of you, but the math says that you aren't really even all that close to retirement, with things as they are now.  (Note that by "You", I mean you and the wife together.  Of course, if you quite in a year, you are extending even longer the time before both of you can retire.)

However, there is so stinking much low-hanging fruit in your budget that you could feed your neighborhood without even reaching up to any overhead branches.  If you want to harvest that fruit, you as a family will be much, much closer to ER.  Your necessary number will be lower, and your savings rate will increase so you'll hit that number more quickly.

If you were to ER in about a year, would you be willing to take on tasks that you currently outsource?  Would you *honestly* use some of your newfound time to cook meals from scratch, cutting your grocery and eating out budget in half, for example?  Since your breakdown groups so many things, it's hard to tell what else you outsource, but housekeeping, yard work, perhaps childcare, laundry service, and anything else you currently pay someone to do could all be cut, if you are truly willing.  Look at the numbers, and put something together to show your wife.  For me, this would be key, if I was going to keep working while DH RE'ed because we still needed income. 

Also, since you are the one pushing for this, look at what you can cut, without expecting her to make matching sacrifices.  You want this, so you lead by example, and you take on a bit more of the burden.  Does your cable include a sports package that maybe your wife doesn't care about?  Cut it.  Do you have drinks with friends every other week to the tune of $50?  Have one beer, or a free water instead.  What about the cabin?  Could you sell that, freeing up that capital and also cutting monthly expenses?  (And would this be more of a sacrifice for you, or for your wife and kids?) Look at what can be cut that won't be a huge sacrifice to anyone, what will only really be a sacrifice for you, or what you can cut with newfound free time.  See if you can make the numbers work, and include a projection for how long your wife would have to continue working after your retirement with your new savings rate and reduced expenses.   Since you want to leave the workforce while your family still needs income, it seems to me like ~75% of the sacrifice should be yours, with the other 25% split between your wife and kids, especially at the start when they are still unsure about the idea and happy with the status quo.  If you push them too hard, they'll just check out.  Asking the kids to skip one week of summer camp is one thing.  Canceling all the super fancy activities you've allowed them to get accustomed  to and pointing them in the direction of a free park may cause mutiny.

I'm interested to see your breakdown in a few months, but remember that just looking at a few carefully tracked months isn't a full picture either.  You won't be building a new deck every year, but you will surely need some maintenance over time.  Some of these things are really just kind of best guesses.  You look at the averages and remove the outliers, and get a fairly decent prediction, ant that's the best you can do with predicting the future. 

begood

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Re: Case Study: Not sure I can grow a mustache
« Reply #22 on: October 18, 2016, 06:33:53 AM »
Yes, thanks.   I'm going to take down the post.  Spend October, November, December tracking our expenses closely and then talk it through with my wife.  She's not as I may be portraying in a few blurbs.  In all sincerity, I think our view has been that we spend less than most of our friends and have saved a lot.   I do appreciate the feedback, and will repost a corrected breakdown and path forward in a few months.

BluegrassMustache, for lots of people who find their way to the MMM forums, it's a HUGE wake-up call. Some people are born frugal, others are just starting to figure things out. We're all on a continuum.

You are where we were seven years ago - we thought of ourselves as frugal because we were *compared to our cohort*. Like you, we drove Hondas instead of BMWs, we had to use vacation time to make trips to see aging parents (we weren't flying to Paris or Cancun for vacation, or cruising on spring break, like many of our friends). We took out half the loan we qualified for when we bought our houses (corporate relos - four houses in about sixteen years).

The true blessing of MMM, for me, is that it has completely reframed my view on how we spend money. We are indeed paying for private education, but it's a conscious, deliberate choice we're making, not something we're doing because everyone else around us does it.

I encourage you to leave the post up. Or start a journal. The journey is as important as the destination, and this is a helpful, supportive bunch of folks.

Heroes821

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Re: Case Study: Not sure I can grow a mustache
« Reply #23 on: October 18, 2016, 06:34:45 AM »
I too want to see what you come up with in a few months. Don't let the Christmas spending frenzy catch you guys!  Also you might want to look into the journal section on here as a way to keep you engaged over the next few months and focused on actually supplying an update.

ooeei

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Re: Case Study: Not sure I can grow a mustache
« Reply #24 on: October 18, 2016, 07:16:27 AM »
These have already been mentioned, but here are the big ones that stick out to me like a neon sign.  The bold ones I just had to emphasize somehow, because they're even more ridiculous than the rest.

Beauty Shop   $167 = $2,000/year
Car Maintenance, Registration, etc.   $333 = $3,996/year
Child activities    $750 = $9,000/year
Clothing/Shoes   $583 = $6,996/year
Dining (Lunch/Dinner/Etc.)   $583 = $6,996/year
Electricity   $500 = $6,000/year
Groceries   $1,417 = $17,000/year (This adds up to $24,000/year when you add in "dining."  That's the poverty level of total income for a family of 4 that you spend feeding yourselves.  This is absolute INSANITY.)
Household; Maintenance   $1,833 = $21,996/year (You spend over the poverty income level for a family of 3 on house maintenance.  Again, INSANITY)

You spend $74,000/year after taxes on groceries, clothes, kid activities, and household/car maintenance.  At your income level this is probably more like $100,000 before taxes.  The child activities I can see being defensible, everything else just seems insanely extravagant.  I suspect you could trim $40k off that pretty easily, which reduces the amount you need for retirement by $1,000,000.  It also gives you $40k more a year to save toward that retirement.  A double whammy.

$24,000 a year on feeding yourselves.  If you have 4 people, you're spending $500/month per person on food, and two of you are young children.  It's really more like $700/adult if we count the kids as one adult.  You either throw away a ton of food, or buy expensive stuff just for the hell of it.  Whole foods is great for this.  You can get a block of cheddar in the refrigerated section for $5, or the same size one in the specialty cheese section where the cheese monger tells you about all of the delicate subtleties to the flavor that costs $25.  Really even with that I can't imagine spending $2000 a month on food and actually eating all of it. 

BluegrassMustache

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Re: Case Study: Not sure I can grow a mustache
« Reply #25 on: October 18, 2016, 08:23:05 AM »
I'm excited and motivated.   I'm appreciative my thread has moved toward the latter stages of laughter.   A lot of people have made very constructive comments.... too many to name all - incognito, player, good, vill, donuts, heroes, etc, etc.   it seems goals of the website are to reach a broad audience, make an impact.

Agree with your logic and will clean up expense and asset categories.  An incomplete list of responses:

1) Yes, the person who said 1.5M in investing is correct.
2) Very much comparing to the cohort
3) Agree I'm a big part of the problem.  I tend to over-improve, spend a fair amount on tools, etc.   I use them, and feel like they can be worth the investment, but I spend too much here. 
4) I don't feel the kids are the problem, at least not in their expectations, rather what we sign them up for.  They are hard workers and avid readers.  We are almost zero screen family.  We don't have cable, no video games, we do stream movies.  The kids were both public, now one is private due to her learning style.  We spend on language/music/sports.   We usually do one week of more expensive camp and those are spendy - definitely something we could consider cutting
5) I will keep the thread as a journal and also try to create a spend that is reflective of an entire year or more
6) We spend a small fortune on cleaning...  $240 a month (cringing).   To the question of what would I be willing to insource.   I would be willing to clean, I already do lawn myself.  We eat at home the majority of time but we blow up numbers on Fridays when we're tired or far, far worse when we go out with friends.  Concerts with friends - same theme.  I am definitely willing and enjoy cooking and think there is a lot of opportunity to deflect expensive outings into home cooked dinners, etc, which is always a better way to catch up.   Agree I need to take on the bulk of the change.   Grocery costs go wild between whole foods and CSAs, etc, but at times we get so much between CSA, garden, it's wasteful.
7) Selling the cabin would be a blow to all of us.  It's such a special, memory creating place.  I'd work longer before I made that choice
8) Charity - I agree with the poster.  We should increase that - I was actually hoping to just increase time we dedicate to charity.   We do volunteer a good amount now  We have a low-income, non-English speaking elderly couple living in a basement apartment.  It has allowed the kids to be trilingual and they help with things around the house.  We don't charge them and they are basically family, but naturally add to all of the utilities.   I know we could flip cash-flow drastically by bringing in an actual renter, but I would work longer before I did it.
9) Would I want to be a SAHD... Honestly, I would probably be fine with that, but it wouldn't be as fulfilling as having my wife and I both balance our lives.   I think there is a bit of a stigma about it.  I am certain the cohort would not be impressed.

More to come as I figure some things out.   The $60K a year expense figure someone cited sounds like a fantastic goal for us (obscene for others) in terms of how much that adds to our savings and lowers the overall retirement figure.    Thanks again.

 

Tyson

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Re: Case Study: Not sure I can grow a mustache
« Reply #26 on: October 18, 2016, 08:50:31 AM »
I've been following the MMM advice for almost 2 years now and my advice would be to start your focus on lowering your recurring monthly bills.  Especially for things that have more than 1 provider that you can shop around to get the best deals - car insurance, home insurance, internet service, cell phone service.  In fact, since you are in CO, I'd rec checking out MetroPCS - they are local and they have some of the best prices for cell plans I've seen. 

Once you get those types of things optimized and are feeling good, start to go after the discretionary spending, focusing on yourself and your own spending first, and slowly bringing on board your wife/family.  I found in my case, that showing that I'd made some progress on my own (ie, our costs are down and our net worth is up), showed my wife that this wasn't just some crazy fad, that it really does work. 

Also, for me - talking about retirement right up front was a non-starter, it was too out-of-left-field for her to frame properly.  So I talked about financial independence and how the amount of $$ we needed in the bank to truly be independent was very much correlated to how much money we spent every month.  That was important because it allowed her to re-think about how we spent money.  It changed from "Oh, lets do something nice, we deserve it", to "Is it in the budget?" 

The other thing - you don't have to make all the changes all at once.  Do the easy/quick stuff first that you have direct control over, and then worry about the discretionary spending a bit later.  IMO.

honeybbq

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Re: Case Study: Not sure I can grow a mustache
« Reply #27 on: October 18, 2016, 09:15:52 AM »
Don't get scared off. I'm a high income earner and (on MMM) a high spender as well in a HCOLA.  I spend more on daycare than many MMers spend all year! It's ok - take what you need here and there and forget the rest. I skip the dumpster diving posts and appreciate ones about credit card rewards and things that are more likely to get my attention and action.

Boulder is a pretty HCOLA and also it's like LA in that there are a lot of cultural pressures to 'do' certain things and 'eat' a certain way, all that are more expensive. I get it (and I love Boulder, by the way).

I also appreciate that your wife obviously has an important career where looking good and feeling good is important to her. A lot of the category spending seems to be in her court -  you could suggest 'trying' to cut down just for a short while, maybe going on a 'no buy' for 3 months and see how it goes.

I think the main issue is you need to have a set goal and then figure out how to cut your expenses to make that goal. Right now you're trucking along, making lots of money, spending lots of money. Do you want to retire in the cabin? Are you going to keep all your properties? Have you funded the kids' colleges? Etc. You guys need a meeting of the mind and come to an agreement and then the budget is just filling in the blanks.

As an edit - if these are your homes, these are NOT too expensive for Boulder. Actually I'm super surprised your house wasn't a million bucks in Boulder. Your home expenses are the least of your worries/issues.
Liabilities:
Owe 326K on Primary, 4th of 30 year fixed, 3.375% - Pay $2221 monthly (620 in principal)
Owe 137K on Second home, 4th of 7 year arm at 2.75% - Pay $938 monthly (340 in principal)
Total: -463,000
« Last Edit: October 18, 2016, 09:17:52 AM by honeybbq »

robartsd

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Re: Case Study: Not sure I can grow a mustache
« Reply #28 on: October 18, 2016, 09:57:10 AM »
I agree that you should first look at optimizing you recurring expenses (telecommunications, insurance, etc.). For communications, IP Daley has some great advice on this forum and his website

If you aren't willing to give up the cabin, what about operating it as a vacation rental when you're not using it? It doesn't need to be a profitable business, just paying (mostly?) for itself would be a huge plus.

I wonder if you could interest your wife in a "work uniform" - a single high quality professional outfit that she has enough of to wear every day? Could save a bundle on clothing, but perhaps more importantly save a bunch of mental energy spent on unimportant wardrobe decisions.

meandmyfamily

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Re: Case Study: Not sure I can grow a mustache
« Reply #29 on: October 18, 2016, 11:37:42 AM »
You should check out this site!!!  They are very similar to your family and Mr. Money Mustache posted their blog a few weeks ago:  http://www.grizzlymomanddad.com/


Grizzly Dad

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Re: Case Study: Not sure I can grow a mustache
« Reply #30 on: October 18, 2016, 12:04:41 PM »
Thanks for the shout out.

Yep. We were in a VERY similar situation, but I'd say you're closer than you think.

It's a bit tough to follow everything you've listed out here - just adding up the assets you've listed I'm seeing more that $1.5M? What did you do with the rest? :)

Jschange

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Re: Case Study: Not sure I can grow a mustache
« Reply #31 on: October 18, 2016, 12:17:12 PM »
Allow me some wild speculation: I think a lot of your expenses are related to your values - what type of food is best for your family/the planet, clothes might be more expensive for 'quality', and kids might be in enriching activities.

How would the changes needed for mustachianism be influenced if you reframe it as living in a more conscious way, protecting the earth and your health. Could you
be selective, possibly minimalist in your clothing and house purchases
buy fancy food, but make a careful effort to avoid food waste
avoid the waste of paper products at lunch time by bringing your own

If you take these attitudes and go hard-core mustachian you will be running laps around your peers.

But what do I know, I make $30 000 a year.

aperture

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Re: Case Study: Not sure I can grow a mustache
« Reply #32 on: October 18, 2016, 12:42:20 PM »
Welcome to the forum BG. It sounds like you recently came acrossMMM and similar and are undergoing an inversion of values. That is a good thing, and you will gain tremendously as a result. I like that you are so candid about the past/present clown spending and that you are looking for practical feedback. Being honest with yourself and looking at past and current spending is crucial to implementing real change.
My family and I went through similar process starting with my discovery of MMM in June 2015. Prior to that we had savings on autopilot, but managed to spend everything else we earned. It was not pretty, and I never had the guts to post it all here like you have.
I would encourage you to be patient with your wife and family. It may take months or years for them to come around on some spending. It may make sense to set limited goals for a period of 1-6 months and monitor everyone's satisfaction as well as outcomes. I had a hard time initially with my wife. She wanted 6x as much spending money as I had budgeted for myself and just did not see the same horizon that I was looking to. But we came up with the shared goal of paying off the mortgage, and she was 100% behind that. Thus when she budgeted tons of spending money, she ended up using much less because she had a goal she believed in. I encourage you to allow for incremental improvements and continue searching for a shared vision of the future. Best wishes, ap.

Zikzin

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Re: Case Study: Not sure I can grow a mustache
« Reply #33 on: October 18, 2016, 12:43:40 PM »
Do you use Mint for tracking expenses? if not, start there., 

Also, if you want to retire, I think you can decide that for yourself, since wifey makes good income, she can support her luxuries.  After she sees how life is good being retired, she might change her mind ;)




ZiziPB

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Re: Case Study: Not sure I can grow a mustache
« Reply #34 on: October 18, 2016, 02:07:39 PM »
Here are a few observations from a high income earner living in a HCOL location:  Not using tax advantaged accounts to their full potential at your level of income sounds crazy to me.  "Retiring" and expecting your wife to support the family, while your wife and you are not on the same page, is a recipe for disaster.  Relying on risky investment strategies will bite you in the a* at some point, unless you have a comfortable cushion built into your stash (which you really don't have at this point).

I've been in your shoes and I can tell you that the MMM early retirement strategy is not about making a ton of money, blowing most of it on luxuries and investing the rest in high risk ventures.  There's probably other places where you find like-minded people but not here. 

But if you want to hang out with us and learn a different (simple, humble, frugal) way of life, you are very welcome, as long as you have an open mind :-)

onlykelsey

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Re: Case Study: Not sure I can grow a mustache
« Reply #35 on: October 18, 2016, 02:17:13 PM »
Also, if you want to retire, I think you can decide that for yourself, since wifey makes good income, she can support her luxuries.  After she sees how life is good being retired, she might change her mind ;)

I know this is a pretty controversial take, but I think there may be something to this approach.  While obviously marriage means supporting each other, including financially, it is increasingly looking like I may head to a semi-FIRE life years before my husband both because of choices he made before we got together and because of his differing priorities now.  If I can get to the point where I can safely support my share of the household with a big buffer based on investments, etc, I'm not going to work longer in order to accelerate his (semi?)retirement if he's not interested in it himself.

This would obviously be more difficult to implement if one of us was going to stay home with the kid(s) or had a disability or something, but if anything I'm the one who has saved up for and is taking months of maternity leave at 100% my own expense, so it's not an issue for us (now).

Grizzly Dad

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Re: Case Study: Not sure I can grow a mustache
« Reply #36 on: October 18, 2016, 02:49:54 PM »
Let's work backwards on this and see if you can make it. I'm showing $1.7M in investible assets outside of your primary home. Obviously a lot more if you're willing to downsize but let's assume that's a non-starter for now.

So with $1.7M you could theoretically support $68k in spending or about $5700 per month. Your situation is going to be a bit more complicated because a lot is locked up in tax-deferred accounts. But for simplicity sake lets assume you have some way to access, and there are ways to access through roth conversions ladders and a few other arcane tricks. You're spending $10600 per month right now. So we need to find 4900 to cut.

1. You say you're wife's not willing to downsize but is she willing to consider a different area? Even just a cheaper location somewhere nearby in colorado? You have >$800k in equity in your house. Taking just $400k out would net an additional $1300 per month from investible assets. That's already 1/4 of the way there. You'd also save on insurance and property tax, another $300. http://www.grizzlymomanddad.com/2016/10/03/housing-part-2-you-dont-have-to-live-in-san-francisconew-yorkexpensive-city/

2. $1400 for groceries? This sounds like our budget pre-wakeup. Get it down to $500 per month. That's another 900.

3. $333 per month on cars? You can drop this significantly. We're down to less than $100 per month and we still have commutes. $230 savings

4. $500/month on electricity? Holy shit. Do you have a manufacturing plant inside your house? Let's assume $300 per month in savings.

5. $500/month eating out? learn to make awesome meals yourself. We're down from around $1000 to around $100 per month. $400 in savings.

6. Household Maintenance $1800? This is pretty big even for a $1M house. Let's just assume $800 in savings.

So that's $4230 difference without even tackling some of the other obvious categories ($600 for clothes?). Leaving you an additional $700 or so to cover each month or another $210k in investable assets needed. Get rid of the mortgage, and JUST have a $400k house instead of a $1.1M one and you can eliminate that piece as well. Or with your salaries just save for another 12-18 months.

Congratulations. You're done. Quit your job and enjoy the the time with your kids. http://www.grizzlymomanddad.com/2016/10/01/my-daughter-changed-me/

 Tell your wife to do the same, you're in this together.
« Last Edit: October 18, 2016, 03:00:45 PM by Grizzly Dad »

dkaid

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Re: Case Study: Not sure I can grow a mustache
« Reply #37 on: October 19, 2016, 08:36:29 AM »
Is your wife moved by the concept of being environmentally friendly?  If she is then maybe you can appeal to this side of her rather than the frugal side as the end result can be the same.  If you buy less and buy used in an effort to not consume as many resources you will save money by default (well it's likely at least....!). 

I'm in the process of reforming my spendy ways and my increased desire to be a good steward of the planet has helped curb my spending as compared to other methods I've attempted. 

I too have a high earning spouse that isn't very interested in FIRE.  Mine loves to buy all the things too.....  It's a challenge but I keep telling myself to focus on what I can control. 

mboulder

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Re: Case Study: Not sure I can grow a mustache
« Reply #38 on: October 19, 2016, 02:44:21 PM »
Hi fellow Boulderite! Based on your $500 electric bill, and no gas/heating bill, I can pretty well guess which neighborhood you live in, because I likely live in the same one: no gas lines anywhere, so all heating is electric, unlike most of Boulder... and electric heating is expensive!

My electric bill used to be pretty high too. If you haven't done so, I recommend getting an XCEL energy audit at your home. The company I went with charged something like $200 if I recall, with the cost taken off of any follow-up energy efficiency work that they did. It was very eye opening to say the least. But the nice part is the contractor, after doing some of the energy efficiency upgrades that I didn't want to do myself, started the process with XCEL to find local rebates for all of the work. It turns out rebates are offered by the city, county and XCEL themselves. I didn't have to do much of anything, and the rebates ended up paying for something like 1/2-2/3 of the work I had done. The rebates are one-time only per household though and there are limits. But another nice bonus is that the same XCEL group that searches for rebates will also analyze work quotes to see if your contractor is ripping you off or not. Also, if you use AC, XCEL has various programs that give you bonuses if you shut it down over peak times. There are other cooling options that are cheaper though your mileage may vary with them: swamp coolers, whole house fan, closing blinds when the summer sun shines in, etc. I don't even bother with AC in my home though it can get toasty in the high summer.

If anything you'll want to get your electric bill under control in case the muni comes and leads to higher electric costs, as some critics speculate.

As for groceries, yes they can be expensive around here, especially for those of us who shop organic or at the farmer's market. A few ideas: learn to love www.budgetbytes.com. I was able to drop my grocery costs a bit using that site while still buying organic. Note, her costs assume non-organic ingredients, so you'll pay more than what she says. Second, look into Costco off of 36, they have a decent - though inconsistent I've noticed - organic selection. Third, don't buy prepared foods at whole foods because it is horribly expensive for what you get. Their sushi, for example, costs comparably to many sushi restaurants in town, and doesn't taste as good. Fourth, realize that there is a "Boulder markup". Buying direct from farm stands is cheaper than the farmer's market because rents at the market are so high. And some places mark up their prices in their Boulder stores compared to their stores in neighboring town so it may be worth shopping around, especially if you can combine grocery shopping with other errands outside of town. Finally, reconsider the CSA, or see if you can reduce what you get, if you end up tossing a bunch of the food. That's just tossing money away too.

MDM

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Re: Case Study: Not sure I can grow a mustache
« Reply #39 on: October 19, 2016, 03:13:18 PM »
...I put electricity, gas, water, sewer for both homes...to a near item in the MMM xls (e.g. electricity)

Apparently the total spending is the total spending, but some of the individual line items aren't as egregious as the OP makes them appear.

LadyStache in Baja

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Re: Case Study: Not sure I can grow a mustache
« Reply #40 on: October 19, 2016, 03:27:40 PM »
Just want to pipe in.  We're extremely low income.  But there's something magical about MMM and the forums.  Since finding this place two years ago we've gone from living paycheck to paycheck to being able to FIRE in ten years.  Having a goal and being inspired by others on the forums has allowed us to raise our income while keeping our expenses low and invest in real estate.

Definitely agree with others to start with yourself first.  But also to cut your cleaning bill you should sit down and divvy up chores as a family.  Let your kids pick first.  Let your wife skip it.  It'll be good for them in the long run to have some experience with this. 

notactiveanymore

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Re: Case Study: Not sure I can grow a mustache
« Reply #41 on: October 19, 2016, 03:30:22 PM »
...I put electricity, gas, water, sewer for both homes...to a near item in the MMM xls (e.g. electricity)

Apparently the total spending is the total spending, but some of the individual line items aren't as egregious as the OP makes them appear.

Also, OP has said the utility line item is for both homes. $500 for two homes for electric, gas, water, sewer, trash is not what's moving the needle.

Heroes821

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Re: Case Study: Not sure I can grow a mustache
« Reply #42 on: October 20, 2016, 07:29:27 AM »
Not sure if OP is still checking on this thread regularly, but I didn't see this mentioned as an option for the Cabin: AirBnB or something similar. If you aren't living in it and it's in the mountains it should be pretty easy to rent out to people.  I know it's scary letting strangers stay in a house you still utilize, but if MMM can rent out his primary house while he visits Canada every year in, functionally, the same part of Colorado as you, it could give you a bonus income stream to help pay off those mortgages.

BluegrassMustache

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Re: Case Study: Not sure I can grow a mustache
« Reply #43 on: October 20, 2016, 07:59:39 AM »
Yes, still here.   Was out of town for work.  I appreciate all the feedback.

I'm going to edit the original post on the lumping of categories...  I use Quicken and put all my utilities: gas, water, sewer, electricity under a close match category, in this case electricity.   We don't use AC - we have a swamp cooler.

I've been going through and cleaning up my Quicken as step 1...   My wife is a great person, hard worker, passionate about trying to cook our meals etc.   Plan is to get a cleaner view of our spend and talk to her about it collaboratively, cutting my areas the most.   Thanks Grizzly Dad and others for thoughts on where to shave.   I think Household improvements, Groceries, Dining, Clothing (if my wife chooses), recreation (we spent frivolously on classpass last year as well) are our best opportunities.   Selling our house would be a tough one.   I also think AirBNB is a great idea for the mtn house and honestly sloth is the only reason we haven't done it yet.

Thanks again!

RelaxedGal

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Re: Case Study: Not sure I can grow a mustache
« Reply #44 on: October 20, 2016, 10:22:06 AM »
I'm new to the forums, but one thing that does surprise me is that you don't see more posts far more extreme than mine.  Families with extremely high end cars, kids at high end private schools, etc.   They could spend my annual outflows on those two buckets alone.  Or perhaps, people like that don't come to a MMM forum.

As it turns out, many of the high rollers, often "Master of the Universe" types, have thin skins. Any critiquing of their lifestyle choices is met with major defensiveness.

And that's why I haven't posted a case study :-) 

BluegrassMustache, looking forward to your more complete case study in January.  We're close to you in income/spending/assets, with things shifted around a bit (more $$$ on vacations, less on real estate).  Right there with you on home maintenance, which is really "things we'd like to have and HEY we have the money."  For us that was solar panels, and then a second bathroom, and right now the deck is being rebuilt.  I consider us only half mustachian, but I enjoy the forums and take what applies to me, leave the rest.