Author Topic: Couple needs help Consolidate in hope to be FI one day!  (Read 928 times)


  • 5 O'Clock Shadow
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Couple needs help Consolidate in hope to be FI one day!
« on: January 14, 2020, 11:34:12 PM »
Hello, this is my first post and would like to share a bit about us.  My husband is employed in real estate field (various jobs) and I as an accountant in Southern CA.  Weíve been working nonstop since high school in a company as self-employed until recently when I started a fulltime job in 2018. 

After reading this forum and various blogs and calculating our assets and expenses, we realize that we donít seem to be on track to retire at all especially with the inconsistent income.   Aside from real estate, we really have no clue on much else.  We would like to ask the community for your advice on how we can consolidate our funds and hopefully be FI in 20 years.

Life Situation: File Married Separate, Husband (36), me (32). Planning to have children soon. H works various hours about 10 hours daily. 

Gross Salary/Wages:
H: $50,000 (Self Employed/Average) / year
Me: $47,000 / year

H:   $14k (Varies, this number is being used for budgeting purpose)
Me: $10k (Fed & SS: $8/CA: $2k)

Total Taxes: $24k/year

Traditional 401k: $235/Month (6%), Employer match 3%
Roth 401k:         $350/Month (9%)

Total: $7,050 | $587.50/Month

Adjusted Gross Income:
H:   $36k (We budget this amount annually, Anything extra goes to paying off debt or various savings) 
Me: $30k

Total: $66k | $5,500/Month

Mortgage, property tax, Ins: $1,700/month
Utilities:                         $300/month
Gym:                    $40/month
Auto Ins:                         $110/month
Cell Phone:                 $160/month (6 lines - family)
Health Ins for both:              $900/month (we both have medical issues)
Motherís Term Life Ins:          $150/month
Universal Index Life Ins (both): $750/month
Household & Food:               $500/month
Auto Fuel:                  $400/month

Total Expenses: $61,320 |     $5,110/Month

Emergency Expenses:
$6,000/Annual due to doctorís fees
In 2018, we spent $50,000 to remodel the home that we are currently live in (will never do this again)Ö

Trad 401k:   $6,200
Roth 401k:   $2,300
Roth IRA:            $11,000 Mutual Funds
Roth IRA:            $5,600 Various stocks
Roth IRA (H):    $3,500 Mutual Funds

2 2008 Lexus:    $8,000
1 Honda Civic:    $3,000
1 Honda Civic:    $1,000 (Will Sell)

Homeís Equity:   $360,000

2 HSA:      $5,000 (been reduced due to the medical expenses in 2019)
Emergency Fund: $5,000

Total Assets: $410,600

Mortgage $238,000 ($272,000, Originate date 2013, $1200/month, remaining 23 yrs)
Credit cards & Personal Loans $18,000 down from $36,000 earlier this year (various movements of funds around to various credit cards, interest is less than 3%)

1)   We are looking for advise on how to consolidate our various investments in order to obtain FI.  The reason why we had so many investments because we did not have 401k in the pass 10 years and the mutual funds that we currently have are very slow to grow and low dividends disbursements.   Regarding personal Roth IRAís, should we consolidate the personal Roth IRAs into two Vanguard / Fidelity accounts and purchase VTI or other Fidelity funds?

2)   Regarding 401k, would it be best to invest in traditional 401k or Roth 401k?  I would like to eventually max out the 401k contribution. Currently, 6% is being invested in traditional 401k and 9% into Roth 401k.  Should I continue to invest in 401k?

3)   Our major expense that deplete our cash is the life insurance.  We purchased these 2 years ago with built-in retirement options because we had no 401k and didnít really maximize our Roth IRA because the increase was so low, and purchasing more properties was not possible due to the low cash reserves for down payments. 

One insurance is $800,000 and the other is $250,000.  If youíre familiar with IUL, supposedly we only purchase the difference between the growth cash value and the insurance value down the line.  This will keep the cost of insurance lower than the actual amount. Now, we are regretting it after learning more about other investment options.  Cancelling it now will not be an option due to the huge cancellation fee.  Should we cancel these down the line?

4)   We are anticipating to bring home $20,000 or more on top of the number we have above.  These incomes tend to be in lumpsum thatís why we donít know how to exactly budget these. We tend to just pay off debt or spend quite a bit.  Besides maximizing the Emergency Funds, HSA, and Roth, how should we turn these extra incomes to produce passive income without having to wait until we turn 59 Ĺ to withdraw the funds so that we can eventually be FI in hopefully 20 years if not earlier especially now that we are in a bull market? 

Thank you for taking your time reading and helping us. 


  • Stubble
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Re: Couple needs help Consolidate in hope to be FI one day!
« Reply #1 on: January 15, 2020, 08:39:55 AM »
What's the cancellation clause on the life insurance?  It's your 3rd largest expense.  Do you have any cash value in it that would allow you to offset the cancellation fee?  You absolutely need to get rid of that and price out a standard term life insurance policy (with a different insurance agent).  You need the insurance company to provide you with exact numbers regarding the out of pocket cancellation costs so you can make an informed decision (including any tax consequences).  Also, you may be able to get subsidized life insurance through your employer.

Why is your Mother's term life insurance listed as your liability?  How old is she and does she even need it?

Consolidation of Roth accounts is the lowest priority unless you are charging outrageous fees or there are no low cost options to invest in.  If that's the case, walk into a Fidelity branch and get the accounts transferred there. 

You are basically living paycheck to paycheck in a sense.  You have too much equity tied up in the house and not enough liquidity if life throws you a curveball. Adding children is only going to make it tougher and significantly add to yearly expenses.

To retire on $61K a year (your current expenses) you will need $1.5 Million in assets (excluding your home).  The bull market is 11 years old, I would use realistic returns going forward. Giving your current situation I would work on upping your income and getting your budget down.  Any extra money should go toward paying off your debt and building up your liquid reserves in the event you have children.


  • Handlebar Stache
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Re: Couple needs help Consolidate in hope to be FI one day!
« Reply #2 on: January 15, 2020, 08:47:54 AM »
I'm not clear on where the money has been going.  You mention the option of purchasing "more properties" -- do you already own investment properties that aren't included here?  Or do you just mean besides your residence?  And why do you have so much home equity?  Is that because property values have increased so much in your area, or because you have been paying down the mortgage?  If the latter, that's not the best use of your money.  I am part of the group that wants a paid-off home by retirement -- but the way you get the best return on your investment is by putting your money into investments first, and then focusing on the mortgage only after those are at a level that will get you where you need. 

You are right that the low-hanging fruit here is the insurance.  That was a very bad deal, and it is bleeding you.  Please pay close attention to the cancellation penalties and get out of it as soon as you can afford to.  Replace that with a 20-year level-term policy, and you will be covered affordably until any kids are adults.

Also, why do you have term insurance on your/his mother?  That is a lot of money.  Generally, you don't need insurance unless someone is financially dependent on you.  And I am guessing that is not true of the mom, because if it were, she could afford to pay her own insurance.  Again, that money is much better spent towards your future.

Finally, what is the $6K in medical?  Was that just for this year, or is that ongoing (like an annual fee/out-of-pocket)?  If you have recurring medical expenses like this, then they're not "emergencies" -- they are part of your ordinary living costs and so should be accounted for in your budget.   Also:  as much as you can, keep your HSA money and pay medical costs out of current income.  The HSA is the single-best investment vehicle available to you (tax-deductible contributions, tax-free growth, tax-free withdrawal for medical expenses, and after retirement, tax-free withdrawal for anything).  So you want to keep that tax-free option growing for as long as possible. 

Generally speaking, you have the right approach:  budget your life around a minimum income, and don't count on there being more.  But the second part of that is that you need a clear plan when that extra money comes in so you don't fritter it away on stuff.  I would recommend something like the first $XXXX amount extra goes to fund IRAs/Roth IRAs; then you can take another $xxx and use it to go out to dinner or buy a particular thing; then the next $XXXX goes to pay down the debt; then you can take the next $xxx and put it toward a vacation fund; etc.  In other words, you basically pre-plan your spending, so that however much extra you bring home, it is already accounted for -- and some of those plans are for fun extras that you want, so you don't feel completely deprived. 

But also consider:  how will your income/expenses change once you have children?  You have what looks to be a workable situation if you maintain your current income and expenses.  But what happens when the income goes down and the expenses go up?  I think you need to get some financial ducks in a row -- like loans/CCs paid off and insurance fixed -- to give yourself a little more breathing room for kids.
« Last Edit: January 15, 2020, 08:49:25 AM by Laura33 »


  • Bristles
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Re: Couple needs help Consolidate in hope to be FI one day!
« Reply #3 on: January 16, 2020, 02:33:27 AM »
 I don't see the need for so much insurance, as stated by the other responses as well.  Ok, you made a bad decision, on the insurance as some sort of compensation action because you didn't have 401K options. But now apparently you do have 401K options, as well as simply putting money into IRA's.

 I'll be blunt here, and maybe it's because we don't carry life insurance,that i feel this way.  Why do you need $800K + $250K + Mothers ins amount ?  That is so much ! .  Drop the $800K policy. Drop the mother/ MIL policy.  Maybe keep the $250K policy.   You both make relatively equal salaries - suppose one dies next month - You use the remaining $250K policy to pay off the house.

   Most of your expenses will drop by nearly 1/2 with only one person to support and a paid off house. Utilities minus $100, Auto insurance minus $60, Health insurance minus $400, Vehicle fuel minus $200, Food minus $100, phone minus $80,etc. - pull out the insurance policy monies and now your monthly spend is closer to [200+40+60+80+500+400+200+$500{Taxes+homeowners ins}=  $1980/month.  50K annual income one person and less than $2000 monthly spend, leaves plenty to put towards retirement.

  I mean i guess if you want to spend so much now on insurance -so the survivor can live a life of luxury ??

 Why a 6 phone line contract for 2 people ?  No kids, future kids dont need phones for 10+ years [if ever] , - business, mom, in laws, ??