Me: 34 Wife 32 Baby Girl:3 months
Income:
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.
Current Expenses
$4500/month
We've cut down recently, we have a ways to go, but are newly focused since the birth of our daughter. A full $970 of this is student loan and a very un-mustachian car payment. These will of course go away, and get us to a little more manageable $3500/month.
Expected ER Expenses
Since we haven't proved we can live on less than $4500 to this point, I guess I'd keep expenses right at that level for the sake of discussion.
Assets
My 401K: 60K
Wife's 401K: 40k I'll get into allocation in another post.
Vanguard Index Fund: 3k
Savings: 7k
Primary Residence: 60K equity
Rental Real Estate: I am 50/50 owner of a company that owns 6 small rental homes. No mortgages. These are worth a combined 500K and cashflow 48k/yr, or 24k per partner if we took a salary. We haven't so far, so I don't include this in income above. Currently all cash goes towards purchasing more homes. This has slowed down recently as prices have gone up. This is my hobby, however within the next 6 years we plan to have 12 or more, perhaps with the help of some financing. At some point we will take salaries, of course.
Cars:
Saturn Vue with 120k miles. Worth probably 4k. We have to replace in the next couple months, its the worst vehicle on snow I've ever driven, and we live in Michigan. I mean its dangerous.
Cadillac Cts Wagon with 95k miles (I know, I know, it was pre-MMM) worth 20k, I owe 10k. I punch myself everyday. Fun car though, for sure. But priorities have changed.
Total Assets: 420K. This does not include the cars. It does include the value of my half of the rental houses.
Liabilities
185K on primary home at 4.88%, 30 year. House payment with taxes/ins $1500
95K student loan (ouch!!) at 2.33% (phew)
10K HELOC at 6.5%
10K Car loan t 3.18%
Total liabilities: 300K
Discussion
Wow, writing it all down makes it seem worse than I really thought. I've long struggled with a need to keep up with the Jones's. I don't know if its a male ego thing, but I'll go for stretches where I do pretty good, but then inevitably end up wanting and buying some big ticket item that sets back our progress. I'm fortunate to have a wife that is comfortable living quite frugally, otherwise, we'd really be in a hole.
The birth of my daughter has really opened my eyes (along with MMM) as to whats really important in life. And surprise surprise, it isnt a Cadillac. I want to RE or at least cut down to 2-3 days/week working my profession (would be $800-1200/week) and then let rentals pay us. My current job provides zero schedule flexibility, and above all, thats what I really crave. So, like so many other people, what I really want to buy from now on is more of MY time.
Specific Questions
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.
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?
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.
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?
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?
THANK YOU THANK YOU THANK YOU, for reading and responding. Remember, let those fists of fury fly, my skin is thick, and more importantly, my eyes are now open.