Reader Case Study – How far til FIRE??

[New Stacher]

Hello everyone! Very new Mustachian here. Been lurking for only a couple of weeks; wish I found this site earlier! I’m 38, single, mom lives with me. I would like to achieve FIRE in 5-7 yrs!

Income: Annual Gross: $130k + 20k bonus
Monthly: Gross: 10890; Net after taxes: $7825

Current monthly expenses:
Rent: $1400 (Junior 1BR in SF Bay area)
Food: $450 (Groceries + Eat out)
Car Insurance/gas: $105+ $110 = $225
Cellphone: $140 (2 lines)
Insurance: Health/Life/Vision/Dental/HSA/FSA: $479 (no more FSA next year)
Timeshare Maint: $50
Misc (household supplies/entertainmt, clothes, gifts, etc): $400
Parcel of land (in home country): $840 (Owner-financed, 0%); will finish by 8/2016
Hair on Fire Payment: Car: $440 (2.29%, $15913 balance)
Charity: $525 (10% of net paycheck)
Vacation: $550 (I go to my home country every year. Airfare $1500/Vacation Exp: $5000 – I pay for 6 for our family)
Total: $5499

Assets:
401k - $174k; now contributing 14% to max out + 6% from company so 20% total
Investmt acct - $10k
ROTH IRA - $1500 (just started)
Savings - $18k
1BR condo unit in my home country (paid), worth $85k – siblings staying there, so no incoming $
1700sqft parcel of land in my home country (paid), worth $15k
10500sqft parcel of land in my home country (still paying, balance $15287), worth $50k

Liabilities:
As mentioned above: Car: $440 (2.29%, $15913 balance). Mustachian Plan: payoff by end of year!!
Parcel of land (in home country): $840 (Owner-financed, 0%); will finish by 8/2016

Questions:
1. Immediate Plans: Buy a rental home in Lake Tahoe (with 5 other friends), $15k each outlay; $200 monthly (if needed, no rentals). When it’s rented at 25%, we’re looking at getting $200 each in income per month. Great, good, or bad idea?
2. Future plans: When “retired,” build a small B&B on the 10500sqft parcel of land. It’s located a mile or so away from a popular beach destination in my home country, so I want to manage it. My sister, who is an architect, did the costing and it’s at $108k at current prices. Question: should we build it as soon as we have funds for it (my sis will manage first) or later when I’m ready to move back?
3. How to achieve FIRE in 5-7yrs?? I want to spend half a year here, half a year in my home country.

[mozar]

So you're saying you plan to save 3k a month and you spend 50k a year (starting 8/2016). 50k*25= 1.25m to retire. 3k a month is 420k in 5 years.
http://www.investor.gov/tools/calculators/compound-interest-calculator


Sounds like you are excited about property but if you want to retire, you need to step back and think about your priorities.

[Retired To Win]

So you're saying you plan to save 3k a month and you spend 50k a year (starting 8/2016). 50k*25= 1.25m to retire. 3k a month is 420k in 5 years...
http://www.investor.gov/tools/calculators/compound-interest-calculator

To expand on Mozar's point:

At your present savings rate of approximately $36,000 a year, in 6 years you will have roughly  between $800K and $900K when you factor in your present holdings, future 401K contributions, after-tax surplus cash flow (if invested) and moderate growth in the value of your investments.  At a 4% safe withdrawal rate, that pot will yield you between $32,000 and $36,000 a year.  Which means that, to retire when you are wanting to, you need to reduce your expenses by at least $20,000 a year from the current $56,000.

The good news is that you could EASILY do that by either (1) moving to your paid-for apartment in your home country when you retire and thus eliminating $17,000 a year in SF Bay rent, or (2) exchanging your car payment for an older paid-for car and learning to "fund" your vacations with hacked credit card travel rewards... or (3) both.

Good luck!

[justajane]

You have a great income but seem to have a lot of balls in the air at once. I would really sit down and figure out how you want your life to look in retirement. Not just 6 months here and 6 months there, but how much management of properties you want to do. In many respects, I think it's risky to buy property with friends, so I might skip on that investment and instead throw that money into a taxable investment account. The B&B idea is intriguing but you really need solid numbers on that.

Good luck!

[New Stacher]

I think you're right, justajane...there are a lot of stuff in the air right now, and I can't figure out where to go. I guess that's also why I'm looking for advice. I'm planning to trim down the monthly expenses to adapt to the Mustachian way of life -- start walking my 1.5 mi to work instead of being a car clown, and get out of the middle class drone life I've been living for years!

Thank you as well, Mozar & RetiredToWin, unfortunately I've purchased these props before I've learned about these other great vehicles for investment, and can't get them off my back for now. Maybe the 36k/year expense is something to shoot for even now to accelerate my path to retirement...

[waltworks]

Don't buy anything more, especially with your friends. Especially with your family.

Cut your costs.

Sit tight.

Very soon, you are done.

-W

[Catbert]

Yeah, what everyone else said about buying real estate with friends.  It's a great way to lose between 1 and 5 friends. 

I assume that supporting your mother, letting relatives live free in your home country condo and paying airfare for relatives is your culture so I'll leave that alone.  You might look at CC churning to get points for some of the airfare.  There are lots of blogs out there devoted to this.  If it's of interest try www.frugaltravelguy.com or www.clubthrify.com for more information.

I agree with others you need to slow down and not move in so many directions.