The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: doyouknowwhy on December 26, 2013, 05:52:27 PM
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Hi,
A bit about me if possible for FIRE by 54. Married 44 (spouse 50)
with 2 kids (10,12). Annual combined income 200k. We save about
25% total per year in wife's 401k and my SEP-IRA
Assets:
1. 401k/IRAs/Roths/SEP-IRA/HSA: 960k
2. SFH rental. Market value about 500k
3. Taxable brokerage account: 200k
4. Main SFH home. Market value 750k
5. Inheritance in trust (equities/bonds): 500k
Liabilities:
1. Mortgage on rental: 220k
2. Mortgage on primary: 380k
Expenses monthly: about 9k-10k
College expenses are not of concern as my wife's work will cover
up to 40k per year per child (that is also indexed).
We would have to cover insurance for about 10 years, but I didn't count
that as kids will be out of private schools by then.
Am I missing anything??
Thanks
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Holy shit, dude, cut those expenses down and retire yesterday.
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From the numbers, you are very financially fit. Does your wife need to keep working for the college benefit? If so, Can you retire as a step towards FIRE? Are you choosing to continue working given the level of assets you have? Have you run your #s thru a calculator like Firecalc? That exercise can be very helpful. Looks like you are in great shape overall and on the right track.
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Hi,
Thanks for feedback. Yes, my wife would need to continue to work at her job in order to receive the college benefit.
I've used firecalc before and played around with some values/variables and it always comes back 90%+ success rate.
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Holy shit, dude, cut those expenses down and retire yesterday.
+1
Wow, that's a crazy amount of money for monthly expenses. Any interest in breaking out the expenses so we can actually try to give you some ideas on cutting that down?
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That initial value (9-10k) incorrect. Here's monthly expenses. Seems closer to 7k:
Mortgage 1850
Property Tax 800
Homeowners Ins 150
Cable 110
Cell 200
Garbage 30
Water 100
PGE 150
Car insurance 150
Gas 400
Food 600
Life insurance 40
Disability 40
Gardener 85
Internet 55
Miscellaneous 1000
Gifts 50
Sports 50
clothes 100
Tuition 1000
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Cable, cell, water, PGE, car insurance (!), gas, clothes, disability, homeowner's and life insurance all seem high. So does "miscellaneous." That's neglecting things that look like ingrained lifestyle choices like tuition and the gardener.
You have enormous assets. Strongly consider dropping all insurance except (1) a high-deductible homeowner's plan, (2) a high-deductible liability-only auto plan, (3) umbrella. (Add the last if you don't have it yet.) You're going to leave your wife and kid about $2.5m in assets if you pass or become disabled. That's a big policy that you've already paid for through labor. I have a more expensive home than you in a flood zone and two cars. I spend about as much on all insurance combined as you're spending on your car insurance alone. High deductibles are your friends. EDIT: I just realized that you're probably paying a lot more than I in part because of the rental. There are still some adjustments that could certainly be made.
It looks weird to me to have $1k/yr in "misc" with explicit line-items for gifts, sports, clothes, the gardener, et cetera. I guess that leaves vacations, home repairs, and furnishings? What is "misc"? Add in gas, and I suspect your house is costing you way more than it looks like at first glance. Can you move in 8 years when your kids are out of college?
I ask because my personal plan looks sort of like this: a) get my assets about where yours are at and maybe FIRE (or maybe not), b) allow housing expenses (direct and indirect) to remain high and therefor bleed assets until the kids are out of the house, c) move the hell out of our high COL area, freeing up equity for investment and reducing costs sharply, bringing assets and expenses into balance. Would something like that work for you? Run some simulations to figure out what happens when your home equity is freed up, and you're living in a place that's optimized for your post-retirement needs. The fact that you're paying a gardener strongly suggests you don't really enjoy as much property as you have, and could benefit from shedding some.
If having cable is worth amassing $33,000 (4% SWR) to fund it, then you should. I'd strongly recommend cutting it for three months anyway. If you find you can't live without it, just buy it again. If you find you don't miss it all that much, you can just put $33,000 in your pocket. I'll tell you where to send my cut later.
Cell phone bill is really high. Recommend checking out the superthread. It should be easy to take a big bite out of that. $100/mo for clothes is also simply high.
ETA: what kinds of cars are you driving? Could you swap either out for much higher MPG options?