Hello fellow Mustachians!
I've been following MMM after finding him from the ERE link back in 2011. I've recently been reading the forums and thought I'd register to post my own situation and offer advice to others on our paths to FI.
Details About Us:
28 year old male, married to a beautiful wife (28 also), have a 2 year old son. Wife is a SAHM, I'm a CPA working in public accounting. Live in Missouri.
Income: (All take home amounts).
Monthly take home = $3,154 (This is actually the total for two bi-weekly checks. We do all monthly budgeting/bill pay/planning based on this number).
Two extra checks that we put towards debt/savings/investing = $3,154
Tax Season Bonus = $13,000
Tax Refund = $1,400 (even though I try to break even, we usually seem to get money back each year from Fed/state combined.)
Total Net Take Home Pay Each Year = $55,403
Current Monthly Expenses:
Phones (RW) = $20.00
Netflix = $8.00
Term Life Insurance = $87.00 ($1M for me, $500K for wife)
Utilities = $220.00 (includes electric, natural gas, water, and trash service)
Internet = $54.00 (only option we have, used for work and subsidized from work, so not up for reduction)
House Payment = $442.00
HO Insurance = $97.00 (currently shopping insurance coverage as this seems high)
Car Insurance = $29.00 (liability only on our paid off car)
Property Tax and HO Dues = $110.00 (property tax around $1,200 and HO Dues around $120)
Health Insurance = $345.00
Food, Household, Fuel, Misc = $800.00 (includes everything it takes to live not listed above)
Pmt to Family Member = $254.00 (we consolidated some student loans with a lump sum from a family member that provided some decent rates to them with a lower rate to us)
Total Monthly Spending = $2,466
In round numbers, the income less expenses allows us to save/pay off debt each year of around $24,000. We have been using this money to pay back student loans, remodel the house we purchased two years ago, establish an emergency fund, etc.
Assets:
Home - $120,000 (conservative estimate of value)
IRA/Retirment Savings - $5,000
2006 Car w/ 165K miles - $2,500
Savings Acct 1 = $2,000 (a lean emergency fund, don't have any plans on increasing or decreasing this amount)
Savings Acct 2 = $20,000
Liabilities:
Home Loan = $86,724 (4.25% on 30 yr note)
Family Member = $50,000
Specific Questions/Issues:
1. Would like to get our family member paid off ASAP. It has been a great situation for all involved and they would prefer we didn't pay it off (they like the interest income), but we are weary of something happening to them and then being in debt to the estate/descendants. Have an option to take out a HELOC on house for additional $20K, combined with $20K from savings gets us to $40K. Will have the other $10K easily within the year, just becoming impatient. Any thoughts on this situation?
2. I don't think we have many holes in the monthly spending. Some will say the $800 is high and I agree it isn't the leanest, but we're pretty satisfied with everything else. Any other areas you think I'm missing?
3. Obviously a long way from true FI, but our goals are different than many here. Would like to work into a lifestyle practice (25-30 hours a week max and/or tax season only) after paying off family and possibly paying off the house. I'm not interested/desiring to completely retire anytime soon. I would be able to clear around $50K from only working 12 weeks out of the year in a similar situation to current one (or just tell current firm I'm only working tax season). Thoughts on this?
4. I'm in a somewhat unique situation with my work environment. I left a large public accounting firm to eventually take over for a retiring partner (a handshake agreement if you will). That hasn't gone according to my plan or anyone else's leaving me in a sticky situation.
Good things about current situation:
-Autonomy - Besides the long hours during tax season, I can pretty much do as I please the other 9 months of the year as long as the work gets done.
-I like the people I work with for the most part.
-The pay is decent for the responsibility levels I have.
Bad things:
-Company is run like it is still the 80's.
-I'm being sold a story of "act and sell like an owner for some future payoff" but obviously none of that is guaranteed.
-The two partners couldn't manage their way out of a closet. They sure can't successful grow a professional services firm in this slow growth economy.
Biggest delimma:
-Current managing partner would like to start a financial planning business (registered investment advisory firm) as a partnership with me, thereby tying me to himself and the CPA firm as well. He funds the start up costs, I manage most of the business. Expenses are shared, but profits split based on who brings in the clients and who does the work.
5. The age old "pay off our home or invest." I understand time value of money, compounding, historic stock market returns vs. the 4.25% loan, etc. But I still find the desire to be free of any debt payments more appealing that sticking it in some Vanguard Index funds. I think I would be happy with less money in old age knowing that we paid off our house early than the other way around. Is this poor thinking/planning?
6. Currently helping our firm set up a SIMPLE IRA through Vanguard, so that will add another 3% raise. Outside of getting the match on the SIMPLE IRA and fully funding two ROTHs for my wife and I, I plan on using all other funds to pay off debt aggressively. At our marginal tax rate, I don't think it is that beneficial to put in pre-tax funds and will not invest post tax until the family member and house are paid off as well. Good strategy?
7. Side income - I have the ability to generate income from consulting, tax planning/prep, and accounting on the side. Any work I currently bring in I run through the current firm. I have no non-competes or anything of that nature (like I said, a handshake agreement). I'm considering taking on some side work for a few extra thousand each month to accelerate the process. I'm pretty sure if the managing partner found out I would be terminated. Too risky or worth it?
In summary, I'm kind of asking for career advice and financial advice in the same thread. Thanks for taking the time to read my case study!