Like a bad penny, I keep coming back

[laurence]

Hey everybody. I figured it's time for a refresher course in LBYM and prep for FIRE.

When last we left this hero, I was happily ensconced in middle management as was my wife, and we were enjoying our upper-middle class home in a happy suburb with three awesome kids.

But we had fallen off the FIRE wagon a bit. Despite getting our household income up to ~270k, we were only saving about $40k. We were sure enjoying life, though! Hawaiian vacations, lots of techie toys, Disneyland primo season passes, weekends away, etc. etc. We thought in the back of our minds that with my pension at 55, extra payments on the house having it paid off by then and the money we were saving that we had retire at 55 in the bag. But I realized that at age 38 I was simply not doing enough. So with renewed vigor we jump back into the community to listen, learn, and modify our attitudes about money again.

Age 38/37, $270k annual income
NW: $400k
New savings rate (including retirement funds): 75k
3 kids, age 8, 5, and 2
Mortgage P&I is $1805 a month @ 3.5%
Owe small amount on cars at zero/near zero interest and no other debts.

Again, came back to re-indoctrinate myself, as a token first move, we got rid of our cable t.v. and land line, and reduced our internet speed, reducing that expense by $140/month. Yay baby steps! (and yay Netflix instant streaming)

 

[REWahoo]

Owe small amount on cars at zero/near zero interest ...

What do you drive?

Welcome back!

 

[FIREd]

Hey laurence, nice to see you're back on the bandwagon.

 

[Meadbh]

Welcome back Laurence!

 

[W2R]

laurence!!! Welcome back.

 

[NanoSour]

Getting rid of cable is great as long as you don't replace it with additional spending to fill the void. I've thought long and hard about getting rid of the cable but like the family time and sports.

Welcome back on the bandwagon and good luck.

 

[laurence]

Thanks everyone!

I'm a little embarrassed to say here: BMW 335i, GMC Acadia (hers, carts the kids).

Yeah, we got to that first tier of financial independence, good credit, low debt, good rainy day fund, and kind of rested on our laurels. We pay for a full time Nanny as well (above board, taxes and everything), so that's a big hit for the next few years but it's worth it.

 

[laurence]

Oh, Nano, I thought I couldn't give up the sports but when we went to Disneyland on Superbowl Sunday, I realized I could quit the habit! We didn't give up the appliance, though, plenty of movies for family time!

 

[UserRequested]

as a token first move, we got rid of our cable t.v. and land line, and reduced our internet speed, reducing that expense by $140/month. Yay baby steps! (and yay Netflix instant streaming)

No.. not the cable TV.

In all seriousness, I actually find that its money well spent. Cable keeps us at home sometimes when we're bored and feel like going out. Plenty of good movies and sports on cable that we enjoy.
IMO a good balance is needed. No spending like a drunken sailor nor being a downright scrooge. You need to enjoy the here and now as well as plan wisely for the future.
On $270k with 3 kids I think a savings of $75k a year at your age is pretty good.
Good luck!

 

[brewer12345]

Hey, L-man, welcome back!

 

[laurence]

Hey Brewer! It seems I can't make enough real world friends who are frugal, I need the virtual peer pressure!

jags, the cable is only partly about the money. I have to admit having three daughters has made me a bit of a prude, and we don't like the messages that are being sent them by even shows that are allegedly for their age (especially the commercials). We feel we can control the content and quantity better with this setup.


Now off to find a thread debating early payoff of a mortgage in light of these super low rates...

 

[pb4uski]

Welcome back. You have a nice savings target at 75k a year and should still be able to live nicely, even after helping support the state of California.

Do you have a number in mind for 55? How much will you need to live?

 

[obgyn65]

Welcome back.

 

[laurence]

Welcome back. You have a nice savings target at 75k a year and should still be able to live nicely, even after helping support the state of California.

Do you have a number in mind for 55? How much will you need to live?

$4 million plus paid off house. At 55 I'll get a $400/month pension (they froze it this year so I can't add to it anymore). I have my Masters so I thought I'd try and teach one or two classes in computer security at my alumn that I live next to to supplement. Obviously we'll need to continue to ramp up the savings year by year to reach this goal. That's also why I've begun looking at a date more like 57/58 years of age.

 

[rodi]

Hi Laurence
- I joined since you were here last time - but can relate to the pressures in San Diego.

I envy your income... Serious envy.

Please tell me you got a SoCal discount on the disney passes. Who wants to go on the blackout dates anyway - it's too crowded. Every few years we get passes... the cheapest So-Cal discounted ones... go a lot on Sundays in the fall and spring. It's too hot and crowded in the summer... so it works for us.

The BMW is almost required here in San Diego. I'm seriously shocked at how many there are in my work parking lot. I'm sure they get nervous when my beater car parks next to their nice rides.

FWIW - I'm in the payoff the mortgage early camp. It will make my budget much easier for ER in a few years.

 

[Sarah in SC]

Awww, Laurence, we've missed you! Glad to hear that the family is doing well, even if there's been some spending creep. It is hard to maintain the frugal dimension 100% all the time, anyway (speaking as someone who bought, and then sold, a boat in the interim since you were last here).

Anyway, delighted to see you are back among the frugal. There is a thread somewhere around here about where we'd be in 5 years that I thought was pretty enlightening. There are a lot of consumer items tugging at our wallets, that's for sure!

 

[meekie]

Welcome Back "Neighbor"! I totally agree on getting rid of cable, there's plenty of stuff on Netflix streaming to watch, and we also got a HD antenna for the few times we want to watch live TV. (Superbowl, Oscars).

I hope you'll be able to continue to enjoy your life as well as keep that new savings rate up. San Diego does have a lot of great free or cheap stuff, heck, Zoo passes are much cheaper than Disneyland passes! (although I still have my disneyland passes, but just the cheapest one)

 

[pb4uski]

$4 million plus paid off house. At 55 I'll get a $400/month pension (they froze it this year so I can't add to it anymore). I have my Masters so I thought I'd try and teach one or two classes in computer security at my alumn that I live next to to supplement. Obviously we'll need to continue to ramp up the savings year by year to reach this goal. That's also why I've begun looking at a date more like 57/58 years of age.

=FV(7%,(55-37.5),-75,-400) = $3.736

=FV(7%,(57-37.5),-75,-400) = $4,433

so it looks possible. Stay the course.

 

[YoungSaver]

Sounds like you've kept up with the Jones's nicely!

 

[chasesfish]

BMW 335 and a moderator on a FI board? That's a new one. That's a nice income, but after tax take home is not that substantial between federal, state, property, and fica taxes. I'd recommend trading in for a Honda Accord for the next ten years

 

[retire2020]

Laurence, 75K savings for 270K income is low. What about funding your Children's college education, any 529?

 

[laurence]

I did buy the bmw certified used...does that count as LBYM?

This is exactly why I came back to this board. My circle of friends include many with higher incomes, we find ourselves falling into a lifestyle, and when you are living that lifestyle and still have put money away each month, there is no obvious wake up call.

I go back and forth on the 529 plans due to the restrictions. I'll investigate some threads here on it and learn more. Right now we do the legal limit on 401k and the companies do some match, but some IRA options are phased out. My wife's company gives a 15% discount on stock purchase to employees up to some percentage (15% of salary?) so we max that out now as well, sell and take the short term capital gains tax hit on the difference.

Between health care costs for a family of five, nanny salary, federal income taxes, california income taxes, self employment taxes (I have a side business)nanny taxes, and property taxes that 270k number goes down real quick. After this and the 401k deductions, what's left to budget is really a little less than half that (I know, boo-hoo). Not complaining, just full disclosure of where we are at.

So while I won't be trading in the car, I will be paying it off this year and keeping it as long as I can (100k warranty, reliability really has come up). Same with the wife's car. We have a five year plan to hit the first million in NW, and the 75k is just the 2013 goal with each year after expected to increase. I welcome all tips, tricks, darts, critiques etc!

 

[aida2003]

Laurence, welcome back to the frugal ways. I'm curious how your better half took the news to switch to different lifestyle. How did the kids react?

Also, you mentioned that you're phased out from the IRA's. I have no knowledge but you might be interested in exploring backdoor investing in Roth IRA's. I've seen people discussing this on Bogleheads. Since we're not affected (yet), I don't know how complicated the process is.

 

[FinanceDude]

Laurence, welcome back. Thanks for the update, I wondered where you went. Sounds like you have done a lot of spending, but maybe can do less in the future?

 

[laurence]

My better half is fine with it, I'm the spendthrift, she's just glad I'm ready to get back on the wagon.

We definitely feel we are good for a good, long time. This is the final house, we love it. We have all of our debt at a 3% or less after tax deductions rate, we are set on capital purchases for a while. We are ready for some serious LBYM for the next five years.

I will look into that back door thing, thank you, aida!