We are both 41, employed with no kids and love the idea of taking off for a part of the year to travel in the next 3-5 years. Our income looks pretty stable for the next 2-3 years but we work at a frantic pace in both of our jobs and pine for a more laid back, relaxed way of life. We love where we live, Portland, OR and don’t really see ourselves moving elsewhere at this time though we originally came from Ireland and Canada so there is always the possibility of returning home one day.
While not a problem, we are struggling with how we structure our lives financially – we are in the accumulating phase right now and with great thanks to blogs like MMM, JD Roth & Ray Lucia I think we have our ‘portflio’ in a reasonably diversified manner. We are reluctant landlords, our 1 rental home is rented (below market value) to a very stable tenant – this area is seeing above normal appreciation so we’d like to hang onto this as long as possible as it’s going to be worth considerably more in 5 years.
I would not be able to hire and train someone sooner than 2 years out so timeline wise it seems like 3-5 years is about right.
Him: 41, self-employed with an estimated income of $120K pa
Her: 41, employed, $95K pa – self employed side job that produces $10-12K pa – (bikes to work every day in a very MMM way)
2013 savings: $133K
Assets:
Primary residence:
Mortgage of $190K – 12 years left 3.25%
Current value: $375K
Rental Home:
Mortgage of $152K – 15 years left – 4.4%
Current value: $230K
Rented for $1K p/m
This is in a rapidly appreciating area so we’d like to hold onto for as long as possible
401K’s - $200K (maxed out with 6% match)
IRA - $65K
Roth - $30K
Index Funds & Brokerage - $322K (50% US – 35% Foreign – 10% REITS – 5% Bonds, all Vanguard)
Cash - $100K – need a little more than normal on hand for cash flow purposes with business but in some ways we partially paralyzed by the market right now and by how much it has increased in the last few years. We also like to look at this money as our opportunity fund and while it is considerably more than we know we should have sitting un-invested we are somewhat comfortable in just keeping this amount on the sidelines…just in case.
However there will be another $75K in case that needs to be invested this year so we’re looking for ideas moving forward.
Expenses:
$4,500 p/m which includes everything - can break it down of course but no credit card payments, no cable.
Vehicles:
#1: 2013 Subaru - $14K to pay down – value of $20K. I drive up to 200 miles a day for my business for sales calls. (My business pays me 56 cents per mile as reimbursement)
#2: 1999 Subaru – 200K miles, long paid for
It’s only in the last 2 years that we have seen our income increase to this level – before this I was staring my business and invested quite a bit in equipment, inventory and general start up costs. We never financed any of it and I have paid myself back the entire amount so the business is 100% debt free
Goal:
The ability to travel is important to us and we would ideally like to spend 6+ months on the road every year for a couple of years. We understand that while this is not a life necessity we are committed to getting out and enjoying the world, experiencing new places and cultures while not going broke. Our ideal scenario is that renting our houses out would partially finance our expenses and we could draw down as little as possible of our investments to fund the rest.
We’re not extravagant when we travel, we strap on a backpack and stick to a pretty frugal budget in off the beaten path places – we plan to spend 1-2 months in different places along the way and move about from a home base, hopefully extended home stays etc.
I would anticipate that our expenses if we semi-retired will be $35 - $40K per year – sounds like a lot but with living expenses, flights etc we'd like to budget of this amount.
My business has just recently started to take off and I hope to have the ability to hire someone to replace my sales role in the next couple of years so we can take off as we wish – I wouldn’t be entirely retired or commitment free but I would hope to be able to take $30-40K salary for at least 5 years if I found the right person to run it (bon chance)
One thought we had was to pay down the mortgages with the additional cash that we are saving and use the rent to fund our travels when we do jump ship. We don’t have any kids to leave estates to so we’re looking to preserve our assets just long enough, or just until o
So the question is what is the best way to structure things moving forward. We read all the time about the 4% distribution rate which will help fund our travels but where exactly do we pull that 4% from or does it even matter, just plan on liquidating any asset?
How about transferring some funds to dividend paying stocks so we can have dividends coming in at different times of the year?
Is the option of paying off our primary residence wise, given the rate we have? If we were to rent this out now we could get $2200 p/m (mortgage of $1500)
Do we continue to just invest in index funds with excess cash or what would be a good alternate?
