Life Situation: married filing jointly, 2 kids ages 5 and 1, live in Orange county, CA, I'm 33 and husband is 40, we have a personal preference to stay debt-free.
Gross Salary/Wages:Husband earns 80,900 yearly salary, about 57,230 after taxes. I am a stay at home mom.
Other Income (nontaxable) : Much of our income comes from monthly and yearly distributions from my in-laws family partnership.
-8000 per year gift money( It's actually 14,000 but we use 6000 of this for property tax and home insurance.)
-36,000 per year (3000 monthly) distn from the family partnership.
-Also, a property owned by the family partnership is on the market, and the cash divvied from the sale will be available to us (not sure how much, but our payout will be about 200,000 to use as we wish for investing, or buying a rental property, or buying our future property in 4-5 years.)
Interest Income: We do not invest yet, husband has a pension that is 25,000 right now. We have always considered his “old man” retirement the family partnership (we do not know the exact amount, but estimate it to be 2 million, growing at 5-6% per year.)
Yearly income after taxes: $101,230
Taxes: 5759.00 fed, 707.00 state
Expenses: I just started keeping track on mint.com and my eyeballs popped out of my head. I consider myself a minimalist and quite prudent (seriously!), but we freaking eat like kings. It's embarrassing to see the numbers glaring at me.
Also, Mint is only showing 3 months of expenses since I JUST started tracking, so this is only as accurate as it can be right now. We treated a lot of people to meals and gifts in may/june/july, so it might be a bit skewed. But maybe not.
Total $6497
Food & Dining $2834 (72% is groceries, 12% restaurants, 11% alcohol, 5% other foods)
Shopping $1031 (85% mostly amazon crap- diapers, wipes, house stuff, randomness, 9% clothing, 5% books and hobbies)
Auto & Transport $818
Gifts & Donations $441
Bills & Utilities $324
Health & Fitness $241
Home $219
Travel $137
Uncategorized $113
Pets $113
Business Services $113
Kids $71
Misc: $46
Assets: House we live in (valued conservatively at 650,000). We own our own crappy (well-loved) cars.
Liabilities: None
THE PLAN:
Our 4-5-year goal/plan is to buy land and build our own small strawbale home. It will probably take 1-2 years, and about 400,000.00 (or less) to accomplish that plan. During that 1-2 years, husband would take a “sabbatical” from work and focus on building. After that 2 years, he would find another job in IT (working remotely since we will be in a rural area) or work a hobby job to supplement (lifeguarding, personal training, etc.)
-Our 3000.00 monthly distribution would still be coming in.
-We could either sell our current home, or rent it out for approx 2500.00 per month.
We would love to be seeing some dividends or other passive income coming in during that time, too, from smart investments we make starting now.
My questions for you all:
-Do you think this 5 year plan is possible? Can he semi-retire in 5 years?
-How much do we need to cut spending (aka FOOD!) to make our dream come true?
-How should we invest the money we save from cutting spending? We are looking to build cash flow so hubs doesn't have to work while we build the house. We also might need to use some of it to buy our future house in 5 years b/c we want to pay full cash.
-What would you do with 200,000.00 coming in soon from the sale of the trust property? Invest it right now in index fund? Reits? Hard money lending? Save it in a CD to use for our future home?
Would you sell our current home in 5 years, rent it out, or buy rental properties for the passive income? Admittedly, the rent-to-value ratio in OC is not good. Not at all.
-Do you believe in out of state Turnkey Property investing? We like the idea real estate investing, but are not the hands-on types at all. We want to focus on building our own homes, not on taking care of tenants, but we are open to rental properties if we can find excellent property managers, etc. Plus, like I said, OC is not the best place to rent out a property.
-We can withdraw from the “big black box”- aka our family partnership, at any time, but have never done so because we feel like the manager is probably doing a better job making money with it than we could. Like I said, they aim for 5-6% steady increase. But we have toyed with the idea of taking some out to invest with it so it can be something we BOTH own (unlike the trust which is his, and then the kids'.) Should we leave it untouched or invest with a portion of it? This could possibly cause a little drama with the siblings because but it could be worth it.
THANK YOU SO MUCH for getting this far. I appreciate any wisdom. My situation has a lot of moving parts and I feel directionless right now.