Author Topic: Case Study - Loosen the reigns or buckle down?  (Read 5381 times)

Credaholic

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Case Study - Loosen the reigns or buckle down?
« on: July 26, 2015, 11:56:00 AM »
I made another post this week about my husband's agreed to monthly allowance and refusal to actually stick to it. A lot of responses got me thinking and I wanted to lay out our actual spending and get feedback. We are a 2 income, 4 person household in Seattle. My husband works in construction and is building us a house in his spare time, some of which we've paid for out of pocket and some of which we have loans for. Total housing debt when done will be under $450K (this is the max of our loans, hoping to spend a little less). House appraised for $900K. I'm the saver, he's the spender. We are both 31 years old. We have $130,000 in retirement accounts. No debt besides mortgage debt.

Income after taxes - $120,000
Rental income - $30,000
401K Contributions - ($36,000)
Total Monthly Cash - $9500

Mortgage @ 4.5% (includes PITI) $2400
Rental Mortgage @ 2.875% (interest only plus taxes/insurance) $1700
UCCs (15 year construction loans @ 4.5%) $500
Utilities $250
Gas (actually $200, but hubby will be driving further in the next year) $300
Groceries $450
Internet $50
Insurance (Cars + Umbrella) $200
Life Insurance Policies ($250,000 each) $40
Health Insurance (family on husband's plan) $725
Boat Insurance $100
Yacht Club (membership & moorage) $350
Cell Phones ($100 paid, $70 reimbursed) $30
Clothes $100
Preschool $600
Travel $500
Gifts $250
Eating Out (goal is $250, actual is $350 + $150 of hubby) $500
Miscellaneous ($300 hubby allowance, $200 for me) $500
Total Monthly Expenses: $9295

Numbers shown above are our actual spending for the most part. We're not actually paying that mortgage yet as our current debt is much less but will go up as we finish the house. 4.5% is the construction rate and max of our permanent mortgage, but could go down depending on 30 year rates when house is done. Obviously expecting some facepunches on the yacht and yacht club. Our plan next year is to sell the yacht and the fishing boat and buy one boat in the 35' range that can serve as both our family getaway and fishing boat. Expenses would come down slightly in this scenario, but not a ton. However, boating is a passion for both of us. (If you're interested in a little more detail about the boat, check out the very first MMM case study on the blog - that's us!) Travel expenses are high this year since we are going to see family overseas for Christmas, and I'd prefer to keep it in the $4000/year range. Health insurance is higher than I want because hubby's family plan increased right after I switched us onto it (wouldn't have switched if I'd known!) I will take us off as soon as open registration starts again.

Hubby's allowance is supposed to be $300 per month but he typically goes over, mainly through food and beer which is reflected in our eating out category. He occasionally goes over more by a couple hundred bucks if a downrigger goes out, etc. His hobbies are not cheap - fishing, snowmobiling, golfing, eating and craft beer. I'd prefer to reign in spending more and ramp up savings instead, but as others pointed out in our other post, if it's not hurting us too much giving him some leeway might actually help him curb his spending more and certainly keep him happy. So I guess I'm asking if/where we're hurting or if I should chill out and let him have room for what he's already taking. Personally I'm not thrilled with our savings rate.
« Last Edit: July 26, 2015, 12:26:04 PM by Credaholic »

tj

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #1 on: July 26, 2015, 12:25:51 PM »
$500/mo eating out for a 4 person household seems perfectly reasonable. I want to say that I spend in the $300-$400 range just on myself, but my grocery bill is less than $100/mo.

I feel like if your husband is spending an extra $150/month out of a $9000/month budget, you're talking about less than 2%.  Pennies on the dollar.

I certainly wouldn't let something like that raise my blood pressure, stress, lose sleep at night, not suggesting that is happening, just saying.

Your budget seems pretty reasonable, you're already saving around 25% which is cetainly better than most people. Nothing wrong with a yacht club as long as you actually use it.

In other words, no I do not think that an extra $150/mo on burritos and tacos is going to delay your retirement by any meaningful margin, especially when he is spending his free time to do manual labor for your shared financial future.

But if you don't want him to be tempted to spend, I would set up some Roth IRAs (I assume you make too much for traditional) - that would be another $11k/year to retirement accounts.
« Last Edit: July 26, 2015, 12:28:54 PM by tj »

wordnerd

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #2 on: July 26, 2015, 12:33:44 PM »
Could you live on a lot less? Yes, getting rid of the yacht-related expenses would net you over $5k a year plus whatever you could get for the boat itself. Is that a reasonable amount of money to spend on a hobby? That's up to you to decide.

$500 a month on eating out (in addition to $450 in groceries) could obviously be a lot lower (for reference, DH and I spend about $100 a month on eating out, though I'm working on cutting it back). And, $500 a month in miscellaneous could be brought down too. But, I think you know all of this.

If it were me, I'd buckle down. But, it's not me, so you need to decide what is "reasonable" to you.

Frankies Girl

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #3 on: July 26, 2015, 02:12:00 PM »
So this is you (lost at sea?): http://www.mrmoneymustache.com/2011/06/13/case-study-growing-a-money-mustache-at-sea/
Sounds like y'all have inflated your lifestyle even more since then and made some poor choices. :(

I probably won't be very helpful since just looking at your budget looks like an exploding volcano of wastefulness to me, so consider this  a reality check.

You should have waaaaaaay more in retirement/investment accounts for your income.

Your housing costs are insane, even with the potential savings of him working on your house build, a nearly million dollar house isn't "frugal" by any stretch of the imagination. Even if you can afford it, you have to realize that the property taxes, insurance and upkeep are going to be really, really high, right? I'm sure there's going to be a maid service and lots and lots of fancy new and expensive furnishings that you just have to have once you move in and then there is maintaining the lifestyle of living in a fancy million dollar house so all you're doing right now is following the path for classic lifestyle inflation. And giant boats and a yacht club? $250/month on gifts? Your food costs (grocery/eating out) is just under $1k a month for 2 adults and 2 kids? Contrary to what tj said, $500 a month on eating out is not a reasonable amount - it's stupid high. You spend $100 a month on clothes? What are you doing to your clothing that you need $1200 a year in replacements?

What about as your kids get bigger and need general stuff, school stuff, college? You haven't built in anything for them so far as your posted expenses, so it's just going to be more spending coming up on the horizon.

You may have a better than average savings rate for your retirement accounts compared to the Joe Schmoes out there, but here on the MMM forum, your spending/expenses are awful and minimize the tiny bit of good you're doing with maxing your retirement accounts.

If you can't live happily on less than $9k/month ( ~$100k a year), then saving a paltry $36k a year isn't going to get you a early retirement, and you'll be lucky to be able to retire at 70 at the rate you're spending is growing. Whether your husband blows $300 or $500 a month on his fun money is not the real issue you should be focusing on; it's the overall lifestyle choices you've both made. Stop worrying over hundreds when you're frittering away thousands each month. Of course he's going to think you're nuts worrying about his fun money when y'all are spending SO MUCH MONEY every single month.

Now I get that certain areas are stupid expensive places to live and even a crappy house can cost over $500k, but if you are here on the forum, then I figure you're sort of interested in reducing wasteful spending and getting financially independent (and possibly retiring early). If so, then it really would be a good idea have a conversation with the spouse about your choices so far, your future plans and goals, and deciding if this is something you can work towards as a team.

If you're both really into the boating hobby, I could see spending more on it, but adjusting expenses elsewhere - like a more reasonable house... but it seems like y'all are trying to have it all right now with no real thought for down the road. If that works for you, then great, but it's kind of short sighted and out of step for the general MMM forum philosophy.
« Last Edit: July 26, 2015, 02:46:35 PM by Frankies Girl »

marty998

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #4 on: July 26, 2015, 03:36:21 PM »
Great post Frankies Girl.

Your budget seems pretty reasonable, you're already saving around 25% which is cetainly better than most people. Nothing wrong with a yacht club as long as you actually use it.

Are you on the right forum? Excluding the investment property they are spending $91k per year. This also exceeds their net salary of $84,000 per year, which means their investment income is currently being used to supplement spending instead of being stashed away to compound in the background.

Unless the plan is to build a grandiose home and use that as a store of wealth until they downsize in the future, I can't see that the OP has a reasonable budget...

Credaholic

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #5 on: July 26, 2015, 06:56:49 PM »
Sounds like y'all have inflated your lifestyle even more since then and made some poor choices. :(
We lived on our boat for a year and socked away money like crazy. Then we bought a 1,000 sq ft house at the very bottom of the market and remodeled it with the money we'd socked away. Lived there for two years and sold for triple, and then took the windfall from that sale and put it towards buying our current property and construction. We've increased our savings rate from $0 to what it is now since 2011, the new mortgage is less than the mortgage on the house posted about in Lost at Sea, and our other expenses have gone down with the exception of health insurance for our kids, our life insurance policies, and childcare. We're by no means model Mustachians (it's hard without total buy in from hubby) but I do think we've made strides towards improving, not the opposite.

You should have waaaaaaay more in retirement/investment accounts for your income.
I agree, but we have been increasing our savings rate each year since we started trying to do better in 2011. I would like to be saving at least 40% though by maxing out two Roths as well.

Your housing costs are insane, even with the potential savings of him working on your house build, a nearly million dollar house isn't "frugal" by any stretch of the imagination. Even if you can afford it, you have to realize that the property taxes, insurance and upkeep are going to be really, really high, right? I'm sure there's going to be a maid service and lots and lots of fancy new and expensive furnishings that you just have to have once you move in and then there is maintaining the lifestyle of living in a fancy million dollar house so all you're doing right now is following the path for classic lifestyle inflation.
I feel compelled to mention that our housing costs include >$500 a month in principal. So there's that, right?! I hate the $500 for the UCC but if it was part of our regular mortgage and amortized over 30 years it would be a lot less per month, but I'm happy that it's being paid off at a faster rate. The payment is also for the maximum we were allowed for the UCC even though we used $10K less. So it will actually be paid off faster than 15 years.

We still own most of the furniture necessary to furnish the house. We will get a dresser for our baby, and a couch for the bonus room off Craigslist, but that is all of the furniture we'll need unless we also buy a toddler bed for our son in which case we'd sell one of the cribs. There will be NO maid service!

The tax and insurance increase does suck :( Hopefully it won't actually assess at $900K. I would have valued what we're building at $750K personally, but the real estate market in Seattle is insane right now. A 3 bedroom rental half the size in our area would cost $2500/month, and while the house would seem more Mustachian it would cost us more. I do realize we could make the choice to live in a lower COL area.

The house includes a detached shop for hubby's projects which should also equal bonus income (selling the furniture he makes) and it also includes a MIL apartment that would easily rent for $1000+. We'll be renting it at a discounted rate of $400 plus free babysitting to my sister initially.

We are building a very energy efficient home including solar panels, so I hope our utilities will be a bit less than what is posted, but I didn't want to under report.

And giant boats and a yacht club? $250/month on gifts? Your food costs (grocery/eating out) is just under $1k a month for 2 adults and 2 kids? Contrary to what tj said, $500 a month on eating out is not a reasonable amount - it's stupid high. You spend $100 a month on clothes? What are you doing to your clothing that you need $1200 a year in replacements?
The giant boat is an antique Chris Craft. Both that and the fishing boat my husband bartered for with side job work, so didn't cost us out of pocket initially. They do tack on a lot of extra monthly expense though. We plan to serve as officer's for our club soon which will then make monthly membership free for the rest of our lives. That and a slightly smaller boat will save at least $150 plus some insurance savings.

I totally agree the food is out of control! It does include toiletries and non-grocery items, but my goal is to keep groceries at $400 and eating out at $250. Is $650 for a family of four crazy?

I don't think we actually spend $1200 a year on clothing, but part of getting husband to agree to his allowance was to make sure that all expenses were covered in the budget. My husband actually does need to replenish his Carhartt work gear to the tune of probably $300 per year. We've never actually bought the kids clothes, it's all hand me downs and Buy Nothing freebies. I've gotten a lot of my clothes recently off our local Buy Nothing, and probably spend <$300 a year which I could also bring down. I tend to ask for clothing at Christmas too.

Gifts - this one drives me crazy! It's broken down like this: $50 each for extend family birthdays (lots of siblings all of whom are generous with us so we feel we can't be stingy back) plus mother's/father's day = $600. Another $600 at Christmas for the extended fam. $200 for each of our birthdays and again at Christmas and $200 for stockings = $1800. For each of the people we buy for we also receive from, so there's that. When you look at the cost of the individual gifts it doesn't seem crazy (at least not based on how I was raised) but added all together it's insane! The extended family has discussed cutting down on gift giving but then it's never put into practice. Husband would balk at getting less than a $200 gift at Christmas or his birthday. Stockings are the typical underwear/sock replenishing type things.

Your budget seems pretty reasonable, you're already saving around 25% which is cetainly better than most people. Nothing wrong with a yacht club as long as you actually use it.

Are you on the right forum?
I'm wondering the same. I know I'm far from perfect, but I still know what Mustachianism looks like and it's not me yet!

This also exceeds their net salary of $84,000 per year...
Am I missing something here? $120K is our after taxe income, not our gross income.

I realize a lot of this is excuses, and as I said I do want to get our savings rate up so I appreciate the face punches, keep them coming. I also do not like the fact that based on this budget, if we sell the rental like we plan to do next year we no longer have enough income to cover these budgeted for expenses. The rental is no longer under water though thankfully and we will walk with a chunk of change.

We have additional savings besides our retirement accounts but I don't want to count any of it because some will go towards construction costs. We do have a small college savings account too.

Maybe I'll post a revised target budget and then we can pick that apart? I do want to retire early, and I know we're not on that track yet.

tj

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #6 on: July 26, 2015, 07:04:01 PM »
Great post Frankies Girl.

Your budget seems pretty reasonable, you're already saving around 25% which is cetainly better than most people. Nothing wrong with a yacht club as long as you actually use it.

Are you on the right forum? Excluding the investment property they are spending $91k per year. This also exceeds their net salary of $84,000 per year, which means their investment income is currently being used to supplement spending instead of being stashed away to compound in the background.

Unless the plan is to build a grandiose home and use that as a store of wealth until they downsize in the future, I can't see that the OP has a reasonable budget...

They are saving $36,000 per year in 401k and $38k per year in a taxable account (150k after tax income less $9295 monthly expenses). That is a lot of money. If they work for 20 years even without considering compounding, they have well over $1.5 million.

I'm sorry, but chastising your spouse over $150 in Mexican lunches when you have a budget in the neighborhood of $9k is very overkill. There are so many things in that budget that could disappear before you start arguing about the burritos. THAT WAS THE POINT I WAS TRYING TO MAKE.  I'm assuming they enjoy having a yacht, traveling ,etc and are willing to work longer to maintain those hobbies. There is nothing wrong with having priorities other than saving every penny.

If they make use of a yacht club or value traveling at $6k/year, there is nothing wrong with that.
« Last Edit: July 26, 2015, 07:10:18 PM by tj »

rpr

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #7 on: July 26, 2015, 07:24:12 PM »

They are saving $36,000 per year in 401k and $38k per year in a taxable account (150k after tax income less $9295 monthly expenses). That is a lot of money. If they work for 20 years even without considering compounding, they have well over $1.5 million.


Maybe I'm mistaken. The way I see it they are saving 36k of their income and spending almost 112k of their after tax income which is 150k. Their pretax income must be pretty close to 200k. Their after tax savings rate is 24%. It is decent by normal standards even though it is by no means mustachian especially for  mustachians making such high incomes.

tj

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #8 on: July 26, 2015, 07:35:51 PM »

They are saving $36,000 per year in 401k and $38k per year in a taxable account (150k after tax income less $9295 monthly expenses). That is a lot of money. If they work for 20 years even without considering compounding, they have well over $1.5 million.


Maybe I'm mistaken. The way I see it they are saving 36k of their income and spending almost 112k of their after tax income which is 150k. Their pretax income must be pretty close to 200k. Their after tax savings rate is 24%. It is decent by normal standards even though it is by no means mustachian especially for  mustachians making such high incomes.

They are spending $112k, but almost half of that is going towards their various real estate properties.


marty998

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #9 on: July 27, 2015, 01:44:34 AM »
hmmm I see it tj.... question to the OP - how much of that PITI is principal?

I don't consider that an expense but others do. Depends on what frame of mind you are in sometimes and the intent of what you are going to do with the house / exit strategy.

I calculated $84,000 net salary as being $120k after tax income less $36000 401k contribution...

Or... $9500*12 less $30k rental income.

Expenses being ($9295 per month less rental mortgage of $1700 ) x 12 = $91k


Edit to add: ok sorry not thinking straight, obviously didn't read that very comprehensive response :) Can see you mentioned the chunk of the mortgage that is principal.

Carry on...
« Last Edit: July 27, 2015, 01:47:03 AM by marty998 »

Credaholic

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #10 on: July 27, 2015, 08:56:42 AM »
hmmm I see it tj.... question to the OP - how much of that PITI is principal?

I don't consider that an expense but others do. Depends on what frame of mind you are in sometimes and the intent of what you are going to do with the house / exit strategy.

I calculated $84,000 net salary as being $120k after tax income less $36000 401k contribution...

Or... $9500*12 less $30k rental income.

Expenses being ($9295 per month less rental mortgage of $1700 ) x 12 = $91k


Edit to add: ok sorry not thinking straight, obviously didn't read that very comprehensive response :) Can see you mentioned the chunk of the mortgage that is principal.

Carry on...
Now that I've reread your first post I see exactly what you were saying, and I'm in agreement that expenses need to come down at least enough to cover everything without using any of the rental income.

I didn't calculate the principal on the UCC, so actually it's ~$800 going to principal total.

Contrary to the $900K appraisal, the house is not particularly grandiose. We are in a good area of the city and it will be a very comfortable house, but it's pretty standard single family-fare. We could have built under 2000 square feet and still been comfortable, but it doesn't cost much more to build a bit bigger while it does hugely increase the value. I suspect we'll stay here at least 10 years. We're very close to the beach and great hiking trails, and bought here because we want our kids to have access to that as they grow up. We will definitely downsize by 20 years when our kids are out of the house at which point we should have a minimum of a million in equity.

ShoulderThingThatGoesUp

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #11 on: July 27, 2015, 10:29:05 AM »
You're worried about your husband's $150 overage? I see no reason he'd listen to you when $350 of the eating out budget appears mutual.

Major facepunch for building a $900k house that is further from your husband's job, which I'm getting from your statement that he'll be driving more in the next year.

frugaldrummer

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #12 on: July 27, 2015, 11:14:26 AM »
Quote
Rental income - $30,000
Rental Mortgage @ 2.875% (interest only plus taxes/insurance) $1700

So, you have a rental property that generates $30k minus( 1700x12) = 9600 "profit".  However, once you subtract for maintenance, repairs, vacancies - AND given the fact that you are not building any equity on the loan as it is an interest-only loan - this rental doesn't look like a very good investment.  What's your long-term plan for generating a real profit from it?  Do you have substantial equity in it now?  Do you expect the market to appreciate enough to generate a profit when you sell?  I imagine hubby is able to do the repairs himself, which may make it  marginally more profitable.  How long is the term of that interest-only loan - would you be better off to refinance it to a 30 year term and lock in a low interest rate while they're still available?

Credaholic

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #13 on: July 27, 2015, 11:21:23 AM »
Major facepunch for building a $900k house that is further from your husband's job, which I'm getting from your statement that he'll be driving more in the next year.

We built the house 10 minutes from my husband's office and a 5 minute walk to the area his company most frequently builds in. But we just found out last month that he's being assigned 5 big builds in a suburb across the lake. It's a promotion with a raise, but it means he'll be driving more for the next year or so. They are paying for his toll pass and reimburse some gas. After that, he'll be back in our neighborhood.

Everyone is so focused on the $900K number that the bank appraised at, but that number is 100% contingent on our location which we picked carefully to minimize driving. I got a double bike trailer this summer for the kids (for free) that I use for the grocery runs now, we walk to wonderful parks around us, hubby has been enjoying a very short commute the past year even if that's been blown out of the water temporarily, and we're within 10 minutes of several family members all of whom graciously provide free babysitting when we need it. We could have built the same house elsewhere, appraised at $600K, not had the equity and not had the convenience our location provides.

You're worried about your husband's $150 overage? I see no reason he'd listen to you when $350 of the eating out budget appears mutual.
This makes no sense to me. I averaged our actual spending over a 3 month period for the numbers above, and yes we mutually ate out $350. We were on vacation part of that period so it did skew a little high, but I am semi comfortable with $250 of eating out. Why would the fact that we mutually spend this much on restaurants mean that I shouldn't be worried about him spending more than that? Isn't it already PLENTY? Why would he need more, and why wouldn't spending more concern me?

Credaholic

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #14 on: July 27, 2015, 11:28:01 AM »
Quote
Rental income - $30,000
Rental Mortgage @ 2.875% (interest only plus taxes/insurance) $1700

So, you have a rental property that generates $30k minus( 1700x12) = 9600 "profit".  However, once you subtract for maintenance, repairs, vacancies - AND given the fact that you are not building any equity on the loan as it is an interest-only loan - this rental doesn't look like a very good investment.  What's your long-term plan for generating a real profit from it?  Do you have substantial equity in it now?  Do you expect the market to appreciate enough to generate a profit when you sell?  I imagine hubby is able to do the repairs himself, which may make it  marginally more profitable.  How long is the term of that interest-only loan - would you be better off to refinance it to a 30 year term and lock in a low interest rate while they're still available?

Thanks to the area (mainly rent to Microsoft families), we've been very lucky. We've had zero vacancy since renting the property out, and my husband does the maintenance which has also been very minimal. So I don't necessarily think that the 50% expenses rule holds true on this particular property, but nevertheless I agree that it is not a good rental. Our plan for it is very short term - we're selling next spring. It switches from interest only to PITI in 2018 and is now at a variable rate which has worked out very much in our favor over the last 3 years but can't be counted on. Rather than refinance, I want to get out of this property finally and perhaps buy one or two much cheaper rentals that are closer to the 50%/2% rules. We have approximately $100K in equity.

ShoulderThingThatGoesUp

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #15 on: July 27, 2015, 11:51:56 AM »
Major facepunch for building a $900k house that is further from your husband's job, which I'm getting from your statement that he'll be driving more in the next year.

We built the house 10 minutes from my husband's office and a 5 minute walk to the area his company most frequently builds in. But we just found out last month that he's being assigned 5 big builds in a suburb across the lake. It's a promotion with a raise, but it means he'll be driving more for the next year or so. They are paying for his toll pass and reimburse some gas. After that, he'll be back in our neighborhood.

OK, that makes sense then.

Quote
You're worried about your husband's $150 overage? I see no reason he'd listen to you when $350 of the eating out budget appears mutual.
This makes no sense to me. I averaged our actual spending over a 3 month period for the numbers above, and yes we mutually ate out $350. We were on vacation part of that period so it did skew a little high, but I am semi comfortable with $250 of eating out. Why would the fact that we mutually spend this much on restaurants mean that I shouldn't be worried about him spending more than that? Isn't it already PLENTY? Why would he need more, and why wouldn't spending more concern me?

I'm not saying what I'm guessing he's thinking is rational, but people aren't always rational, especially about food. I'm thinking he's ignoring the limit you set (hopefully mutually?) because he perceives some hypocrisy on your end, and I'm guessing at what that might be.

Credaholic

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Re: Case Study - Loosen the reigns or buckle down?
« Reply #16 on: July 28, 2015, 04:12:49 PM »
Okay, obviously the responses have been a resounding buckle down! I'd like to come up with a 10 year plan for semi-retirement. We would both enjoy continuing to earn to some degree, just with more flexibility, so for argument's sake I'm going to cut our income to a third at that point.

If we plan to downsize in retirement, can a larger more expensive house be justified now as a vehicle for savings? If value increases by 3.5% in the next 10 years we'll be looking at $1.25M with debt of $300K. We could spend a considerable amount of that windfall on a free and clear property and live on interest from the rest.

If we continue to invest in our retirement accounts at the current rate, assuming a 6.5% return we'd also have approximately $750K in 10 years.

Our semi-retired expenses should look as follows:

Mortgage @ 4.5% (includes PITI) $2400 $400 for taxes and insurance
Rental Mortgage @ 2.875% (interest only plus taxes/insurance) $1700 Ignoring rental properties for the sake of this exercise
UCCs (15 year construction loans @ 4.5%) $500
Utilities $250 $200 for smaller house
Gas $300 $150 when driving less (probably even lower)
Groceries $450 $600 due to teenagers
Internet $50
Insurance (Cars + Umbrella) $200 (maintaining this in case we insure teenagers, could come down if we don't have full auto coverage/umbrella policy that we maintain now due to rental)
Life Insurance Policies ($250,000 each) $40
Health Insurance (family on husband's plan) $725 $600 (This will go into effect end of this year, should hopefully continue to be cheaper especially with subsidies if we're earning much less)
Boat Insurance $100 $50 (not an antique boat, smaller)
Yacht Club (membership & moorage) $350 $250 (no membership dues)
Cell Phones ($100 paid, $70 reimbursed) $30 (could switch to cheaper plans if we didn't have reimbursement)
Clothes $100 $75 (current is probably around $50 in reality, leaving a little extra cushion for clothing teenagers)
Preschool Kid's Activities $600
Travel $500 $250 (travel less due to size of family)
Gifts $250 $200 (cutting back on extended family gifts)
Eating Out $500 $200 (even more time to cook when we're working less)
Miscellaneous ($300 hubby allowance, $200 for me) $500 (I assume we'll continue with hobbies when working less)
Monthly Expenses: $4395
Annual Expenses: $52,740
Annual Income (after taxes): $40,000
Difference to be made up by investments: $12,740 / 4% rule = $318,500 needed while in semi-retirement

So we could live semi-retired off our house sale after downsizing free and clear. This also leaves the retirement accounts alone. Assuming another 10 years of semi retirement we should be able to fully retire at 51 with approximately $1.8M invested. Flaws with this plan?