Wanted to Rule the world--until I got there! :)

[Errollyn]

Congrats on the workplace success of both you and your wife, JD.

I'll just add this to the discussion about expenses. It's really hard to truly understand how much you're spending and where you're spending it without closely tracking every dollar of outflow for an extended period. I have a checklist with my monthly expenses similar to the one you posted, and it shows that I spend $3000 per month. But in 2020 I tracked every dollar we spent, and the real number was closer to $5000 per month. This was in part due to some unexpected house and vehicle repair expenses, but also just because it's hard to know what I'm spending on "stuff" when it doesn't fit into one of the big categories or it doesn't come with a monthly bill.

So one thing you might consider is trying to track every penny you and your wife spend over a year just verify that $90K number is correct. It was kind of a pain to do it, but I felt it was data I NEEDED to gather before I could make an informed decision about my ability to retire.

 

[Music Lover]

I'll just add this to the discussion about expenses. It's really hard to truly understand how much you're spending and where you're spending it without closely tracking every dollar of outflow for an extended period. I have a checklist with my monthly expenses similar to the one you posted, and it shows that I spend $3000 per month. But in 2020 I tracked every dollar we spent, and the real number was closer to $5000 per month. This was in part due to some unexpected house and vehicle repair expenses, but also just because it's hard to know what I'm spending on "stuff" when it doesn't fit into one of the big categories or it doesn't come with a monthly bill.

So one thing you might consider is trying to track every penny you and your wife spend over a year just verify that $90K number is correct. It was kind of a pain to do it, but I felt it was data I NEEDED to gather before I could make an informed decision about my ability to retire.

If all the money goes in and out of one account it's easy to keep track of expenses. I don't track my spending but I can know exactly how much I spend down to the penny over any time period if required because all the money goes into one account and all the bills and expenses come out of that same account.

Of course a spreadsheet helps if you want to break down spending by category, but I don't need that information.

 

[jdunc31]

Agreed guys on the expense tracking point---to that end we have put everything going in and out thru 1 joint card so we can track all of those expenses that don't fit Into one of those buckets....it is a great exercise and sometimes an eye opener as to what you actually spend your money on...

 

[viking111]

Great Feedback so far--I appreciate it. It seems a lot focused on the expense side (which is a good point) we have been tracking this for some time here are some averages...

Mortgage 2200
Car 1 0
Car 2 350
Auto Ins 150
Auto Gas 500
Electric 300
Gas House 125
Internet 70
Cable 250
Groceries 500
Dining Out 800
Haircuts 125
Lawn Care 125
Pool Care 75
Ent. 500
Clothes 500
Land Pay 225
cell phone 200
Kid School 100
Animals 50
Health Ins 300

Monthly 7445

Annually 89340

Home insurance ?
Home taxes ?
Auto taxes ?
Vacation ?
Other ?

 

[jdunc31]

Home insurance ?
Home taxes ?
Auto taxes ?
Vacation ?
Other ?

Property Taxes and Insurance are built into the Mortgage cost, we have a separate Vacation/Entertainment fund allocated, but Auto Property tax is overlooked and needs to be included---around $500/year.

 

[jdunc31]

***Updated Information***

Here are some details...

Me-Age 42 Salary $200k/year, side hustle hobby (true desire) currently making $100K as of this year which would continue going forward...

Wife-47 Salary $130K/year

We have: no debt other than $330K Mortgage, no student loans left, no c-card, no cars, no expensive hobbies other than we love to travel when possible

Expenses: including leisure would be around $90K/year

$ status:
$375K cash liquid in bank account (planning on doing something with this, just got some options auto deposited into account this month)
$1,100,000 in 401K accounts
$420K in Vanguard brokerage account
$220K in low cost annuity with 5 year vesting rider

Side Hustle is still going as expected, Wife is still happy in her gig

***Development***
As expected, PE has come in and is wiping out the Senior Management team--they are wanting us to all stay on board in production/sales roles. Not sure how to feel on that one--mostly pride based would say "forget it!" but the sensible thing would be to "Stay on cash checks and deal with less stress"

There is an option on the table to walk with 1/2 off my equity (about $350K) and would leave the other 1/2 off if I accept and walk--this doesn't sit well with me.

The other part that doesn't sit well would be reporting to the replacement--if left alone and just producing revenue this isn't a problem--the likelihood of that actually happening is slim though...

The big debate for me seems to be that we are right on the edge of being able to walk but maybe just not quite there...

I am always curious to hear others stories to help me guide my thought process. We are both fairly young (42/47) which makes my thinking different if we were approaching 59 or 65 with options that that opens up...

Looking for others that are/were in similar ages and $$ situations to see how they played things out, head kicks and other advice are always welcome as well!

Fire away.....

 

[pjigar]

I am in a similar boat (minus the changes). I choose to stick around until we are financially ready. Don't fix it if it ain't broken.


PS: By the way, I changed job 3 years ago AND took a pay cut based on "pride issues". It was a very bad move financially so I kind of regret it. But on the other hand, the new job afforded me more time so not all is lost. It was a mixed experience and hence I said: Don't fix it if it ain't broken.

 

[Ready-4-ER-at-14]

I've skimmed the thread again and my concern for you has nothing to do with the number of zeros in any particular account. You could downsize and live forever in any number of places throwing skipping stones across a lake if you wanted to.

My concern is everything seems to be US dollar centered. Our wealth can be measured in so many ways. In currencies, Dollars (US Australian, Canadian), euro, gallons of oil, loaves of bread, number of new BMW convertibles, acres of farmland, nights you could stay at the fanciest hotel in NYC.

I compute my net worth in several ways and it is sobering to see that are not in lockstep. Doesn't matter much if you are quite elderly and the currency is solid.
If however you are young with possibly 40 years left and little restraint in government spending....

Some people just start and sell businesses when they have a track record of earnings.
Maybe that can be your side hustle, hobby when you tire of skipping stones.

And with all that being said, you deserved praise for all you have done and what you have accomplished and asking people who may possibly offer ideas based on their own lives so far.

 

[Koolau]

Assuming side hustle is solid at $100K and DW is really willing to continue while you FIRE, it would appear you are golden. Just remember that your "stash" of wealth would not support your $90K lifestyle should your other income dry up for some reason. Here on the FIRE forums, we tend to emphasize the passive income provided by our "stash." At even 4% WDR you're not quite there AND at mid 40s, you might need your stash to last 50 years (not just 30.) Still, it's a good place to be. Only you can decide if you are willing to chance the long-term retirement, depending upon incomes NOT from your stash. It's probably quite doable - just not where I would want to be. As always, YMMV.

 

[brydanger]

Hello everyone! 1st post here looking for some advice/validation or red flag advice from so many of you that have walked this path already. I will try to explain my situation and if more is needed please ask away--looking for some guidance here....

I am 41 my wife is 45 we both earn nice wages and have done reasonably well living below our means (or at least not over our means for sure!). Personally I have recently brought a company up and been able to rise thru the ranks to a current CEO role.

However.......

We sold our little company and I have stayed on and kicked a lot of the cash down the road to the next round of buyouts thru stock options and equity in the company. Since the sale I am realizing that this is not actually what I want... and am beginning to value my time and freedom far more than adding more $ to the ledger. What I want to reasonably solidify is that stepping back from current role will not leave our family in the poorhouse and begging for food!

Here are some details...

Me-Age 41 Salary $225k/year, side hustle hobby (true desire) currently making $100K as of this year which would continue going forward...

Wife-45 Salary $130K/year

We have: no debt other than $350K Mortgage, no student loans left, no c-card, no cars, no expensive hobbies other than we love to travel when possible

Expenses: including leisure would be around $90K/year

$ status:
$200K cash liquid in bank account
$800K in 401K accounts
$300K in Vanguard brokerage account
$200K in variable life policy of cash value with $750K death benefit on each

***my wife is supportive of my stepping back from traditional corp role in favor of side hustle role. She is more happy to continue with her corp job until age 60-65.

My question that I know only we can answer but would like views on--can I reasonably financially walk away at this point with what we have now?

Please fire away, I am new to this community so maybe not so up to date on the lingo or desired info often discussed it seems....

Thanks in advance!!

JD

You aren't happy where you are... so make a change!
It seems far too easy for people to think that this is a black and white, now or later discussion. You get to turn your side hustle into whatever you want it to be, and if you choose to do so it could actually make you more (and happier) than the current situation.

My advise (though it wont be popular here) would be to make your side hustle real estate (or at least part of it).

Use the current high paying W2 job to invest in a couple rentals over the next few months and then hand in your notice as soon as the last one closes.

Moving forward the passive income from those rentals (especially as it grows over time) will take the pressure off any other side hustle as well as the "number" you're trying to reach in those retirement accounts.

Multiple small income streams is always easier and less stress than relying on one large one, and you'll love the tax/write-off benefits that come with it.

 

[HI Bill]

For someone with a $400K+ income, you don't seem to have that much saved. Therefore, I'm not certain that your $90K budget is reasonable. Have you actually tracked your spending? If you're paying 35% Federal taxes, and some state taxes, you should still have a spendable income of something like $235K+. Typically, the higher one's income, they greater their spending, and the more 'little things' that fall through the cracks. I'd suggest a hard dive into your spending, and a realistic evaluation of how much you'd like to spend in retirement, not how much you can get by on. I started out with an annual goal to spend $75K, but added a house and travel, and doubled my budget to $150K before FIRE to allow me the independence I wanted in retirement. Good luck!

 

[Golden sunsets]

OP; It has been pointed out several times that your 90K in expenses doesn't appear to include federal/state income taxes. You have not responded to this point. What say you to this point?

I'm confused as to where the money is from the sale of your business. Did you get anything up front at the time of sale? If not, all is on the back end(?), and that is either 750K if your company makes its numbers or $350K if you leave now? Something doesn't add up.

 

[RetiredHappy]

Since you said your wife will continue to work until 60-65 and make $130K, add that to your side hussle of $100K, you can certainly leave your current company. $230K should support your annual expenses for the next 15 years or so, while your investments continue to grow.

 

[jdunc31]

For someone with a $400K+ income, you don't seem to have that much saved. Therefore, I'm not certain that your $90K budget is reasonable. Have you actually tracked your spending? If you're paying 35% Federal taxes, and some state taxes, you should still have a spendable income of something like $235K+. Typically, the higher one's income, they greater their spending, and the more 'little things' that fall through the cracks. I'd suggest a hard dive into your spending, and a realistic evaluation of how much you'd like to spend in retirement, not how much you can get by on. I started out with an annual goal to spend $75K, but added a house and travel, and doubled my budget to $150K before FIRE to allow me the independence I wanted in retirement. Good luck!

***appreciate that, the numbers you lay out are more or less correct--we are adding about $130-$150K per year over the last several years to the retirement accounts.

The $90K spend rate is pretty accurate over a 2-3 year period. The side hustle as just in the past 2 years become the income earner that it has....

The combination of PE buyout, side hustle growing into significant income, job dissatisfaction, and ability to have stepped up retirement contributions with the initial buy out cash and increase amounts into retirement have led me to this point.

 

[jdunc31]

OP; It has been pointed out several times that your 90K in expenses doesn't appear to include federal/state income taxes. You have not responded to this point. What say you to this point?

I'm confused as to where the money is from the sale of your business. Did you get anything up front at the time of sale? If not, all is on the back end(?), and that is either 750K if your company makes its numbers or $350K if you leave now? Something doesn't add up.

***I was not aware of the fed/state tax question--yes we have it accounted for though.

As to the business as mentioned in the 1st post---we took "some" up front money with the majority kicked down the road into options and future equity. And yes, there is an offer to take 1/2 now and walk away or take 0 now and continue to run hard/hit numbers and max it out....

 

[Golden sunsets]

***I was not aware of the fed/state tax question--yes we have it accounted for though.



As to the business as mentioned in the 1st post---we took "some" up front money with the majority kicked down the road into options and future equity. And yes, there is an offer to take 1/2 now and walk away or take 0 now and continue to run hard/hit numbers and max it out....

OK. Post #9, which you authored, shows the breakdown of your expenses. In which of those categories is your federal and state income tax expense?

 

[Koolau]

For someone with a $400K+ income, you don't seem to have that much saved. Therefore, I'm not certain that your $90K budget is reasonable. Have you actually tracked your spending? If you're paying 35% Federal taxes, and some state taxes, you should still have a spendable income of something like $235K+. Typically, the higher one's income, they greater their spending, and the more 'little things' that fall through the cracks. I'd suggest a hard dive into your spending, and a realistic evaluation of how much you'd like to spend in retirement, not how much you can get by on. I started out with an annual goal to spend $75K, but added a house and travel, and doubled my budget to $150K before FIRE to allow me the independence I wanted in retirement. Good luck!

Good point on accurate accounting of spending. I noticed long ago that I was lousy at "estimating" my spending - in individual areas. I finally tracked all spending one year and that's when I realized just how "off" I could be. The good news was that year-over-year, I had a pretty good sense of what we were spending - in total. How this could be, I don't know. For instance, I thought we spent way more on eating out than we actually did and way less than we actually spent on eating at home. I guess it balanced out. When I compared my totals for all categories that one year - I was within 2 or 3% of TOTAL spending. I was way off on many of the categories, but I guess it balanced out. Who knew! YMMV

 

[cat4ever]

+1 on the salaries don't seem to match the spending/savings numbers.

Taxes are very easy to look over in your spending estimates because they are taken out of your salary before you even seen them. Since you never see them you never "spend" them, i.e. they never hit your bank account(s) that you use to pay bills from, so you never see them leave those accounts either. Please double check that you understand what we're saying about Fed and state taxes.

Maybe I'm a little paranoid about this because I over-looked them right up until about a month before I was going to pull the chute. Luckily I had enough slack, as well as the good fortune of a strong stock market in the previous year to make up for it, but the hit to expenses can be substantial.

 

[Katiek]

I'd focus on how stable the side business is and is it something that could grow if you have more time to spend on it? Could you move to another role that may not be as time consuming, keep your equity and focus more efforts on the side hustle?


I think you're in a position to do whatever you choose. Either option still has a very good household income, and only you can decide how much aggravation staying will cause.



It sounds like one of the main things bothering you is leaving equity on the table with the buyout option. Understandable given the work you put into growing the company. I'm sure you've evaluated all your options and rights with your own lawyer. But ultimately, it seems to be a decision of how unhappy the new structure would make you. You may make more by staying, but I think you'd be ok either way if your side hustle is stable.

 

[jdunc31]

I'd focus on how stable the side business is and is it something that could grow if you have more time to spend on it? Could you move to another role that may not be as time consuming, keep your equity and focus more efforts on the side hustle?


I think you're in a position to do whatever you choose. Either option still has a very good household income, and only you can decide how much aggravation staying will cause.



It sounds like one of the main things bothering you is leaving equity on the table with the buyout option. Understandable given the work you put into growing the company. I'm sure you've evaluated all your options and rights with your own lawyer. But ultimately, it seems to be a decision of how unhappy the new structure would make you. You may make more by staying, but I think you'd be ok either way if your side hustle is stable.

I think the biggest issue/hold up is not knowing when the PE firm is going to spin this off again---at that point I will be able to hit my internal number, walk away and not worry about this being a little too soon.

The problem with that is this could be anywhere from 6 months to 10 years with no telling what end of that timeline....

In regards to the earning vs savings issue that is popping up--outside looking in I guess the concern makes sense--however we are relatively young, have not been earning that income for 20+ years and have a young family--so although we don't have $10mil+ in the coffers I think for being mid forties the amount is pretty decent--decent enough too consider what we are considering now...

 

[Spirit_Cheese]

...
The problem with that is this could be anywhere from 6 months to 10 years with no telling what end of that timeline....
...

That would be too great a timeline for me. I think I'd take the lump sum now, walk away and leave the rest on the table. I'd certainly regret it (probably) if the payout ended up being six months, but if it was anything longer than two years I think I'd feel like I made the right decision.

 

[jdunc31]

Well I have made 1 decision today---I have agreed to stay onboard and downsize into a production only role and am able to leave the management part. This will come with a small salary hit but free up considerable time to work on personal production and revenue.

It also will allow me to continue to vest into the rest of the stock option/retention plan from the PE folks, and keeps medical insurance for me as long as I am here...

So all in all it is a nice win--the only thing that feels off is the not being in charge piece (or maybe even more so the reporting to the new guard/replacement) That part is causing some angst--if left alone to produce it should be fine---if micromanaged that would not be so great...

Feels a little surreal---I am sure this is the best path but I would also like to fast forward 6 months or so to confirm that....

 

[Koolau]

Your decision gives you the breathing room I sense you may have been needing. It isn't irrevocable. You can leave later if things are not to your liking. Seems very reasonable to me. Best of luck. Be sure to let us all know how it is working out (we're sort of "invested" now.)

 

[jdunc31]

Your decision gives you the breathing room I sense you may have been needing. It isn't irrevocable. You can leave later if things are not to your liking. Seems very reasonable to me. Best of luck. Be sure to let us all know how it is working out (we're sort of "invested" now.)

will do, and Thanks.

If nothing else being able to write out my thoughts and than come back to review helps in the process.

 

[Katiek]

Agreed, This seems like a good solution for now and one that leaves all your options open in the future.