Hey everyone. I just found this site, and read through nearly every single article, and the whole idea, even though I'd heard of "financial independence" before, never really spoke to me until I read MMM's perspective on life. Now I feel I need to get started right away.
Here's my current situation:
We are my wife, my one year old daughter, and myself.
My take home pay is about $107k/year on a gross salary of about $150k. My wife stays home with our daughter. We may have a second child. We are both in our early thirties.
House:
I bought my house (in coastal California) last year, for $550k, with 3.5% down. The interest rate on the mortgage is 3.875%, but because of the FHA loan that we used, we are alo paying about $500/month in mortgage insurance. Balance on the loan is $530k. Current value of the house (per Zillow) is $599k. My total housing payment each month breaks down to roughly:
$800/mo principal
$1,700/mo interest
$500/mo mortgage insurance
$500/mo taxes
$100/mo homeowner's insurance
The total payment is $3635/month.
Cars:
2012 Chevy Volt. This is leased, and subsidized by work, so that from my perspective, the monthly payment is essentially free. I can't do much about it regardless, because I'm committed to pay for the lease until summer of 2014, at which point I can either buy the car or turn it in. This is the car I commute to work in.
2012 Subaru Outback. I (sigh) financed this car, but after reading nearly every single one of MMM's articles, I'm going to pay this off *RIGHT AWAY* - as soon as I get my next paycheck on the 15th. I currently owe $7,900 on it. This is the car my wife drives and the one with the car seat in it for my daughter.
2007 VW GTI. This is the car the Volt replaced. It's for sale. I don't owe any money on it or anything. Hopefully I can sell it for $9-10k.
1985 Chevy C20 pickup truck. This is really a tool more than a vehicle. Recently I've used it for things like: pulling tree stumps out of my front yard, picking up abale of straw, and hauling things (like tree stumps) to the dump. I paid $1800 for it and it gets driven a couple times a month.
Recurring Bills:
I think I'm actually pretty good in this category.
Cell phone: $80 (this is my wife's iphone plan. Work pays for mine).
Insurance: $259 (combined for all cars and a 20-year term life policy on myself, homeowner's is mentioned above in "house" section).
Electricity: $67 last month, which is typical. We don't have air conditioning (coastal California, see house price).
Internet: $60
Web Hosting: $20
Spotify: $10
I don't really keep good numbers on tracking spending in general. I may have missed some small things 9we have no cable TV or anything, though)
Food:
No idea. I transfer $250/week to my wife and she uses that for groceries, gas for the Subaru, things for the baby, etc. I don't have a breakdown.
Other Assets:
IRA: current value $56,000. I am not currently contributing to a 401k (my company offers one but it has no matching).
Cash on hand: $13,000.
Job/Commute:
I work in software, like MMM used to. I live sort of in the country/near the ocean, and commute into the Silicon Valley. Recently my office moved, and so my new commute is even longer than my old commute. It now stands at 52 miles each way, which takes an hour and twenty minutes or more (each way). Luckily I "only" have to do this three days a week. I telecommute the other two days. One thing that's worth mentioning is that my pre-tax salary is approximately $150k/year, but I also have approximately 15,000 shares of unvested pre-IPO stock in a company that I really do think could do quite well. It is absolutely reasonable that this stock might be worth $30/share in a couple years (or it could be worth nothing, or $100+/share). This stock vests for me over roughly the next 3.5 years.
Spending:
You'll wonder why my assets are so meager compared to my fairly low-seeming spending. It's because I've tended to spend rather than stash my leftover cash in the past. I've bought plenty of surfboards, fancy racing bicycles, expensive European vacations, brand new cars, etc. Usually (except on cars) I haven't borrowed money to pay for these things, which I always felt was "doing pretty good", but it means that my stash is correspondingly small now.
Goals:
I've thought about it a lot, and decided what I *don't* want to do is move closer to work. I'd rather quit my job and get one closer to home. My wife and I have chosen the place we want to live, and giving that up for a job seems backwards, especially with the goal of being a lot less reliant on my job at all in a few years. We have friends and family and are building ties here. But before I do anything like quit (and give up all that stock) I'm going to try and negotiate more time working from home first. There are other people working for us who are remote full-time, or 75% of the time. Hopefully I can get a similar deal, maybe only driving into the office once a week.
My short-to-mid-term goal isn't retirement exactly, but just the ability to have a lot more flexible work options. Maybe I could work three days a week, or full-time telecommute, or get a job here in town (where there are fewer jobs and they don't pay as well) and ride my bike and still get home by 5:30. I figure if we paid off the house, then the amount I'm spending every month would drop from something like $6000 to about $3000, which would open up lots of options. Because of this, and the ridiculous insurance I pay on the mortgage, I was thinking that my first goal (after paying off the car) would be to dump money into the house (both by over-paying the mortgage, and doing a couple improvements myself) to the point where I have 20% equity, and then, assuming interest rates are still low, refinance to get an even lower rate on a 15-year loan with no insurance required.
I could then keep dumping more money into the house, even faster without the mortgage insurance to pay, and especially if that stock ends up amounting to something (or I could re-evaluate if the new mortgage is cheap enough, and put the money somewhere else).
Once the mortgage is paid off, I could try and get a part-time position, or a closer job, or if full-time telecommuting works out, maybe just keep doing my current job from home for a while, and saving an extra $3600/month.
What do you think guys? Is this a reasonable plan? what would you do?
Thanks everyone, sorry the post was so long.