Author Topic: Trying to decide our next step  (Read 5148 times)

chevelle57

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Trying to decide our next step
« on: January 14, 2022, 02:28:32 PM »
We are trying to decide our next step. Currently I'm very dissatisfied with my current role at work and have expressed a desire to transfer to something different for the last 4 months and there are no other options available. But we feel like we are pretty close to pulling the plug in general but there is always the worry that stuff won't work out in early retirement.

Life Situation: We currently live in Texas and have 2 kids under 10. We are late 30's. I've recently finished my bachelors in CompSci while my wife runs a commercial property that we purchased. I work a normal 40 hour week but have some late meetings due to working with a team in India which I don't care for. My wife works from our commercial property 2-3 days a week but its very relaxed and she can do 95% of the work remotely and takes days off as needed for child care or vacations.

Gross Salary/Wages: My compensation is 105K year with a 5% 401k Match

Individual amounts of each Pre-tax deductions 401k Max mine out each year
FSA max out
Child care FSA max out
IRA max out after taxes are done based on what we can put in
insurance is about 400 month through my work

Other Ordinary Income: Currently have a small set of crypto mining rigs, My net profit from them varies but its in the range of 1,500 a month after paying for electricty. Don't know what will happen to profits in the future but the rigs have paid for them selves at the point and I'm all profit.

Qualified Dividends & Long Term Capital Gains: None

Rental Income, Actual Expenses, and Depreciation: We currently make about 85K/year from the commercial property. This factors in savings for capex and maintenance. We also are holding the note on a a property we sold a few years ago. There is about 55K left on the note and we get $330 a month. There will be a balloon payment due in 3 years or so and we expect the principal left at that time to be in the 52-53K range. We can also calim depreciation on the commercail asset in the range of 30K per year.

Adjusted Gross Income: Kind of all over the place. We max out any tax advantage account we can but with all the moving parts of our real estate and other things our taxes are a moving target most years.

Taxes: We have money set aside for taxes each year but with how in flux our life/business is we tend to not have much of an idea as to what we are going to pay until our CPA runs all the numbers.

Current expenses:


Mortgage 1850/month 1,100 PI 750 TI

Utilities(including power, internet, cell phones, trash, sewer)  700/month this is an avg, its higher in the hot months and lower in the cooler months. we are still getting used to the Texas heat so we probably keep our house cooler then optimal during the summer and have a higher bill to pay because of it. We did get additional attic venting installed at the end of the summer and we believe this should help during the next hot season to keep the house cooler with a lower electricity bill, but we will wait and see.

Cars 500/month includes fuels and maintenance and insurance. We currently have 2 cars and a truck and are looking to down size to 1 car and a smaller mare fuel efficient truck. Something along the lines of a Ford ranger, S-10, Tacoma. Depending on the trade in value we get we might have to come to the table with some additional cash for purchase this next vehicle out right. I do most of our vehicle maitnence so we project this to be high as long as we don't have any major issues

Food $850/month broken up between grocery and eating our. 5-600 from grocery budget and 250-350 for eating out. This is something that we have reduced over the last year as we have been decreasing the amount of times we are eating out

Kids 5K a year we allocate total for each kid to do 1 extracurricular activity and then just general kid activities/field trips/other non daycare kid stuff

Sundries Currently 400/month but we project this going down. One kiddo is still in diapers and we plan on this not being an expense by the end of the year hopefully sooner. Deffienetly room here to trim and it might be artificially high since our Costco membership is expiring soon and we have stocked up on most of the dry goods we get there like diapers, wipes, TP, paper towels, toothpaste and what not.
 
Daycare 15,000 a year for daycare for our youngest and an afterschool program for our older one. We would cancel both of these if we pulled the plug.

Gifts 3K year, We enjoy the holidays and both have large extended families. This also provides for the random birthday parties during the year our kiddos get invited to. This seemed high to us at first but after totaling the last holiday season the is pretty close.

General 10K/year. This includes everything form new cloths to vet visits for our dogs to projects around our house. We have been pretty free with this over the last year or two but it has included some optional little house projects and with the price of materials where they are at this doesn't go as far as it would have a few years go.

Health Currently we have pretty good insurance through my work and we pay 400/month. We do have some underlying heath conditions that are being treated but project spending in the range of 200-800 a month on prescriptions based on the type of plan we would have after leaving my job.  After retiement we are projecting 1K as a round number

CapEX We allocate 3500 a year for home related capex stuff. Might not have something this year but we know at some point there will always be a home repair related expense coming.

Hobbies/Entertainment/Travel We are allocating 15K for this going forward. Its been all over the map the last few years with a big relocation and then covid messing with vacations. This would include traveling back to see family over the holidays in addition to a pretty hefty amount set aside for a large overseas vacation assuming covid is something we can deal with in the future. We lump all of these together sine we kind of view it as a sliding scale, if we are traveling less we will be spending more on hobbies and entertainment.

I know some of the expenses are round numbers but we very much like to have wiggle room in our budget to shift money form one category to another as needed. We also projected high on some to give us buffer room in planning for retirement.
We are projecting about a 100K budget but that includes a lot of buffer and a big chunk(15K) for fun stuff (vacations hobbies and entertainment). This 100K budget doesnt include federal taxes sine its hard to project with how many moving parts we have in our tax return. 

Expected ER expenses: Health care is the big one. but we do plan on dropping day and after school care if I was to leave my job.

Assets:
Amount & description - include current asset allocation plan if you have one
Cash - 105K This includes reserves for taxes and our real estate property (we plan on moving anything over 50K into out brokerage after taxes are paid for 2021)
Brokerage Accounts - 202K
401K/IRA/SEP - 284K If I left me job I might lose a little of this. Womewhere in the range of about 5K that I still need another few years to vest. They changed the vesting and anything that gets matched now is fully vested.
Roth IRA - 123K
Crypto - 170K but this can fluctuate at times
Note - 55K
Fundrise - 1,400 (tried this out and at this point am planning on letting this money sit there since its a pretty small amount)

Total non cash investments 835Kish

Definition of assets: All of our brokerage/401K accounts are mixed between VTSAX, SP500 index funds and a few target date retirments funds. All are with vanguard. 98%+ equities
Primary Residence 450-500K
Commercial Property 1.8-2 million depending on the market
Note 55K


Liabilities:
30 year fixed on our home with 217K left @3.8% we have paid a little extra but still 26 years or so on the note.
20/5 commercial note for 750K we have a rate @5% currently and it adjusts every 5 years. we have 19 years left on the note and 4 years until the first rate adjustment.
No other debt, we pay off our CC every month and own our cars outright.

Specific Question(s): We are currently trying to decide what to do with our lives. I'm not currently happy with my job but having limited experience and I feel like I still have large gaps in my computer programing ability and would fail if I went somewhere else. I'm also not sure it its just the career in general that I don't like or where I currently work. My wife really enjoys running our commercial property and the flexibility it provides. In theory we should have no problem living off of the revenue from it but its scary to step away from a normal W2 job and the benefits it entails. We want to travel more but the property kind of ties us to the area, we can get away for a week or two at a time but anything more then that and we would not feel comfortable. We have looked at getting someone part time to help with it but its hard to justify the expense unless we are traveling extensively. And then we have to juggle the expense and reduction in income with the added expense of traveling. I guess we are just over all trying to figure out what will make us the happiest going forward.

I know I've probably missed info and was a bit all over the place so feel free to ask any questions and any bit of advice is welcome.

getmoneyeatpizza

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Re: Trying to decide our next step
« Reply #1 on: January 15, 2022, 12:37:43 PM »
It doesn't seem like you have a real question. You are doing pretty well even considering your high spending. I'm not going to go through your budget.

It seems like you shouldn't quit your job but just go part time and/or switch jobs. Your spending is too high to quit. Your field is very in demand and you should be able to easily find another job.

Why did you just finished this college degree to immediately quit?

I don't understand what "Note 55k" is in your assetts

Things I would do:

Refi that mortgage. Rates are going up you may still be able to get a better rate.
Keep mining but Sell that 170k  cryto for stock/bond in appropriate asset allocation
Fill out the tax spreadsheet in the case study pinned topic. A very informative exercise
In the tax spreadsheet you may be better off doing dependent care credit instead of FSA, check that out
As you mention, sell a car as soon as possible (And don't buy a new one), auto prices are high, take advantage



waltworks

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Re: Trying to decide our next step
« Reply #2 on: January 15, 2022, 12:46:44 PM »
Sell commercial property, retire, or go find a job you like better, or whatever.

I mean, if you are self managing and it takes any meaningful amount of time, that means you're currently paying >$1 million to have a halfway decent job that you say ties you to the location and prevents you from vacationing/moving away (yet your wife "likes the flexibility?!?)

You don't want to pay for professional management (presumably because it would reduce profits to almost nothing?) I have news for you: you are already paying for professional management, with your irreplaceable time/remaining life.

That sucks. Sell it immediately and go do something you like.

-W
« Last Edit: January 15, 2022, 12:53:13 PM by waltworks »

chagan

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Re: Trying to decide our next step
« Reply #3 on: January 15, 2022, 05:17:28 PM »
OP - This sounds more like a Husband/Wife discussion is needed on what to do with life in general. If you are new to the coding world and feel like you aren't ready to jump ship to another place, since the current job makes it comfortable, could mean that you need to give it more time. A change in jobs could mean you are still miserable along with the uncertainties a job change brings, unless you know exactly what you don't like about your current job.

Sometimes "Normal is boring"... there doesn't seem like there really is a problem in your "Problem statement" but the lack off a problem is making you wonder if you just need to shake things up.

If it ain't broken, don't fix it.

getmoneyeatpizza

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Re: Trying to decide our next step
« Reply #4 on: January 16, 2022, 08:51:48 AM »
Plus one on sell the commercial property.

How many hours does your wife spend on this a week?

If you can clear 1.1 million from the sale AND your wife's time. That 1.1 mil gets you 44k a year in income.

She could get a part time job and add that to the 44k and see the true opportunity costs of not selling.


waltworks

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Re: Trying to decide our next step
« Reply #5 on: January 16, 2022, 01:29:41 PM »
If you can clear 1.1 million from the sale AND your wife's time. That 1.1 mil gets you 44k a year in income.

She could get a part time job and add that to the 44k and see the true opportunity costs of not selling.

Don't forget the $15k a year in daycare costs. Really (assuming she wants to be a SAHM, which of course is not a given) the day to day finances might be exactly the same once taxes are taken into account, but without the job or being tied to the location due to worrying about the property.

-W

jeroly

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Re: Trying to decide our next step
« Reply #6 on: January 17, 2022, 05:04:54 AM »
You have about 2 million dollars invested in that CRE property that return just $85k in cash flow and/or provide your SO with something to do.
You'd be at the very least safer by diversifying away from having 70% of your investable assets in one investment.
You'd also likely be boosting your expected rate of return.

If you put that money into financial assets instead of RE...
 your SO's time would also be freed up for generating additional income or for doing other things;
 you'd remove the thing tying you down;
 you'd reduce your exposure to the real estate market;
 you'd remove the issues about how to tap your assets to pay expenses without tax penalties before 'retirement age.'

chevelle57

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Re: Trying to decide our next step
« Reply #7 on: January 17, 2022, 07:53:59 PM »
It doesn't seem like you have a real question. You are doing pretty well even considering your high spending. I'm not going to go through your budget.

It seems like you shouldn't quit your job but just go part time and/or switch jobs. Your spending is too high to quit. Your field is very in demand and you should be able to easily find another job.

Why did you just finished this college degree to immediately quit?

I don't understand what "Note 55k" is in your assetts


The note in our assets is one we are holding on a property we sold a few years ago. It's at 6% and there is a balloon payment in 3 years or so. I also don't want to fall into the sunk cost fallacy, just because I've spent time and money to pursue this degree doesn't mean I need to continue working a job that would require it.

chevelle57

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Re: Trying to decide our next step
« Reply #8 on: January 17, 2022, 08:14:53 PM »
Since a few people have mentioned the commercial property I'll give some better numbers.
Currently worth about 2 mil and we owe 770K on the note. Our basis in the property is around 1.1 million so the taxable profit would be in the range on 800K assuming commissions, pre payment penalty on the loan and other expenses. The 2 million is a rough number and it could be higher or lower, no way to tell with out putting the property on the market. That would leave us with about a 150K ish tax bill and would net us between 1 and 1.1 million depending on the exact sale price.

While we will have made about 85K for the trailing 12 months on the property we have continued to increase rents and can project growth in that going forward. We also get about 25K a year in equity paydown and have the benefits of depreciation on the 1 million purchase price. We are also seeing the appreciation in the value of the property as we continue to optimize operations and increase rents and would hate to miss out on it.

While my wife is at the property 16-25 hours a week its pretty minimal effort on her part and she uses the time to stay caught up on family tasks ie. scheduling appointments, paying bills that aren't set to auto pay, stuff like that. There have been weeks where we haven't gone to the property at all due to sick kids or what not and it runs its self for the most part, its just helpful to have a body on site at times.

I probably didn't articulate my main question that well in my first post I ended up typing way more on our back story then I thought initially. I guess my main question is what else should we consider as we try to figure out our next step. I'm not currently happy with my job and would like a change but feel stuck there due to benefits, we feel the aca market place in Texas is overpriced and all the plans we have seen are horrible coverage. Also being newly graduated I feel it would be hard to start over at another company and I'm not sure if I would enjoy a similar position in a different atmosphere. I don't know if that's any clearer, I guess with out knowing what we want its hard to ask for advice. I was hoping taking the time to list all this out would provide me with some clarity but I'm not sure if it has. Thanks to everyone who has taken the time to read and respond. 

waltworks

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Re: Trying to decide our next step
« Reply #9 on: January 17, 2022, 08:36:47 PM »
The property numbers would be ok, if you weren't spending your time running it. If all you need is a body on site and it's so easy, just hire someone to do it FFS. It sounds like it's ruining your life, honestly. No way in hell would I own that place in your shoes.

If the wife wants to keep working on the commercial property and you want to be tied to the location, great. Keep doing it. You're totally set either way, though, so don't fool yourself that you're somehow getting ahead by holding it. If all goes well you might die with a bit more money, but having spent more of your life working. Your call on that tradeoff, I'm guessing future deathbed you has a few thoughts.

You don't need a job at all, regardless of whether you just graduated. Start thinking that way. Go explore the world a bit (if you can get time off from running the building, that is) and see if there's something you'd rather do with your time or some other place you'd rather live.

You're the dog that caught the car, son. There isn't a "next step", financially speaking. But if you want to just take the blue pill and keep on keeping on, you do you. Kids (and you) won't be young forever, always keep that in mind.

-W

chagan

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Re: Trying to decide our next step
« Reply #10 on: January 18, 2022, 07:51:43 AM »

You're the dog that caught the car, son. There isn't a "next step", financially speaking. But if you want to just take the blue pill and keep on keeping on, you do you. Kids (and you) won't be young forever, always keep that in mind.

-W

Wholly second that... and very elegantly put BTW @waltworks

DaTrill

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Re: Trying to decide our next step
« Reply #11 on: January 18, 2022, 11:13:51 PM »
What is the opportunity cost of your wife working somewhere else?  If you are not a commercial property expert and have a good understanding of how this property went up and why it will continue, sell and count yourself lucky.  Cap rates on rural strip malls have tripled in parts of Texas in the last three years and unless they triple again or you want to make CP your full-time business, get out.  Sell crypto again, unless you are an expert and can explain why it's gone up and expect this to continue.  You have used leverage to your advantage, don't let it cut you the other way.       

All programming jobs are less than ideal where most of the work is trying to do 60 hours of work in 20 hours.  Unless you can get a 20%+ raise, new job will be the same.       

chevelle57

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Re: Trying to decide our next step
« Reply #12 on: February 21, 2022, 08:59:43 AM »
I'll start by saying my initial valuation of our commercial property at 2 million was a rough number, and I thought it was high and we would only be able to sell in the 1.8ish range. After talking to 3 different brokers we had the property under valued even at the 2 million. Even after capital gains, depreciation recapture, and commissions it looks like we will net more then enough to push us well into the FIRE category. We should be listing the property in the coming weeks and we have a rough idea of our next steps. Thanks to everyone who offered suggestions.

waltworks

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Re: Trying to decide our next step
« Reply #13 on: February 21, 2022, 12:08:04 PM »
Congrats!!!

-W

chevelle57

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Re: Trying to decide our next step
« Reply #14 on: September 13, 2022, 06:40:51 PM »
I know only a few people responded to my original post but figured I'd give a little update. We sold everything....lol. We ended up selling the commercial property for just over 2.6 mil ( would have been higher but rates increasing put a damper on the market) and we sold our house and almost everything else we owned. We are setting off on 9 months of worldschooling/travel before we come back to the states next summer for a wedding. Assuming we are enjoying it we plan to set off again after the wedding with no real end date in mind. Thanks for the commenters that helped us realize we are the dog that caught the car, and we can now enjoy every thing the "car" has to offer.

Gremlin

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Re: Trying to decide our next step
« Reply #15 on: September 13, 2022, 07:22:59 PM »
Huzzah!  Welcome to the rest of your life on your own terms!

FIREeh?

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Re: Trying to decide our next step
« Reply #16 on: September 13, 2022, 07:27:25 PM »
This is an amazing update, the kind that is both generally inspiring and shows others the value of taking good advice! I hope you share more in the future. And have fun!

meandmyfamily

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Re: Trying to decide our next step
« Reply #17 on: September 13, 2022, 09:37:43 PM »
Awesome update!! 

iluvzbeach

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Re: Trying to decide our next step
« Reply #18 on: September 13, 2022, 11:27:54 PM »
Holy smokes, great update! Thanks for checking back in to let us know what had transpired.

six-car-habit

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Re: Trying to decide our next step
« Reply #19 on: September 14, 2022, 11:01:33 AM »
 case study for the win !      Wow- big changes, big results, big adventures...

Laura33

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Re: Trying to decide our next step
« Reply #20 on: September 14, 2022, 01:24:48 PM »
Dude, this is awesome!  So few people actually take the advice offered -- congratulations, and enjoy FIRE!

jeroly

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Re: Trying to decide our next step
« Reply #21 on: September 14, 2022, 06:25:04 PM »
That is totally fantastic! Congratulations, and best wishes.  What places are you most excited to visit?

JupiterGreen

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Re: Trying to decide our next step
« Reply #22 on: September 14, 2022, 06:59:47 PM »
I know only a few people responded to my original post but figured I'd give a little update. We sold everything....lol. We ended up selling the commercial property for just over 2.6 mil ( would have been higher but rates increasing put a damper on the market) and we sold our house and almost everything else we owned. We are setting off on 9 months of worldschooling/travel before we come back to the states next summer for a wedding. Assuming we are enjoying it we plan to set off again after the wedding with no real end date in mind. Thanks for the commenters that helped us realize we are the dog that caught the car, and we can now enjoy every thing the "car" has to offer.

Inspiring, congrats!

change_seeker

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Re: Trying to decide our next step
« Reply #23 on: September 15, 2022, 12:01:38 PM »
AWESOME story and congratulations!!!

Please keep us updated on your adventures.

406MtnFire

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Re: Trying to decide our next step
« Reply #24 on: September 15, 2022, 12:13:36 PM »
Just wanted to say congrats! Huge move and hope it's working out for you. Update us if it was "worth it" or not.

-Guy who owns a cash flowing 6 plex and will do the same thing in a couple years hopefully.

LightStache

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Re: Trying to decide our next step
« Reply #25 on: September 15, 2022, 04:13:15 PM »
Well this thread took a big turn towards awesomeness!

clarkfan1979

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Re: Trying to decide our next step
« Reply #26 on: September 17, 2022, 09:32:39 PM »
Selling the commercial property for 2.6 million certainly changes things. I was going to originally state that your spending was a little too high and a part-time job would be better than 100% quitting. It seems like it's a different story now. Congrats.

calimom

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Re: Trying to decide our next step
« Reply #27 on: September 18, 2022, 05:50:01 PM »
Well done, @chevelle57 family!

waltworks

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Re: Trying to decide our next step
« Reply #28 on: September 20, 2022, 07:34:19 PM »
OP, I salute you!

It is super rare that anyone takes our advice here. I was expecting an update that said you bought another commercial property and now your wife works 80 hours a week but you're making a ton of money, or something along those lines.

Instead, you took the blue pill!

Keep us updated, have an awesome retirement!

-W