Hi-New here! Hoping to FIRE in 16 years. How do expenses pre FIRE change over time?

[NgineER]

Hello everyone, have been lurking for a while and found very useful information. I am hoping to retire at 55, DW is already retired (if you can call being home with 3 kids retired).
Started w**king late in life after grad school and various adventures. Started budgeting when we decided that DW would stay home with our kids.

My answers to... Some Important Questions to Answer Before Asking - Can I Retire?


1. Have been tracking budget for two years, annual spend about $40k, but imagine that will increase as kids get older, oldest one in first grade. Income currently at $120k + about 10% bonus.

What is a realistic increase of spend in your experience? (with kids growing up).


2. I imagine that my expenses will go up in retirement as we hope to travel and explore more.

3. We value education, but we are not planning on covering college expenses completely for the kids (Dual citizenship for the kids allows for free college abroad and 529s could go for masters here.)

4. Don't have enough details yet around spending habits in ER yet.

5. I might be able to do consulting, but have not investigated that avenue yet. I am looking into getting one or two income properties, but don't know how to handle these with increased travel in retirement, what do you do?

6. I will not receive a pension, but have a nice 6% $/$ match plus 3% retirement contribution from company

7. I am not counting on any SS in retirement

8. Have not thought too much about retirement tax situation yet.

9. ~$230k roth and $300k tIRA. 401(k) $38k (W**rking at new Mega Corp for a little over a year) Maxing out 401(k), roth IRA and stock purchase plan.

10. Hoping to get into the 90's in good health like my grandparents

11. Fire calc says I'm in good shape, but don't know how realistic my current spending/savings will be in five or ten years as I only started tracking a few years ago and our family has been growing.

12. Currently have life insurance covering me until 55 at $2MM pay out and much less for retired wife, but something that would help with child care etc if she was to pass.

I am starting to reinvest dividends into bonds and will add to bonds to reach 40% equities at 55.

I am interested in income properties, I am handy and I think I'd enjoy it provided I have good tenants. I need a new garage, I am considering a 2nd story on garage as a one bedroom apartment to ease me into landlording. Is this a good idea, or would it be better to buy a standalone property? You who have income properties, do they significantly contribute to your FI?

To all you who are FIREd with kids, how have your expenses increased with age after you discovered the option to RE?

Thanks

 

[sengsational]

Interesting question about projecting kid expenses. My quick and dirty look suggests there's not much extra cost until cars and college. The chart below is for all famliy expenses, including 'biggies' like housing, etc. It's inflation adjusted. We kept our consumption flat, which most people would have a hard time with, I think. In other words, I didn't buy bigger and more stuff when I got a raise. And my stay at home spouse was on a budget that stayed flat. We also saved because the kids did NOT get cars, and the younger child decided she wasn't interested in getting her driver's licence (they can have a permit, and not cost you anything extra on your auto insurance, but once they get the licence, you're in for big $). 2010 was the first 1/2 year of college and 2013 was 1.5 kid-years in college (younger just had 1/2 a year in 2013). So what I'd conclude is that you could model with a fairly flat kid expense estimate, but bump it up by separate college and car/insurance estimates.

 

[Walt34]

It is not too soon to be thinking about what your answers to these questions will be:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[InParadise]

Molof: "What is a realistic increase of spend in your experience? (with kids growing up)."

Your expenses will increase as much as you let them, assuming good health for the kids and no health emergencies that are out of your control. Some will need braces, some will play sports and some will play an instrument. Eldest was reasonably cheap, but we recognized if we didn't want him tearing our computers apart, he would need his own. One birthday we gave him enough towards a basic computer, allowing him to put long term savings towards upgrades. We try to teach them money management skills for short-long term spending goals, saving for college, and charity from initially an allowance, and then their work money.

Youngest has a very hard time holding on to money, which means he often does not have the $$ to spend on what he needs/wants. As a kid we outfitted him for Lacrosse to the tune of $300, but told him anything additional was on him. I can't tell you how many times he came to us for equipment upgrades, which we consistently turned down due to lack of his funds, suggesting that building up his stamina by doing a running workout would be a way to improve his game within his budget. On the other hand, music he really worked at, so we put up the funds for his instrument upgrades and paid for private lessons.

Neither will get a car from us, unless that makes it more convenient for us, and will be one of our cast offs. They have to pay their own insurance, which is about $1,000/year!

Fortunately, he is starting to get it, but it took a lot of emotional scenes to which we had to be consistently on point for the message...you save now, later you can spend. Talk to your wife about your strategy. You want to figure it out now!

IP

 

[Bestwifeever]

It is not too soon to be thinking about what your answers to these questions will be:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

I am pretty sure those ARE the op's answer to those questions

 

[Walt34]

I am pretty sure those ARE the op's answer to those questions

D'oh. Hate when that happens,

 

[Hermit]

What is a realistic increase of spend in your experience? (with kids growing up).

Hi molof and welcome to the forum.

I had a different experience from those above. Kid money was going out so fast I gave up on budgeting and all that and just became the chief bill payer. It was plenty hard enough just to keep up with that. By the way, that included private school from junior high on for two kids. I didn't see that private school thing coming, but it all worked out good. Still managed to max out the 401k and am now living the RE life happily ever after.

 

[NgineER]

Thanks for the input so far. It is encouraging that at least some of you were able to keep expenses in line, hopefully I can manage to do the same and teach my kids some valuable lessons at the same time.

 

[sailor]

Our annual expenses for the family of 5 raised from annual 60k when the kids were tiny to about 90k right now.
Kids are now 9,7, and 5. Some of it is inflation, but our biggest budget busters are:

• a house in a much better school district (much bigger taxes and getting a mortgage, where there was no mortgage before)
• children extracurricular activities (all three little sailors do gymnastics, the middle one competitively, two older kids take piano lessons)
• vacations (plane tickets to Europe are much more expensive than before and we are limited to school vacations times for the trip. Infants no longer can fly on your lap).
• our "gifts given" spending category swelled immensely - three kids go to a lot of birthday parties, let's say $20 for a gift adds to a significant amount
• we also noticed gradually increasing grocery budget, we went from roughly $7500 to $11500 last year.

 

[NgineER]

Sailor - Thanks for the feedback
Our current budget includes a mortgage in a good school district and tickets for four to Europe once a year (youngest still in lap...)
We have so far limited the parties the kids go to, but it might not be as easy as they grow older
We are currently budgeting for $60k per year, but there are budgeting buckets that are full and that money is going into an ER savings account (~$20k/year)
We try to eat only organic and as much as possible locally grown and my wife has been very resourceful in finding good sources of inexpensive local organic food and we don't eat out much.
Our food budget is ~$5k/year

 

[rodi]

I see some similarities between you and I. I'm not retired, but my husband just retired this past month. I have an 11 yo and 13 yo. I plan to retire in 3 years, when I turn 55.

Kid related expenses - these are optional, but ones we've chosen to take on:
- Piano lessons for both $5000/year (that's for both, $2500/kid).
- Sports - the boys play rec league basketball and one plays little league baseball - with the shoes, balls, batting helmet, etc... probably about $500/year total for both.
These are ENTIRELY optional. You do not need to provide these to do a good job parenting.

My 13 year old is desperate for a cell phone. We've said no. Perhaps when it serves OUR purposes, we'll add a phone to our Ting plan - but he won't get data because I'm cheap.

Both kids received very nice laptops from their aunt. My older son wants a super gaming computer, he's saving his own money for that. The laptops my sister gave them are better than the one I use - so they have no right to complain.

We have added driving expenses because we're sending them to an International Baccalaureate magnet school that is 10 miles from our house. (40 miles a day when you look at pickup and drop off.) Still cheaper than private school and provides more rigor than the local school. Plus the IB diploma is directly transferable to EU universities.

Like your sons, my boys are dual citizens - so there's the option to send them to school in the EU without the complicating visa issues.

We are funding $6k/year/kid into the 529's until the accounts hit $120k. (about 60% of the way towards that goal.) 529's aren't useful for most european universities - but there are no guarantees they won't go to school locally. (We live bicycle distance from UCSD - a top notch public school.) Even in Europe you still have some college expenses (living expenses, etc.) If they go to university in the EU we'll just pay the penalty on the gains of the 529s. The contributions can be withdrawn penalty free. Our goal is to have them graduate with a bachelors, debt free.

My husband and I feel strongly that *giving* a car to a child makes them appreciate it less - and therefore be less invested/careful. So more likely to crash it. We'll match $1 for $1 on a car purchase - and they'll pay for their own insurance.... or they'll ride the bus. We'd rather allocate the money towards their college funds.

We limit our trips to Europe to every 4 years. The airfare costs are prohibitive. We do driving trips (mainly to national parks) in the 3 years between European trips. When I retire we have plans to do a full summer abroad taking advantage of relaties in Sicily, Milan, and Venice... as well as vacation rental apartments.

 

[Bestwifeever]

Molof, welcome. Your kids are little so hard to predict what costs might be. Such fun ages! Enjoy every minute (I am sure you do!).

One of our members here carried ample life insurance on his spouse as well as himself, which enabled him to stay home with his teenagers when she passed away.

Be sure your kids know early on the level of financial support you hope to provide for their college expenses (weddings, cars, etc.) so they can plan and apply themselves accordingly.

 

[NgineER]

We also saved because the kids did NOT get cars, and the younger child decided she wasn't interested in getting her driver's licence (they can have a permit, and not cost you anything extra on your auto insurance, but once they get the licence, you're in for big $).

I had not counted on the additional car insurance yet...

My husband and I feel strongly that *giving* a car to a child makes them appreciate it less - and therefore be less invested/careful. So more likely to crash it. We'll match $1 for $1 on a car purchase - and they'll pay for their own insurance.... or they'll ride the bus. We'd rather allocate the money towards their college funds.

$/$ matching sounds good - hopefully they are good savers and save a lot, but then you are in for big $ as well. At least it gives them appreciation for the vehicle.

We limit our trips to Europe to every 4 years. The airfare costs are prohibitive. We do driving trips (mainly to national parks) in the 3 years between European trips. When I retire we have plans to do a full summer abroad taking advantage of relaties in Sicily, Milan, and Venice... as well as vacation rental apartments.

We have set our European trips as high priority as I have seen the difference it makes in their language skills. My wife is US so most of the conversations is just one directional in my language.

We are funding $6k/year/kid into the 529's until the accounts hit $120k. (about 60% of the way towards that goal.)

We are way behind here, and might contribute more once I get my first promotion at new Mega Corp...

 

[NgineER]

Hi molof and welcome to the forum.

I had a different experience from those above. Kid money was going out so fast I gave up on budgeting and all that and just became the chief bill payer. It was plenty hard enough just to keep up with that. By the way, that included private school from junior high on for two kids. I didn't see that private school thing coming, but it all worked out good. Still managed to max out the 401k and am now living the RE life happily ever after.

Hoping to stay on top of it... I am budgeting for my expenses increasing 5% annually until I retire to hopefully cover some of these additional unforeseen expenses

 

[NgineER]

Molof, welcome. Your kids are little so hard to predict what costs might be. Such fun ages! Enjoy every minute (I am sure you do!).

One of our members here carried ample life insurance on his spouse as well as himself, which enabled him to stay home with his teenagers when she passed away.

Be sure your kids know early on the level of financial support you hope to provide for their college expenses (weddings, cars, etc.) so they can plan and apply themselves accordingly.

Thanks for the advice on managing expectations.

As far as life insurance, I am pretty sure that my current employer would be supportive of reduced hours in case of a spousal loss. I am hoping to exchange some of my promotions to more time off instead and maintain my income - we'll see how that goes.

 

[NgineER]

Molof: "What is a realistic increase of spend in your experience? (with kids growing up)."

Your expenses will increase as much as you let them, assuming good health for the kids and no health emergencies that are out of your control. Some will need braces, some will play sports and some will play an instrument. Eldest was reasonably cheap, but we recognized if we didn't want him tearing our computers apart, he would need his own. One birthday we gave him enough towards a basic computer, allowing him to put long term savings towards upgrades. We try to teach them money management skills for short-long term spending goals, saving for college, and charity from initially an allowance, and then their work money.

Youngest has a very hard time holding on to money, which means he often does not have the $$ to spend on what he needs/wants. As a kid we outfitted him for Lacrosse to the tune of $300, but told him anything additional was on him. I can't tell you how many times he came to us for equipment upgrades, which we consistently turned down due to lack of his funds, suggesting that building up his stamina by doing a running workout would be a way to improve his game within his budget. On the other hand, music he really worked at, so we put up the funds for his instrument upgrades and paid for private lessons.

Neither will get a car from us, unless that makes it more convenient for us, and will be one of our cast offs. They have to pay their own insurance, which is about $1,000/year!

Fortunately, he is starting to get it, but it took a lot of emotional scenes to which we had to be consistently on point for the message...you save now, later you can spend. Talk to your wife about your strategy. You want to figure it out now!

IP

It is so interesting to see how all my kids are different, I am sure they will be on different ends of the spectrum too when it comes to money management, but as with all things, being consistent in your message is important. It is nice to hear that your youngest is starting to get it

 

[sengsational]

I had a different experience from those above. Kid money was going out so fast I gave up on budgeting and all that and just became the chief bill payer.

Hoping to stay on top of it... I am budgeting for my expenses increasing 5% annually until I retire to hopefully cover some of these additional unforeseen expenses

I should have stressed that I was able to hold fast to a budget only because my wife, when she left her career to stay at home, agreed that we'd hold the line on spending. She had the COLA'd budget for herself, kids, groceries, and operating her car. We stuck to that. The kids were in public schools and had their extracurriculars, but it did come down to selecting what they wanted most sometimes. I told myself it built character

 

[Hermit]

Thanks for the advice on managing expectations.

As far as life insurance, I am pretty sure that my current employer would be supportive of reduced hours in case of a spousal loss. I am hoping to exchange some of my promotions to more time off instead and maintain my income - we'll see how that goes.

I went through the insurance calculators to make sure the family was adequately funded in case I died. In the process, I found that we were under-insured on the DW. My Megacorp provided insurance for spouse. I bumped it up to provide adequate coverage. I think it was around $1 a week. She died in an accident just as the youngest started college. That extra insurance provided college funds that we would have derived from her salary. Well worth the cost.

 

[NgineER]

Hermit:

Sorry to hear about your wife... Nice in that situation to have at least college expenses paid for. My wife is not bringing anything home anymore, but eliminating some other expenses we currently have. She is insured for $0.5MM, so it would not allow me to quit my job today, but it would cover college expenses and additional miscellaneous that we don't need today due to her taking care of the home and family.

 

[growing_older]

Interesting question about projecting kid expenses. My quick and dirty look suggests there's not much extra cost until cars and college.

This was not my experience. As kids got older, the daycare or afterschool expenses decreased (not a factor for OP with a stay at home parent), but the schools have been cutting back on all kinds of funding. To play sports requires fees, plus uniforms plus equipment. Music lessons and instruments. Fees to be in the Drama Club. Schools have sponsored some excellent educational trips, but kids have to pay to participate. Band trips, Band uniforms, academic competitions, Math events. We did not provide cars or insurance, kids had to pay that themselves, but the other educational and experience spending definitely did rise as the kids got older, especially in middle school and high school.

 

[sengsational]

This was not my experience. As kids got older, the daycare or afterschool expenses decreased (not a factor for OP with a stay at home parent), but the schools have been cutting back on all kinds of funding. To play sports requires fees, plus uniforms plus equipment. Music lessons and instruments. Fees to be in the Drama Club. Schools have sponsored some excellent educational trips, but kids have to pay to participate. Band trips, Band uniforms, academic competitions, Math events. We did not provide cars or insurance, kids had to pay that themselves, but the other educational and experience spending definitely did rise as the kids got older, especially in middle school and high school.

I got some feedback last night that agreed with your assessement (daycare/afterschool expense going down, then extracurricular expense coming up later). My kids went to public schools, and yes, they had the band trips, uniforms and stuff like that. But they gerrymander the school districts around here so we have a mix of incomes, and the programs are designed to be non-exclusionary on the basis of cost (i.e. pretty cheap to participate). But yeah, if you want your kids to have riding lessons or something like that, budget those separately, hehe. Otherwise the 5% should cover it.

 

[sailor]

Hermit:
Sorry to hear about your wife... She is insured for $0.5MM, so it would not allow me to quit my job today, but it would cover college expenses and additional miscellaneous that we don't need today due to her taking care of the home and family.

I know it's a morbid subject, but don't forget about Social Security survivor's benefit with small kids.
All kids get it before they turn 18 (19 if still in school) and spouse, if caring for kids before their 16th birthday.
Your Social Security statement (available at ssa.gov) provides the actual amount (for me it was $2k monthly per kid, for the family not to exceed $4700).
Because of this benefit we decided to carry only moderate amounts of term life insurance.
We hope to be FI by the time kids reach this age.

 

[growing_older]

My kids went to public schools, and yes, they had the band trips, uniforms and stuff like that. But they gerrymander the school districts around here so we have a mix of incomes, and the programs are designed to be non-exclusionary on the basis of cost (i.e. pretty cheap to participate).

Mine, went to public schools as well. What I found was that the budgets at schools just keep getting tighter, so programs that were set to have only modest costs to participate were partly funded by the school budget and that has only gone down for many years. By the time the youngest was participating in many of these activities, the previously stated school's goal to keep them affordable was no longer part of the equation. They needed 100% funding, and were trying for more than 100% in attempts to subsidize kids who really could not afford it. Also PTA fund raising became a major focus, and the PTA actually paid for many school supplies, some staff positions and even some basic maintenance on the building.

 

[dontworry]

Our kids are currently 9, 11, and 12. They go to public school as there really aren't many other options out here in the boonies where we live. I work from a home office and DH has a flexible schedule so we haven't had to pay for day care for 3-4 years, so we are very fortunate. Kids are involved in lots of activities but so far things haven't been too expensive. There are sports fees, band instrument rental, etc. My oldest is in the ski club which is by far the most expensive. I think for us the expenses are gonna come with cars and college. I am not looking forward to paying for auto insurance when we have three teenage drivers. We will see about college...we would like to help pay for as much as possible but time will tell. I know it's early but I don't know if I see all three going to a four year traditional college/university. My boys don't love school by any means. Time will tell!

 

[NgineER]

9. ~$230k roth and $300k tIRA. 401(k) $38k (W**rking at new Mega Corp for a little over a year) Maxing out 401(k), roth IRA and stock purchase plan.

Update after one year on the board... Didn't have great returns this last year~5.7%. Stached away a lot and my net worth has gone up... Was hoping to hit two commas before my 40th, but I am $32k short.

~$277k Roth
~$330k tIRA
~$73k 401k
~$32k stock purchase plan after tax
~$80k after tax mutual funds
~$70k cash
~$60k home equity

Putting away about ~$70k annually including employee matching.