Author Topic: Poke the budget of a newly converted mustachian  (Read 5531 times)

londonbanker

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Poke the budget of a newly converted mustachian
« on: November 22, 2014, 02:59:59 AM »
My wife and I converted to mustachianism 2 years ago (when we found out we were pregnant) and sorted our finances out drastically to a place I never thought we could achieve in such a short period of time.

We are now in a place where we are quite happy as we save almost 50% of our net salaries, despite living in central London, which is one of the top 3 highest COL in the world (which is also the reason our salaries are v good).

I really think there is not much fat to trim at this point; trust me, it was very bad before !! But you guys are the experts, so I'd be interested to get your views.

Monthly income net of tax - $26,500
That includes our current base salaries + incentive comps average over the past 3 years

Monthly expenses - $13,100
$6,360 - Mortgage
$275 - Property tax
$300 - Utilities (W/G/E)
$75 - Internet/TV/Phone
$250 - car maintenance and insurance (gas is paid by employer)
$960 - Grocery / baby essentials (milk/diapers etc...) - 12months avg
$400 - Restaurants / outings (roughly 1ce a wk on avg, also includes takeaway)
$300 - Travelling / holidays
$700 - Discretionary (clothing, house maintenance, gifts, hair cut etc...)
$2,700 - Full time nanny (she also takes care of the house - nursery would save only $700 a month and we'd have to pay a cleanerfor roughly 400/500 a month)
$1,500 - unsecured debt repayment (should be paid off within 24months)

Net ~ $13,400 a month or $160,000 a year, which is roughly what I saved last year across the pension, taxable accounts.

Few considerations:
- At this point, we are not willing to relocate to a lower COL area.
- If we were renting vs. owning, we'd save $2k a month vs our mortgage, but rent inflation has historically been around 5% a year, and we would also miss on the appreciation of the london real estate market + the equity we are building
- We will consider nursery in 12months, when the baby turns 2yr as the cost then drops significantly (prob by $1200 a month), and by then she will be bi-lingual - which is a big reason for having the nanny (speak same foreign language than my wife)
- Food isn't cheap in the UK, but even less in London. We don't shop at whole food, far from it, and that only includes dinners for the week and week end meals as we both are fed by our employers for free at work.
- When the unsecured loan is paid off, we would save the extra $1,500 a month, or invest it in a buy-to-let property outside of London.

Thanks for any feedback you have

surfhb

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Re: Poke the budget of a newly converted mustachian
« Reply #1 on: November 22, 2014, 04:12:44 AM »
I don't see much fat to trim either :)

The question I raise is what is your personal time line for FI?   How long do you want to work and what will be your expenses after you retire? 

To put things in perspective I would only need to work 2 or 3 years at your job to retire ;).  Good work!
« Last Edit: November 22, 2014, 04:15:32 AM by surfhb »

londonbanker

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Re: Poke the budget of a newly converted mustachian
« Reply #2 on: November 22, 2014, 04:36:08 AM »
Regarding our ER goals, we are clearly aiming to retire before the legal pension age (minimum at 57 in the UK), which is 22 years away for me.

Our current NW is around $1.3m (inc real estate) and should be around $10-13m by the time we get to 55 y/o. So we could retire anytime between now and then, depending where and how we are ready to live - we have family living in France, US, Russia and Thailand... all having very different COL - from the extremely expensive to the extremely cheap.

The big unknown is really around our daughter and her likely little brother/sister. Not sure we can move to a remote place and retire, as we need to plan for college etc...

I would like to believe that we can retire/part retire within 10years and live a very comfortable life wherever we want outside of the stupidly high COL areas (London, NYC, Tokyo etc...)

BPA

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Re: Poke the budget of a newly converted mustachian
« Reply #3 on: November 22, 2014, 05:30:53 AM »
If you are looking to cut back more, restaurants and discretionary seem high from an MMM perspective. 


marty998

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Re: Poke the budget of a newly converted mustachian
« Reply #4 on: November 22, 2014, 06:01:49 AM »
what problem exactly are you trying to solve?

With all due respect, you're in a position to do whatever you want in life. Saving $10k here or there is not really going to make a difference when you are pulling in $300k a year.

BPA

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Re: Poke the budget of a newly converted mustachian
« Reply #5 on: November 22, 2014, 06:35:42 AM »
what problem exactly are you trying to solve?

With all due respect, you're in a position to do whatever you want in life. Saving $10k here or there is not really going to make a difference when you are pulling in $300k a year.

MMM would disagree:  http://www.mrmoneymustache.com/2011/08/01/a-millionaire-is-made-ten-bucks-at-a-time/

Wile E. Coyote

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Re: Poke the budget of a newly converted mustachian
« Reply #6 on: November 22, 2014, 07:27:22 AM »
What's the interest rate on the mortgage and unsecured loan? 

londonbanker

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Re: Poke the budget of a newly converted mustachian
« Reply #7 on: November 22, 2014, 09:00:41 AM »
What's the interest rate on the mortgage and unsecured loan?

The mortgage rate is 1.9% and the unsecured is 5%, which is why i am overpaying it

waltworks

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Re: Poke the budget of a newly converted mustachian
« Reply #8 on: November 22, 2014, 09:27:43 AM »
Why even post? Poke holes? You are already FI by most reasonable standards, but don't want to slum it outside of London. So you'll be in the same boat indefinitely unless you change your mind about that. If your goal is to keep working and accumulate $10,000,000+, good work, you are on your way. If your goal is time with your kids, sports/recreation, travel, volunteering... fail. You could be doing tons of that now.

You have chosen to work instead.

-W

Calvawt

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Re: Poke the budget of a newly converted mustachian
« Reply #9 on: November 22, 2014, 10:35:18 AM »
You are on the right track for sure.  I would advise figuring out how much you think you will need each month so you can figure out the nest egg you need (annual expenses x 25). You probably only need to work a few more years to be semi or fully retired.  Good luck!

surfhb

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Re: Poke the budget of a newly converted mustachian
« Reply #10 on: November 22, 2014, 01:29:55 PM »

The big unknown is really around our daughter and her likely little brother/sister. Not sure we can move to a remote place and retire, as we need to plan for college etc...


Once you answer this question I think you'll be golden.   

I mean, I live on the beach in Southern California.    You could easily buy a home here, send your kids to the best schools and colleges and never work again right now!    It all depends on what you want and what's really important to you. 

londonbanker

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Re: Poke the budget of a newly converted mustachian
« Reply #11 on: November 22, 2014, 03:06:50 PM »

The big unknown is really around our daughter and her likely little brother/sister. Not sure we can move to a remote place and retire, as we need to plan for college etc...


Once you answer this question I think you'll be golden.   

I mean, I live on the beach in Southern California.    You could easily buy a home here, send your kids to the best schools and colleges and never work again right now!    It all depends on what you want and what's really important to you.

Interesting. I thought all real estate in calif was expensive, and so was the cost of living. Are you talking the San Diego area?

surfhb

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Re: Poke the budget of a newly converted mustachian
« Reply #12 on: November 22, 2014, 06:15:22 PM »

The big unknown is really around our daughter and her likely little brother/sister. Not sure we can move to a remote place and retire, as we need to plan for college etc...


Once you answer this question I think you'll be golden.   

I mean, I live on the beach in Southern California.    You could easily buy a home here, send your kids to the best schools and colleges and never work again right now!    It all depends on what you want and what's really important to you.

Interesting. I thought all real estate in calif was expensive, and so was the cost of living. Are you talking the San Diego area?

A decent home in Huntington Beach, Orange County , Ca will run about $550K.    With a paid off home and a million net worth would be more than enough for retirement.    Its not Central London  and you wont be eating out much or doing expensive holidays the rest of your life but thats what this site is all about right?  :)

Im just giving you an example of where youre at right now.    With your income, Id hammer away a little longer....maybe when youre done with having kids and they're older.   By then you would pretty much live anywhere you want in the world (within reason).   
« Last Edit: November 22, 2014, 06:22:44 PM by surfhb »

londonbanker

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Re: Poke the budget of a newly converted mustachian
« Reply #13 on: November 23, 2014, 08:48:01 AM »
SurfHB - great shout. I just spent an hour on Zillow; houses 5-10min walk from the beach for $600-800k, with decent schools (9/10 ratings out 10)... not sure you can beat that anywhere else in the world for that weather !!!

Seems like the surfing and kite-surfing is pretty decent there as well... really gets me thinking. I can see myself leaving it all behind in 5years when I hit 40 ! My daughter will be 6y/o then.

I need to do a bit of research around VISA requirements... not sure how easy it is to get them these days for europeans, especially if we want to buy a house.

Also, do you happen to know if the public schools are free to foreigners as well? ie. if you do not have a green-card or citizenship?

surfhb

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Re: Poke the budget of a newly converted mustachian
« Reply #14 on: November 23, 2014, 11:13:15 AM »
Oh great!   I just inadvertently convinced you to move here and take up surfing.  Haha.   The surf is too crowded the way it is! :)

Kite surfing is good here since we get alot of afternoon on shore winds.   

Yes....it's free...sort of.    You pay city property taxes for things like that

The down side of OC is the congestion.   Millions of people live here....but you are already used to that.    The up side, and correct me if I'm wrong, but I'm pretty sure taxes are much lower in the US.  I also think investment opportunities are greater as well.   At least as far as taxes go.   I mean the UK is great but they sure as hell sock it to you with the taxes when a guy like you as such a large net worth

I hope you pull the trigger.    Retiring and having the time to make your kids breakfast, walking them to school then go surfing for a couple hours sure beats the shit out of trivial meetings at the office all day :)
« Last Edit: November 23, 2014, 11:35:36 AM by surfhb »

londonbanker

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Re: Poke the budget of a newly converted mustachian
« Reply #15 on: November 23, 2014, 02:56:03 PM »
Congestion is only a problem when you need to take the car, which doesn't apply to me so much when I am retired. I would like to believe that if there is some sort of local grocery stores, bakeries and coffee shop within walking / biking distance, the usage of the car should be minimal...

Walking the kids to school and catching 2/3h of surf after that... so unimaginable for me today.

Taxes are really high in the UK when you're earning decent cash - my marginal tax rate is 47% (equiv to fed + state + medicare + SS), which really sucks. They are even talk increasing that by up to 5% if the "democrats" get elected next year! So I am sure I would be better off tax-wise, although I cannot find on Google how much taxes I would pay if I was 100% living from investment income - say 30% bonds and 70% dividends/selling stocks.

Am I right to think that for the fed tax, I would get taxed at normal income tax rate for the interest earned from bonds (ie. from the 30% in my example), but that the income coming from dividends and CG would only be taxed at capital tax rate ie. 15%?
What about state tax and medicare/SS, am I still liable to pay that on the income I make from investment?

I am thinking of posting that question on the investment part of the forum

surfhb

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Re: Poke the budget of a newly converted mustachian
« Reply #16 on: November 23, 2014, 08:58:03 PM »
Another site you could ask this tax question would be the Boglehead Forum.   Not a very frugal bunch but tons of great tax and investment advice from others in your income level.   

Message me when you retire and move.    You can thank me in person. :)   Haha
« Last Edit: November 23, 2014, 09:03:08 PM by surfhb »