31 year old, married with two young kids, looking to FIRE in 5 years

[Finance Dave]

I thought it might also be helpful to describe the types of businesses many of my friends own. I would consider most of them "micro" businesses, as you'll see below. How is it that I know most of these "friends"? We have a common car interest, and met via our cars. We all enjoy high-performance musclecars. Why do I mention this? Because it shows that all these business people are successful...they make enough money to buy multiple cars that cost over $60k each and operate/maintain them. I've either been to, or seen, all their homes, and they are not "car rich, house poor" people. Whether they save a lot for retirement and plan to ER I don't know...but certainly they could.

1) Guy 1 owns a business renovating movie theaters. They replace curtains on the walls, the seating, carpets, aisle lighting, etc. They do this all over the country. He has about 5-6 employees. They own 2 large vans to carry the team along with tools. For local jobs, they come home each night. Other times they book 4-5 jobs on the other side of the country, drive out there, live on the road for 3-4 weeks, and return home to a 2-week "vacation".

2) Guy 2 owns a business repairing car interiors for used car dealers. They get a used car in trade, and there is a tear in the seat or dash, or cigarette burn, or etc. He drives a van with a small specialty toolkit, and goes to the dealers to fix these issues...maybe he'll go to dealer A on Mondays, dealer B on Tuesdays, etc. His capital investment was very small...a van and maybe $2,000 worth of specialty tools. He did have to attend a 2-week course to learn how to fix and color-match vinyl, grains on leather and so on.

3) Guy 3 owns a small construction company in the Chicago area. For many years they did extremely well. The past 3 years have been very difficult for them...although luckily all their employees are sub-contractors...so their fixed costs are very low. When times are good they may have 8-10 crews working on various residential houses

4) Guy 4 retired in his mid '40s from the navy, and now advises the DOD on naval ship maintenance. He started his own company for this, so he's the only employee. He makes a modest amount of money but only works half-time.

5) Guy 5 sells car detailing items, such as waxes, polishes, cleaning supplies, etc. His biggest capital outlay is inventory....he needs to have things in stock so he can ship fast. He makes a decent living.

6) Guy 7 is an engineer and designs underground drilling head blade inserts. You know, like when they tunnel under the streets of NYC to build subways, they have these 20' diameter drills that cut through the rock and dirt? He designs the small cutting inserts on those..most of them are diamond. He works out of his home, has an office with an expensive CAD station, and has one employee. Again, he's very successful.

7) Guy 8 owns a company that supplies cardboard boxes that are made of recycled materials to local produce vendors. He's relatively new to this, and is struggling a bit due to the economy.

Just thought I'd give you some ideas...all businesses aren't restaurants, car washes, and tax-preparation services.

 

[alexbalex]

I just FIRE'd last month (wahoo!) @ 36 w/ no assumption of SS, factored in college costs significantly increasing, and assuming no inheritance (though this could also be significant, I just make my plans without assuming it will happen).

Congrats on being able to retire at 36, wow! would love to hear any tips you have for how to get there!

I see the benefits to not taking into account SS and assuming huge increases in college rates, but I honestly think these are unlikely scenarios and I would be better served by taking into account estimated values of these and then building in leeway (by saving enough for a higher FIRECALC rate of success).

For SS, no politician would vote to eliminate SS, so I don't see why you shouldn't assume it into your model, factoring in a benefits cut or an increase in the SS benefits age. As for college, college simply cannot continue to increase at 6% a year or it will become entirely out of reach of the middle class, something colleges which compete with other schools for students would balk at. Even now, I think you're seeing a lot of private colleges' tuition rates not increase or increase at a lower rate than formerly.

Your healthcare costs are WAY low if you want decent coverage. COBRA for my family of 3 is currently $1100/month! There are some cheaper options for my family that I have quotes on (shopped across three major insurers which each had 3-5 plans), but the cheapest is around $600/month which is really just catastrophic coverage along with one doctor checkup a year. With kids you will go to the doctor much more than you think...and it will easily add up to several thousand dollars of out of pocket expenses if you only have a catastrophic plan.

Hmm.. yikes, $1100 a month seems really high. I currently am planning for $9000 a year, but will reevaluate once we see how Obamacare shakes out. Do others out there pay this much?

I didn't go to the doctor too much growing up (maybe cause my mom fed me raw cow milk to strengthen my bones ) but my kids currently go to the doctor a LOT (daycare means they are sick like every other week) so Im hoping they'll get it out of their system.

I think you are counting on too much at the moment which may not come true. A potential inheritance can disappear with a long term illness on the part of the person from whom you intend to inherit.

I'd say it's too early to determine if you can retire early. It's certainly a laudable goal for which to strive. When you have the money in hand, then run numbers. For now, strive for the financial goals you've stated.

True, I'll have to run the numbers then and see if it works out. Psychologically though, having that "five year plan" works wonders for me, simply b/c I'm so burned out its nice to be able to see a light at the end of the tunnel (even if it later turns out to be a train).

I try to be very conservative with inheritance (by discounting 50% what I estimate the current amount would be). I just don't want to ignore some likely source of income (and thus have to continue to w*rk and miss even more freedom/time with my chilren when I could take it into account in some sort of highly risk discounted way.

 

[alexbalex]

@FinanceDave- Thanks! It sounds like a ton of work, which I would love in many ways, (running my own business, creating and managing my own ideas) but seems like it would delay rather than expedite my being FIRE, as I would have to put in 60 hour weeks for 4-5 years.

I've had a couple of ideas for businesses I could start, but it seems like the amount of money to be made would not be nearly what I could pull in from continuing with having a salary.