Hey guys - long time listener, first time caller!
No, but seriously, I have been ruminating on this for a couple months. It's a long one, so kudos if you can get all the way through. Any and all advice is welcome!
Situation: Male, 24, Married (Wife is 24 and still working on her Bachelor's - 1.5 years left) with one child (9 months old). Live in South-Central PA
Gross Salary/Wages: $60,000, with a likely 2%-3% increase come March
Pre-tax deductions:
-401k: Through Vanguard, 6% Contribution (~$280/month) with a 4.25% employer match
-HSA: $10/month (the minimum contribution needed for employer contribution of $2,000 a year)
-Medical/Dental/Vision: $287/month
Other Ordinary Income:
-Company Bonus - could be $400, could be $1,500. I won't find out until March
-Company Well Being Health Incentive - Wife and I participate in programs throughout the year to earn small bonuses. Usually amounts to $800.
Adjusted Gross Income: Ballpark of $55,000.
Taxes: Ballpark of $6,700 all in.
Current monthly expenses:
-Rent $1,195
-Loan Payments (see below): $550
-Insurance (car and renter's): $190
This definitely high. Justification: I have to occasionally drive a company car and am required to maintain a minimum insurance coverage. Plus, a few years back I had a driving incident that raised my rates for a while. The renter's is the minimum required for our lease. Unfortunately, there is little wiggle room here
-Phone: $127
This is also high. My company stopped providing company phones. Instead, you bring your own smartphone through ATT and they help with a portion of the cost. We pay for the smallest data plan we need (1GB between the two of us). This is an area where we could downsize as we make zero-interest payments on our phones every month. The plan itself costs about $80/month
-Comcast: $66
This is the cheapest high speed internet plan in our area, which my wife needs to do her online classes
-Groceries: $450
Includes our son's formula. Hopefully he'll be done with that in a few months. We live in an area where farmers markets are abundant, but health and well-being is not something I will skimp on. We buy almost no processed food and a lot of fruits and vegetables. Our son's favorite food is curried green lentils, so I'd say we're succeeding in this area even if it comes at a premium
-Gas: $160
We're clowns. Big-time. Problem is both school and work are in opposite directions, compounded with the fact that the only family in the area to watch our son is in another direction from both, so we're living in the middle of the triangle until my wife's done with school. At least our cars are fuel efficient.
Entertainment: $20
Netflix, Hulu, and Amazon Prime
Utilities (Electric, Gas, Water/Sewer, Trash): $220
There's room in this one but not much. There are only so many things that can be done to make a rental property energy efficient.
Charitable Giving: $75
Alcohol: $50
Travel: $100
My family and high school friends live 8 hours away in Michigan, and we make between 3 and 4 trips out there. We spread the travel cost out monthly.
Misc.: $100
All-In, we're looking at ~$3400 per month in take-home pay, and after these expenses, about $350 is left over in the budget. I'm not a budget Nazi, because I know the moment our budget is set, something comes along to smash it into bits. There are also those glorious two months during the year with 3 pay periods. I did not include those in the monthly calculation because I don't like the way that math works. For those two periods, I plan on investing in (used) supplies for our home - bikes, a grill, toddler clothes, etc. and using the rest to make chunk payments on loans.
Assets:
-401(k) - ~$10,000 in a Vanguard Target Retirement Fund. I don't have the option for VTSAX or any of the other big index funds, so I'm going to let the folks over there figure out my allocation for me for a while.
-2 Cars. 2014 Mazda CX-5 and 2012 Ford Focus (Both automatic :/)
I fully accept any face-punches for this one. My wife has told me one thing - her car is non-negotiable. It's fully paid for and is an excellent travel vehicle. She says we can do whatever we need to achieve our goals except sell her car. My car is more flexible and I will probably look into something older with a stick when we can move to within biking distance of my work. For now, I need something reliable to commute in. Plus it's worth just barely more than what we owe on it
-Trust Fund - ~$26,000 <see below>
-Bank Accounts - ~$4,500
We're moving, and in doing so are breaking our current lease, so this covers those 2 months when we're making rent payments on two places. Yuck.
-PA Investment 529 for our son: ~$1,250
Liabilities:
-Student Loan: Originally $23,000, 10 year payoff, 5.1% Interest Rate. Current Balance just over $18,700. Monthly payments ~$246, I pay a little extra at $300
This is a private student loan, offered through the school I went to. Te school does not accept government funding and I do not qualify for any federal aid on this loan.
-Car Loan (AAAAAAAGGGGGHHHHHHHH): Originally for $11,500. 5.5 year payoff, 3.8% Interest rate, just over $6,800 owed. Monthly payment is ~$194 and I also pay extra at $200 a month. If it makes you feel better, I did not buy the car new. In fact, I was able to negotiate $1,500 off the original asking price. I had recently been burned by a very unreliable craigslist ride that needed close to $3,000 in work so I turned to the waiting arms of the dealer...
Hey, at least I have a credit score over 730...
Specific Questions: Find a comfortable chair, this one's long.
I have two burning questions.
1) Planning for the long term
It's pretty clear that I'm not one of the higher earners here. I'm okay with that because I enjoy my job and the company for whom I work. I'm not in any position to leave for a few years, either. I have way too many opportunities to build my resume here before even thinking of looking elsewhere (if I ever do). I do see that there is a high potential I could burn out well before "retirement age", so I've made it a personal goal to retire before my last child is done with high school. Playing with some numbers, it looks like if our income/expenses were to never change, my number would be about 24 years. That's good, but not great.
Here's the problem: my wife and I are looking to have more kids. It's (parenthood) something we enjoy a lot (even though it can be maddeningly frustrating at times). More kids adds more expense and less income, no matter what way you look at it. I know my salary will continue to go up but our expenses will likely rise accordingly. Unfortunately, I discovered MMM and FIRE after marriage and kids, before we could build up a solid financial foundation. I already feel like I'm playing catch-up.
Our current 5 year plan (including the details outlined in Q2 below) has us debt-free in 18 months (by taking $1,000 a month and throwing it at my student loan), and then barring any unexpected setbacks, has us in a house in 3.5 to 4 years (depends on how long it takes to get the down payment together). After that, we can start aggressively saving more. My wife may work eventually, but she also may decide to homeschool our kids (Her degree is in education, with a focus on private schools) and garden/grow as much produce as she can. I'm leaving that up to her.
I know I want to retire early. 45 is okay, 40 would be nice, 38 would be cool - that gives 14 to 21 years. I know after retirement we want to travel. I have intentions of making money on the side, or even working part time somewhere that feels like a hobby and not a job. My wife may want to work, she may not. Really, I just want every day to be Saturday (I've been thinking a lot about jlcollins' recent post). Post-FI, I expect our expenses to be close to what they are right now. Maybe a little less.
Here's the actual question:
Pretend, for a moment, you're in my shoes. There are a few things non-negotiable: 1) Your job (and the tools to do it - insurance, phone, etc.) 2) Your wife's education and your living situation for the next 4 years. 3) Your wife's car. 4) You're going to have more kids...1 or 2 at least.
How would you achieve FIRE in 14-21 years??
2) About that trust fund...
My wife had a trust fund set up in her name shortly after she was born. There was a large initial deposit and some smaller ones until she was about 3. I don't know what it grew to at its peak but it was at least $150,000. It was set up to fund only her education until she turned 21 and then after that she was granted full control. Her educational path has taken some turns along the way and it's been used for some other things so it's dropped considerably to its current point. Currently she has about $9,000 of classes left (including books, etc.). We get quarterly statements for it and the most recent one showed it was growing at about 5.5% (It holds largely municipal bonds, various index funds, and a few other things. A very conservative mix). Its fees are somewhere around 3%. Not great. The manager of the fund emailed us after our most recent withdrawal and asked if we would like to just close the account instead of have it sit at a slow growth rate. We probably will close it, and here is what I was thinking as far as how we would use the assets:
0) Set aside the remaining funds necessary for school as well as $5,000 for an emergency fund in a high interest online savings bank.
1) Pay off the car loan balance
2) Fully fund our HSA for the year
3) Put the remaining amount in the 529
Is this a wise use of these assets? Or is there a better way?
I appreciate it if you've made it this far and welcome any and all input! Again, thanks for reading...looking forward to the facepunches, I feel like I've gone soft since the holidays.
