Dear Mr. Money Mustache or Members that may be able to help us,
I came across the Mr. Money Mustache website today doing a google search on 'average household grocery expenses' in an effort to finally start a family budget. I have always been a believer in achieving financial independence, early retirement, and being able to provide a good financial and educational foundation for our children. However, I know our hard-earned money is being wasted, I have spent too much time at work for too many years (60-70 Hours+/Wk for 20 years), and our health and happiness is sufferring. It is challenging for my wife and I to agree on a common financial or life goal, and how budget and stick to it. I not only concerned with how we spend our earnings going forward, but also protecting our current assets to ensure they are not squandered in the future.
I am 40 years old and my wife is 9 years younger and we have two small children under age 5. We are a single income family currently and I have been very fortunate to
make a very good income over the past 10 years with an average of over 200K/year with the last two years exceeding 400K/year and our net worth is ~850K. However, I own a small business and it is difficult for me to estimate what my salary and bonuses will be year to year. My wife is taking college courses to complete a degree program and trying to decide what to to for a career so we eventually have a second income and more stability. I am also looking to complete an advanced degree at some point in the next 5 years and also thinking of a change in career to something more predictable/stable and with regular work hours and vacation time I can actually take and enjoy.
We currently live in a older and very energy-inefficient home with a primary mortgage balance of 250K @ 4.5% interest and little if any equity if we were to sell today
eventhough we have invested near 100K into the house over the past 7 years. We also have a weekend/vacation home (1100/SqFt) worth about 250-300K which we do not have a mortgage on, it is off-grid, solar-powered, and highly efficient. This second home is very important to us as its a place for us to get away with our family and spend quality time without distractions and spend a lot of time outdoors and getting back to the basics. It is also or 'Plan B' in case things go very bad for us financially, we have a place to live free and clear of any debt and very low overhead and re-occurring cost.
We would like a new house and can qualify for a mortgage w/o selling our existing home, but we feel it's too much of a risk carrying the overhead of another home for a
year or more waiting for it to sell at a loss. Is it worth the risk to get out from under the operating costs of our existing in-efficient home and get into a more manageable and nicer home? We were looking at more expensive homes in nicer neighborhoods, but I am concerned (regardless of low interest rates) about a long mortage term, higher monthly payment, and 8-9K/year property tax that comes with it. We are also looking at building a smaller efficient home but the costs would still be quite high to do where we currently live.
As far as retirement and savings, we have ~20K emergency/backup savings, ~40K savings set aside for a new home, ~325K in retirement, ~10K for each child in UGMA savings accounts.
Now here's the expenditures (estimates, but you'll get the picture),
Not so bad (easy to budget, no so avoidable):
- $1400/Month Mortgage and Insurance
- $9K in Real Estate Property Tax (5K Primary Residence, 4K Vacation Home)
- ~$150/Month for auto insurance
- $430/Month for auto payment
- $50/Month for auto property tax
- $150-200/Month pet care and food (dog and two cats)
~ $500/Month for pre-school for two kids
~ $200/Month for speech therapy for kid
~ $1000/Year Water/Sewer/Garbage Pickup Charges
~ $1000/Year Auto Maintenance/Repairs
~ $2000/Year Community College Courses
~ $2000-3000/Year for Vacation
Scary (no budget, no discipline):
- $900/Month in Fuel for Cars/SUVs/Trucks
- $350-$425/Month in Heating Oil and Natural Gas for Primary Home
- $225/Month Cable (TV and Internet, no Phone)
- $250/Month Cell Phone Bill
- ~$250/Month Electric Bill
- $500/Month Medical Insurance (Not a good plan, high deductible, no maternity coverage)
- ~$200/Month average additional monthly medical co-pays and bills
- ~$3000-5000/Year average home repairs/maintenance
- $500+/Year for pool maintenance (open/close, chemicals)
- $2500+ over past two years for a persian cat, pure-bred dog, and rabbits that we ended up giving away.
- $6000/Year paying off credit cards that were opened to buy who knows what, nothing significant to show for expenditures (more eating out, online purchases, etc)
~ $7500/Year on birthday parties, baby showers, christmas gifts (conservative estimate)
- $2200/Month on groceries and hour household items, eating out, entertainment, baby sitters, clothes for kids,weekly house cleaning (at least $1500/Month on groceries and eating out alone - not exactly sure how all this $is being spent)
- $XXX/Month - unaccounted for
Where do we begin? Where do we start with budgeting, whats reasonable for various budget categories (i.e eating out, groceries, household items), where do we go for help with managing this? What decisions do we need to make in an effort to reach financial independence quicker, and early retirement for me? Should I change careers now to get better stability, quality of life, medical coverage/benefits (at a likely lower salary) or just try to squirrel away my earnings since I on average make more money with my existing job than I would elsewhere? What should my wife do as far as getting a career and earnings to contribute to a financial plan? Should I just cash out a large chunk of my retirement account and buy a new house and only have a small mortgage remaining? Or, Should we just pack up and move to our vacation home (the town has good schools for our children and I can work from anywhere with a Internet connection) or is that too soon or drastic (Plus my wife doesn't want to move there as there's no where to shop close and doesn't want to move away from family w/o real good reason).
Please help!!!