Regarding your goals, I'd say that, if you are confident in your business continuing to generate the kind of income that you've described, you should make the jump. I think that that's all it would take. If your wife wants to spend more time with the kids, she can do this. You are in a position that you should be willing to go for it. If you make some small steps, you should be able to control the safety of this move.
Agree on this pretty much. We're close to taking the leap. My W2 job is pretty flexible and posh though so it isn't an easy decision to take the plunge. I probably work 20 (W2) hours/week at random times throughout the day, weekend, etc. I support a lot of stuff overseas so it gives me flexibility to run our business during the day. Things get very busy at times, but overall the average workload is probably 20 real hours per week.
The other issue is that real estate development is cyclical and thus it isn't really a warm-fuzzy setup. Things are going well now, but we have no confidence it will continue in perpetuity. The positions we bought into post crisis are solid, but prices for dirt have gone up and thus we're diversifying to other types of income...like hard money loans and other asset types. We intend to monetize our current assets and deploy them in a balanced fashion over the next 12 - 18 months.
My accountant and I are working on reducing item 1. Buying some more free and clear property would give me some extra depreciation expense. My plan is to control anything we end up buying. The last $200k in income will increase my effective tax rate roughly 6-7 points so this is definitely something I plan to focus on in the coming several months to reduce our largest expense.
Childcare will be reduced by roughly a factor of 30% in August of this year when the school year starts. The next 60%ish will go away in 3 years. We'll probably continue to have some expenses here for a brief after school stretch unless we can convince the grandparents to watch 3 kids every day; which seems unlikely ;-)
The mortgage has a big fat bullseye on it, but it is pretty cheap debt. Item 3 in my list is PITI so only the PI would go away if we paid it off. The TI will persist.
Groceries can definitely be optimized. We'll invest some effort there.
FICA taxes start phasing out after $118k or so (too lazy to look up exact figure) so any lift we get in earned income will eliminate either half of this expense or all of it depending on whether it comes from W2 or our personal business W2.
Other items from 6-32 worth investing energy in reducing in the short term seem to be:
-Item 6....Not sure how this will go over with the wife, but we can check it out
-Item 7....A lot of this is business related so I am not sure it can be reduced a ton
-Items 8/9....huge bullseye here. Worthy of study
-Item 10...Would lower our standard of living if we cut it
-Item 11....hard to get rid of the AC breaking on the house and stuff lik ethat
-Item 12....would probably go down in FI, but we use our cars now so they need to be supported. We could probably change our own oil, but this is a low payoff activity IMO
-Item 13....could clean our own house during FI
-Item 14....could exercise more flexibly during FI so this could probably be chopped a lot
-Item 15...I don't plan to get rid of cable
-Item 16...Utilities would probably increase slightly if we were at home more
-Item 17...Darned kids getting sick really puts a constraint on my FI plans ;-)
-Item 18...Electricity would definitely go up if we were home more during FI
-Item 19...There is probably money to be saved on insurance. Worth investigating
-Item 20...Money to be saved here for sure
-Item 21...Could cut our own grass if we had more time to do it. Could probably do it now, but that would decrease time with kids on the weekend more
-Item 22...Mostly driven by business....hard to cut much here without sacrificing a lot more income
-Item 23...Would probably increase in FI
-Item 24...Pretty small expense. I guess we could stop giving people gifts ;-)
-Item 25...This is a good cut target. The wife likes this stuff....a battle worth fighting
-Item 26...Need internet access for our business
-Item 27...I'll try fighting this battle again....may lose
-Item 28...Pretty minor expense in the grand scheme of things. May be worthy of energy later on, but probably not worth focus now
-Item 29...This will go down during FI
-Item 30...This was really an anomaly...I rarely have things dry cleaned
-Item 31...Ooma service is pretty bare bones and saves on cell costs
-Item 32...We spend very little on clothes. I am surprised it even made the list
So....on the immediate hit list:
1. Tax planning - Working on this right now....was working with accountant today on planning here
2. Childcare reduced 30% in August
3. Grocery reduction or optimization with eating out
4. Investigate insurance in detail
5. Investigate diet/health items
6. Argue with wife over pest control expense
7. Argue with wife over security system
I think we can pretty easily buy a few rentals to save $2k annually in federal taxes using depreciation expenses. This will trade a bit of cash for this, but it can be minimized if we are patient. Childcare is going down roughly $600/month using napkin math in August. So these two items should trim $767/month or so from the budget.
So to start out with I just need to find another $233/month to hit my 10% reduction initial target using items 3-7. Estimates:
-Can probably save that alone looking at groceries and dining out. Need budgets here and this is worth the effort given how much we spend here
-Can probably easily trim 10% off insurance costs. We spend a lot on insurance for the business too so this is worth investigating
-Diet/health can probably be trimmed. I already trimmed this some last month, but we can probably do more going forward
-Have battle with wife over items 6-7. These two line items alone averaged $94.14/month in the last two months, which is almost half of the remaining savings needed
So this would get us from roughly $9900/month to closer to $8900/month as a first step. As someone mentioned in either this thread or another one this would be the equivalent of roughly $300k in stache needed for FI assuming we can keep the budget monthly. That's another just over a year's worth of managing development projects and is pretty low hanging fruit so the energy required won't be that high.
All of this will likely take a few weeks to implement. I'll report back on what I can work through or actually save so the numbers are more detailed and less fuzzy.
