1. Plan of attack debt-wise. The car and the HELOC for me are a given. They have to go away asap. Car first? From there, how to treat the student loan? Its been suggested to treat that like a mortgage since we bought a little bit of a conservative house income-wise? I don't know I i can get with that or not, because to me, that $600/month payment is a lot of what makes me give up so much of my time.The HELOC is costing you the most money by far at 6%+. Get rid of it - now. Your student loan is quite large but thankfully at a very low rate. Is it fixed? I'm guessing no. If it's variable I'd be quite worried that it'll go up over the next few years.
2. How should I factor in rental income into the FIRE picture? Should I just treat this totally separate, as sort of icing-on-the-retirement-cake? Or is it more realistic to say that as of now, thats $2k/month of perpetual income?If you plan on doing it during FIRE years, then it's $2k/month of perpetual income by your estimates. You can reduce that from what you think you'll need ($4500/mo - $2000/mo = $2500/mo or $30k/year). Of course have a backup plan if this doesn't work out.
3. How long to FIRE? One factor is that with our professions, we pretty easily could do a day or two per week and make $800/week gross.Using the $2k/mo from your rental income I have your FI number at $750,000. So however long it takes you to get there, which depends on savings and the markets. Given your numbers, 7% growth and maxing out your 401(k)s annually (but nothing else) I'd put it at 11 years. Save more and it could be less.
4. After debt is handled, where should I invest outside of 401k? Roth? Do we qualify? Other IRAs? Or should I go non-sheltered into Vanguard, since I'll likely want that money pre-59.5?I'd recommend an IRA. There are lots of ways of accessing the money before you are 59.5. But tackle that HELOC first, and then maybe the SL if it's variable-rate.
Um - don't see why being required to buy a GM is such a bad thing. GM has some good fuel-efficient cars. Buy a used one with 50k+ miles on it that gets >30mpg and use it sparingly. A good set of snow tires means any modern car can handle well in the snow. Here in Canada many people drive compacts and sub-compacts with great results. You can get two car seats into most any car these days. Are you looking for a specific model?
5. Future car purchase: Here's a topic I despise. And here's why. We have to buy GM vehicles. I hate this, but its our reality. It would cause major waves in both our families to go outside GM. It just isn't worth it to have that argument at this point. SO, we live in Detroit, and make very frequent, 3 hour round trip visits to our parents. We have one child with a giant-ass baby seat, and one more likely soon, so enough backseat room is a must. Handling in snow is also a priority. One accident involving my pregnant wife was enough thank you. Suggestions?
Thanks for posting. I have just a couple minutes now to respond to two points:
4) I believe at your income level, you are just above the income cap that the IRS sets to get deductions from additional IRA (traditional or roth) contributions, so basically that negates the main argument for doing so. I am no tax expert, but was looking into this for my own situation yesterday. Obviously there are lots of exceptions/depends on how you file taxes/etc.
5) I recommend purchasing a Pontiac Vibe (this is a GM car, yes?). They haven't made them in several years, so would obviously be used. It is basically the same as a Toyota Matrix with decent gas mileage, good safety/handling in snow, and enough room for plenty of kids.
No huge facepunches as you've not detailed expenses, but that's not what you're asking about anyway.
Also curious about your profession, as the ability to scale your level of work sounds pretty ideal!
Income:Did a quick check on your income numbers, assuming your taxes are done married filing jointly.
Me: Gross 136K. Net:72K or 6k/month after maxing 401K/FSA
Wife: Gross 58K. Net:31K or 2400/month after maxing 401K
Monthly take home: $8400. So, if we did nothing but our 401K thats a 34% savings rate. Am I doing that right? Obviously that needs to be much higher.
Salary/Wages | $16,167 |
Pretax Health Ins. | $300 |
Pretax Vision/Dental Ins. | $100 |
Healthcase Flex Savings Acct. (FSA) | $417 |
FICA base salary/wages | $15,350 |
401(k) / 403(b) / 457(b) / etc. | $2,917 |
Income subject to IRS tax | $12,433 |
Other income (int., div., etc.) | $0 |
Federal Adj. Gross Inc. | $12,433 |
Federal tax | $1,913 |
State/City tax | $497 |
Soc. Sec. | $952 |
Medicare | $223 |
Total income taxes | $3,585 |
Add Daycare reimb. | $0 |
Add Health care reimb. | $417 |
Income before other expenses | $9,265 |
Quote1. Plan of attack debt-wise. The car and the HELOC for me are a given. They have to go away asap. Car first? From there, how to treat the student loan? Its been suggested to treat that like a mortgage since we bought a little bit of a conservative house income-wise? I don't know I i can get with that or not, because to me, that $600/month payment is a lot of what makes me give up so much of my time.The HELOC is costing you the most money by far at 6%+. Get rid of it - now. Your student loan is quite large but thankfully at a very low rate. Is it fixed? I'm guessing no. If it's variable I'd be quite worried that it'll go up over the next few years.Quote2. How should I factor in rental income into the FIRE picture? Should I just treat this totally separate, as sort of icing-on-the-retirement-cake? Or is it more realistic to say that as of now, thats $2k/month of perpetual income?If you plan on doing it during FIRE years, then it's $2k/month of perpetual income by your estimates. You can reduce that from what you think you'll need ($4500/mo - $2000/mo = $2500/mo or $30k/year). Of course have a backup plan if this doesn't work out.Quote3. How long to FIRE? One factor is that with our professions, we pretty easily could do a day or two per week and make $800/week gross.Using the $2k/mo from your rental income I have your FI number at $750,000. So however long it takes you to get there, which depends on savings and the markets. Given your numbers, 7% growth and maxing out your 401(k)s annually (but nothing else) I'd put it at 11 years. Save more and it could be less.Quote4. After debt is handled, where should I invest outside of 401k? Roth? Do we qualify? Other IRAs? Or should I go non-sheltered into Vanguard, since I'll likely want that money pre-59.5?I'd recommend an IRA. There are lots of ways of accessing the money before you are 59.5. But tackle that HELOC first, and then maybe the SL if it's variable-rate.QuoteUm - don't see why being required to buy a GM is such a bad thing. GM has some good fuel-efficient cars. Buy a used one with 50k+ miles on it that gets >30mpg and use it sparingly. A good set of snow tires means any modern car can handle well in the snow. Here in Canada many people drive compacts and sub-compacts with great results. You can get two car seats into most any car these days. Are you looking for a specific model?
5. Future car purchase: Here's a topic I despise. And here's why. We have to buy GM vehicles. I hate this, but its our reality. It would cause major waves in both our families to go outside GM. It just isn't worth it to have that argument at this point. SO, we live in Detroit, and make very frequent, 3 hour round trip visits to our parents. We have one child with a giant-ass baby seat, and one more likely soon, so enough backseat room is a must. Handling in snow is also a priority. One accident involving my pregnant wife was enough thank you. Suggestions?
I don't really understand waht your question is.
QuoteIncome:Did a quick check on your income numbers, assuming your taxes are done married filing jointly.
Me: Gross 136K. Net:72K or 6k/month after maxing 401K/FSA
Wife: Gross 58K. Net:31K or 2400/month after maxing 401K
Monthly take home: $8400. So, if we did nothing but our 401K thats a 34% savings rate. Am I doing that right? Obviously that needs to be much higher.
See table below for what I got. At least several of the numbers below are likely wrong, but $8400 is much different from $9265. Can you clarify?
Salary/Wages $16,167 Pretax Health Ins. $300 Pretax Vision/Dental Ins. $100 Healthcase Flex Savings Acct. (FSA) $417 FICA base salary/wages $15,350 401(k) / 403(b) / 457(b) / etc. $2,917 Income subject to IRS tax $12,433 Other income (int., div., etc.) $0 Federal Adj. Gross Inc. $12,433 Federal tax $1,913 State/City tax $497 Soc. Sec. $952 Medicare $223 Total income taxes $3,585 Add Daycare reimb. $0 Add Health care reimb. $417 Income before other expenses $9,265
Even with SL debt, with two good professions and the ability to work per diem, you have it made.
Without seeing your numbers no suggestions to make. Your student, car and house loans take up about $2000 per month. What are you spending the other $2500 on?
The HELOC and mortgage are the only things that are mathematically worth pre-paying.
Everything else should be invested.
Snow tires make a HUGE difference. In the fall, places like Tire Rack run specials with tire+rim pre-balanced. If you're willing to use a jack and a tire iron, it doesn't take long at all to swap tires. Long-term, having a set of rims and tires together are cheaper than paying a shop to swap tires every season.
Good advice from all posts. You have some of the biggest things correct already, e.g. maximum 401K for both of you.
Take advantage of posted ideas, work on reducing/eliminating wasted spending, invest after-tax extra in various index funds, and enjoy family time. Set the cruise control for 5 years or so, then recheck :).
Attached is a spreadsheet with a big ol' "miscellaneous" number to match your $4500/mo OP value. Use, modify or ignore at your pleasure.
And again - enjoy that 3 month old! :)
Would you pay the HELOC before the car? Aren't there at least some tax benefits from the HELOC?You pay the HELOC off because it has a 6%+ interest rate. No tax break will make up for that, and I believe that you will already max that out with the interest on your mortgage.
My SL is fixed. I was fortunate, went to school at the right time for a loan. Oxymoron maybe? Would you still pay off aggressively knowing that? Or should I get aggressive about the index funds?
Hmmm. Snow tires. I know how stupid it sounds that I didnt think about that, but I'm completely worthless when it comes to autos. They make that big of a difference I take it?
By law everyone has to have snow tires on during the winter months here.
Good point - ibleedirish, check the regulations about studded snow tires in your state before buying. I know in New England they require you to take off studded-snow tires by a certain date (usualy around the end of March). More southern states don't allow them at all because they tear up the roads. But any winter tire will be night-and-day difference on cold snowy winter days.QuoteBy law everyone has to have snow tires on during the winter months here.
My area isn't all that bad as winters go, but quite a few states could use that law on the books.
FWIW, studded tires are illegal here (for cars at least).
So don't pay down the car loan early? Very interesting. I guess I just see that loan balance and its like looking a whole big pile of stupidity and wastefulness. Maybe its good to have that hanging over me as a reminder. :)
Good advice from all posts. You have some of the biggest things correct already, e.g. maximum 401K for both of you.
Take advantage of posted ideas, work on reducing/eliminating wasted spending, invest after-tax extra in various index funds, and enjoy family time. Set the cruise control for 5 years or so, then recheck :).
Attached is a spreadsheet with a big ol' "miscellaneous" number to match your $4500/mo OP value. Use, modify or ignore at your pleasure.
And again - enjoy that 3 month old! :)
You didn't mention what your employer contributes to your 401K. The max contribution limit to a 401K per year per person is 52K. Of that 51K, you may contribute 17.5. So if your employer is only contributing a small piece, consider setting up a 401K through your rental company. You'd have to start paying yourself a small salary, but you could immediately loan the money back to the company for cash flow for new purposes. Once you're paying yourself a salary, your company can then contribute 32K to your 401K. Depending on the structure of your business, your wife may be able to do the same through your company.