Hello Mustachians,
I am a 46 year old male living in a University town in the Rockies. I have an advanced degree and have worked all my life at environmental education and field science jobs. Knowing that I have low earning power (or at least a very low tolerance for corporate-style high-wage jobs), I have always lived like a grad student, and have a wide reputation among friends as the cheapest bastard around who still gets out and has a lot of fun in the hills.
I bought a house in 2004; benefiting from the incredibly available credit at the time, a chunk of money I had saved, and some additional down-payment loans from family (now paid off). I have always had housemates living with me, now including my partner, and that has mostly paid the mortgage. Recently I have been doing more office-based NGO work that pays better and I now have more substantial savings. I was recently able to refinance the house to a 3.5% 15-year deal.
In January my mother passed away suddenly, leaving me philosophical about life's impermanence and more deeply convinced of the need to live NOW - not putting off any more of life's adventures until some pie-sky retirement day. Mom also left me with part ownership of a couple condominiums and some substantial Vanguard accounts. My brother and I will be creating a charitable donation fund in her name that will pay out $10,000 per year.
I want to be able to leave the chained-to-the-desk lifestyle I've taken up, and be able to do the kind of beneficial field work I love - when and where I want to. I also want to be able to do "work" projects that may not pay off financially, but are enriching for my community and myself, such as writing and photography.
Can I do it now? That is my question!
Here's the numbers:
Savings in bank: $35,000 and climbing
House equity: $120,000
Total value of inheritance: $430,000
(Total assets: $585,000)
Rental income annually: $10,800
Current job income AFTER taxes: $26,000
Balance of mortgage: $120,000
(Monthly payment: $1,200)
My share of annual donations to be made in Mom's name: $5,000
Biggest annual budget for personal expenses I can imagine: $17,000.
I'd like to use my assets to pay off the mortgage, buy a rental property, and do some energy efficiency remodels to my house. I think this would result in the annual income scenario below:
Investment (at 4% return after taxes): $9,000
Rent on primary house (proven over 10 years): $10,800
Rental property (very conservative): $9,600
-50% for rental vacancy, taxes and expenses: -$10,200
Work income (after taxes): $7,800
Total of $27,000 income vs. max of $22,000 expenses. That seems to leave me a healthy margin of $5000 annually even given conservative assumptions. I'd expect to add to my savings, and eventually add rental properties (I like fixing stuff!) by borrowing against equity as time goes on to make additional rental income when I don't want to do any sort of paid work.
What am I missing or mis-calculating? Finance is not my bag, and I am slightly terrified about leaving my hard-won job for this exciting but unknown mustachian world. Thanks for any advice and ideas!