Hello Everyone,
I apologize for the long post. This is my first post to the MMM forum. I found this blog about a month ago while sitting at my computer sick of my job on a Friday and decided to google retirement. My mind was immediately opened to the MMM way and I have read each and every article. It was if every article was written directly towards me. The similarities between myself and MMM are insane (except I am nowhere near as bad ass). I too live in Colorado, I am an electrical and computer engineer, and I currently own 2 rental properties (on accident, kind of). I have made significant strides within the last month to work towards the MMM lifestyle and I know I have a long way to go. I thought that if I posted my current situation on here, I can get a group of Mustachians to help me accomplish my goals and move toward FI and happiness.
Within the last month, I negotiated to work from home, my wife takes the bus for free to work, and I paid off both of our cars (although I will rightfully get punched in the face for my fleet). I understand that I am a long way on my expenses portion and I will get that in control right away. This first post is to introduce myself and see if I can get any help on the “larger” questions of my financial situation. Also, this provides a snapshot that I hope to update over the years so everyone can see this plan in action. So the goal is FI by 2020 or sooner, will you help me?
Below is my situation with a few key questions. Please let me know your thoughts and I would be happy to answer any questions. Thank you for your help and I will be sure to return the favor.
Income
Jane
Monthly Salary ~$5000
401K Contribution ~$500
Take Home = $3400
John
Monthly Salary $9773
401K Contribution $1368
Stock Purchase Plan $977
Insurance $27
Taxes $2056
Take Home $5344
Current Investments
Jane 401K 50K
John 401K 208K
Fidelity (Stache) 74K
Rental Expense
#1 First Mortgage $1040 167K @4.5% (252K 2042)
#1 Second Mortgage $337 43K @8%
#1 HOA $49
#2 Mortgage $754 124K@ 4.5%
#2 HOA $180
Total Rental Expense = $2360
Rental Income
#1 Rent 1600
#2 Rent 850
Total Rental Income = $2450
Expenses - Bills
Mortgage $2112 373K @3.625% (426K 2042)
John Student $150 22K @1.875% (2026)
Jane Student $130 ?????
Appliances $250 4K @ 0% (2014)
Auto Insurance $200
Phone $125
Comcast $110
Water $150
Gas&Electric $100
Netflix $15
Expenses – Spending
Food & Dining $600
Auto $200
Personal Care $125
Shopping $100
Home $100
Health and Fitness $100
Travel $500
Misc $125
Key Questions:
1.) What would be your plan of action to become FI in the shortest amount of time?
2.) Do I already have too much in my 401K? Should I reduce my 401K contribution and add to my stache? What about the tax advantages?
http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/3.) On rental #1, I have a 2nd mortgage of 43K @ 8%. Would you use part of my current stache to pay that off due to the high interest rate?
4.) With a relatively large mortgage, I do not know how to account for this. If I want to retire within 8 years, I will still be paying this high mortgage making it difficult to reach FI. What do I do?
If you are still reading, I love you and thank you. Below is my current plan line-by-line:
1. Rental: Use 43K of my 74K to pay off my rental 2nd mortgage. This will allow me to cash flow around 400 a month and hopefully keep my rental finances separate from our personal finances. I am doing this because I cannot guarantee 8% return on my money in the market.
2. Student Loans: The interest rates are so low I do not see a reason to pay these off earlier than I have to. Also, they will be about done by the time I reach FI.
3. Auto Insurance: I just paid off my cars this month. I will go shop insurance plans in January to reduce this expense.
http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/4. Phone: It will be difficult to convince my wife to go with a $10 plan. My phone is paid through my company. This is a tough one for us.
http://www.mrmoneymustache.com/2012/10/11/our-new-10-00-per-month-iphone-plans/5. Comcast: Cancelling TV. How do I get inexpensive, but reliable internet. I work from home so it is important that it is reliable and fast. I do not have neighbors to share with.
http://www.mrmoneymustache.com/2011/05/06/mmm-challenge-cut-your-cash-leaking-umbilical-cord/6. Water: I have tracked the last 12 months and will work to reduce this every month.
http://www.mrmoneymustache.com/2011/11/30/an-800-gift-from-me-to-you/7. Gas&Electric: I plan to do a personal home energy audit and see if I can decrease this monthly bill.
8. Netflix: This is not too bad once I cancel cable.
9. Food&Dining: We are working on reducing this. We used to eat out every weekend. I am eliminating this.
http://www.mrmoneymustache.com/2012/03/29/killing-your-1000-grocery-bill/10. Auto: I know that this is too high. Now that I am working from home and my wife is taking the bus. This should drop significantly.
11. Personal Care: I am having a hard time convincing my wife to cut my hair. (Punch me in the face) I am that guy who currently goes to a Salon and gets a $60 haircut and my wife gets her hair cut every 3 months for ~$200!
http://www.mrmoneymustache.com/2011/05/30/get-rich-with-the-universal-mens-grooming-device/12. Shopping: This is not a true $100/mo but every so often we will buy something. I will work to limit this.
13. Home: We have a very old house (1926) that we just bought last year. There are some updates we would like to do and just general maintenance. Not sure if we can decrease this much.
14. Health&Fitness: My wife has a yoga membership and she really enjoys it. I think that this is a good expense and worthwhile.
15. Travel: This is our top priority as a couple. We love traveling internationally. I do not want to reduce this but would love to hear people’s opinions on traveling on a budget. MMM does a lot of “road trips” but he does not provide much advise on international traveling. Any ideas?
Thank you!