Married, Early 30's, 2 Kids, Looking for Future Flexibility

[slowdown21]

Hi all,

Discovered MMM about a little while ago ago and am trying to play some catch up. Looking for some feedback on a few specific questions.

Life Situation: Married, filing jointly. 2 Kids, likely more on the way.Rent in HCOL area. DW is 31, DH is 33.


Goals
* Job Flexibility - I like working and plan to well past FIRE, but like the idea of being able to do so on my terms.
* Job Changes - I had a job not work out as have many people I know. Would love to be in a spot to better absorb an unexpected change.
* Long Term Care - We have family that may need our help long term and would love to be able to support should they need it.


Gross Salary / Wages
* DH - $118,000 Annually, I do not really enjoy the role/company fit, but have been picky in looking for other opportunities. I can do this a while longer if it keeps us on a good track.
* DW- $26,000 Annually - Self Employment Income. Works from home and avoids most childcare expenses. Income is contract based so it can fluctuate year to year.


Pre-tax Deduction - All on Husband Only / Annual
* Health/Dental/Vision - $5980
* HSA - $7000/year
* Pretax Commuter - $390 (bike mostly)/year
* 401(k) - $6690 (employer contributes 3% and matches 100% of 6%, which is what I contribute) / ~$17k/yr with all matches.


AGI - $123,600


Expenses (Monthly)
* Rent - $1800
* Renter's Insurance - $17
* Bike Maintenance - $10
* Cable TV (hulu, netflix) - $20
* Car Insurance - $168
* Car Maintenance - $40
* Charitable Cont. - $700
* Kid's (supplies/childcare) - $150
* Gifts - $70
* Clothing - $50
* Dining - $240
* Utilities - $150
* Entertainment - $40
* Fuel / Parking - $80
* Groceries - $600
* Personal Care (Includes Hair Cuts) - $150
* Life Insurance / Disability Insurance - $60
* Medical Expenses - $200
* Miscellaneous - $50
* Gym - 250 - 2 adults + includes child care at the gym for 2 kids.
* Student Loan - 197


Total - $5042/mo or $60,504/yr


Assets
* Cash on Hand - $46,000
* Taxable Accounts - $34,510 ($25k in a low risk option for Emergency Fund)
* Traditional IRA (401k rollovers) - $47309
* 401K - $57000
* HSA - $12000
* Car - Paid Off - $6700 estimated value

Total Assets - $203,519


Liabilities
* Credit - $0
* Auto - $0, paid off about 2 years ago
* Student Loan - $11k @ 5.35% interest rate (about $200/month). Started at ~$110k between two of us, but able to pay down to this last loan.

Total Liabilities - $11,000


Questions
* Cash on Hand - Where should I invest this? Plan to use for house down payment at some point, but dependent on when we find a good option.
* Rent vs Buy - We get an OK rental value for HCOL area, but rental prices have been increasing and we're nervous we'll need a bigger space and get priced out. If we don't house hack, buying probably means a longer train commute than the 20 minute bike ride I have today. Also nervous market is close to peak and we'll buy at a bad time (MIL bought at worst time and home value halved). 
* College - Should I put money away now or wait until FI and then throw bulk of income towards it?


Any general feedback on progress towards more flexibility would be very appreciated as well!

[marty998]

Use your cash to pay of the student loan as soon as you can. You'll easily replenish the cash savings in the next couple of months.

If the low risk option in your taxable accounts is essentially cash as well, then why not put the rest of your cash into that low risk option while you wait / search for a new home?

[Platypuses]

Welcome to the forum!!

Take a look at auto insurance quotes $168/mo seems extremely high especially when your car is valued at $6700.
I second the idea of paying off student loans with your cash on hand. Great job at paying off ~$100k already!
Also, I would max out 401k since you have a satisfactory emergency fund established. This is much better to do than saving for your kids college.

[Hirondelle]

Regarding your expenses, the lowest hanging fruits you seem to have are food costs (a total of $840 for only 4 people of whom 2 are small!!!), personal care (what the heck do you do with your hair?!) and the gym.

You could probably cut the food costs by $200-300 with relatively low effort. Just halve the dining out and reduce groceries a little (check out the 'Groceries under $200 month' thread that's also a family of 4.

Have an extra look at your personal care and gym costs. What does the money get spend on? How do you value this? How often do you really go to the gym and are there cheaper gyms in your area that provide similar facilities at a lower cost? How old are your kids (e.g. how long would the childcare aspect of the gym be a significant benefit)?

[myrrh]

I agree with the above posters, pay off the student loan.  After the loan is paid off, increase your 401k deductions, it will reduce your taxes. Start an IRA or Roth IRA for your spouse.

Get multiple quotes on car insurance. Consider liability only as replacing your car with a similar value one won't break you. Sometimes the price difference between liability only vs all (comprehensive, collision and liability) isn't much, but you should know either way.

Have you looked at the rent vs buy calculator? The New York Times has one, and JL Collins has a post about it. To buy or rent can be an emotional decision but you should at least run the numbers. If it turns out that renting is the (logical) choice for your family, I'd start moving the taxable funds into two Roth accounts (one each for you and spouse) as a second tier emergency fund/college fund/retirement fund/what have you.

 

[zolotiyeruki]

Here's one more vote for paying off the student loan and plowing money into 401k's and IRAs.  Right now, your biggest expense is almost certainly taxes, so shifting a bunch of your income into tax-deferred investments is a good idea.

You have nearly a year and a half worth of expenses in cash and taxable accounts.  That's way beyond even a conservative emergency fund.  At least half that money should be in a more long-term account, like an index fund.  (or are you perhaps saving it as a potential down payment?)

It sounds like you're willing to potentially take a lower-paying job that's a better fit.  Most of your expenses are under control (and other posters have pointed out opportunities for optimization), and you're living well within your means, so you really can make that change any time you feel ready.  Staying in your current job will accelerate your eventual FIRE, but it sounds like flexibility (i.e. earn less doing something more fun) rather than retirement is your goal.

[bbqbonelesswing]

* Cash on Hand - Where should I invest this? Plan to use for house down payment at some point, but dependent on when we find a good option.

If I were in your place, I'd pay off the remaining student loans. After that, you'll still have plenty of cash on hand to cover any emergencies.

[slowdown21]

Hi all,

Thanks for the replies!

***UPDATES***
Paid off Student Loans
Found Car Insurance at Geico for $70
Gym - i canceled my portion to drop it to $200. Remainder is wife and kids. Functions as mini daycare. My wife can drop kids off for two hours and work on her business on her laptop.
Groceries/dining out - working in this one but have found it difficult. My wife has a ton on her plate and it’s felt too stressful for her to shrink it. I am working on meal prep plans to shrink my food costs for breakfast/lunch.

***NEW GOAL***
Hoping to move to California in the next year. Driver is being somewhere warm to raise the family.
This would restart my wife’s business from scratch.
I would either need to negotiate a remote work arrangement with my current employer or find a new job. We know cost of living, specifically housing, is quite a bit higher.

***QUESTIONS***
Cash on Hand - we still have about $50k outside of emergency fund. We’re putting 12k towards 2019 Trad IRA. Should we go ahead and put another &12k in towards 2020? We’d still have $24k left, what should we do with it? Put in Taxable account or Max 401k and use $ to supplement monthly budget? We had this saved for a house down payment, but with how often we’ve considered moving to different cities, I don’t see us actually buying for some time.

Based on Finances, do you think we can absorb and additional $1000/month in rent with my wife also restarting her business and potentially taking awhile to get going again?

[Laura33]

Yes, the 2019-2020 IRAs are good ideas.  Personally, I'd keep the rest of the cash on-hand as a slush fund to cover unknown expenses associated with moving to CA -- moving costs, higher rent, restocking house, new curtains, etc.

Your numbers suggest you can make it just fine if you maintain your salary -- you're spending $60K/yr, and your post-tax income from you alone would be around $100K, so you have room to cover more expensive rent.  The real question is whether you want to absorb  that lifestyle inflation, because it increases the amount you need to FIRE ($1.8M @$72K/yr vs. $1.5M @$60K/yr), at the same time as it reduces the amount you have left to save ($125K-$60K now vs. $100-$72K there).

[Freedomin5]

If you move to California, how would that change your expenses? Is the extra $1009 in rent the only expense that will go up?

[ReadyOrNot]

Wait, your monthly charitable contributions are $700? Annual contributions of $8.4k while you have 2 kids in HCOL area, while wife sporadically makes $26k while paying self-employment taxes? 

While you still have student loans while making so much in contributions to charities? Why? 

And you want to move to an even HCOL area?

California's housing costs are high, taxes are even higher.  Commute costs are outrageous.  I can't imagine trying to make it work based on the income I make (about double to yours), never mind on your income level.

I'm a bit flabbergasted to be honest.