40yo, Still Grinding Away, Future Has Promise

[progmtl]

Hi all, I just posted my first couple of posts so I guess I should post my "story" here .

I'm 40 with a wife (38) and child (7). We both work and have a very good combined income > $300K. However, there is a lot of stress and doing all the child-related tasks on top of our jobs is not the way I would prefer to live. Some people like the go-go busy-all-the-time pace; not me.

I have been working at my job with slowly increasing salary for almost 18 years - since college. I am bored and somewhat burnt out on it. My wife is a doctor, so her path was long and arduous and she has only been making good money for 3.5 years. She likes some aspects of her job, but the hours and on-call shifts are too much.

The good news is that we are both reasonably frugal and I caught the RE bug in 1999. We saved pretty well even through the "lean" years while we had a younger child in daycare/preschool and my wife was doing her residency and fellowship training. Now that she is making a nice salary we save easily (conservative estimate) $90K-$100K per year.

Net worth is currently around $1.4m, consisting of 401K/403B balances, taxable investments with Vanguard, and a lesser amount of stock options, home equity, cash. I have some unvested stock options that are worth > $100K which will fully vest in a little over 3 years.

We have a sizable mortgage with still about $385K remaining to pay. Also my wife's med school loans are still at $130K or so. The net worth factors in these debts, however, and both loans are at great interest rates.

My plan for now is to hang on at work at least until those stock options vest - so 3-4 more years minimum. After that I will evaluate our net worth and might consider quitting my job. Even if my wife continues full time our lives would improve by having me do most of the child-related work (which I already do out of necessity due to our schedules and work commitments) and take back some of the house work which we pay for (cleaning/mowing). I would be more inclined to cook more interesting things, etc.

I would hope my wife is willing to stay full time for a few years more after that. Her income is higher and we would still be bringing in > $200K. It would slow our savings rate by a good amount, but we may already have a net worth in the vicinity of $2m at that point. The nest egg will grow as long as we don't tap it.

My thinking for 10 years from now is that my wife can shift to part time work. I think she would enjoy working part time reasonable hours. I think if she quit entirely she would have a lot of trouble filling her time. She doesn't have a wealth of hobbies/interests like I do or a burning desire to spend a lot more time on them.

I'll end this ramble here for now. Our future looks very nice, but I feel like I need to grind away for at LEAST 3-4 years before we start having some interesting choices to make. And I will need to be sure my wife is on board. She knows about my plans in general, but maybe hasn't thought through a lot of the details like I have.

Oh, and there are a lot of things I would like to do after ER - a couple of which might (long shot) produce income. I am not planning to be a couch potato. As for now, I spend too much time reading ER forums and blogs .

 

[panacea]

Welcome Progmtl!

Sounds like you are doing very well. I bet you'll be feeling much better once you are able to knock down those debts though.

I work with a number of docs and many of them are trying to work toward a 3 or 4-day work week and limited, or no call to improve their mental health. Most say FT just doesn't seem sustainable anymore as they are required to see more patients in the same short day to increase revenues. Also, sounds like virtually all employers have switched to electronic medical records, which apparently is a huge time sucker (at least until they get better at the process). Many of the older docs especially have trouble getting acclimated to the process and are spending their weekends trying to get caught up. Is your wife finding any difficulty with these issues? Or just looking forward to less w*rk in general?

 

[progmtl]

"Good" debt?

Welcome Progmtl!

Sounds like you are doing very well. I bet you'll be feeling much better once you are able to knock down those debts though.

Thanks panacea! Yes, it would be nice emotionally to see those debts eliminated, but the practical/numbers side of me is not so sure. The student loan, with some Sallie Mae discounts, is at an effective interest rate of 1.625%. To me, that is a "don't pay a penny off early" rate. Nearly free money and a nice inflation hedge.

The mortgage is a different animal. I have the amazing rate of 2.375% (for 4 more years) by using a 5/5 ARM. I have used ARMs (typically 5 year ones) over the last 11 years that I've been a homeowner and saved tens of thousands in interest. I realize there is risk of rate increase here, albeit capped at 2% per event and 5% lifetime. One way that I am mitigating that risk is by paying down some extra principal each month. If rates do rise fast, worst case scenario is that the rate goes to 4.375% for another 5-year period after the reset in 2018, which is not far above what a 30 year fixed rate would be today. And by the end of that period, if necessary, I could have drastically reduced or possibly paid off the mortgage. In the meantime I save
~$6k per year in interest.

I guess if you have to have debt, it pays to manage it (and the interest rates) well!

 

[progmtl]

Full time is not really living

I work with a number of docs and many of them are trying to work toward a 3 or 4-day work week and limited, or no call to improve their mental health. Most say FT just doesn't seem sustainable anymore as they are required to see more patients in the same short day to increase revenues. Also, sounds like virtually all employers have switched to electronic medical records, which apparently is a huge time sucker (at least until they get better at the process). Many of the older docs especially have trouble getting acclimated to the process and are spending their weekends trying to get caught up. Is your wife finding any difficulty with these issues? Or just looking forward to less w*rk in general?

Full time is just too many hours. On-call shifts 1-2 weeknights per week, and all weekend every 4th weekend (that's Fri/Sat/Sun and being physically present at the hospital all day Sat/Sun). Plus normal weekdays can be long - 9-10 hours is typical but there are no guarantees; some days are longer. And we have a young child who misses her mom! Some nights she doesn't see her at all.

I don't think my wife is slowed too much by EMR; there was an adjustment period a while back and things have improved. I think that she just wants to do a good job and be thorough; and all the pressures and incentives are to be as fast as possible and move on to the next patient (for example, with writing notes about the patient). Some of her colleagues write minimal, crappy notes and it annoys her.

In the end it all boils down to quality of life. We both have worked very hard in school and jobs to get where we are - and for what? To be constantly in a rush, stressed out, and not doing what you really want with most of your waking hours? That doesn't sound like a good tradeoff for a lifetime of hard work. Enter FIRE. Yes, now that sounds right . Or perhaps semi-ER at first, where work is scaled back and quality of life improves.

 

[daylatedollarshort]

Welcome progmti. You are smart to start living frugally so early. With high income and frugal savings habits I think you will find the world is your oyster.

Just working some combination of part time or an at home business to make $60K, which is 20% of $300K, even without using your investment income, would provide more income than the median household in the U.S. earns in a year, only in your case by working minimal hours. The key is just to keep LBYM like you have been. You can use your currently high combined income to buy financial security and loads of free time instead of stuff.

 

[ggbutcher]

You both are at a good place: at least one really-high-paying job, and a good number of years left in which to use it to prepare for FIRE. Your savings at this point already is well above most folk. And, being "frugal" at least means you are aware of your expenses.

Just by itself, if you never put another $1 into the $1.4M and made 5% on the dwindling balance, starting now you could take ~$3000/month with a 3% COLA from it until you turned 100. Only you know how that would cover your expenses, but this is a good baseline expectation upon which to consider various combinations of remaining work years, investments, etc.

 

[progmtl]

Welcome progmti. You are smart to start living frugally so early. With high income and frugal savings habits I think you will find the world is your oyster.

Just working some combination of part time or an at home business to make $60K, which is 20% of $300K, even without using your investment income, would provide more income than the median household in the U.S. earns in a year, only in your case by working minimal hours. The key is just to keep LBYM like you have been. You can use your currently high combined income to buy financial security and loads of free time instead of stuff.

Thanks for the welcome daylatedollarshort! I guess I am lucky to have a naturally careful/frugal mindset. My family didn't have a lot of money growing up and I think the tension around money and bills certainly affected my outlook. Financial security was always a top priority to me. On the other hand, both my siblings are spenders (on much lower salaries!), so who knows?

I really like the part time idea, and I may be VERY lucky indeed if my wife decides that part time work is the right balance for her. Because she may easily be able to pull in, say, $70-80k per year without working a great many hours. That would make semi-ER very safe for us. We will just have to find that perfect position for her.

I am burnt out on the corporate work thing, but I could see myself blogging (I have a niche in mind) or trying (long shot) to do creative work for income - writing music being one option (I'm a guitarist and amateur musician). Or heck, just playing in a band for fun. I very much like the concept of using money to buy time/freedom. In a few more years, without a market collapse, we may be there.

 

[progmtl]

You both are at a good place: at least one really-high-paying job, and a good number of years left in which to use it to prepare for FIRE. Your savings at this point already is well above most folk. And, being "frugal" at least means you are aware of your expenses.

Just by itself, if you never put another $1 into the $1.4M and made 5% on the dwindling balance, starting now you could take ~$3000/month with a 3% COLA from it until you turned 100. Only you know how that would cover your expenses, but this is a good baseline expectation upon which to consider various combinations of remaining work years, investments, etc.

Thanks ggbutcher, it is always nice to hear others affirm what I think I already know - that we are pretty well along towards FIRE. I have only roughly tried to sketch out our ER expenses; there are too many unknowns. Health insurance is a big one. But also kid-related expenses, as our daughter is only 7 right now. We are also in CT, a fairly high cost area. And I would be willing to downsize our house, which is fairly large, but we need to consider any possible disruption to schooling, etc. Downsizing to a more convenient location in our same town might not save us much money (we are currently way on the outskirts of town).

So there are many variables but I could see us, someday, settling into a $60k-$80k spending range in ER. That is with a lot of "fluff" just in case, and not assuming a mortgage payment. It seems to me that if we had $2m in investments (not counting home equity) and a paid off house we are in decent shape. If we have that, plus my wife willing to work part time, then I think we would be quite safe.

 

[ggbutcher]

Just make sure you account for inflation in your expenses. You have at least a 40-year window, and things will surely cost more at the end of it. Consistently demonstrated over the past 100 years to average about 3%/yr.

 

[daylatedollarshort]

I really like the part time idea, and I may be VERY lucky indeed if my wife decides that part time work is the right balance for her. Because she may easily be able to pull in, say, $70-80k per year without working a great many hours. That would make semi-ER very safe for us. We will just have to find that perfect position for her.

That was our semi-ER kind of plan. We were in a somewhat comparable situation, but we didn't wise up on lowering our expenses / working part time until our fifties.

We always saved a fair bit compared to most people, but our expenses were still pretty high and we were not watching them closely enough. A few years ago we realized if we were willing to move towards a more middle class lifestyle than we had been, neither one of us had to work a full time megacorp job any more.

Then we got interested in sustainable and simple living, and that has been a fun hobby as well as a real cost saver. For example, we used to use more electricity than average and now we only use 1/2 as much electricity as the average U.S. household, even though we have haven't downsized yet, have two big screen TVS, lots of computers and a chest freezer. Plus we have many ideas we have not had time to implement yet to get that usage even lower.

A good portion of our second, full time income had been going to taxes, job and commute costs, and extra spending because we didn't have as much time for activities like price shopping, cooking from scratch, examining our energy usage and just reviewing the budget in general.

 

[progmtl]

Just make sure you account for inflation in your expenses. You have at least a 40-year window, and things will surely cost more at the end of it. Consistently demonstrated over the past 100 years to average about 3%/yr.

Yes, a good thing to keep in mind. I really haven't given much thought to it, except inasmuch as I know the 4% SWR guideline does factor in inflation. We currently have an 80/20 asset allocation so having a heavy stock tilt probably also helps a bit with inflation. And right now half of my fixed income allocation is in TIPS. But when I get closer to pulling the plug I will probably want to run some numbers out 40+ years with inflation factored in.

 

[progmtl]

That was our semi-ER kind of plan. We were in a somewhat comparable situation, but we didn't wise up on lowering our expenses / working part time until our fifties.

...

Then we got interested in sustainable and simple living, and that has been a fun hobby as well as a real cost saver.

...

A good portion of our second, full time income had been going to taxes, job and commute costs, and extra spending because we didn't have as much time for activities like price shopping, cooking from scratch, examining our energy usage and just reviewing the budget in general.

A good point - this is a benefit that I hope will materialize for us after FIRE, although I will not count on it financially. But having more time (and energy) should allow us to trim some expenses and be more efficient. It amuses me that my physician wife envies the "extreme couponing" people on TV. She says she wishes she could save money like that. I guess it would be a worthwhile hobby if she enjoyed it!