My fellow Mustachians,
I am a middle aged lawyer who is busily working towards early retirement. My wife is a stay at home mom caring for our infant daughter. I am keen to hang up my shingle as a lawyer and devote the remainder of my life to raising my daughter and pursuing other non-financial goals.
Below is a detailed snapshot of our finances for your consideration. Please keep in mind that all my figures are in Australian dollars. So the US equivalent is approximately 2/3 of those amounts.
Assets- Cash - $85,000
- Property - $2,075,000
- PPOR (primary place of residence) - $1,200,000
- IP1 (investment property) - $350,000
- IP2 - $1,000,000
- Mortgage - ($475,000)
- 401k / superannuation - $350,000
- Index funds / shares - $230,000
- Total - $2,740,000
My mortgage is due to be refinanced in April 2021. I plan to withdraw all the money from my index funds, together with the cash in my bank accounts (excluding an emergency fund), and use it to repay more than half of the loan. If I were to mortgage the remaining $210,000 for a 25 year term at 1.95% (which is available at my bank), then my monthly mortgage repayments would be
$900.
Post-FIRE Monthly Cashflow- Rent from IPs: $3,850
- Offshore pension: $1,850
- Mortgage Repayment: ($900)
- Total: $4,800 per month after tax
Our family on average spends
$5,000 per month, so the figures work on paper. But there are issues with our assumptions:
- Rent from IPs: this figure accounts for management fees, but otherwise assumes the best case scenario. In reality, we will have to pay expenses for repairs, tenancy changes, unexpected mishaps and so on.
- Pension: we’ll only receive the full amount of this payment for the upcoming 5 years. After that, it will reduce to $750 per month.
Again on paper, we are able to drop our outgoings to $3,000 per month. Based on previous experience, however, I don't see this as likely. It is more realistic that we will stay within the $4,000 to $5,000 per month range.
Bottom Line - Can we FIRE?My concern is that the cashflow figures look shaky long term. I am worried about resigning from my position and, one to two years later, being forced to take on another (lower paying) job.
We have given thought to spending time in low cost-of-living cities once the Covid situation alleviates - mainly Asia given its proximity to Australia. For various reasons, however, we cannot leave Australia for long periods (eg months). If you factor flight costs into the equation, the time spent overseas doesn't necessarily save a ton of money. We also want to move back to Australia at some stage for our daughter's education.
We have also thought of taking on a tutoring franchise to supplement our cash flow. However again, that can easily turn into another full time job which seems to defeat the purpose of FIRE in the first place.
Realistically, do you think we are ready to FIRE or is there still more to do? Many thanks in advance for your advice.
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EDIT
As suggested, I have been through my monthly spending and compiled the following table of typical expenses (which is based off the Moneysmart budget planner application):
- Home and Utilities
- Council rates: $221
- Electricity: $190
- Gas: $220
- Internet: $70
- Mobile: $58
- VPN: $8
- Insurance and Financial
- Car Insurance: $100
- Home & Contents Insurance: $300
- Health Insurance: $365
- Charity: $500
- Groceries: $433
- Medical: $433
- Clothing and shoes: $217
- Transport and Auto
- Public Transport: $338
- Petrol: $260
- Registration & licence: $79
- Repairs and maintenance: $83
- Fines: $17
- Children: $217
- Eating Out: $700
- Total - $5,019