29 (now 38) - Long Way to Go, But Digging In

[Standard Staples]

Long time lurker, but I thought it couldn't hurt to get actively involved in this forum, with so much great support going back and forth. Here's our situation:

Me (29), DW (29) and DS (20 Months)
$155,000 Combined Annual Income

$60,000 Roth
$50,000 Taxable Brokerage
$43,000 Rollover IRA
$37,000 401k (Combined)
$13,000 IRA (College Savings)
$33,000 Cash/HSA

Primary Residence: $222,000 Debt ($128,000 Equity)
Rental Property: $142,000 Debt (-$35,000 Equity) - Currently generates $250/month in profit.

NET WORTH: ~$329,000

Average Annual Expenses: $55,000-60,000
Average Annual Savings: $70,000
($35,000 401k - $20,000 Brokerage - $5,500 Roth - $5,500 IRA - $4,000 HSA)


We are planning to have another baby within the next two years, and we are strongly considering having my wife stay home at that point (a fairly rare instance of looking beyond the financial aspects of the decision). I'm also in line for a new job that will match, if not exceed, our current combined income. We have a fairly long horizon, as I don't see us moving/retiring until our second heads to college. With that in mind, we're currently eyeing 2035 as a retirement date.

So what do you think? How are we looking?

 

[FUEGO]

Looks like you're in a decent spot right now. You're saving half your income right now. If your wife stays home, I assume childcare and other expenses drop, and your taxes would be near zero with 2 kids and other smart tax moves like 401k contributions. You could probably still save a decent amount of money, especially if you increase your income.

We personally chose to have both spouses continue working to turbocharge our savings, but we also had nearly free childcare with DW's mother 1.5 miles up the road from our house. We also both had flexible 40 hour/wk jobs so juggling the career and kids wasn't too bad. It's really a personal choice and all about trade offs of lifestyle versus maximizing your savings.

If you keep saving like you've been doing, you shouldn't have a problem reaching FI by the time your new arrival departs college.

 

[FIREontheMountain]

Welcome to the forum. 31yr old here in a somewhat similar situation to you. It sounds like your most valuable asset is your earning potential. If you can bring in $150k/yr on your own and keep lifestyle creep out then I think you will be fine having your DW stay home with the kids. If she isn't happy or it doesn't seem to make sense anymore she can always return to the workforce after a few years.

Have you had the "what level of lifestyle do we want?" conversation with your DW? My DW and I have had many discussions about this and have found them to be very helpful in solving the age old "how much of our time should we trade for money?" quandry. We also try to make sure that we are enjoying the present as much as possible and budget for that, you only get to be young once!

With a potential retirement date 20+ years away I think focusing on your career and family along with a your high savings rate will get you there. Learn about asset allocation, tax strategies and avoid lifestyle creep. Best of luck!

 

[Standard Staples]

Welcome to the forum. 31yr old here in a somewhat similar situation to you. It sounds like your most valuable asset is your earning potential. If you can bring in $150k/yr on your own and keep lifestyle creep out then I think you will be fine having your DW stay home with the kids. If she isn't happy or it doesn't seem to make sense anymore she can always return to the workforce after a few years.

Have you had the "what level of lifestyle do we want?" conversation with your DW? My DW and I have had many discussions about this and have found them to be very helpful in solving the age old "how much of our time should we trade for money?" quandry. We also try to make sure that we are enjoying the present as much as possible and budget for that, you only get to be young once!

With a potential retirement date 20+ years away I think focusing on your career and family along with a your high savings rate will get you there. Learn about asset allocation, tax strategies and avoid lifestyle creep. Best of luck!

Great question about lifestyle, and we are on the same page regarding this issue. The level of lifestyle we currently lead suits us both very well, and we can easily afford it on one salary. Lifestyle creep is certainly something to keep a close eye on.

 

[Standard Staples]

Somehow 4 months got away from me without an update, but I'd like to post more regularly, starting today. Here's my 2014 End of Year update:

========================================================

$155,000 Annual Combined Income

$66,000 Roth
$52,000 Taxable Brokerage
$43,000 Rollover IRA
$64,000 401k (Combined)
$14,600 IRA (College Savings)
$18,000 Cash/HSA

Primary Residence: $218,500 Debt ($131,500 Equity)
Rental Property: $141,000 Debt (-$35,000 Equity) - Still generating $250/month in profit.

NET WORTH: ~$354,100 ($88,000 Increase from EOY 2013)

2014 Annual Expenses: $57,600
2014 Annual Savings: $71,850

========================================================

For 2015, our combined income will increase to $165,000. The plan to increase our NW is as follows:

$40,000 401k (including Company Matches)
$20,000 Brokerage
$10,000 House Principal Payoff
$8,000 Reinvested Dividends
$5,500 Roth
$3,600 IRA
$3,600 HSA__________________________
$90,700 TOTAL

========================================================

We are still planning to have another baby around this time next year, but we have mostly decided for my wife to continue working. I opted to decline the new job back in September, as it would have required much more extensive travel. I would hate to be away from my wife and young son that often, so the money wasn't enough to justify that kind of lifestyle shift. With these new plans, our horizon has shifted back to 2033, which seems entirely doable with both of us working.

========================================================

So what do you think? Does this seem like a good gameplan for 2015?

 

[Options]

A lot can happen between now and 2033. Life events have a way of surprising us. I recommend keeping that in mind and continuing to plan ahead as you're doing. You're off to a great start. Wish I had have been as forward thinking as you at your age. Recommend continuing to read this and the BH forums. Had I read the BH forums when I was 29 I would have retired long ago.

 

[Legally_dead]

Looking good. Question for you: Why do you not max out your HSA contributions?


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[Standard Staples]

Looking good. Question for you: Why do you not max out your HSA contributions?


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We are actually split on health insurance right now. Through my company, I have a PPO. My son is on my plan, as we know he will require a small elective outpatient surgery this year, and the HDHP would have run $5,000+ out of pocket.

My wife is on her company's HDHP/HSA, and it costs her almost nothing as a "Single." We are taking a calculated risk by having her on the HDHP, but we don't anticipate any big expenses for her this year. Her company contributes $1,000 per year upfront to the HSA, and we opted to contribute $100/paycheck on top of that, totaling $3,600.

I'll admit I simply didn't check the Single limits ahead of time, but we're pretty close to the $3,350 allowed.

 

[nash031]

========================================================

$66,000 Roth
$52,000 Taxable Brokerage
$43,000 Rollover IRA
$64,000 401k (Combined)
$14,600 IRA (College Savings)
$18,000 Cash/HSA

...

$8,000 Reinvested Dividends

========================================================

The game plan looks fine to me, I just want to know how you're getting the 4% dividend!

 

[lhamo]

My wife is on her company's HDHP/HSA, and it costs her almost nothing as a "Single." We are taking a calculated risk by having her on the HDHP, but we don't anticipate any big expenses for her this year. Her company contributes $1,000 per year upfront to the HSA, and we opted to contribute $100/paycheck on top of that, totaling $3,600.

How does this mesh with your plan to have another child in 2015? What if there are complications with the pregnancy or the birth?

 

[Standard Staples]

The game plan looks fine to me, I just want to know how you're getting the 4% dividend!

It's a combination of stock investments and a decent (3%) 401k dividend. Before any contributions and/or dividend increases, I'm projecting a 4.55% YOC for my Stock/Roth accounts (excluding the 401k), spread over a fairly diversified range of sectors (Consumer Staples, O&G, REIT, Telecom, etc.). I should generate a bit more than $8,000, but I'm conservative on that number.

 

[Big_Hitter]

So what do you think? How are we looking?

Doable. Kids are expensive. Hope they can get a scholly otherwise plan on having about $125K per each now (present value) in the bank just for edumication.

Also, do you want to upgrade your standard of living or "trailer park" it? If I would have stayed in the house and lifestyle I had when I was your age I'd be at least $500K more in the black.

Once they "retire" they never return to work. My wife "retired" in 1996.

 

[Standard Staples]

How does this mesh with your plan to have another child in 2015? What if there are complications with the pregnancy or the birth?

Good catch. The plan is to get pregnant in the middle of 2015, with the child born in 2016. We'd bring her to my plan for 2016 to minimize out of pocket birthing expenses.

Pregnancy complications would certainly throw a wrench in the plans, but it's a calculated risk. Her first was smooth and uneventful, so we're cautiously optimistic for similar results.

 

[Standard Staples]

Doable. Kids are expensive. Hope they can get a scholly otherwise plan on having about $125K per each now (present value) in the bank just for edumication.

Also, do you want to upgrade your standard of living or "trailer park" it? If I would have stayed in the house and lifestyle I had when I was your age I'd be at least $500K more in the black.

Once they "retire" they never return to work. My wife "retired" in 1996.

Agreed. The traditional IRA is currently earmarked as a college fund. We contribute monthly, and my parents generously gift money for his birthday each year. We'll see how that grows over time, and I certainly keep my fingers crossed for scholarships and/or in state college. We're already dressing him in shirts and jerseys for the college we'd like for him to attend (my alma mater).

As far as our standard of living, we feel very comfortable where we are. We have more than enough (if not too much) house, two reliable (and again, probably nicer than we need) cars, and we live in a safe area with top rated schools. We vacation and enjoy life as we see fit, but neither of us has the undying need to keep up with the Joneses. My wife is really cool, in that she rejects the trappings of designer clothes, handbags, $5 coffee, weekly manicures, etc., in favor of memorable vacations and experiences as a family.

I'd say we have everything we need and plenty of what we want. No plans to upgrade anytime soon. If anything, I'd be more interested in paying off the house we have now faster, opposed to buying anything newer/bigger.

 

[Big_Hitter]

^good - I did (sort of) the same thing except no kids and joined an inexpensive country club, raced my WRX for a while (don't get into car racing) saved $$$ and took another job 1800 miles away in a smaller town doing the same thing I was doing in the big city somewhere much, much nicer than Houston.


I'm about as old are you are when you want to FIRE and wouldn't have done anything differently, except maybe instead of modding and fixing my WRX I would have bought a z06. Even with a (big) recent home upgrade and the much more expensive country club here I can FIRE now if I choose to do so (having a nice defined benefit pension from the old megacorp helps, a lot). I could FIRE now, but like my job, my wife would kill me if I stayed home and I can't see myself golfing or skiing all time without the needed and daily brain damage of my profession.


Remember - most early retirements are health related.

 

[Standard Staples]

Great new milestone to report. This week, we passed $400,000 in Net Worth!

At this same time three years ago, when I first started really looking at the numbers in better detail, we had just inched past $100,000.

Just wanted to update with some good news. LBYM works, no doubt about it.

 

[Katiek]

Congrats! At your age it's important to keep track of expenses and save significant amounts (take advantage of years of compounding), but it's also important to invest in family and make sure to enjoy these years and not just view them as a path to some future time when you'll be happy. Sounds like you're doing a good job of balancing these factors.

 

[Options]

Great new milestone to report. This week, we passed $400,000 in Net Worth!

At this same time three years ago, when I first started really looking at the numbers in better detail, we had just inched past $100,000.

Just wanted to update with some good news. LBYM works, no doubt about it.

$100K to $400K in three years--congratulations on such an outstanding achievement. Not easy to do these days given the inflation adjusted erosion of wages.

"LBYM works, no doubt about it." Couldn't have said it better.

 

[LBYM]

Great new milestone to report. This week, we passed $400,000 in Net Worth!

At this same time three years ago, when I first started really looking at the numbers in better detail, we had just inched past $100,000.

Just wanted to update with some good news. LBYM works, no doubt about it.

Who told you that I work? I'm trying very hard here to slack off

Congratulations on the milestone, you're in tremendous shape. Keep up the good work.

 

[Fireup2020]

Congratulations!!



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[Standard Staples]

So, something pretty cool happened last month. I track our NW as it grows each month, and when I was closing out April, I realized that we have already raced past our NW growth for the entire year of 2014!

It's really amazing how much this thing can really snowball.

 

[SumDay]

This warms my heart. Good on you guys!

 

[EastWest Gal]

Ah the magic of compounding and a few good market years.


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[robertf57]

So, something pretty cool happened last month. I track our NW as it grows each month, and when I was closing out April, I realized that we have already raced past our NW growth for the entire year of 2014!

It's really amazing how much this thing can really snowball.

Ok, so you're finally where you should have been last year??

Sorry, couldn't help myself I'm sure the run up in the market in Q1 and Q2 have put you above your 2015 target...

 

[Standard Staples]

Ok, so you're finally where you should have been last year??

Sorry, couldn't help myself I'm sure the run up in the market in Q1 and Q2 have put you above your 2015 target...

Huh? I was saying that our NW grew ~$88K throughout the entirety of 2014. Now only 4 months in to 2015, we have already grown our NW more than $88K, passing our 2014 results.

To your point, we actually are closing in on the end of 2015 target I had set in January, which is even crazier.