Author Topic: Reader Case Study: How quick can we get there?  (Read 5367 times)

sustainlifeblog

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Reader Case Study: How quick can we get there?
« on: February 18, 2014, 09:59:46 AM »
Income: Both my wife and I work regular 9-5 jobs at the moment, and earned ~105k in 2013. I also run a small side business that has profits of ~5-6k/year. I'm 28, and she's 32.
1 child, girl, 1 week old.

Current expenses:
Mortgage (15 yr, ~111k balance @ 3.375) 1100/mo.
Student loan (5,800 left, min 150/mo) 400/mo. (Plan is to pay this off by the end of the year)
No Other Debt.
cell phones (2) 50/mo (republic)
Gym 44/mo - Covers both of us, but seriously considering getting a weight rack for the house.
lights/gas avg, 80/mo, but can go as low as 50 and as high as 120
Trash/sewer/water - 45/mo - this probably wont get much lower, ever.
gas - 250/mo - Probably high for us (I walk to work every day and my wife's commute is ~5mi). Should start to get lower as we get in the habit of biking/walking more.
Food 708/mo, broken down like:
  • groceries: 375/mo
  • resturants: 175/mo
  • bars/booze: 83/mo
  • fast food/coffee shops: 100/mo
Netflix: 17
Car Insurance: 150/mo (2 cars, 1 2010 ford ranger, 1 2011 nissan rogue)
House projects/stuff: 1k/mo (avg, expect this to go down as 80% of stuff is now done)
Savings Contributions: 1000/mo
Retirement Contributions 500/mo - low because we both will have pensions (hopefully)

Retirement contributions are low for now, we've been focused on updating our house and paying off debt.

Avg Monthly Expenses (From 2013): 6036, but includes savings/retirement.


Assets:
Primary home - conservative value of 220k.
Roth IRA - 8000
Brokerage account: 1k
Money Market - 20k
Savings/Cash - 14,500
403b 1,000 - contribute 1500/year

Liabilities: Amount - rate - description
111k - 3.375 - house loan
5500 - 6% - student loan.

Total: 116,500

Specific Question(s): Looking to reach FI as soon as possible. Our expenses have been high over the last 18 months because we bought a pretty drab/beat up property in a good neighborhood at a low cost, and have sunk quite a bit of time/money into making it something that looks like and would sell for much more than we bought it (150k - apr 2013).
I know that our food spending is high (and I realize it's much higher than it should be). Probably need some tips on how to stay at home and eat when facing a time crunch at night (yes, we have a crock pot, yes we use about 1-2x/wk).

So, mustacians, where can we cut and start investing in the proceeds?

I've toyed with the idea of pulling some equity out of the house and purchasing a rental property, but it's not exactly a great time (just had a kid). The rental market in our area is totally whack (you can buy a house for 115k, rent it for 850-900/mo) because of a military installation.

Thoughts? Places to cut (besides food, gas)?


« Last Edit: February 18, 2014, 11:42:13 AM by sustainlifeblog »

mom2_3Hs

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Re: Reader Case Study: How quick can we get there?
« Reply #1 on: February 18, 2014, 10:16:07 AM »
You have a one week old...you need to budget in either one of you staying at home or childcare, which will run you somewhere between $500-2K/mo, depending on what you do.  The question is, do you both want to stay in the 9-5 gig and get to FI faster, or one of you stay home with your mini-mustachian and take a slower route?  Personally DH and I have taken the slower route so we can enjoy NOW with our kids.

Otherwise, the standard cook more at home, pay off the school loan, then either invest (in the market or a rental) or pay off your mortgage.

matchewed

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Re: Reader Case Study: How quick can we get there?
« Reply #2 on: February 18, 2014, 10:32:05 AM »
Seems to me you already know where you're weak and where you're fine. Act on those and you should start seeing your savings ramp up. Perhaps do searches for recipes, use the slow cooker more, freeze meals for future use, punch yourself in the face for the fast food and restaurants (you've got a kid now time to show a good example regardless of age)...etc. Reduce your driving (where are you driving to that requires that much gas, it's not work).

Exflyboy

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Re: Reader Case Study: How quick can we get there?
« Reply #3 on: February 18, 2014, 10:42:32 AM »
Yes food is way high ( coffee shops add up fast) as is gas.. How much are you driving?


Can you cut down to 1 vehicle and ride a bike?

I agree build a squat/ press rack at home. I built one form Unistrut and was safely squatting 300+ lbs with it in my younger days.

Frank


nereo

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Re: Reader Case Study: How quick can we get there?
« Reply #4 on: February 18, 2014, 10:57:35 AM »
a few suggestions....
sell one (or both) of your cars and pay off the 6% student loan.  If you sell both get something older, cheaper, and with better fuel economy.

Besides the crock-pot strategy (which I love) I've come realize my freezer is my friend.  There's a lot of meals you can make and freeze.  Soups without dairy are one good example.  Lasagnas are another.  Doubling a recipe adds just a miniscule amount of extra time, and you save a bundle in time and energy in the long run.

Also, instead of "going out" we've poured our energy into making a fancier meal once a week. Cut your restaurant budget to one $50 meal a month.  Find a cuisine you like (we're on authentic Cantonese right now), get a good cookbook out of the library and go from there.

Why does trash cost $45/month?  what about bi-weekly trips to the dump instead?

hopefully you will recover all the costs you've put towards upgrading your home.  If the rental market is that far out of whack, I would look into moving to an entirely new place and renting out your current home for 150%+ of your monthly mortgage. 


rocksinmyhead

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Re: Reader Case Study: How quick can we get there?
« Reply #5 on: February 18, 2014, 11:20:00 AM »
Besides the crock-pot strategy (which I love) I've come realize my freezer is my friend.  There's a lot of meals you can make and freeze.  Soups without dairy are one good example.  Lasagnas are another.  Doubling a recipe adds just a miniscule amount of extra time, and you save a bundle in time and energy in the long run.

agreed, I freeze SO much stuff! this would probably help a lot with reducing fast food spending.

sustainlifeblog

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Re: Reader Case Study: How quick can we get there?
« Reply #6 on: February 18, 2014, 11:43:41 AM »
Yes food is way high ( coffee shops add up fast) as is gas.. How much are you driving?


Can you cut down to 1 vehicle and ride a bike?

I agree build a squat/ press rack at home. I built one form Unistrut and was safely squatting 300+ lbs with it in my younger days.

Frank

There's not really a point in cutting down to 1 vehicle. the truck just sits in the driveway all day, and is used about 1x/mo haul construction stuff. I've tried to get my wife to ride a bike, but I just think she's really not into it at all. I'll keep working though.

As for the squat rack - do you have any designs/plans for that?

4alpacas

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Re: Reader Case Study: How quick can we get there?
« Reply #7 on: February 18, 2014, 11:55:01 AM »
Besides the crock-pot strategy (which I love) I've come realize my freezer is my friend.  There's a lot of meals you can make and freeze.  Soups without dairy are one good example.  Lasagnas are another.  Doubling a recipe adds just a miniscule amount of extra time, and you save a bundle in time and energy in the long run.

agreed, I freeze SO much stuff! this would probably help a lot with reducing fast food spending.
+2 on the freezing! 

I'm not great at starting the crock pot in the morning, so I just cook double recipes on the weekends (and reheat during the week).  My favorite lazy item is the quesadilla (http://www.budgetbytes.com/2012/02/hearty-black-bean-quesadillas/).  I make a huge batch, toss a few/quart freezer bag.  No need to even defrost.  It's comfort food at its best.  We've cut out our lazy night Chipotle runs.  Frozen pizzas (not super mustachian, but less expensive than delivery) have cut out our pizza ordering completely. 

Switching to eating at home is easy when you have quick options around.  It takes so much less energy to throw something in the microwave than to order delivery/take-out. 

Catbert

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Re: Reader Case Study: How quick can we get there?
« Reply #8 on: February 18, 2014, 12:01:05 PM »
Come up with a couple of simple meals that have limited/flexible ingredients.  What those are may depend on what you like to eat.

If you have eggs you can always make a frittata with whatever else you have. 
If you have dried pasta you can make a sauce in in the time it takes to boil water and cook pasta.  In addition to tomato sauce (canned tomatoes, onion, garlic, spices) you can make tuna pasta (canned tuna, olives) or olive oil, wine or lemon juice, garlic and something or just plain olive oil and garlic.

nereo

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Re: Reader Case Study: How quick can we get there?
« Reply #9 on: February 18, 2014, 12:09:28 PM »

There's not really a point in cutting down to 1 vehicle. the truck just sits in the driveway all day, and is used about 1x/mo haul construction stuff. I've tried to get my wife to ride a bike, but I just think she's really not into it at all. I'll keep working though.

How about this for a "good point in cutting down to 1 vehicle":  you can take the money you get from the sale and probably completely wipe out your 6% student loan plus have some $ to fund your IRA for 2014.  If it  just "sits in the driveway all day" it isn't doing anything.  It costs money (thru depreciation, and because you have to have some insurance + taxes paid on it).    I just fudged some numbers for a 2010 Ranger and the KBB value in my area for a moderately used version was about $11k.  Every year its value will decrease, even if you don't drive it. 
If you discover later you really need another car, you can buy a slightly older version and still save a few thousand$.



MissStache

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Re: Reader Case Study: How quick can we get there?
« Reply #10 on: February 19, 2014, 07:12:19 AM »
Yes food is way high ( coffee shops add up fast) as is gas.. How much are you driving?


Can you cut down to 1 vehicle and ride a bike?

I agree build a squat/ press rack at home. I built one form Unistrut and was safely squatting 300+ lbs with it in my younger days.

Frank

There's not really a point in cutting down to 1 vehicle. the truck just sits in the driveway all day, and is used about 1x/mo haul construction stuff. I've tried to get my wife to ride a bike, but I just think she's really not into it at all. I'll keep working though.

As for the squat rack - do you have any designs/plans for that?

I don't understand this!  It sounds like this is the EXACT reason to cut down to 1 vehicle!  Not only do you have valuable asset (that is rapidily depreciating) that could be much better put to something else, but your insurance payments are really high.  $150/month is crazy.  And why do you need another vehicle to haul construction stuff- you have a Rogue!  That will certainly get the job done.

Sell the truck, pay off your student loan in one fell swoop, and invest the rest. 

You're doing really well otherwise (except for your food budget, but you know that), so I know you are capable of plucking the low-hanging fruit.  DO IT!


smalllife

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Re: Reader Case Study: How quick can we get there?
« Reply #11 on: February 19, 2014, 07:24:13 AM »
Why does trash cost $45/month?  what about bi-weekly trips to the dump instead?

Might not be an option - I HAVE to have sewage/waste disposal through my city (taking bags to the dump not an option, although you can do that on top of the trash can pick up.  If you have water, you are required to have sewage) and they only have a one size fits all service.  No competition in the city, so no other options.  Combined with the base water/gas hook up charges and it's $70/month minimum.

SunshineGirl

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Re: Reader Case Study: How quick can we get there?
« Reply #12 on: February 19, 2014, 09:05:01 AM »
Congratulations on your new baby!

You were very, very wise to get a 15-year mortgage - it'll be paid off when you're about 40, which is great! Personally, I would not tap that to buy a rental property, even though your rental situation is intriguing. You're going to have a wild and crazy year with a new baby, anyway, and there's a real upside to keeping things simple for a while.

You'll probably find yourself staying in more with a wee one, unless you have free childcare in the form of grandparents, so your eating out expenses could decline naturally. I'd make a rule of no fast food, ever, because no good can come of it.

I think you're doing well, and I think you can easily pinpoint ways to save more money. Trying to secure raises could be beneficial, as could building that side business of yours.

Johnny Aloha

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Re: Reader Case Study: How quick can we get there?
« Reply #13 on: February 19, 2014, 11:03:54 AM »
First, with a one week old, don't make any huge changes right now.  Just enjoy (or try to survive!) this brand new experience.  Time flies.

Second, you should think twice about buying a rental in your area.  $115k purchase price for $900/month rent is not very attractive, unless there is a decent chance for appreciation.  Even if you self-manage your returns won't be great, and it would be much easier to get the same returns with a low cost index fund.  If you don't know why I'm saying this, start reading about RE investing (check out the thread in this forum).

Congrats on the baby!

soccerluvof4

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Re: Reader Case Study: How quick can we get there?
« Reply #14 on: February 20, 2014, 06:27:56 AM »
I agree, sell your truck and pay off your student loan #1. If you must have a car and you can get 11k for your truck you could get a descent vehicle for the difference.  There are tons of ideas on threads about saving food costs. Buying items in bulk and your meats when on sale and freezing and alot of healthy crock pot meals are methods we use with 4 kids.