Mustachians;
I have been reading this blog for about 6 months and have finally come out of hiding :) My wife and I have come to realize that we need/want a simpler life and would like to punch out of the Rat race as early as possible. A little bit about is, both are 47 and working with 2 kids, both in college and living at home. We live in the far western suburbs of Chicago and I work downtown and commute by train and my wife works (let the face punching begin...) 50 miles away in a Northern Suburb of Chicago. I am amazed at what MMM lives on and when i run the numbers, it seems very plausible to me. I am very familiar with where he lives since I’m a CU Boulder grad. I have come to realize that I have been approaching this the wrong way. It’s clear that instead of trying amass ever greater piles of cash, that we would be better served by reducing our costs.
We are blessed with a very high combined income, as in up in the shit tons range compared to what I have seen discussed here and am embarrassed to say we are not all that close to Early Retirement. Not due to lack of money, we have a net worth approaching 1M. However due to spending the numbers I was running and all the conventional advice was that I was going to need 3-4 M to retire and that seemed to be a long ways off.
So, I have the outline of a plan and want to see what folks here think. This is an ongoing project and my wife is willing but skeptical about being so austere :) Let’s start with the big plus side of our leger;
- Savings Rate today, about 54%
- Paid off house 2000 sq ft , what I would consider upper middle class but not McMansion level, reasonable($8000/yr) by Illinois standards anyway Property taxes (Hence why we live so far West)
- 3 positive cash flow rentals, about $600/mo net everything.
- No debt except that supporting the rentals, which I actually just consider leverage Plenty of equity there so in my mind I’m debt free but that is not technically correct.
Now for the Sins that justify major face punching. We are very time strapped so we spend a lot of money buying our time back. Classic double income treadmill.
- 4 paid off vehicles, one for each family member. Other than numbers, the vehicles themselves are normal. 03 Honda Accord, 96 Ford Contour, 2000 Nissan Pathfinder (I drive this 6 miles a day to train station due to poor mileage) and a 06 Nissan Sentra.
- Maid service $200 Mo
- $800/mo grocery Bill, not counting eating out
- $200/mo Eating out (Wow!)
- $220 Cable/internet/phone bill
- $200 Cell phone bills, (2 smart phones the wife and I 2 dumb phones for the kids)
- My cost of commuting is $195/mo so not too bad, my wife however is about $1000/mo at $.50 mile, up there with bat shit insane….
- I also believe we average about $500/mo in what I would call retail therapy
So, without any more gory details, suffice it to say that out outgoing money every month is on the order of $6200/Mo. At that consumption Rate, assuming a SWR of 4%, I will need a minimum of 1.9M to retire. As I said earlier, our net worth is on the order of 1M but that includes 300k in total Real estate equity which is not really anything but an expense So, I figure I’m at 700k and need 1.2M more. Better in my mind is to reduce spending down to something like $4200/mo therefore only needing 1.3M which is only about 600k more and with our savings rate and returns, can be had in about 5 years at age 52.
Now that the face punching is commencing (I envision a scene very similar to that Scene in the movie Airplane where everyone is lined up to take a whack at the hysterical passenger) I have a plan outline that goes something like this.
- Replace all smart phones with dumb phones, saving about 100/mo.
- Drop Phone landline and get something like magic jack, (need a land line for work, con calls at all hours of the day and night) $50/mo
- Reduce cable package to bottom tier $70, I know that a true mustachian would eliminate it, but I love my football
- Cut $200/mo from Groceries by teaching our little darlings how to cook and make them do so to pay their way Side benefit, reduce eating out by $150/mo and lose weight to boot.
So, easy saves come out to $570/mo. Now for the hard one. The commute. This is a real issue because where we live is pretty hard to change. It’s inexpensive, in the same town and my mom, dad and siblings and is where we have lived for 17 years and is close to my kids campus’s. I have run some numbers and moving anywhere near cook county with a family type home doubles my Prop taxes to 12k/yr and that is on 1200 sq ft house that would cost 50% more than the sale value of my home. I don’t think this is a good way to go.
I wanted to run a radical plan by the Mustachians. How about a commuter pad What I’m thinking is that I could buy, a very small 400 sq/ft condo near where my wife works and have it cost, all net, about $1500/mo. It’s on a train line so I can commute from there with no extra costs and the size of the place is like a hotel room, we just own it and live there during the week. In my mind, it works out like this;
Current commute cost for Wife $1000/mo over 3 hours a day on the road
Commute cost with new condo maybe $100/mo.
Since the condo is $1500 and new commute cost is $100/mo for a total cost of this plan is $1600. But wait the crowd says, twirling their moustache’s, how can spending more help you out. Here’s how, at least I think. The $1000/mo we are currently paying is going down the shitter, nothing to show for it and is murder on my wife. The $1600 option is in an asset that will hold value and be liquidated when we punch out. I would pay cash for it so the cost I’m using here is opportunity cost of not having the investment the actual cost will be around $600 mo. So, even at $1600/mo I see this at only $600/mo going down the shitter. For a savings of like $400/mo plus my wife gets a 5 min commute.
This is my Phase one plan; it nets $970/mo savings and gains an asset to boot. Phase 2 will come mid year and will address the maids and the retail therapy issue. Sorry for the huge wall of text, but this is the whole enchilada Thanks for listening.
Steel