I agree with the many others overall: you've done great work, though your expenses omit some things and your kid and/or medical expenses may vary going forward. I happen to be very familiar with your situation, as I have lived it, in part.
I'll skip to your four questions:
1) I would listen to
@Laura33 on that one. I prefer paying down fixed-rate mortgages that are higher in rate, however, not when you have a large liquidity risk and a 5/1 ARM mortgage. You have to get that sorted out first, before FIRE. Your whole plan depends upon interest rates over the next five years, so I would figure this piece out, see where your expenses are by then, and then revisit this analysis, if it were me.
2) Expenses looked fine. BUT, the big caveat: you have no sinking fund for large home ownership expenses or also for big projects (deck, etc.).
The hot water heater will go out (and hopefully not flood). The winter storms may bust a pipe. You'll eventually have to replace the roof and A/C. You're asking about FI, so you have to have those bases well-covered with your budget and I don't see them. These aren't things you can easily cash flow out either, since you don't have a large "misc" built in for things like it.
So, I would add $1k/mo in sinking fund until you hit the right spot. You didn't list some of the other home details I would want to narrow that down more easily. (Maybe it's $800 / mo., but it's definitely way above where you have and likely $1k+ for a good home in a HCOL area. Right now, you're going to be way over $1k/mo, and closer to $2k/mo.) The unfortunate problem is that those expenses are really irregular and painful.
Ditto kid expenses: they are likely to increase, not decrease. Young kids are cheap except for childcare, and older kids are expensive on literally everything else. I would assume that that number goes up a little instead of down. If it works out better, then great, but at least you won't be disappointed.
3) You can do that. And maybe it's worth it to you, but I would seriously look at your life plan/goals, especially re: FI, and see if it makes sense to do it (or really, to do it right now/this soon). You might wait until materials are cheap/you collect some, or other hacks. Like others mentioned, I would
also add this into your budget: you are likely to continue wanting to do some things like this and/or replace these over some time period (e.g. the deck), so this adds to your net expense some.
4) Yes, your plan to coast to 2025 seems very reasonable, since that's when you'll know more about the house, your kids won't be as tiny, and you'll know a lot more about your home spending levels, too. That's exactly what I would do.
I would only add that you're adding $40k/year to your retirement, which is fantastic, but your net spend is up significantly, so you're probably a bit farther from FI than you're thinking based upon your old numbers. I suspect that that's what you're going to find when you do this again in five years,
however, your upside is that your kid expenses will go away once the kids are out of school, so unless you plan to quit sooner, you're going to hit a point where it should become far easier eventually.
If you DO want to quit sooner, then I would adjust plans now and/or buckle down a little more on big-picture things: home spending (projects), income (if any ideas there make sense), and whatever you
can do to improve the 5/1 ARM situation. And add more to savings, of course.
I measure our net worth monthly with a quick/easy spreadsheet where I track it, but the best measure for FI is looking at how much you have saved in liquid assets (real net worth, excluding your home) versus your income (or your income less actual retirement contributions - i.e., your
actual net spending). It bakes in all the problems: lifestyle inflation, actual spending, and so on.
You want to be at 25x your net spending in assets before you pull the trigger, and some are more conservative than that. Compounding helps, of course, but that ratio will give you an immediate gauge for where you are. If you're at 5x, then you need to double it at least 2+x, which is going to take a while. If you're at 20x, then you're within reach assuming that you keep up a good savings rate.
That's the fastest way to see where you're at IMO. You'll see that added spending (bigger house, more projects, more maintenance, inflation in general)
kills your ratio and thus your time to FI, whereas more savings helps it speed along.
