Author Topic: Trim My Fat  (Read 3688 times)

aes421

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Trim My Fat
« on: December 30, 2019, 09:35:18 AM »
Ideal FIRE date is 5 years from now, so I'm looking to trim out excess expenses to help us get there (plus we're looking at 15k pay raise in the next 2 years).
What suggestions would you make to help us get there?

I think our after tax balance is sufficient to cover later life, so I'm considering dropping to company match and putting the rest in a brokerage account.  I know there are ways to access the money before 60, but I'm worried about not being able to get it or incurring penalties.  Is this a bad idea?


Life Situation: Married no children. Ages 25 and 26

Gross Salary/Wages:
- 60k base + ~7k overtime
- 77k base

Individual amounts of each Pre-tax deductions
- 19k to 401k
- 19k to 401k, 7k to HSA, 3.5k insurance premiums

Other Ordinary Income: None

Adjusted Gross Income:
-48k
-47k
Taxes: (Roughly estimated because I couldn’t find a good calculator that included 401k, HSA, and insurance premiums)
Federal: 8k
State: 4k
FICA: 10k

Current monthly expenses:
P&I: 997
T&I: 218
Home: 638 (bought out first house, so we had to furnish it.  Also remodeled the kitchen)
Groceries: 320 (includes household products)
Eating out: 63
Charity: 327 (important to us, so can't be cut)
Gifts: 41
Car Insurance: 135
Fuel: 110
Car Maintenance: 45 (new tires + oil)
Utilities: 140
Mobile: 50 (one is prepaid for a year, but comes out to $15 a month)
Internet: 30
Hulu: 2
Vacation: 40 (normally significantly higher; we used the money to remodel kitchen this year)
Health related: 43
Hosting: 20
Other: 253 (includes mostly clothes, haircuts, car tags, and hobby related purchase.  Also a bunch of random Amazon purchases that I'll definitely be evaluating)

Assets:
2015 car with ~40k miles; worth around 10k
2015 car with ~45k miles; worth around 18k
House zestimate 178k (paid 170k 1 year ago)
Cash: 16.5k
Brokerage: 23k
401k, Roth IRA and HSA: 180k

Overall our yearly investments are: 19k x2 in 401k, 6% company match x 2, 6k x2 in Roth IRA, 7k in HSA,  9600 in brokerage, and then any extra that we don't spend gets swept into our brokerage every few months.

Liabilities:
136k home loan @ 3.875 for 15 years.  Paid down to 131,482 with ~14 years left. $1215 per month
« Last Edit: January 06, 2020, 06:57:54 AM by aes421 »

waltworks

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Re: Trim My Fat
« Reply #1 on: December 30, 2019, 11:06:08 AM »
I didn't add it up super carefully, but your monthly spend is around $3500. So $42k/year. To cover that, you'll need basically a cool million bucks invested. It appears you've got a little over $200k invested right now, and you're hovering somewhere around a 50% savings rate (ie, investing $50k/year or so).

5 years is not going to happen with those numbers. If you're very fortunate, you might have in the ballpark of $600k by then, though.

Expenses, honestly, look pretty good. The only really low hanging fruit (charity) you've ruled out, so my advice would be to try to go to 1 car (or none!). Cutting back on home reno/furnishing expenses would help a ton, too, and that may happen organically - or it might not.

Really, you should probably expect something more like 10 years on your current trajectory, even with some minor tweaks around the edges, as a best case scenario. You aren't insanely high earners and you're also not insanely frugal, and you're basically starting from scratch. That's ok, you're still way ahead of even most people here, let alone the rest of the US.

-W
« Last Edit: December 30, 2019, 11:36:44 AM by waltworks »

aes421

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Re: Trim My Fat
« Reply #2 on: December 30, 2019, 11:34:28 AM »
Thanks for the input waltworks! 
I think you may be estimating our savings rate low.  I have atleast 66k setup on auto investments (max 401k x2, max Roth IRA x2, max family HSA, and additional $800 in brokerage a month) + an additional 6% match on each of our salaries should put us well above 70k invested each year.  I'm hoping between trimming some expenses and pay increases we can make that 5 year date, but I may be over zealous.  I'm glad to hear you say our budget looks good though and that we are on track for FIRE even if it's not as early as I would like!

affordablehousing

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Re: Trim My Fat
« Reply #3 on: December 31, 2019, 09:47:39 AM »
Keep the goal of 5 years, but you're so young, there could be other expenses that come up. I think the main point of Walt's response was correct, figure out a way to make more money. You're thinking in the right direction, the only thing that will hold you back is how big your shovel is. If you are two able-bodied adults, you ought to focus your efforts on making more money.

Freedomin5

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Re: Trim My Fat
« Reply #4 on: January 03, 2020, 12:54:54 AM »
I agree with the others — reaching FIRE in 5 years on your current trajectory is unrealistic. However, you asked about advice/suggestions to help you get there, so I’ll focus on that, rather than raining on your parade.

DH and I were able to reach FI in five years; this is what we did. Maybe some of the strategies that worked for us will work for you in your situation. In addition to many of the things you are already doing...

1. We each took on a side hustle.
2. We lowered expenses to the point that our expenses were covered by one side hustle, then we saved  and invested the rest of the money. We had a 80-90% savings rate.
3. We found ways to increase income by keeping our CVs up to date and switching jobs every few years. We were constantly looking for new opportunities.
4. We purchased an investment property using leverage. We’d like to use leverage to buy two or three more properties.
5. We rented out the extra bedroom in our apartment.
6. We don’t drive or own a car. We live walking distance to my work. DH rides the bus to work. We live walking distance to the grocery store, school, and subway station. It’s a major consideration when deciding where to purchase/rent property.
7. We househack. We found work contracts that provide a housing stipend so housing is essentially free. You might do something similar by getting a roommate or two.
8. We opted for the smaller apartment with lower heating costs.

Hirondelle

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Re: Trim My Fat
« Reply #5 on: January 05, 2020, 10:57:06 AM »
The lowest hanging fruit I see are your cars.

Why are your relatively old cars worth so much? Expensive cars have more expensive repairs. Expensive cars often use more fuel (cause they bigger). Expensive cars are more expensive to insure.

Best option would be to drop 1 car completely if that fits with your work. If that doesn't, evaluate if it would be worth it to trade the most expensive car (including all costs, so depreciation, insurance, fuel and repairs all together) for a cheaper one.

BostonBrit

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Re: Trim My Fat
« Reply #6 on: January 06, 2020, 01:18:16 PM »
As others have pointed out in other threads, probably the single largest deciding factor on FIRE date is the decision to have kids or not.

Figure that out and then things will become more obvious.

Good luck!