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What is WestchesterFrugal's net worth?

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$1mm to $2mm
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$2mm to $3mm
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Author Topic: Reader Case Study: Can We Have It All But Still Retire Early?  (Read 118249 times)

MelbAUReader

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #100 on: March 11, 2014, 08:32:43 PM »
I'm far less than an authority on the topic, as a relatively new reader myself, but for what it's worth I can sympathise with your situation - coming from a life where I have been surrounded by the trappings of wealth for a long time.

Most of the posters here seem to be either staggered at the figures involved, or working under the assumption that with such large numbers, the only changes that are worthwhile are the drastic ones, such as:

  • Moving House
  • Changing Schools
  • Selling the Car
  • Leave the Country Club

Undoubtedly these would all save tens of thousands of dollars of expenditure a year, and are a nice way to solve the financial equation of saving more. But ultimately it's a jarring and drastic change from a lifestyle you love and enjoy, and - unless you're in the head-space to do so - largely unpalatable.

My thoughts are that you start with the small things first, a previous poster has already outlined ~$3,000 / month in saving opportunities that would have very little noticeable effect on your every-day life, and that as you begin to scrimp and save and optimise the little things, the larger expenses may begin to seem more realistic and achievable.

To me it seems clear that there is very little anyone here could teach you about earning or investing your money, and that you really aren't living beyond your means in the traditional sense. It's more about starting to change your lifestyle away from the mindset of purely affording these things 'because you can', and starting to use the fundamental ideas in the articles here - optimising every transaction.

Trying to investigate more affordable travel options, more affordable (and IMO rewarding) hobbies and activites - I love running for example, it also happens to be extremely inexpensive, and making a large portion of your high-end expenses something that is flexible and adaptable to your lifestyle. Being able to instill solid traditional values such as hard-work, respect and a love for finding their own entertainment (without money) in children is something that will serve them well.

There's nothing inherently wrong with living a life full of luxury items when you do have the means to afford them, it's just a matter of aligning your goals alongside that. If you want to live a simpler like in retirement then start moving towards it now, the goal should be - I believe - to find your own life, not one dictated by the people around you. The lower a % of your income you can live on, the sooner you're able to have a life where work is optional, how soon and what kind of life follows is entirely your own decision.

In this case I don't believe it's a question of numbers in-so-much as a question of Psychology. You could retire tomorrow if you were willing to live a frugal lifestyle, the key is to be able to put yourself in a position whereby you can retire whenever you like and still maintain a lifestyle you desire. For some people that will mean the expectation of being able to fund private school for their children, because their earning potential allows this to be a possibility, the end-goal isn't necessarily to live the cheapest and most frugal life on the planet, it's to live a life where you have freedom to pursue what makes you happy and value most.

TreeTired

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #101 on: March 11, 2014, 08:38:55 PM »
At this point, what can I contribute to this thread?  You are living proof that it is always possible to expand your lifestyle to meet (or exceed) your income.   If you have not read "Bonfire of the Vanities"  please do,  and take note of Sherman McCoy. 

mgreczyn

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #102 on: March 11, 2014, 08:45:59 PM »
Westchester, in all seriousness I think that if you're looking for actionable retirement advice, Financial Samurai might be more helpful.  I do think that it took some guts to post here, and hopefully you're not taking any of this personally.  It seems like you love your job, are in no hurry to retire and probably have a network that would land you a new gig in a pinch that most of us could spend our entire lives aspiring to and never quite reach.  I'm guessing you have much more to offer us than we have to offer you, in that you've definitely nailed the income side of things. 

mm1970

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #103 on: March 11, 2014, 10:16:41 PM »


I think our problems lie in trying to ‘fit in’ with our peer group.  We both went to top tier universities and graduate schools, and the reality is none of our friends from school are into living drastically below ones means, or if they are they are embarrassed to show it.  It isn’t fashionable for an Ivy League grad on the fast track to talk about pinching pennies and how to stretch a dollar in a budget.  So we play along, sending our kids to private schools (the ‘best/most selective/established’ in the area) are members of a ‘selective’ country club that is hard to get into (took years to get 2 sponsors, 10 letters of recommendation, attend half a dozen cocktail parties with current members while being scrutinized, kissing up etc.), have an $85k luxury sedan (to drive to the club and other social events to fit in, of course) and take expensive vacations requiring lots of flying (sometimes international) every year.  We both come from semi-humble backgrounds, what I would characterize as middle-ish class, where education was highly valued and material possessions beyond basic needs were desired but a practical impossibility.



Grad of two Ivies here. There are plenty of us who are thrifty. You are hanging with the wrong crowd.

This is what I was thinking.  I don't think you can blame the Ivies.  You need to blame the private schools, and the proximity to NYC, and perhaps your industries.  My husband went to an Ivy and I went to a top-10 school, and we just don't run in that crowd.  I had to read your income a few times before I realized that it was per month.

I just cannot see where the private school, country club, expensive vacations are all that necessary.

mm1970

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #104 on: March 11, 2014, 10:19:25 PM »
Quote
what about someone who has already invested a huge amount of time and money building up a certain lifestyle (sunk costs) but then starts to see the light, analogous to religious conversion - do you just walk away from it all?

Yes.  A little bit at a time, but once the cost is sunk, it's sunk.

mm1970

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #105 on: March 11, 2014, 10:25:59 PM »
Maybe I'm missing something, but why don't you sell your other house? It has 0 net income...right?  If not only to simplify things!

A lot of your expenses relate to your image, as others have pointed out.  Does it really matter in the end?  Are your friends going to care?  If they do care, does that say anything about your friendships?  I'm not sure, just wondering.  I live in one of the nicer areas of my city, and my neighbor literally gave me a lawnmower when they saw me using a push reel.  They probably think we're poorer than shit (for some reason), and I could care less.

Honestly, one of my biggest worries about your lifestyle would be your kids.  You say you both came from humble-ish backgrounds...what would your kids say about you and how they grew up when they're adults?  What kind of lifestyle expectations are they going to have?  In the book "millionaire next door" (which you should read, I think there will be a lot of eye openers as to why a lot of us on the forum can't even begin to relate to your situation), one of the biggest concerns high-spending millionaires have is that they're kids are going to be dependent on them forever--ESPECIALLY if they don't end up with high-earning careers like you and your husband have.  Just some food for thought.

Thanks for the comment zarfus

As mentioned in the case study, we actually did try to sell our house, but the demand just wasn't there for our property in a weakening environment at that time.  We will list it again next year when the current lease ends.

I have read the "Millionaire Next Door".  Great book.  The funny thing is, our kids actually don't think we make that much money (their friends are much wealthier with 'nicer stuff') - and are intimately aware of what the 'richer' parents do for a living and kind of want to emulate them.  I don't think they are going to be dependent on us, and even if they weren't in a position to make oodles of cash we wouldn't indulge them - we owe them opportunities pre-18yo and education (maybe even some college), and not much else.
My kid is the same way.  We make 2x what some of his friends' parents make.  But he thinks they are rich because they have a Wii and an Xbox and we have neither.  And they drive a Porsche CAyenne and we drive a Civic.

happy

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #106 on: March 11, 2014, 10:55:25 PM »
Is anyone else starting to get joet flashbacks?

O yes, o my yes. I was just wondering where the line in the expenditure for the dog walker was.

OP, I have read your opening post, several times in fact. Most of the comments I formulated have already been raised by others. So I will be brief.

1. Arebelspy said this
Quote
You choose what you want to buy into.
  He's a really wise person. Its a deceptively simple comment. Really think about it. If you haven't already done it you could look into blogs about lifestyle design. Afford Anything is interesting, although you may not find anything there you necessarily wish to copy.

2. Learning to live happily on very little is a fundamental life skill.  It will free you from having to worry about financial security, which if I recall was one of your reasons for looking at all this. If you choose you can decide to learn this skill.

3. Paradoxically coming from a high income lifestyle is a handicap in learning this. Some of us here have done it.  Start with all the low lying fruit. If you can't bear to get rid of some creature comfort, spend half on it, or do it half the time. Do some "no spend" challenges for fun. As far as keeping up with the Joneses, it sounds like its too hard for you to go cold turkey and do a Mustachian 180. Keep trying to spend/do the minimum you think you can get away with without it being noticeable. Gradually go one step further.  Look at the big picture as well as the nickel an dime. Biggest areas of expenditure for most are house, transport, food. In your case add school fees,  and country club. Ultimately if you want a different lifestyle you should try to face up to the issue of your excessive houses, which are keeping you where you are. If you want a different lifestyle that is, I'm not clear about that.


anisotropy

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #107 on: March 11, 2014, 10:57:44 PM »
I am going to try a different approach/perspective:

let's assume you don't change anything, start with current post tax net worth of 1.64mm as mentioned in the post, keep all income and expenses the same. Given a 4% real return, this 1.64mm goes to 3mm in 10 years. With 20k deposit a month, 10 years bring that to 2.4mm on the principle alone, so roughly another 3mm with 4% return over 10 years.

This brings you to 6mm in 10 years, which is about 20k/month expense if we use the 4% rule. While it's not 60k/month I think you might be able to take an early-ish retirement in 20 to 25 years if you change nothing. It's still early retirement though by most standards, you will be 55 to 60. And let's not forget, we didn't even count the 4 mm houses. :)

We are in Oil and have a rough an idea of how co-workers all go nuts and spend most of their money on stuffs, and yes, sometimes it's hard to not buy a luxury car when practically everyone, even HR admin, drives a flashy bmw to work (and pay 500 a month on parking lol). You mentioned you really enjoy your jobs, maybe you would be happier working for a few extra years while enjoying the "finer" things in life.

I love the market (even though today I got my face punched hard, thanks to fmcc/fnma). Not sure if you guys are analysts, traders, or fund managers, but if you are in this for the thrill/money maybe calling it quit in 10 years is too soon. Sharks are born to swin :)

expatartist

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #108 on: March 11, 2014, 11:04:52 PM »
Well if we're going to get competitive about things.... ;)

btw, what is the appropriate size house (incl basement) for 6 people?

Well I don't make anywhere near what you do, but I am in the 6-figure range and we live at 233sqft/person. That is my wife, my daughter, and I in 700sqft, and I find it accommodates us quite well. I am hoping we can shrink this some actually to help us ignore the urge to acquire more things. YMMV
alm0stk00l - thanks for the response

interestingly enough we lived in a 600sqft 1br in Manhattan when we had our first child (3 of us) when we were your age - so I guess we were even more Mustachian than you at the time on a sqft/person basis

DH and I live in a two-level flat which is, max, 300sqf, near the Forbidden City. But the nice view makes up for it: http://www.flickr.com/photos/ebriel/10593351913/

Most of our neighbors don't have toilets. Whenever we sit on the balcony, we're grateful for the one we have -- even if it does stink up the house!

Jamesqf

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #109 on: March 11, 2014, 11:23:15 PM »
Thanks Jamesqf, although you have unfortunately shown yourself to be one of the many who are commenting without understanding what you read (specifically regarding the 442k net worth)

Sorry, but I think the problem there is more your lack of writing clarity, at least previous to my post, since you quite clearly stated in your initial post that you have a net worth of $442K.

Be that as it may, though, what you need to do for your own benefit is to forget the financial industry chicanery for a minute, add up your real, income-producing assets, and take 4% of that number.  If you can live on that amount per year, you can retire now; if not, you have to either increase the assets or decrease your spending (or both, of course).

Quote
Read Malcolm Gladwell's latest book.

Why?

tomsang

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #110 on: March 11, 2014, 11:59:49 PM »
A lot of budgets that we see are math based. How to cut out to optimize. I believe yours is based on fullfillment, happiness, and meaning even though you don't say what you are trying to accomplish.

I relate to your situation based on income, but not on expenses. A number of years ago, I woke up and decided that I did not want my children to grow up with a silver spoon. That I wanted to structure my life around the areas that were important to me vs. the quest for materialistic trinkets and status.  I believe that at some point you will determine that you are hurting your children by exposing them to the environment that you created. This is an eye opening experience and it takes awhile to unravel.

I am not even close to MMM, but our kids now are some of the best dressed kids in the school and are excited to get 90% of their clothes from Thrift Shops. We cancelled cable for a time, we started cooking more meals, we stopped buying the latest electronics, when the wife retired we bought her a 2002 Honda CRV, I drive a 6 year old SUV that needs to be replaced with something more practical.

At a sleepover my daughter came home with clothes from a very wealthy family. We probably make more and most likely have a higher networth than the family hooking up our kids with once worn clothes.  You can feel embarrassed or you can be Mustachian.

If my kids pursue their passion and pick a career that doesn't pay a six figure salary, I am hopeful that we didn't ruin their concept of "Enough", that we are teaching them that it is stupid to have a brand new car, brand new Iphone, brand new clothes, etc.  That they can value people based on who they are vs. what they own, where they go to school, or one much they make.

Give up on the sunk costs and unravel the areas that are not in alignment with your values and the values that you want to pass down to your kids.

Good luck.

Tom

P.s.  are you going to take the blue pill or the red pill?  I have a post on that Matrix reference

travelbug

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #111 on: March 12, 2014, 12:04:09 AM »
...
« Last Edit: March 13, 2014, 12:37:13 AM by travelbug »

Freckles

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #112 on: March 12, 2014, 12:23:20 AM »
{Also, I'm such a dullard that I read your $71k salary and at first thought that was annual and was really, really confused for a minute. Hahaha!}

Me too!  I couldn't fathom how they could afford all that they have on so little money each year.  It took me a while because this public school teacher has never made $71,000 in a year!  My brain didn't even consider that that income was for one month.  How could two people make that much money in one month?  I still don't even understand it.  Also, I'm so in the wrong field.

quilter

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #113 on: March 12, 2014, 06:42:19 AM »
West, thanks for the clarification. Just wanted to add that while we nowhere approached your level of earning, one thing that helped us to figure out our path was to find our true hourly wage. I worked as a nurse, and when the kids were young we paid child care. So say I could make $30 per hour. If I subtracted the fed and ny state taxes, the social security and medicare contributions, and what I was paying for child care, the cost of commuting the twelve miles, keeping up nursing license and  the lack,of time to cook etc and my real hourly wage was quite low. Our solution was for me to work part time so I would not lose my employability and I would be able to step in if DH lost his job.

There are many solutions, but cutting landscape services for instance may take a huge chunk out of your valuable at home time.   Your choice might be to make x amount of dollars per hour if even after taxes and expenses landscapers cost you 1/2 x per hour.

You have to figure out what makes sense for you and your family. Since I grew up in foster care and had nothing, my perspective was very different than yours. Obviously there was no Ivy League for me, I really didn't know anything about social status.  What is important to me is much different than what is important to you, but both of us could be right.

ZiziPB

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #114 on: March 12, 2014, 06:44:29 AM »
Quote
(the marginal 39.6% federal + 8.82% state + 3.876% city)

You forgot to include the nanny tax - or are you not paying any?

cynthia1848

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #115 on: March 12, 2014, 07:09:02 AM »
You should be paying the live-in on the books, which means a W-2 with FICA, unemployment, etc. taken out.  The nanny tax is reported on schedule H of your 1040.

ZiziPB

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #116 on: March 12, 2014, 07:48:02 AM »
You were complaining about taxes being your biggest expense, so I think the comment is quite pertinent.

In any event, I just want to point out that taxes are my biggest expenses by far as well (also live in CT and pay close to your marginal tax rates) but I live on half of my regular salary and bank the other half plus my cash bonus and stock options.  You appear to spend more than your regular net salary every month.

cynthia1848

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #117 on: March 12, 2014, 07:51:35 AM »
The nanny tax (if you are paying it) decreases your after-tax income, even if it is not part of your 'regular' marginal rate.  How is it not pertinent?

In any case, I would encourage you to pay it - if you aren't, it's illegal, and your nanny could sue you for all the back amounts due, etc.

CommonCents

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #118 on: March 12, 2014, 08:31:37 AM »
I guarantee that plenty of your Ivy Leaguer classmates are not in finance (I know that, because I know a lot of them). I'd start by going to some college alumni functions (every Ivy holds them in the city) and seeing what your smart, motivated peers who aren't in finance are doing with themselves.

+1.  And if one of the ones you mentioned we share is Dartmouth, PM me, particularly if it's undergrad.  (Based on the similarity in age, you might even be in my or my husband's class.)  As you probably well know, Dartmouth has probably one of the strongest alumni networks in the US. 

Cynthia, you are both correct.  Yes, he should pay taxes for the nanny and not pay under the table - but nothing he wrote suggests he is doing that.  He is correct that the figures he posted on taxes are for his income, and not taxes he pays on outflow.  He also didn't post sales tax.  Can we drop this and move on to more productive suggestions?

OP, if you still want (constructive) suggestions, perhaps you would consider rewriting an initial post that lays out the finances more clearly, or creating a new post in this thread clarifying those details (laid out in the same format as before with assets/liabilities etc listed rather than paragraph format) along with post-retirement spending plans.  I appreciate the clarification you gave to me regarding the $442k confusion, but it's probably buried in the thread now for a lot of folks.  Also, if you want more suggestions, perhaps answer some of the questions from folks here regarding what you're seeking - in life, and in terms of feedback from posters.

jpo

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #119 on: March 12, 2014, 09:08:48 AM »
OP - have you considered converting part of your 6 acres into a food forest? That would solve some of the lawn-watering and the grocery bill at the same time.

carloco

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #120 on: March 12, 2014, 09:18:16 AM »
or Buying your sons landscaping equipment.  For a month's bill they would be well equipped;  Perhaps make real money doing the neighbor's yards. 

I hope the nice elderly nanny has a nice retirement account.  That's who I think the most.   



jpo

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #121 on: March 12, 2014, 09:59:44 AM »
OP - have you considered converting part of your 6 acres into a food forest? That would solve some of the lawn-watering and the grocery bill at the same time.
Thanks for the (sarcastic) post jpo

We actually have a small garden in a corner of our backyard where we plant produce and some herbs.  I estimate that the costs of maintaining the garden are higher than the savings from not having to buy at the grocery.
It wasn't sarcastic. One of the main tenets of permaculture is that the garden essentially takes care of itself... check out Gaia's Garden, your local library may have a copy.

Mister Fancypants

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #122 on: March 12, 2014, 10:17:30 AM »
My spouse and I are in our mid and late 30s, living in an expensive suburb of NYC.  We are already pretty entrenched into a very expensive lifestyle that has been sustainable thus far due to high incomes, but if something unexpected were to occur we would be in financial danger. 

Here is your real concern and what you are really asking for help with, how to deal with the unexpected and this is the right place for that as pretty much the goal of Mustachianism to set your life up financially so no matter what unexpected situations occur there is no danger.

First off, it is important to note that both my spouse and I are of like mind in our desire to change our situation.  We both like our jobs (one is very stable, the other is driven by the financial markets), and find fulfillment, intellectual challenge and social benefits from our careers.  So you could say that our primary objective is to make sure we are financially stable in the event of the unexpected, with a very close second being retiring as early as possible. 

Here is the first unexpected situation that can come up; one of your jobs is driven by the financial markets. Clearly your lifestyle is driven by your high dual income, if you suddenly lost the financial driven job and couldn't replace it could you sustain your lifestyle what would you cut first, would the stresses on you marriage and home life be too much for family even if you could get by financially. I will discuss some more about both the stress and the financials below as you have other details where they make more sense to comment.

I think our problems lie in trying to ‘fit in’ with our peer group.  We both went to top tier universities and graduate schools, and the reality is none of our friends from school are into living drastically below ones means, or if they are they are embarrassed to show it.  It isn’t fashionable for an Ivy League grad on the fast track to talk about pinching pennies and how to stretch a dollar in a budget.  So we play along..

You have heard the replies of many Ivy League grads on here already that this is simply not the case. If anything most people are associating this more with Wall Street excess then the Ivy League which is far closer to the truth and the combination of Wall Street and the Ivy League which is a very small subset of the population and also in a very small geography the metro NY area. You have also heard many comments from people who are ex-Wall Streeters who have left your lifestyle. I work with the traders who worked their way up from the pits as well as the Wharton and Harvard grads who were recruited, in both groups there are those who fit into your demographic and those who don't. These are your choices and you have made them. I had the choice to be a trader, I choose to write the software instead as I love technology I work less hours have less stress and spend more time with my family. I am fine with a much smaller pay check and bonus. I still have all my Ivy League friends though and those from the state schools all are really cool.

While we could live a much simpler life, the reality is we enjoy a lot of the trappings that money can buy and, to be honest, I think we trick ourselves into feeling that we are ‘socially accepted’ and that we’ve ‘made it’.  The area we live in is plagued with this disease of showing how well you are doing (even if you’re not) and keeping for the sake of assimilation.  It’s an expensive habit and obviously shows some of our insecurities – but at this point we are pretty well committed (with tons of sunk costs) so are just trying to make the best of the situation and hoping to make it to retirement, early or not, while still providing for our children’s experiences (trying very hard to give them all of the things that we did not have growing up).

Your choice, you like the lifestyle... No problem with that if you are happy with the choice then keep it up. But you clearly state it shows insecurities, it’s an expensive habit, you probably regret the sunk costs, regardless of the fact that they are sunk or not. You are just hoping to make it to retirement, after giving your children what you have decided is what you think is best (I'm not judging you decisions on what is best by the way, that is completely up to you, just make sure you understand the choices you make).


Our incomes come from large, stable institutions that have both been around for over 100 years.  We are both doing well in our careers with expected promotions and pay rises over time, but the landscape for financial institutions in particular is changing pretty dramatically, so we are not counting on necessarily making the incomes of people above us, but instead budgeting on total compensation to keep up with inflation over time.

I told you I would come back to the loss of the financial market driven job, I worked for Lehman Brothers up until the end, and it was a stable 150 year old institution. I remember the very calm voices mails we got from Dick Fuld (CEO for those who don't know) about the company’s future; the early RSU's to take advantage of the stock's upside 4 months before the bankruptcy. The funny thing is a few years later I heard weekly voice mails from Lloyd Blankfein and they sounded almost identical to those of Dick Fulds. So my only advice to you is don’t bank on the stability of a job from a 100 year old company, you never know when the next financial crisis will hit and there will be another financial crisis, Fannie and Freddie and going to be wound down, the Fed balance sheet needs to be deleveraged, Russia is on a land grab and who knows people are still unemployed in droves in the real world.

In terms of investments, since a lot of our income as well as job security is dependent on financial market stability over time, we have taken the conservative route of using the stock market rally over the last 2 years to get completely out of stocks altogether (which still leaves a significant passive exposure due to deferred compensation allocation – see below), allocating the funds towards debt repayment (highest rate on any loan is 4.625%) and investing in private real estate deals (LLCs managed by professional investors, targeting high single to low teens returns in non-speculative transactions).  We have a lot of exposure to NYC metro area real estate already given our two properties, but the deals we invest in are in other parts of the US and our view is that with historically low interest rates and inflation that will probably increase over time we would prefer to keep our investments in assets that should not only give solid real returns but also do well in inflationary environments and provide a bit of a hedge.  Our 401k’s are in cash and short-term bond funds, and our self-directed IRAs are invested in the real estate deals and other business ventures via trust companies.

That is still a fairly high risk portfolio, you are highly concentrated with restricted stock and/or employee stock options in one or two financial firms, you have equity in two properties in the NYC metro areas, and the remaining assets are then in other privately managed real estate transactions throughout the country and short term bonds and cash. The correlation between your asset classes is way too high and you do not have enough diversity. If either of the companies goes under your stock is gone, if interest rates go on a tear the principal in your bond funds can lose a lot of value more then you will make in interest and dividends. Real estate is up in the air and you are in private deals so they are a crap shoot, some are awesome others are mine fields. I would think considering your professions you would have a more diverse investment portfolio.
 
Here are the stats (income/expense/saving totals are monthly):
Assets:
2 homes:             $4,100,000 total value (Zillow)
Deferred Compensation (pre-tax):    $2,100,000 (half of which has vested; fully vests over the next 4 years, and keep getting more each year as part of annual compensation “bonus”; closely tied to financial market returns as a lot of it is in company stock and equity-like instruments; if made redundant everything would vest immediately unless were terminated for ‘cause’ for doing something unethical)
Retirement Accounts (401k, IRA):    $825,000
Taxable Investments:          $250,000
Cash and Equivalents:          $5,000 (to pay bills; cover spending, bank account minimums)
Total Assets:             $7,280,000 (not including “stuff” like cars, jewelry, etc.)


Liabilities:
Combined Mortgages:    $2,600,000 (4% and 4.625% fixed rate fully amortizing 30yr mortgages, which mature in 20-25yrs)
Home Equity Line of Credit:    $370,000 (4% rate until 2017 at which point will have to renew; we sweep all excess funds into this account to pay down balance; available credit of $130,000)
Credit Cards:    $23,000 (we pay these off every month; $15,000 on cards with 0% intro offers on purchases to a certain date, at which point we would pay down to $0 balance)
Private School Tuition for 2 kids:    $1,025,000 (this is the total cost in today’s dollars, which in my mind is a rough inflation adjusted estimated total until they graduate high school, assuming the cost doesn’t grow faster than our 4% marginal cost of borrowing;  {Edit to save space}
College Education:    $450,000 (2 x 4yrs at $56k/year, inflation adjusted estimate; we actually are of the mind that the kids should contribute to their college costs via scholarships, internships, grants and loans if needed, so this is a bit conservative)
Total Liabilities:          $4,468,000 (including private school tuition and college costs)

I don't really agree with your math, you are putting future liabilities against current assets. You save for college and pay as you got for private school, those liabilities don't count against your current assets. Unless you are pre-paying for the tuition for all 12/13 years then you only need to account for the amount you pay now.

I also wouldn't count non-vested RSU or stock options as assets, only vested assets, they are only yours when they vest, they are contingent on your employment and you assume that is going to continue as such, what if you get another job offer and it is too good to turn down, they may not buy you out, but that leaves a million bucks on the table. It’s not yours until it’s yours.

So you have:

Assets:
2 homes:             $4,100,000 total value (Zillow)
Deferred Compensation (pre-tax):    $1,050,000 (half of which has vested;
Retirement Accounts (401k, IRA):    $825,000
Taxable Investments:          $250,000
Cash and Equivalents:          $5,000 (to pay bills; cover spending, bank account minimums)


Total Assets:             $6,230,000

Liabilities:
Combined Mortgages:    $2,600,000 (4% and 4.625% fixed rate fully amortizing 30yr mortgages, which mature in 20-25yrs)
Home Equity Line of Credit:    $370,000 (4% rate until 2017 at which point will have to renew; we sweep all excess funds into this account to pay down balance; available credit of $130,000)
Credit Cards:    $23,000 (we pay these off every month; $15,000 on cards with 0% intro offers on purchases to a certain date, at which point we would pay down to $0 balance)

Total Liabilities: $2,855,000

Net Worth: $3,375,000

Now you haven't indicated you children’s ages so you have roughly a $1.45 million education savings goal over I will guess a 10 to 15 year period not counting investment returns on those savings. And each year that goes down as you will pay current tuition on private school out of current income and/or savings. So hard to calculate the moving target based on the information you provided.

Also as side note not sure if you have HELOC on both properties but if not see if you can get one on the 2nd property at a lower interest rate and see if you can shift some of the mortgage to the HELOC to reduce the monthly payment.

You are already using you first HELOC as a sweep account to mortgage accelerate as that saves on interest until your bills come due, good call :)

Income:
Gross Income (pre-tax/401k):    $71,000 (base salaries of $34,170, the rest is annual bonus with varying payment/vesting schedules throughout the year; I took the combined average over the last 5 years – our incomes have generally been increasing but obviously fluctuates a bit given one of our jobs is in finance and the wild swings in the market over the last 5 years)
Rental Income:    $6,000 (this just covers our total costs for the rental property before depreciation so net cash flow is $0)
Total Income:   $77,000

Expenses:
Taxes (Fed, State, City, SS, Medicare):    $24,600
2 Mortgages (PITI):          $18,200
Charitable Giving:          $2,500
Property Maintenance:   $2,300 (for both properties combined: snowplowing, budget for anticipated repairs over time, etc.)
Landscaping:   $2,000 (both properties, grass cutting, hedges, spring/fall cleanup, 6.4 acres total)
Live-In Help:             $1,800 (this is salary in addition to room/board)
Country Club:            $1,770 (includes all meals, drinks, fees, summer camp)
Groceries/Household Items:       $1,640 (this is for 4 adults and 2 children)
Vacations:   $1,250 (flights and some hotels are paid via miles/points from credit cards and flights/stays for work travel)
Utilities:   $1,120 (primary residence only: cable/internet/phone/wireless, electricity, natural gas heat, water – quite high due to sprinklers in summer to maintain that nice lush lawn we pay so much for)
Kids’ Activities:   $685 (all lessons, fees, activities, tutoring)
Shopping:             $500 (gifts, personal items, miscellaneous – plug account)
Auto Insurance/Maintenance:   $480 (3 cars, all 2007 model or newer: 2 for commuting – the above mentioned Leaf and showoff machine, 1 small SUV for the grandparent/nanny to take kids to schools and activities)
Public Transportation:         $330 (train tickets, subways)
Gasoline:            $230
Restaurants/Eating Out         $200
Entertainment:            $80 (Netflix, iTunes, Movies, etc)
Total Expenses:            $59,795

Savings:
401k:               $4,600 (including employer matches)
Mortgage Principal Payments:      $4,170 (included in mortgage payments in expense above)
Income less Expenses above:      $11,205
Total Savings:            $19,975

This is also a little cryptic... You should relist this with just your base pay (net after taxes) not counting any deferred (stock compensation) and then list any one time annual cash payment you get as part of your bonus. Then list all of your expenses that you pay monthly but not redundantly mortgage is part of expenses and savings etc... This becomes too confusing for people to follow.

So make 3 simple sections

Net income (actual money you have to spend every month)
Actual monthly expenses
Savings

Nothing should be in more than one section, people here are smart enough to know mortgage principal is considered savings, feel free to break you mortgage payment out and include the interest in expenses and principal in savings.

Retirement scenarios:
If I take the after-tax (40% marginal rate to make things simple even though our effective tax rate is much less) values of the deferred compensation and retirement accounts in the ‘Assets’ and subtract out the ‘Liabilities’, I get to a net worth of $1.642mm.  However this does not take into account owning a house outright, which I would estimate we should conservatively budget for $1.2mm for the areas we are considering living, bringing us to $442k net worth.

On the expense side, once the nest is empty and the house is paid for (downsizing eventually to the $1mm house mentioned directly above) as well as the rental house is sold, I think we can very comfortably get monthly expenses to $7,000/month or $84,000/year.  Note that this includes having to pay for a live-in to help with care of an elderly parent.

Assuming we can continue to save roughly $20k/month, the stock market doesn’t crash (which would decrease the value of the deferred comp and make a finance job’s income and outlook less rosy) and a 3% withdrawal rate (we’d like to leave behind some money for kids and charitable orgs that we support, without paying Uncle Sam any death taxes), we estimate our retirement date to be 9-10yrs from now [$84k/0.03 = $2.8mm; $2.8mm - $442k = $2.358mm; $2.358mm/$20k/month = 118 months = 9.8 years].

Of course this 10year plan assumes everything goes smoothly and unexpected cost increases and expenses and income decreases don’t occur.  We are hoping for the best and planning for the worst. 

Thanks for reading.

I have already gone over where I disagree with your math on your net worth, I don't agree with how you project out your net worth into the future to determine when you will have the assets you need to retire based on you current or project spending.

So instead I will discuss your current not quiet worst case scenario… Losing a single job, worst case would be losing both.

Right now you have $250k in taxable investments locked up in private real estate deals, so I am assuming those are not that liquid (could be wrong). You have $1.05 million in vested RSU's or stock options that you have access to if you needed in an emergency. Not sure what your selling restrictions are and if you have any unrealized gains built in if they are short or long term etc., but you would not have access to the full amount of taxable investments if you needed them in an emergency. Based on your tax bracket you would pay 20% federal capital gains tax, 8.82% NYS capital gains, 3.8% payroll tax (go Obamacare for high income earners).  So let’s ballbark it’s and say you can walk away with $900k after taxes if you liquated everything (that assumes the deferred comp was intact post job loss).

So in the end if you lost a job you have $130k of liquidity in a HELOC available to fund your lifestyle. Now your taxes would drop with the income drop so the $24k in taxes would drop as well proportionally. The $6k on the rental would cover the $6k in PITI expenses, but the remainder of your $59k of monthly expenses still needs to be covered with only $130k so you have maybe 4 months to replace that income before you have to sell assets.  At this point the sold assets can last about 3 years, if you get that far along new net worth is only going to be house assets plus retirement accounts – liabilities.

So if you think you are living a sustainable lifestyle based on your income and can retire and meet your savings goals without some rethinking then keep on chugging (once again not making any judgments that is your decision to make based on the math you decide if the risks/outcomes are likely or worth it etc…). 

I said earlier I was at Lehman at the end, I know lots of people (some friend) who lost everything because they didn't think it could happen to them. And when I say lost everything sometimes I mean more than their house unfortunately. Then again I know others who got multiyear severance packages landed other jobs and tripled up, so it can go either way.

-Mister FancyPants

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #123 on: March 12, 2014, 10:25:46 AM »
@WesterchesterFrugal - You sound like you have your shit together but need to prioritize what makes you happy. Decisions from soul searching don't happen overnight but you'll probably get there since you are exploring multiple scenarios. One day you'll have to get off the treadmill and change your lifestyle before you get too entrenched.

jpo

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #124 on: March 12, 2014, 10:31:16 AM »
jpo - sorry for the false accusation!

Will have a look

Most of the acreage (and a lot of the of the landscaping costs) are for a rental property in another state, and I'm not sure the tenants would want us to plant a garden in their yard.
No problem.

At your financial scale anything you gain from changing the landscaping is small potatoes but it seemed like something that might interest you. After all, MMM himself has said that this is really an environmental blog masquerading as a financial blog.

eman resu

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #125 on: March 12, 2014, 10:41:07 AM »
Hi again,

I don't have any advice, but wanted you to know your thread has made me reconsider some things about my own situation. For instance, I called your country club bill "fluff" (not meanly!) in my first reply.  Then I worked my numbers a little and noticed my "work-related socializing" type expenses are, adjusted for relative income, slightly higher than yours.  So, I need to consider if I have fluff or if I just reacted in a knee-jerk way to the actual numbers in your list.

Also, your OP shows that you are taking a conservative approach when assessing your present position financially.  When I assess mine, I don't project the numbers quite as aggressively/conservatively... which means my plan probably isn't as conservative or safe as I have convinced myself it is.  All good stuff to have to mull over.

Anyway, I  noticed you identified a couple expenses to hit the chopping block.  That's awesome! Good luck and thanks for posting.

totesmahgoats

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #126 on: March 12, 2014, 11:10:07 AM »
btw, what is the appropriate size house (incl basement) for 6 people?

Well I don't make anywhere near what you do, but I am in the 6-figure range and we live at 233sqft/person. That is my wife, my daughter, and I in 700sqft, and I find it accommodates us quite well. I am hoping we can shrink this some actually to help us ignore the urge to acquire more things. YMMV

Five of us live in 2200sq ft and I'm looking to downsize.

I have to say i wasn't going to touch this thread with a twenty foot pole because A) I don't think I can offer anything constructive B) the elders have it covered, but since I had to chime in with that tidbit I will to a psuedo related extent.

My MMM aha moment was when I realized that we were paying more in taxes in a year than my sister was making as a teacher and weren't maximizing it or really making it do any sort of work for us at all. You pay close to that in a month in taxes, or even more shockingly just in "life style maintenance". It's your money so take that as you will. Good luck to you.

Jamesqf

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #127 on: March 12, 2014, 12:02:27 PM »
OP - have you considered converting part of your 6 acres into a food forest? That would solve some of the lawn-watering and the grocery bill at the same time.
Thanks for the (sarcastic) post jpo

We actually have a small garden in a corner of our backyard where we plant produce and some herbs.  I estimate that the costs of maintaining the garden are higher than the savings from not having to buy at the grocery.

Possibly because you are paying someone to do the maintenance?  Whch means that, quite aside from the expense, you (and your kids) are missing out on the pleasures of cultivating your own garden.

I think you might benefit from examining your whole lifestyle from this perspective.  You obviously don't have to worry about pinching pennies to survive*: you need to think more about time.  Are you getting the most benefit from the time & money you are spending on any particular activity?  For instance those expensive vacations: do you really enjoy them, or would you perhaps prefer to say hike a section of the Appalacian Trail?  Or the fancy car: might you not get just as much pleasure, plus inverse green status, from a Prius?  Do you really enjoy what you do at your country club?  (Golf, I suppose, which to me is the last step before the care home :-))

I suppose it comes down to personal taste, but to me it seems that the money you have left over after supporting your lifestyle just isn't adequate compensation for having to live like that.


*Though I learned much that useful from having had that experience, personally I'm glad it's in my past, and I hope it stays there :-)

dude

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #128 on: March 12, 2014, 12:44:52 PM »
I don't particularly think I make a lot of money (compared to my peers, both at work and play) . . .

oof.  I thought you were a pretty self-aware guy until you said this.  Dude, seriously?

okiedoke

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #129 on: March 12, 2014, 01:26:57 PM »
I know where you're coming from.  Similar education and background, different field and city, until I happily moved away from all that to a much slower pace.  My kids will also go to private schools for 13+ years each, still a country club member (although both of these things are much less expensive where I live). 

I'd look at it this way:

1.  Prioritize the things that are most important to you.  It sounds like kids' education is #1 with a bullet, and everything else is behind that to a meaningful degree.   Fine.
2.  Adjust your spending for your priorities.
3.  Really, truly recognize that bad things can happen with your careers.  Seriously plan for that.  Namely, by upping your liquidity and diversifying your holdings more.  I wouldn't have as much tied up in the private NY real estate stuff -- you're really overweight there, plain and simple.   A good book to read on this is "Are you a stock or a bond?" By Moshe Milevsky (sp?).  The Affluent Investor touches on this (adjusting your investments to compensate for the type of human capital you have invested).  You've already instituted some of this, but you can do better.

Seems like this statement from you is on the right track:

"Some immediately actionable items will include cutting the landscape bill, ditching the expensive car, scrutinizing grocery/utility/shopping expenses and cutting as appropriate, taking fewer/shorter/less-expensive vacations and cutting some insurance (self-insuring).  Kids' activities could also be trimmed quite a bit."

Not much more to do than this and my #3, it seems.  Nobody at the club is going to care if you don't drive a 7 series / S Class or win lawn of the month.  If they do, screw 'em.

WageSlave

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #130 on: March 12, 2014, 01:33:16 PM »
I came across the MMM blog about 4 months ago and have read every post and comment, and am now going through the forums.

If that is true, then surely you should have a "feel" for the overall tone and character of this blog and the forums, no?  You get the gist of what MMM's message is, right?  Yet...

I do wish to thank everyone who replied with a comment (even the snarky ones, a high % of which were not only unhelpful but demonstrated a lack of attention to detail and poor reading comprehension)

Emphasis mine.  Couldn't we argue that you are demonstrating a lack of attention to detail and/or poor reading comprehension?  In other words, if indeed you've read all the blog posts, you'd know that MMM's annual spend is less than half your monthly spend.  So I'd say the expectation is that, anyone who has basic reading comprehension skills and is minimally detail-oriented would know that your situation is dramatically different than the overwhelming majority here.  And to be clear, I'm not implying you're not welcome, not at all.  I'm saying, please give everyone the benefit of the doubt that this is a bit much to wrap their heads around because it's unusual grounds for the site.

Furthermore, if you'd read even a handful of forum posts, you'd know there's a certain "style" or "idiom" that most people use when exposing their numbers.  You did not follow convention.  There is of course no right or wrong way to do this, and no formal forum rules about how to do it.  But why not make it easy on everyone and follow suit?

I think a little bit of humility would go along way towards furthering your cause---I'd argue that too is the appropriate tone for this site.  Consider MMM's numerous self-deprecating jabs about how he still "sucks" and lives an overly luxurious life.  If someone mis- or under-reads your posts, you could reply (as you have), and say, "Go back and re-read my post"... or you could recognize that at least some of these people are making an honest effort to help, and return the courtesy with a reply along the lines of, "I understand my original post may have been unclear; let me try to convey it in another way to help..."

So why am I here?  Well I was looking for some helpful advice on things to consider/improve, I was looking for a bit criticism as that's how you really learn about yourself, I was looking for some motivation and inspiration.

I did say clearly in the second paragraph of my original post: "But I came to the conclusion that there may be others like us who would benefit from this process and I really would like an objective opinion from the MMM community on what we could improve on."

Edited for brevity, including removing yet another jab at the community's reading comprehension.

That first paragraph is a non-answer, in my opinion.  That's the kind of fluff I used to write on my essay questions back in school when I knew I could get away with it.  Who here in these forums isn't looking for "things to consider/improve, a bit of criticism, and some motivation and inspiration"?  I think the only thing you left out was entertainment, which is certainly a motivator for some here.

The second paragraph I suspect gets closer to the truth, in particular, "there may be others like us who would benefit from this process".  Note that "the process" is to continually strive for increased happiness while continually decreasing consumption.  Do I have a unique interpretation of this blog's message?  I doubt it.  Or can I again question your attention to detail and reading comprehension, as in, maybe you're missing the point?

My cynical opinion is that the true reason you're here is that you're fishing for acceptance, as in, "Hey guys, my consumption is through the roof, my environmental footprint is outrageous, I only save 25% of my income (which happens to be top 3% or better in the richest country in the world), I drive an $85k car to my ultra-exclusive country club... but I drive a Nissan Leaf to the train, so it's OK right?"

I'm personally far from the ideal represented by the MMM superhero persona... my consumption is high (though you still best my annual spend in two months), and I've given to the temptation of complainypants syndrome more times that I'd like to admit.  Heck, I've even gone "fishing" on these forums myself, looking for people to say, "You're saving 80% of your pay, good enough!"  But at the end of the day, I realize it's kind of an exercise in "Internet forum masturbation" or whatever you want to call it.  That is, I already know my spending/consumption is higher than a lot of people on this forum, and I know it's due to falling to the temptation of convenience and chasing the dragon of hedonistic adaptation.


travelbug

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #131 on: March 12, 2014, 05:15:31 PM »
...
« Last Edit: March 13, 2014, 12:37:50 AM by travelbug »

arebelspy

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #132 on: March 12, 2014, 05:42:39 PM »
Lastly, if I just wanted acceptance I would get a dog or just continue to hang out with sycophants who agree with my point of view.

No, typically a person who exhibits behavior similar to what you have shown needs the validation of changing someone's point of view - i.e. if you can get Mustachians to admit what you're doing is okay, then it's fine.  As long as you get a few, you can feel justified and you can dismiss the rest who "just don't get it."

We get it.

Spend what you'd like.

I hope you find happiness.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Ambergris

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #133 on: March 12, 2014, 05:52:45 PM »
I think a little bit of humility would go along way towards furthering your cause---I'd argue that too is the appropriate tone for this site.  Consider MMM's numerous self-deprecating jabs about how he still "sucks" and lives an overly luxurious life.  ....Note that "the process" is to continually strive for increased happiness while continually decreasing consumption. 

I absolutely agree that this is the message of the site and the values that the forum members generally hold.  The issue here is that the OP is not looking to "continuously decrease consumption" or recognize where his/her consumption is outrageous.  He/she just wants to tweak a few things around the edges of their budget and leave most of the ridiculousness intact, with a view to retiring "a bit" early.  But that's not we do here.  It's not what people come here for.  I'd love to help, but I don't see how I can help someone who wants to do minor tweaking of a monthly budget that is approximately twice my annual spending.  If the message was, "I know in the long term 95% of this needs to be eliminated, but where are some easy places to start?" I think people might have responded better.  As it is, the values many of us hold mean that we can't possibly approve of this level of consumption or attempts to maintain it and will say so if our opinion is solicited.

WF solicited our opinions.  We did not force those opinions on him/her.

My cynical opinion is that the true reason you're here is that you're fishing for acceptance, as in, "Hey guys, my consumption is through the roof, my environmental footprint is outrageous, I only save 25% of my income (which happens to be top 3% or better in the richest country in the world), I drive an $85k car to my ultra-exclusive country club... but I drive a Nissan Leaf to the train, so it's OK right?"

Another unwritten community rule is the "facepunch" - that is, you frankly tell people when their spending is out of whack or they are not living up to the values the community generally holds to.  Furthermore, it is considered a kindness and proper behavior because it helps people modify habits that are harming themselves, their society and their environment.  WF has got a number of fairly hefty facepunches, as should have been expected.

So, fine. You're benchmarking yourself against your HBS or Wharton peers and your country club buddies. Why have you decided this is your peer group, as opposed to your undergraduate classmates, or the people from your hometown? You've chosen the ruler you're measuring yourself against. So the question becomes: why this ruler? Why are these people your baseline for normal?

Bingo. WF is right that, by Westchester standards, he/she is quite frugal. 

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #134 on: March 12, 2014, 06:14:40 PM »
I don't think any of us think you are a lost cause.. but on the flip side we'd hate to see you waste this fabulous opportunity and go the way so many of the ultra high earners did during the financial crisis.

We really do wish you the best even if you assume that we can't "comprehend" your situation.. I can assure you there are many Bsc's, Msc's and Phd's on the forum who comprehend your situation very well. You are voluntarily "stuck" in a caviar lifestyle and love everything about it and want to maybe do a bit of trimming.

Needless to say this is a forum where we encourage people to turn their spending lives around and get off the corporate treadmill and say goodbye to abusive bosses and 60 hour workweeks... Thats not where your at so you really shouldn't be surprised at responses that rub you the wrong way.

arebelspy

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #135 on: March 12, 2014, 06:21:29 PM »
Lastly, if I just wanted acceptance I would get a dog or just continue to hang out with sycophants who agree with my point of view.

No, typically a person who exhibits behavior similar to what you have shown needs the validation of changing someone's point of view - i.e. if you can get Mustachians to admit what you're doing is okay, then it's fine.  As long as you get a few, you can feel justified and you can dismiss the rest who "just don't get it."

We get it.

Spend what you'd like.

I hope you find happiness.
arebelspy - thanks for the comment

What 'behavior' have I shown?  Is it inflexible?

Did you read the other comments and replies?  Did you see the list of actionable items that would be addressed?  Do you already have an instinctual predilection to how you will respond to this comment?

You don't need to respond - I think it's interesting that you felt the compulsion to do so to my reply to someone else though.

Heh.  Best of luck.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

TheRedHead

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #136 on: March 12, 2014, 09:19:29 PM »

Pre-bonus season, it was really eye opening to see how many of my husband's coworkers were FREAKING OUT about their bonuses. It turns out they weren't living on their base pay and saving/investing/splurging their bonuses. Instead, like you, they'd built a lifestyle that necessitated a certain level of bonus income to keep the wheels on their life. On the other hand, when my husband's bonus was announced, I basically said, "oh, that's nice," paid off our student loans, and invested the difference. Our anxiety level is a lot lower. Finance is a very demanding career track, and your financial situation is almost certainly ramping up your stress level

I don't live in Fairfield County any more, and I don't play the NYC WASP status game. There's a reason for that. By the time I finished college, I found that more and more the aim was to continue achieving higher, higher, higher for no apparent reason. Get a promotion at work! Why? Not because you want more responsibility or more interesting/different work, but because then you show up your cohort! Get a high status hobby! Why? Not necessarily because you love playing squash, but because that's what you do. Acquire some really obvious status markers! Why? So everyone knows you're successful! It's very, very hard to break that emotional cycle, especially because, if you grow up in that world, all your friends are there too. It is incredibly difficult to leave that world, and the transition is going to be traumatic, whether you do it now, or when you FIRE in a decade on your current timeline. Leaving your spending and priorities aside, I'd start planning the transition now. I guarantee that plenty of your Ivy Leaguer classmates are not in finance (I know that, because I know a lot of them). I'd start by going to some college alumni functions (every Ivy holds them in the city) and seeing what your smart, motivated peers who aren't in finance are doing with themselves.

OMG - THIS!! Yes! I still can't believe that was my life for 10 years. Never been saner or happier since I left.

Cassie

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #137 on: March 12, 2014, 09:58:23 PM »
+1

HopetoFIRE

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #138 on: March 12, 2014, 10:43:01 PM »

Thanks for posting, WestchesterFrugal, and its wonderful that you are looking to reduce your living expenses in order to achieve FIRE.  I have to start off saying that I am a newer member myself and probably do not have the expertise for minimizing expenses like others here do.  I am also here in order to see how my family can further cut our expenses and maximizing our savings. 

I have to say that I was confused after taking a look at your financial assets/expenses initially.  Please correct me if I am wrong, but you pretty much have $1.1 M in home equity and $3.18M in other (mainly retirement) assets, assuming you'll be fully vested in the deferred compensation.  What got me confused was lumping the school and college expenses with your liabilities.  Most people will probably include that as part of their money/annual expenses since it doesn't make sense to me to include it the way you did since you can't withdraw from your retirement to pay for the educational expenses now.  So in reality, you are spending about $12k more than your stated budget per month, which would make sure monthly savings, outside of mortgage prepayment and 401k, close to zero.

Even then, your future nest egg and current net worth is still substantial and will be enough, for an average family.  However, with your expenses, it will be difficult.  I think the main thing for you to overcome is the "keeping up with the Jones" mentality.  I think it is unrealistic to think that once the kids leave the house you'll be able to drop that mentality just like that.  I won't pretend that I know what people spend on where you live, but I understand wanting to keep up with others.  My DH and I made a combined $507k last year.  Not as much as you, but not too shabby.  We are also in peer groups where there is an emphasis on driving nice cars, private schools, sometimes country club.  We live in a middle COL area, but a very nice gated neighborhood where home values are twice those that are outside the gate.  We have people living there who have more money than we do (partially because we are younger).  We have professional baseball/football players, execs of big companies, etc.  They all drive nice cars and have nice toys.  Believe me, it is hard to not buy into all of that.  Lucky for us, I could care less about what people think of us and our material possessions.  We belong to a country club (also full of people with money, but dues are about 1/8 of yours for our basic membership) and we love to travel.  However, our living expenses is at about $12k a month (about 60% is childcare costs, mortgages, and student loan, but i know, face punch) and we save about 60% of our net salary, not including $3k for mortgage prepayment monthly.  I have also started to watch our budget more and am thinking that I can save an additional $2-3k a month by being more careful with our spending.  Even with our kids leaving the nest, I can probably only drop to about $5k a month since I would still like to be able to travel.  It just seems amazing to me that you will be able to drop to 1/5 of your current spending in retirement.  If you would like to post your retirement expenses, I can compare to ours to see if there is something that you have forgotten ( our biggest expenses will be property taxes and healthcare costs).

As far as what your children learn regarding money, I think it is too easy to say they understand the value of money when their normal is so abnormal to so many people.  I can say this because I worry about my own as well.  We hardly get them toys, they go/will go to public charter school, etc.  however, their normal is living in a 4200 sq foot home in a gated community and going swimming in a country club pool.  Not very normal at all.  We tell them all the time how blessed they are because mommy and daddy and others do not grow up this way.  Hopefully, it will sink in.  When they get older, we hope to start volunteering with them.  I hope they won't grow up feeling entitled to these things. 

My biggest concern for you would be possible job loss or decrease in bonuses since you are relying on both your incomes and bonuses to sustain your lifestyle.  So, to answer your question, I don't think you can have it all and achieve early retirement goals, if having it all means your current lifestyle.  I hope you are able to find major places to cut spending (ie home maintenance costs, utilities, lawn maintenance, country club dues, grocery) and I look forward to seeing constructive comments here so that I can take the advice to apply to my own expenses as well.

Abe

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #139 on: March 12, 2014, 11:52:15 PM »

As far as what your children learn regarding money, I think it is too easy to say they understand the value of money when their normal is so abnormal to so many people.  I can say this because I worry about my own as well.  We hardly get them toys, they go/will go to public charter school, etc.  however, their normal is living in a 4200 sq foot home in a gated community and going swimming in a country club pool.  Not very normal at all.  We tell them all the time how blessed they are because mommy and daddy and others do not grow up this way.  Hopefully, it will sink in.  When they get older, we hope to start volunteering with them.  I hope they won't grow up feeling entitled to these things. 

My biggest concern for you would be possible job loss or decrease in bonuses since you are relying on both your incomes and bonuses to sustain your lifestyle.  So, to answer your question, I don't think you can have it all and achieve early retirement goals, if having it all means your current lifestyle. 

I agree strongly with your assessment, HopeToFIRE. I grew up in that lifestyle, as did generations of my family. I have come to enjoy being more frugal as an adult compared to how I grew up, partially through my parents' emphasis that the luxury we have can be fleeting. Though I'm sure my parents meant the best, it was confusing to have my parents telling me to do as they say, not as they act. Only after going to boarding school did I undergo the lifestyle "deflation" necessary to "have it all" but be on track to retire early.  Though my wife and my income (plus income from my parents' generous gifts) is significantly more than my parents', we have seen enough suffering amongst friends who chose high-risk/high-reward professions to value contingency planning. 

Our strategy is to live a lifestyle that can be supported if one of us were indefinitely out of work (this is not hard, as others have pointed out on this forum!). Though both of our jobs are very secure, we don't even use her income in our budget planning. If your baseline spending becomes such a small fraction of income, you can occasionally buy expensive things or do some expensive activity. The key point I want to make is certain things aren't "normal", but they can be fun if done in moderation.

For more concrete examples, we spend money if it will allow us more time with family and friends. Paying people to do laundry and clean the house, for example. We structured our lives to have the niceties we value, and eliminate those typically associated with families at our income level but we don't value. For this reason, we purposefully chose not to live in the fanciest part of town or go to country clubs. We can visit our friends over there, but that level of upkeep has too low a reward for us to value.
Examples-
Utilities: keep the heat on (being cold is not fun), but cut out cable tv (boring).
Lawncare: bought a house with very nice interior but a small lawn, replaced grass with a few nice trees and bushes.
Cars: drive a Honda because it drives just as well as my Lexus did. This may vary for you. As long as our patients do well, no one cares what we drive but it seems in business there's more expected?
Food: eat the same cheap but healthy food our ancestors ate for millennia. Go to restaurants if we feel like it, but not too fancy.
Entertainment: friends can be entertained at home, and for a lot less expensive than taking them out.

In the end, you must decide what the "all" that you want to have is. Planning for the future, see what you experiences and comforts are important to you, and what are extraneous. Some things we just had because that's how I grew up. Only after careful introspection did we realize they weren't worth the expense. It is your life to live, and not for neighbors, friends or co-workers to judge.

homehandymum

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #140 on: March 13, 2014, 12:01:35 AM »
So, to answer your question, I don't think you can have it all and achieve early retirement goals, if having it all means your current lifestyle.

Yes, this has been what has been rolling in the back of my mind all day.

If how you live now is defined as "having it all", then no.  But if you are able to re-define "having it all" then perhaps yes.

The other comment I've come back to this thread to make is this.  If I were to summarise your initial post, the way I read it was "These are our major expenses (big houses, one of which we have tried and failed to sell, private schools, country club, au pair, overseas travel).  Can we retire early?".
Quote
Our situation:
-   Dual income professionals with undergraduate and graduate degrees from "prestigious" universities (part of what is keeping us from becoming true Mustachians imo – see below)
-   2 young children, both in private school
-   2 homes, a primary residence and our former primary residence (in another town 50 mins away we moved from due to work related commutes) that we are currently renting out
-   2 additional members of our household: live-in help and an elderly (sick) parent
-   lots of expensive hobbies/toys/activities: country club membership, 3 cars, 2-3 vacations a year

So, when people replied, they were hitting your big expenses.  There is no sense dicking around with switching internet providers (for example) if you're spending 100k flying to the Alps to ski.  But every time someone makes a suggestion about those big ticket items, you simply state that they are off the table:  (again paraphrasing, forgive me if I have misunderstood.  The internet is a bugger for people reading exactly what you wrote, not what you mean to say :)  )

"The landscaping is mostly the house we can't sell", "Private schools are absolutely the best choice for us. Not negotiable."  "Already paid for country club, and we use it to play tennis and swim".  "Our au pair is part of the family".  "Can't move to a smaller house because we have an au pair." 


You have two choices - dick around the edges and save a still impressive amount; skip travelling for a year or two, and give up one or other of your expensive hobbies and you'll save more than many of us will retire on.

Or make some massive lifestyle shifts, and actually retire early - move south, switch industries, nerf the private school track, or similar adjustments.


happy

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #141 on: March 13, 2014, 01:00:03 AM »
This thread inspired me to try to find out what a "country club" is/does/what you do there. Wikipedia is not very flattering….

Simple Abundant Living

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #142 on: March 13, 2014, 01:46:03 AM »
I think this post hit a chord with people here because the ideal of MMM is freedom (from soul-draining work, debt, lifestyle, fashion, etc) and responsibility (to your own financial security, the environment, higher ideals, and your core values).

I personally don't feel like the OP has freedom, rather he is a slave to the obligations and expectations of his peer group.  I get the feeling that he puts value in the environment(owns a leaf and a LED collection), charitable work and donations (board of something and donations of 3% of his total salary). That shows some seed of responsibility.  But much is left to do.  And earning a high salary puts you under the microscope because of how much bigger your impact is for good or bad. 

I hope you will spend more time here. I think you may find it liberating to find a community who celebrates frugality, non-consumerism and green living.

MrsPete

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #143 on: March 13, 2014, 06:41:48 AM »
Hmmm . . . quite a lot of information.  As I see it, these are the real issues: 

Big Problem #1: You are earning a whale of a lot of money, but it's just passing through your hands -- you're not accumulating wealth.  You are the working rich.  You're rich, but if you stop working, in short order, you won't be rich any longer.  This is rather amazing to me because my husband and I earn a fraction of what you do, yet (excluding real estate) our net worth is more than twice yours -- almost three times.  Admittedly, we're about five years older, but that shouldn't be a significant factor. 

Big Problem #2: You are letting other people dictate how you "should" spend your money.  The car is a good example.  I know people who have a car they adore -- in this area, it might be a '65 Mustang -- a car that they've worked on, that they love to show off, that they take to car shows.  Those cars are huge priorities in their lives, and the people garner a great deal of enjoyment from driving them.  While I don't share that value, I can understand spending on a hobby.  In contrast, I hear you saying, "I drive an 85K car because it's what a person of my status is supposed to drive to the country club." I don't hear you saying that you're getting joy from the car, the two houses, etc., etc., etc. 

Big Problem #3: You've built a house of cards.  Because you're spending essentially all you're earning, it'd only take one big problem to ruin all you've built.  One job loss, one illness, and your savings won't sustain this lifestyle all that long.  And your jobs aren't the type that're easy to replace.  It's easy to say, "Oh, that'll never happen to me", but you can find examples all over the news about people who thought the same thing. 

Big Problem #4:  You're raising your kids to expect this type of lifestyle, something that they may or may not be able to sustain in the future.  I know, you said you expect them to pitch in and help with college, but what are they doing NOW?  You can't wait 'til they're young adults and expect them to suddenly start taking on responsibilities.  You start when they're little with taking out the garbage, then helping with the yardwork, then managing their own money in small ways.  I also think you're stretching the truth about teaching your kids:  I agree that a five-year old can understand that it's important to save, but I have trouble believing that your kids understood compound interest at five.  And unless they're idiots (very unlikely), they realize that they're not middle-class kids; they realize that most people don't have two houses and live-in help. 

My kids are 17 and 20, and, looking back, I am very glad that we purposefully chose to give them significantly less than we could have afforded.  When they want something, they either figure out how to earn the money, or they ask for it for their birthday /Christmas.  They share an old car.  They still don't have smart phones.  My girls are thrifty and resourceful, and they know how to fit into a variety of social situations.  They're comfortable at a 5-star oceanfront resort, and they're comfortable at a campground.  They know that we've saved money for them to attend college without debt, and they know that we own significant real estate, but they do not know just how much we have in investments.  They see themselves as middle class kids -- they have no clue that they have rich parents (not your kind of rich, but still rich . . . and sustainable). 


If I were in your shoes, I think I'd take these steps:

- Sell the second house, even if it's a break-even venture.  Get it off your plate.  Invest the money.
 
- Downsize the extravagant choices.  The car, the extra help, the country club.  Would your dinner invitations really stop if you drove up to the country club in a Camry?  If so, do you really want those people for friends?  Invest the money.  You'll be amazed at how fast the money will accumulate if you're not spending so lavishly. 

- Pick a lower-cost-of-living place to live.  You're highly influenced by your surroundings, and if you stay where you are, you're going to feel pressured to continue this lifestyle . . . and if you weren't averse to that, you wouldn't be posting.  So pick a spot where you can spend in a more healthy way. 

- While I didn't read every word of the posts, I have the impression your kids are probably in the 9-14 age range?  Pick a time when they'd be a reasonable age to make a move.  When will your oldest start high school?  That might be a good time to move.  Let him or her launch into a new school while everyone else is new too.  Or whatever works well for your family. 

- Balance your ideal spot and your ideal get-away timeslot with how much money you can accumulate between now and then, and be honest with yourself about how you'll spend. 

- As you're picking "the number" for how much you need to retire, do not neglect your children's educational costs.  Private school is not a need, but it may be a priority that you continue to fund.  Make some decisions on how much you need for each child. 

- I also wouldn't cut the vacations, though I would cut down on how much you're spending on them.  In your "retirement budget", plan for X number of trips each year, but make 50% of them budget vacations:  Rent a house at the beach.  Spend your days reading in the sun and playing board games with the family in the evenings. 



windawake

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #144 on: March 13, 2014, 07:41:09 AM »
If your kids are as bright and talented as you think they are, you could also "downsize" by getting a nice 3BR apartment in one of the non-trendy parts of Brooklyn or Queens with good public schools (Kew Gardens and Forest Hills come to mind) and making all your kids sit the entrance exams for Stuyvesant/Bronx Science, etc. when they're in 8th grade. At the worst case scenario, you can send them to the local very good public school. Remember that urban districts can often leverage their large size to allow resources suburban schools and most privates just can't.

At a minimum, moving into the city will let you ditch the country club, one car, many of the commuting costs, and landscaping. Sell the other house too. I'd find a building where you could buy a 3BR family apartment and rent something on the same street or even in the same building for the live-in and your elderly parent. You can tell all your Westchester friends that you just are bored with the slow paced suburban life and want the excitement of the city. Your commute should stay about the same. Then, when you're ready to FIRE, you have an apartment with reasonable carrying costs (your common charges will be less than your current property tax and that will include utilities and building staff), in one of the most exciting cities in the world, in the same region as your family and friends.

I really like this suggestion. But, then again, it's not my life. And I'm a city person at heart.

Mister Fancypants

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #145 on: March 13, 2014, 08:12:21 AM »
Mister FancyPants - that was quite a reply, both in detail and length!


I actually had to edit it down; I hit the 20,000 character limit of a post, never happened to me before.

Re Deferred compensation: the vesting is only relevant if one were to go to a competitor - in almost every other instance it would be delivered (other than termination for cause due to ethics).  You bring up an interesting point about solvency, however.  The financial institution is not a bank, we didn't receive government bailout funds during the crisis (in fact could argue our firm benefited from it), and, while I am not my employer's CFO, we estimate the risk of insolvency at close to 0% unless there were a Madoff-like fraud occurring.  Whether the co stock price holds up well in a market crash is another issue.  I can't cash it in or borrow from it, but it vests 25% each year so getting a large chunk next January, January 2016, January 2017, etc.


Regardless my only point is not count the chips until they are cashed, if 25% vests each year just count the amount that is vested, the companies keep throwing the RSU's at you to keep you from jumping ship, every year you get more so until you reach an action that gets you fully vested you leave something on the table.

One other note (which someone pointed out in a PM) that I should have mentioned: the income numbers are actually the average of the last 5yrs of our W-2s, so the actual earnings going forward will be higher since our combined base of $410k + [25% of existing deferred comp ($2.1mm)] + cash portion of future bonuses (from both jobs) will be > $850k listed as income.


This probably goes to the point that the way you listed your numbers was to cryptic, I kinda was able to read between the lines just from having the same type of pay structures that your actual income was probably higher but it was hard to discern.

Re Portfolio: Would agree that we are levered to financial markets due to deferred compensation structure as well as income and job security correlation to financial market performance.  The real estate exposure to NYC metro is also exposed to the market imo.  This is why we own no equities in other accounts!  These are risks that are very difficult to hedge (other than perhaps buying some put protection on a basket of competitors' stocks).  We don't have a problem being massively overweight real estate based on our view of the world.  Additionally, the bond fund we own has a duration of 2.6yrs.  Tons of dry powder in the event of a major correction in any asset class.  And I (conservatively) didn't include the 5% annual coupon from the $250k taxable account (preferred class of a real estate LLC) so that's another $12,500 annually one could theoretically add to 'Income'

Fair enough, the protective puts on a competitor as the deferred comp vest sounds like a smart hedge especially as you gain more deferred comp year by year, usually more comes in than vests unless they are switching to a higher cash component of bonuses firm wide.

Re Private school and college liabilities: Our children will both have graduated from high school by summer 2024.  I calculated the present value of the private school 'liability' by including all costs associated with the education (including a generous annual gift each year, which in an emergency would obviously go to $0) so the number is conservative.  As mentioned we expect our kids to meaningfully contribute to college costs so that figure is conservative as well.  I've already mentioned why we see the costs almost as 'debt', and we wanted to budget for it as a liability instead of a current expense that recurs annually because it would help us in our understanding of our true 'Net Worth' and the progress we are making toward FI.  It is much easier for us to say our 'adjusted, conservative' estimate of Net Worth is $442k, our number $X so we only have $X - $442k on an after-tax basis to go.  In a real pinch the college 'liability' approaches $0 as well.

Your $442k is still outlandishly low by any calculation considering your asset base and income, I would think you would make major adjustments before you actually wound up with a number that low, so as it might seem conservative to use that figure, it is not realistic in planning. I am constantly adjusting projections and recalculating things to adjust for changes in my situation, I think you need to reel in your projections to what you would do in more short term situations and how things would project outward from there based on those changes which would give you a more realistic outlook of the further out future in a whatif scenario.

Like you said if things keep on going you really have no problems, you are only planning for the whatif's.

Re Cash management and other liabilities: as mentioned before the retirement accounts are split between cash/equivalents and private real estate deals.  The accounts with cash used to be 100% in stocks, and we've been selling on the way up and are now completely out of stocks (as of end of last year).  In the disaster scenario we could either borrow (from 401k) if liquidity is needed.  The finance job base salary is actually a little lower than the other job (but with a bigger bonus), so if that were to go away (and never come back ever, although this seems highly unlikely) the hit would not be as dire from a monthly liquidity perspective as mentioned.  We both have disability and term life via our employers which would pay 60% of base salaries (indefinitely) in the event of disability and multi millions in the event of death.  In the crisis scenario we would also envision cutting expenses that weren't true *needs*, and the club we are members of actually allowed special dispensation for members to take leaves of absence without any penalty (other than embarassment?) during the last crisis and the policy remains.  The HELOC is on the rental property (we don't owe much on the mortgage for it) and theoretically we could open another for the primary residence as a backup (should probably do that now while times are good rather than after it's too late).

Verify the disability policies fine print are really for life (65) and not just not able to do your own job. Most employers only pay for disability insurance that covers employees being disabled from performing their current job not any gainful employment. What this means is for the first 2 years you get 60%, afterwards it is at the insurance companies doctors determination if you can have any gainful employment they can stop paying. When you buy personal disability insurance you will usually buy it to cover any employment until 65, it cost more, most employers don't do this as they don't want the liability. Ask HR or the carrier they can provide you with the policy details.

I would absolutely do the HELOC on the primary residence if you mortgage rate is 4.65%, you can probably shave at least half a point off of that on a few hundred grand and get another few hundred grand liquidity. That will save you a few grand a month in interest which can be put towards the education expenses. That’s a homerun and probably the most Mustachain thing you can do, (except maybe mow your own lawn said tongue and check). If you are interested in the HELOC I know and excellent local broker PM for the details, if you don;t already have someone

I'm sorry to hear about your experience at LEH - it was really a horrible time for so many people, especially the ones who were over leveraged (I know quite a few with a couple of really bad stories of overextended acquaintances at the club).  I do think that the likelihood of such a collapse happening again is slim, given increased regulations and capital requirements and human nature learning from the past (and perhaps overcompensating).  Hopefully this clarifies our financial situation - appreciate you digging into the details and the advice.

I loved LEH, it was a great company whose executives waited too long to see it was in trouble, I unloaded all of my stock as it was going to down, I took losses, but it could have been worse. I did have RSU's but like I said I never counted un-vested RSU's so that didn't really impact me, it sucked, but it happens.

So my experience personally was of great memories and sadness to see it go down, I have friends who were buying the stock all the way down and didn't see the writing on the wall. Others who had all their equity in the firm, things haven’t so good for them, some have rebounded others have not.

I disagree with you on it being a slim chance of something bad happening again, as everyone missed the mark on the underlying causes. Too big to fail has just gotten bigger and the new regulations and capital requirements haven't really done anything to reel the greed on the street or in Washington. I for one will also blame Main Street but no one wants to say that. This conversation is way off topic and we could discuss in great lengths in another thread or PM if you are interested.

That being said, I do agree that in all likelihood I don't imagine the financial system being on the brink again in the next 6 to 30 months... Beyond that is probably too far out to forecast.

As far as the details and advice, you are quiet welcome I have enjoyed this thread very much. I actually find it somewhat ironic, I don't quite fit into this Mustachian world as I am by no means the epitome of frugality, I'm green when it’s convenient, I don't ride a bike and I am very much a consumer and do the expensive vacations etc. etc... On the other hand I don't live in your world either, my income is a little under half of yours but my net worth is within a million bucks, my assets and net worth are only off by my mortgage. I'm a public school type of guy and I very rarely go with friends to their country clubs even though I live right next to one. But I fit into your world a lot more than I fit into Mustachianism, but also not quite...

MrsPete

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #146 on: March 13, 2014, 08:29:49 AM »
You are correct that a lot of it is passing through our hands.  Some of it our own fault (luxuries that we can address and cut), a lot of it not (taxes).

Taxes -- if only we had the answer to that one. 

I am amazed if you have amassed >$6mm in your early 40s with a fraction of our income.  How did you do it?

I'm looking at the 4xxK number you used early on.  As I said, I'm excluding real estate -- I'd bet I own exponentially more acres, but yours is worth more dollars.   

I don't agree with your comment that one big problem will ruin it all.  You are assuming that there would be no response to a significant life event, which is madness.  Some examples: the elderly grandparent could be sent to live with her other child 30 miles away; the live-in is no longer needed; club membership goes on hold; material possessions (there are quite a few and worth quite a bit) are sold.

Thing is, we've all heard multiple stories of people who "had it all", experienced a downturn, but didn't adjust their lifestyle.  I agree it's madness, but it seems to be pretty common. 

I can definitely relate to the elderly grandparent.  We were in such a situation until last July, and I don't regret a single penny we spent caring for her.  We had lunch delivered every day, and she had a home health nurse who came in twice a week . . . but we did an awful lot of work caring for her.  It was both a pleasure and an obligation, and I miss her terribly. 


Our kids do chores, and they get a small allowance of which they save half (long-term), give away a tenth, and budget the rest for things that they really want.

Good!  I hadn't picked up on that from the posts, but it is tremendously important. 

And you are wrong - both of our children knew about compound interest by their sixth birthday (as an outside date).  You would also probably be surprised that, while only in elementary school, they can already read simple corporate balance sheets and income statements - kids are pretty interested in what their parents do for a living.

I agree that they'd grasp that the bank pays you interest for keeping your money, but compound interest is pretty complicated for a kid whose brain would still be in the stage of concrete operations and who, in school, is still learning addition and subtraction.  Perhaps you mean "are aware of this", while I mean "understand it and can calculate it and make educated decisions about it". 

onsideration is also whether we really want to stop working before our kids leave for college.  We can't quit tomorrow or even the next few years, but theoretically if we made major changes would could while they are in high school.  But would we want to, and if so how would it affect them to see their parents living the early retirement lifestyle at a time when they will be extremely busy and probably stressed out (the typical life of a high school student these days)?

I wouldn't make your decision based upon this idea.  I have a college student and a high school student, and they're not particularly stressed, even for tests, the SAT, etc.  My oldest chose her career when she was a toddler and hasn't waivered, whereas my youngest has worried about how to best use her talents, but she and I are working on finding volunteer experiences and shadowing opportunities to let her see her options for herself. 

Of course, I might not have the best handle on that topic.  I don't "do stress", and my kids are like me.  We believe in advanced preparation and hard work, which reduces stress.  The only stressful event I can think of from the last year is my grandmother's death.  She was very, very sick for three weeks, and we moved heaven and earth to get her to doctor appointments and make  her comfortable -- even though we all knew exactly what was going to happen.  She was 100 years old, after all.

Finally, city person vs. non-city person at heart . . . you are what you are.  You're looking for a lifestyle change, a money make-over, but be honest with yourself about where you really want to live and what you can/can't do without.  The city /non-city thing is one example.  If you try to fit yourself into a mold that "isn't you", it isn't going to work.  So I'll end with good advice from Shakespeare:  To thine own self be true.   

« Last Edit: March 13, 2014, 08:32:55 AM by MrsPete »

Daleth

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #147 on: March 13, 2014, 08:39:56 AM »
The reality is I'm not concerned about their financial future or how they value 'things or experiences' - I am actually hoping that by the time they are adults a lot of the things we read on this blog will become second nature to them, and they will be able to choose how they want to live by the time they are our age via financial independence.

So, you're shooting to give them a very different life lesson than they would get if you continue in your current trajectory. IOW nothing about how you've been living up to now is likely to teach them what you want to teach them. Which, I guess, is why you want to change. Overall it sounds to me like your personal values are not reflected in your life. It feels like for a while your personal cruise control was set to "doing what we do because it's what people [in my social group] do," as opposed to "because it means something to me." And now you want to turn off the cruise control... for which I salute you.

My first question about expenses is why you're bothering to rent out a house that brings you approximately $0 after expenses. Shouldn't you aim to sell that, ideally soon, before interest rates start creeping back up? What's the point of keeping it?

My second question is why you would want to keep living more or less as you are until the kids are in college. While they're at home is the one time in your lives that you can really shape their characters and destinies. As food for thought, I offer you a few links about this family:

http://www.bainbridgereview.com/news/27542469.html
"On Thursday, islanders Behan and Jamie Gifford sailed their 47-foot sloop Totem out of Eagle Harbor with no clear notion of when they will return.

Soon to be joined with their children – Niall, 9, Mairen, 6, and Siobhan, 4 – the Giffords will spend the next several years sailing the Pacific. Their itinerary is purposefully vague.

“As long as we’re all having a really good time, and we can afford it, we’ll keep going,” Behan said."

FYI, that was in 2008, and they're still doing it. Their kids have spent the last half-decade living at sea and in several foreign countries, first world and otherwise. Here's their blog:
http://sv-totem.blogspot.com/





« Last Edit: March 13, 2014, 08:45:23 AM by Daleth »

crazyworld

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #148 on: March 13, 2014, 09:38:36 AM »
Long time lurker here; registered to reply since I found this very interesting.  We are no way in the same income & net worth league as you West (~200K annual income); we both have higher ed & professional degrees.  I am curious though what you want to change anything for?  You are doing really well and are in a position that many would love to be.  There is not one right way to live life, is there?  If the jobs are great, friends are great, kids are doing great, then what problem are you trying to solve?  You are in finance, so you already know assets and investments and can run the numbers.  I also disagree with changing the kids school.  While I am personally not in favor of private schooling, the fact is your kids like their's and have established friends there.  A little harsh to change it all up now, so you can retire early from jobs that you find fulfilling.

Also, can't help myself here =)  taxes: how can america be the great place it is w/o all of us higher earners chipping in?  Since I grew up in a third world country, I know what happens when a nation can't pay its bills.  Barely any law and order, dirty air, potholed roads, denuded mountains, polluted rivers and beaches, corruption, no reliable emergency services - medical/fire/coast guard - I could go on and on.  Really, all that stuff takes money.  Yes it hurts to pay so much, yes there is waste.  There were a few fabulous rich around when I grew up, and they lived in their giant mansions in a bubble as much as they could.  They could buy the best education, security for themselves, even medical care, but air & water and natural beauty can't really be bought with private money. 

WageSlave

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Re: Reader Case Study: Can We Have It All But Still Retire Early?
« Reply #149 on: March 13, 2014, 09:44:38 AM »
Re poor reading comprehension: can you really scrutinize my total spending over the last 12m if I started reading the blog 4m ago?  Doesn't seem like a fair comparison.  I am simply pointing out that a significant % of the comments either didn't read the original post thoroughly or didn't read any of the comments.  Is it too much to ask for people who comment(multiple times) to do so?

I wasn't scrutinizing your spending, I was scrutinizing the approach you took in your original post, and the attitude that persists in all the follow-ups.  I'm saying (1) your case is wildly atypical, and (2) your presentation doesn't follow established norms.  And despite these facts (which should be glaringly obvious to anyone who's "read all the articles") you're insulting the reading comprehension skills of a community that is trying to help you.

You admit yourself that there is no right or wrong way to expose numbers so I will leave it at that.

There is no right or wrong, but again, why not throw everyone a bone and follow established conventions?

You're taking your broken Chevy to the Ford mechanic, and stamping your feet in frustration when he doesn't magically have all the answers right off the top of his head or repeats some of his questions, all the while neglecting the fact that he's never even seen your model before, let alone the problem.

I agree with you wrt humility - we could all use more.  I do get a little annoyed by haters (complainypants?) who scrutinize the most minute things that are different from their own specific view of the world.

Well, I guess we'll have to agree to disagree that driving an $85k car to an ultra-exclusive country club, top 3% or better income, a professionally managed six acre yard, and crazy-expensive private schools and an au pair are minute details.