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Old 07-07-2008, 04:12 PM   #21
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I'm in roughly the same boat as you (age, income, kids ...) so I understand where you're coming from. I think a certain amount of lifestyle creep is unavoidable while your family is growing.

Sometimes, you gotta let yourself go a little bit before your gut kicks in and regulates your spending a little more.

2Cor521 made an excellent point. Take comfort in the fact that what you've saved thus far is more important than what you're saving this year, and quite possibly more important than what you'll save in between now and FIRE.

Edited to add: I just did some quick calculations, and to spur you on I'll note that we're on track to save 40% of our gross income this year. Biggest helpful factors are:

(1) minimized our housing costs by living in a small home up until now (we'll have to see how much longer we can continue this, with the family growing ... but thankfully house prices are sinking back down to Earth)

(2) driving one old, beater, Japanese car that require little in the way of ins., maint., and fuel

(3) in an odd way, having a kid ... how the heck do you have time to play Nintendo with two little kids around? :-) I barely have the free time required to spend any money these days! (gone are the days of going out with the guys and dropping 100 bucks on drinks) My fun time on the weekend now is usually spent swimming at the town pool, going to the playground, trying to find a moment of quiet time to hang out with my better half, and other free stuff.
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Old 07-07-2008, 04:23 PM   #22
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We're a strange mix of hermits, plastic-bag-washers, dryer-sheet hoarders and a few who raked in ungodly incomes in a short period. If you compare your nest egg to those of your officemates you'd probably find you're well ahead of the pack.
Hey I don't wash plastic bags to save money, it is to save the environment, now not using dryer-sheets that is to save money.
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Well, 22% is good
Old 07-07-2008, 04:23 PM   #23
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Well, 22% is good

if you started from a young age. If not, it is almost impossible to retire early. Now even counting principal, you are likely doing somewhat better as inflation diminishes your debt, although price declines are working against this currently. This decade hasn't been kind to stocks but that shouldn't last forever. You have to like the feeling of money more than what it can buy to really get ahead. I have a 50in plasma but it replaced a dead 20yr old tv. Next up is a 20yr old refrigerator.
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Old 07-07-2008, 04:30 PM   #24
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We save about 75% of our income. I guess simple things make us happy. We also live in the midwest where it does not cost much. I do not have a 50" HDTV(I am happy with the 1980's 19 inch we have), Nintendo Wii, , Nice treadmill, jacuzzi, and fancy BBQ. The refrigerator is 26 years old but works good. The washing machine is 12 year old but works good. The 14 year old car also runs great. I do not have alot of things, but I do not want alot of things. My father was one of the happiest person's that I knew and he grew up in a house with dirt floors. I had a good friend that said the only thing that matters is if you go to heaven or hell. It was a simple statement, but it made me think alot about what he said. He was right that is all that realy matters. Could we spend more money? Yes, but what would be the point if we are already happy. I think alot of people try to buy happiness, but it can not be bought.
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Old 07-07-2008, 04:38 PM   #25
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Old 07-07-2008, 05:44 PM   #26
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We are in a 20 year mortgage but plan on having it paid off in ~14 total years, so I'll be 43 when we are mortgage free.

Taxes are our biggest expense, but after that we seem to be leaking money on a thousand little things. We have an excel workbook that goes back 8 years but while it tracks our finances pretty well, the "credit cards" entry is the biggest single expense and what we throw on it is lost. We pay the balance off every month, but because we just glom everything on it we couldn't tell you how much of it is gas, groceries, home depot, etc. and it can be several thousand a month. That's where we need to attack.

EDIT: DW has a separate spreadsheet breaking down the credit card expenses, my bad. They are all over the place though.
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Old 07-07-2008, 05:44 PM   #27
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Well, what would be your savings percentage if you stopped paying your mortgage? Just kidding.

I think you're pitching 92 mph fastballs in the majors instead of in the local community slowpitch league. People may not be very impressed by 22% in Yankee Stadium on this board but you're way way ahead of the national average because your savings rate has a "+" in front of it, let alone two digits.

You're at the point where you could propose eating out less often (good luck with that!), eliminating all childcare expenses (only if you survived the discussion about dining cutbacks), and no home improvement (do you have a deathwish?). After all, it's not as if spouse is going to believe you if you offer to sell the BBQ. And you're certainly not going to change your vacation plans!

You might have cause to sweat if you were driving leased SUVs or paying two mortgages or dropping $5K on booze & basketball tickets. But you're probably spending more money on commuting to work than on anything else. What would you do, garage your car and hop on your bicycle?

Hey, there's an idea. Would your spending drop (and your savings rise) if you spent 90 hours a week at work? It's not as good as deploying to the Western Pacific, but you could pack your own breakfasts, lunches, and dinners to your cubicle! The home improvement expenses would drop to zero because you'd never be home!!

At $300K you're beginning to approach the point where the annual (reinvested) income will start to equal a minimum-wage salary. A few more years of compounding and it'll be like having a third wage-earner in the house.

With two kids you're probably doing as well as it can be done. You're certainly aware of your spending and you're making savings a priority. The rest will all fall into line on its own.
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Old 07-07-2008, 05:58 PM   #28
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Eating out is a big money pit for us. Samclem pointed out that we were plenty happy with 100k, why is 170k not greatly increasing our savings? No car payments, total debt is 280k all in the house, low interest rate.

Meanwhile we've spent as much as 5 grand on the credit cards in one month! Usually it's about 2 grand, but still. My commute is short so I'm spending about $50/week on gas, DW spends about $100/week running the kids around. It all seems small individually, but seems to really add up.

Ever notice how big salaries sound great as an annual amount then net a dissapointing number on the 'ol bi-weekly paycheck? I make 97K (plus some small bonuses that don't factor into the usual paycheck) which sounds great but the paycheck comes out to $2,400 after taxes, 401k, health insurance, vision, dental, flex spending account, pension deduction, etc. etc.

So I'm taking home 62k/year and have a $3k/month housing cost. It's DW's consulting that lets us "live it up".
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Old 07-07-2008, 05:59 PM   #29
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We are in a 20 year mortgage but plan on having it paid off in ~14 total years, so I'll be 43 when we are mortgage free.

Taxes are our biggest expense, but after that we seem to be leaking money on a thousand little things. We have an excel workbook that goes back 8 years but while it tracks our finances pretty well, the "credit cards" entry is the biggest single expense and what we throw on it is lost. We pay the balance off every month, but because we just glom everything on it we couldn't tell you how much of it is gas, groceries, home depot, etc. and it can be several thousand a month. That's where we need to attack.

EDIT: DW has a separate spreadsheet breaking down the credit card expenses, my bad. They are all over the place though.

I use Quicken to track my expenses across all accounts including checking, savings and credit card accounts. It takes just a few seconds to download the data from the internet each day, no manual entry required. With one click I get a detailed report of my spending with great details about each spending category. The first time I used Quicken for example I was floored at the amount we spent on phone per year (it was scattered among several bills before). With that knowledge we were able to cut that bill nearly in half. Spending $70 to buy the Quicken software has more than paid for itself over the past 2 years.
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Old 07-07-2008, 07:46 PM   #30
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"Hey, everyone! Lawrence just left an opening--pile on!"
You've got a full plate at home. The truth is, the performance of your investments will play a big role in your retirement date. Sure, saving more will speed the arrival of the glorious day, but 22% isn't slacker territory. We're a strange mix of hermits, plastic-bag-washers, dryer-sheet hoarders and a few who raked in ungodly incomes in a short period. If you compare your nest egg to those of your officemates you'd probably find you're well ahead of the pack.

Okay, back on your head! Buckle down and pump up those savings! You guys were happy earning and spending $100k, you should be socking away gobs of money now!
To feel better about yourself, check out the Federal Reserve Survey of Consumer Finances. The 2007 report should be coming out soon. I'm sure Laurence will find himself in the top 10% -- for age groups 5-10 years older than he is.
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Old 07-07-2008, 07:50 PM   #31
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Eating out is a big money pit for us.

Is there some reason you can't eat at home?

You know you can change that.

Are you one of those folks who takes your screaming/running around little darlings to restaurants?

Disclaimer: I spent several years working in food service.
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Old 07-07-2008, 08:22 PM   #32
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A 22% savings rate with two small kids is really fantastic. If you can keep that up through their college years, you can then ramp it up a bit after they are grown and off on their own. We went through all that and weren't really able to save significantly until our late-40's. Having kids when you are young makes it hard to accumulate wealth as your salary is generally just starting to rise. The good part is that they are adults and hopefully self-sufficient just as you reach your peak earnings years.

LBYM means very different things to different people at different times.
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Old 07-07-2008, 08:51 PM   #33
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I think we are somewhat unusual in that we have never budgeted. Until I came to this board, I did not even know what we spent each year. I since figured that out to have a sense of what we would need to RE.

Our philosophy has been to spend only what was necessary. Some extras, but not many. Essentially, we lived a lower middle class life style on an upper middle class income. As a few others said, your spending does not have to be linked to your income. When DW stopped working, and our income was almost cut in half, our spending did not change (other than child care costs going away). DW joked that we would have to cut back now, but that was a joke because there was little to cut back on.

If you really want to save more, decouple your spending from your income. Ask do I really want to make this purchase? I think the key is, at least for me:

I REALLY HATE TO SPEND MONEY

You would be surprised how an attitude like that can make savings grow.
Not discounting the above, I think it is important, even for us, to have a few indulgences. This helps to take the edge off. We have traveled numerous times to Europe and the Caribbean and live in a nice house in a good neighborhood, but that is about it.
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Old 07-07-2008, 08:53 PM   #34
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Relax, you are doing well. Just think a bit about whether the things you are buying are adding to your joy of life or whether they are being driven by consumer culture or lack of planning. (You know, that Your Money or Your Life stuff)

On a slightly related note... this year DH and I have not even been able to track our spending. In Tokyo things cost so much, sometimes we have to just pretend we are spending monopoly money. Luckily, a lot gets taken out before we see it, but still - we're a bit out of control.
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Old 07-07-2008, 09:41 PM   #35
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When you decide you want to FIRE sooner rather than later, the secret is to start paying yourself first. Each year, contribute the maximum amounts allowed to your retirement plans and an additional 10% (or more) of your gross income to your taxable investments. Then pay your living expenses. Then have fun buying toys.

Because the job market is so volatile in Silicon Valley, I made the decision many years ago that I would rather have financial freedom more than owning a lot of toys. So I achieved financial freedom by cutting my living expenses to the bone and getting out of debt. It takes less investment income this way to become financially independent.

Now I want to increase my investment income so that I can increase my lifestyle (but still retain financial freedom at all times). My rationale is along the lines of the musical chairs game played by children: should the music stop (i.e., Silicon Valley has another bust, which it has every few years), I want to continue not to have to depend on earned income to pay my living expenses (because earned income is sometimes hard to find when Silicon Valley is in its down cycle).

My "music stops" scenario means I don't have to worry anymore about the job market or the economy. This lack of worry is worth more to me than the toys I haven't purchased and enjoyed yet. Your tradeoff may vary.
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Old 07-07-2008, 10:16 PM   #36
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Eating out is a big money pit for us.

Is there some reason you can't eat at home?

You know you can change that.

Are you one of those folks who takes your screaming/running around little darlings to restaurants?

Disclaimer: I spent several years working in food service.
LOL, I should clarify that we get take out a lot, "Honey, can you pick up something on the way home, it's been a day."

While the kids are pretty darn well behaved, we keep it strictly buffet style when we go out with them.
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Old 07-07-2008, 10:19 PM   #37
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I had a period in my life where my income increased fairly dramatically (not in your league), and at the same time we finished paying off our 30 year mortgage after 10 years. So, lot's more money, much lower bills should have equaled a lot more savings. But it didn't. We were dripping money everywhere we went. I had always considered myself very frugal, but then again I'd never had so much disposable income.

What I ended up doing, and I credit it with most of my success in becoming FIREd, was to buy a new house and take out a mortgage. I then invested the cash I got for the old house. This sort of forced me to be saving, because just paying the mortgage equated to saving/investing. Once I saw how well that worked, I set up other "automatic" forced savings methods. Over the years it paid off for me. It was so much easier for me to never see the money than it was to touch it then try to let go again. Maybe something like this could work for you.

All that said, I think 22% of $170K isn't bad. Give it a little compounding time and you'll be in great shape. Good luck.

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Old 07-07-2008, 11:46 PM   #38
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I think the key is finding the balance between saving and spending. Half of the fun of getting to your destination is your journey, and if you have to spend the next 20 years penny pinching and being miserable, well it doesn't sound like much fun.

I think most importantly stop comparing yourself to what everyone else is doing. You do need to look at where your money is going and if you are satisified with that outcome move on. If you recognise areas where you could tighten up without causing stress to anyone in the household and it's something that everyone is on board with, well do it.

The take-away, eating out dilemma is one area where most of us have fallen victim I am sure. For me, I found it helped immensely if I menu planned. Always have some standbys so if it's one of those days there is something to go to in the cupboard. For us it is baked beans on toast, or a bacon sandwich, even a frozen pizza which is half the price of a Pizza Hut pizza.
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Old 07-08-2008, 08:25 AM   #39
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Sorry, this is not going to be a "feel-good" response. You are basically leaving free money on the table that you should be scooping into your pockets.

You and your spouse should be maxing out your retirement plans because that saves that money from federal and state taxes. That means you contribute $15,500 to your 401(k) and your spouse contributed up to $45k to hers. you can also put money into Roth IRAs while your income is still low enough to let you do so. There was a hint that youi are working on paying off a low interest rate mortgage ahead of time. If you ain't maxing out your retirement plans and saving taxes by doing so, then that's a big mistake.

We have 2 kids. We have all the toys. We take nice oversea vacations. We eat out a lot. We have similar family income. But somehow we save a lot more. I suspect it's because of our lowe cost of living since we pay only about 15% of our income in income taxes despite being in the 33% marginal income tax bracket. Anyways, don't leave free money on the table.

We also charge everything to credit cards andpay them off in full each month. We don't like to keep a budget as well. However, we feel we don't need a budget when savings/investments gets taken out before we see the money. One thing that we do is have different credit cards for different major categories. For example, we have a nice cash-back card that is used ONLY for gas and groceries. We have another card that is used only for eating out. Another card only for travel. Each card thus maximizes the perks associated with that expense category. It turns out that this also makes it trivial to see what we spent on eating out, etc.

Good luck, but have some common sense and grab that free money!
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Old 07-08-2008, 09:25 AM   #40
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We don't have a couple of kids around the house, so I may be way off base Laurence in my comments. Feel free to tell me to shove it.

The take out thing often isn't very healthy and is expensive. You might consider taking some time to make up a bunch of pre-made food and freeze it. Soups can freeze well. Greg makes huge batches of pea soup and veggie soup and freezes some and it tastes great. Lasagna and spaghetti meals freeze well too.

Chop up veggies and keep them in the fridge and eat on them all the time.

Oh, I am jealous of your spa tub.
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