What would you do?
I am 45, married 2 boys 18 and 15 with no debt. (INTJ)
We moved to the US (Austin TX) 10 years ago and had to start over at that point.
I have been called a Software Engineer, Project Manager (PMP) with an MBA – all of this used to be important but now is meaningless
The only real asset we have is the house that’s paid for (200k) little or no 401ks etc. I am planning to have savings of around 10k by the end of February. The priority has been paying off the house and taxes.
Living like we do right now I can reduce my budget to no lower than $1,700 per month.
I am earning a pretty good salary and have a few luxuries like cell phones and gym membership that I would forgo. The high speed internet will have to go - that's the hard one.
housing 855
food 500
gas 80
Medication 190
Life Insurance 76
My contract is due to expire at the end of February 2011.
I calculated my unemployment to be roughly $1,600 per month.
My goal is having residual income exceed expenses by February 2012
So the way I see it is I can take the next year off and devote all my energies to FI.
Working another 5-10 years to save enough just doesn’t do it for me.
Any ideas of the best strategies to employ to get me to FI in one year would be appreciated.
Need Help FI by FEB 2012
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George the original one
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Very challenging!
Investing $10k, only looking for yield, will get you $50-60/mo before taxes. You can use a margin account and maybe get another $25/mo, but without any cash reserves, I don't think you should.
Why does housing cost $855/mo if it's paid for? Or are you planning on selling the current house and invest $200k?
Overall, you need more cash in the bank. You'll need to work for the remainder of 2011 and stuff the bank account.
Investing $10k, only looking for yield, will get you $50-60/mo before taxes. You can use a margin account and maybe get another $25/mo, but without any cash reserves, I don't think you should.
Why does housing cost $855/mo if it's paid for? Or are you planning on selling the current house and invest $200k?
Overall, you need more cash in the bank. You'll need to work for the remainder of 2011 and stuff the bank account.
One year is an incredibly aggressive goal to achieve financial independence, especially if you want to do it without working a 9-5. Let's do some math:
How much savings will you need to have to make $1700/mo? Using Jacob's assumptions (4% yield, post-inflation) you would need 300 times your monthly expenses, which is $510,000.
Unless you can start a business which will net you $510,000 more than your yearly expenses, I would probably try and find another job and set my sights a bit lower. Even the 5 year figure you see on this forum and blog is aggressive and would require extreme measures for the average person to achieve (hence the name, early retirement extreme).
I don't mean to discourage you! Coming here and making the changes you mentioned in your post is a fantastic first step. You are already ahead of so many others on the path to financial independence.
How much savings will you need to have to make $1700/mo? Using Jacob's assumptions (4% yield, post-inflation) you would need 300 times your monthly expenses, which is $510,000.
Unless you can start a business which will net you $510,000 more than your yearly expenses, I would probably try and find another job and set my sights a bit lower. Even the 5 year figure you see on this forum and blog is aggressive and would require extreme measures for the average person to achieve (hence the name, early retirement extreme).
I don't mean to discourage you! Coming here and making the changes you mentioned in your post is a fantastic first step. You are already ahead of so many others on the path to financial independence.
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AlexOliver
- Posts: 461
- Joined: Tue Aug 03, 2010 7:25 pm
Andre, I'm not sure I understand what you're asking.
I don't know any way you can reasonably expect to retire in 73 days with savings of $10k, and 4 mouths to feed, even if your house is paid off.
Somehow, your budget seems inaccurate-- As an example, how do you spend $80 per month on gas, but nothing on car insurance? You don't list a car as an asset either.
As others have noted $855 per month on a paid off house seems high, but perhaps you're lumping together water, electricity, gas, property taxes, maintenance, hoa fees, homeowner's insurace, etc...
The good news seems to be that difference between your unemployment check and your minimum expenses is only about $100 per month. So, your $10k should last until your unemployment benefit runs out.
I don't know any way you can reasonably expect to retire in 73 days with savings of $10k, and 4 mouths to feed, even if your house is paid off.
Somehow, your budget seems inaccurate-- As an example, how do you spend $80 per month on gas, but nothing on car insurance? You don't list a car as an asset either.
As others have noted $855 per month on a paid off house seems high, but perhaps you're lumping together water, electricity, gas, property taxes, maintenance, hoa fees, homeowner's insurace, etc...
The good news seems to be that difference between your unemployment check and your minimum expenses is only about $100 per month. So, your $10k should last until your unemployment benefit runs out.
I hate to say it, but in this situation we need to know more information about your finances (basically everything). I'd note that if you collect unemployment insurance you are expected to devote your time to looking for work. To do otherwise is fraud.
I'd love to take the next 3 years off (it's 100 weeks now, plus the new bill will extend that, right?) and get paid around 2k/mo but that just seems wrong.
I'd love to take the next 3 years off (it's 100 weeks now, plus the new bill will extend that, right?) and get paid around 2k/mo but that just seems wrong.
The only way possible I see is to sell the house and find alternative living arrangements for next to no money (used RV?), while using the $200k of equity to invest on margin (like retired@33), maybe getting yourself up to ~$300k invested, but that still only brings in about $12k/year at 4% SWR, with interest payments to make on the margin. That would leave you with having to earn about another $12k/year somehow through a business. It's risky too and means you might have to go back to work someday if the market dips too much.
If it were me I'd sell the property and, put the money in the market, but use a minimal amount to buy a distressed property through a foreclosure sale or auction, rehab it, and rent it out or sell it down the road. But that requires a lot of skills, tools, knowledge and work that you'd have to go through which is essentially the equivalent of taking on another job.
Realistically, the best thing for you seems to be to find alternative housing, put the $200k in the market, try again to trim expenses, and figure out a business you can live with or take on part-time work for someone else. You didn't say what you do for a living or what skills you have but I'm thinking consulting, programming, web-design, copy-editing, freelance writing, crafting high-quality musical instruments, breeding some kind of animal at home, restoring classic cars/antique furniture/etc... millions of part-time, work from home things you could do that wouldn't be too hard to get up to $12k/year in income if you're skilled and persistent. Just depends on your interest and expertise.
Though of course, none of this is really being FI, just changing jobs, going part-time.
You seem unwilling to cut expenses, but just FYI, Jacob lives well on much less than what you spend, as do I. With $200k in assets you could be FI if you were frugal enough. Change in housing, go car free, go vegetarian, lower or get rid of the life insurance (just will your assets to your boys, $100k each is all right given how old they are). It's just a matter of wanting to do it.
If it were me I'd sell the property and, put the money in the market, but use a minimal amount to buy a distressed property through a foreclosure sale or auction, rehab it, and rent it out or sell it down the road. But that requires a lot of skills, tools, knowledge and work that you'd have to go through which is essentially the equivalent of taking on another job.
Realistically, the best thing for you seems to be to find alternative housing, put the $200k in the market, try again to trim expenses, and figure out a business you can live with or take on part-time work for someone else. You didn't say what you do for a living or what skills you have but I'm thinking consulting, programming, web-design, copy-editing, freelance writing, crafting high-quality musical instruments, breeding some kind of animal at home, restoring classic cars/antique furniture/etc... millions of part-time, work from home things you could do that wouldn't be too hard to get up to $12k/year in income if you're skilled and persistent. Just depends on your interest and expertise.
Though of course, none of this is really being FI, just changing jobs, going part-time.
You seem unwilling to cut expenses, but just FYI, Jacob lives well on much less than what you spend, as do I. With $200k in assets you could be FI if you were frugal enough. Change in housing, go car free, go vegetarian, lower or get rid of the life insurance (just will your assets to your boys, $100k each is all right given how old they are). It's just a matter of wanting to do it.
Seconding everyone on needing more information. Your categories are incredibly fluffy. The gas could be heating or a car, or just gas money to friends. Where does less frequent stuff like clothes and entertainment go? And with two boys at that age I'd err on the side of a rather large emergency fund. I know i needed a lot of help getting out of messes.
Speaking of savings. You say you are starting from near zero and want 10k at the end of Feb2011? So 5k a month. Is that an achievable rate for you? Let's assume it is. If you did try and lounge on unemployment you won't be adding to that. If you did keep working at present levels you could get another 60k raw money to play with.
So without considering the fact that it takes you time to earn said money, you'd still need to almost double your money to retire in Feb 2012.
So yeah, it's not adding up. Sorry.
Speaking of savings. You say you are starting from near zero and want 10k at the end of Feb2011? So 5k a month. Is that an achievable rate for you? Let's assume it is. If you did try and lounge on unemployment you won't be adding to that. If you did keep working at present levels you could get another 60k raw money to play with.
So without considering the fact that it takes you time to earn said money, you'd still need to almost double your money to retire in Feb 2012.
So yeah, it's not adding up. Sorry.
George - The $855 is property taxes, water electricity etc.
Halcyon - I agree it would be close to impossible to save the money to retire based on the 4% rule. I need a much more creative solution.
AlexOliver - I want to have my residual income exceed my expenses. (Some maintenance on this would be OK - like working 4 hours a week)
Mo - My car is a worth maybe 1k (DW thinks that is a gross exaggeration) I only have liability insurance and it is tied into my house insurance. So its small and included in the housing $855 amount.
Dragoncar - My contract is really expiring and I will really look for a similar job at similar rates. I just wont be too upset if I don't find a job immediately.
Halcyon - I agree it would be close to impossible to save the money to retire based on the 4% rule. I need a much more creative solution.
AlexOliver - I want to have my residual income exceed my expenses. (Some maintenance on this would be OK - like working 4 hours a week)
Mo - My car is a worth maybe 1k (DW thinks that is a gross exaggeration) I only have liability insurance and it is tied into my house insurance. So its small and included in the housing $855 amount.
Dragoncar - My contract is really expiring and I will really look for a similar job at similar rates. I just wont be too upset if I don't find a job immediately.
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George the original one
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- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
$855/mo seems high for property taxes, water, electricity, homeowners insurance, etc.
If I pick on my own house (1850 sq ft 4-bedroom split level), I spend $300/mo on taxes & insurance, average $150/mo for electricity (heat pump sucks power in the winter), $35/mo for water, $35/mo for garbage, and $92/mo for combined POTS phone w/cable internet. Since you have liability car insurance rolled into the mix, that's another $45/mo. So my monthly cost is $657/mo.
Seems like you should be able to drop your monthly cost for housing to about $600 if you forego the Internet and are frugal with electricity/water/phone unless taxes are significantly higher in Austin.
If I pick on my own house (1850 sq ft 4-bedroom split level), I spend $300/mo on taxes & insurance, average $150/mo for electricity (heat pump sucks power in the winter), $35/mo for water, $35/mo for garbage, and $92/mo for combined POTS phone w/cable internet. Since you have liability car insurance rolled into the mix, that's another $45/mo. So my monthly cost is $657/mo.
Seems like you should be able to drop your monthly cost for housing to about $600 if you forego the Internet and are frugal with electricity/water/phone unless taxes are significantly higher in Austin.
Andre,
Your expenses seem high. Especially housing.
Sell your house and move to Ohio. You can buy a 3 bed /2 bath house here for 30k - in good condition. Companies around here are hiring every software engineer they can their hands on. Starting pay for entry level is 60k + full benefits - and that's without a degree at all. With a master's degree and experience you should easily be able to land a job making 100k+ no problem.
Invest the 200k from the sale of your house. Work for another two years and save an additional 200k+. Reduce your expenses to 1k /month so you are FI and switch to doing contracting work part time until you figure out what you want to do with the rest of your life.
Your expenses seem high. Especially housing.
Sell your house and move to Ohio. You can buy a 3 bed /2 bath house here for 30k - in good condition. Companies around here are hiring every software engineer they can their hands on. Starting pay for entry level is 60k + full benefits - and that's without a degree at all. With a master's degree and experience you should easily be able to land a job making 100k+ no problem.
Invest the 200k from the sale of your house. Work for another two years and save an additional 200k+. Reduce your expenses to 1k /month so you are FI and switch to doing contracting work part time until you figure out what you want to do with the rest of your life.
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retirebyforty
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- Joined: Fri Nov 12, 2010 8:22 pm
- Contact:
How about this?
- Don't drop out. Get a high paying job until Feb. 2012
- Move out of Austin, too expensive.
- Sell the house and buy a 4 or 6 plex. You need a high paying job so the bank will lend you money.
- live in one and rent the rest. Try to get positive cash flow.
- take your kids out of school and put them to work. Put your wife to work.
- Don't drop out. Get a high paying job until Feb. 2012
- Move out of Austin, too expensive.
- Sell the house and buy a 4 or 6 plex. You need a high paying job so the bank will lend you money.
- live in one and rent the rest. Try to get positive cash flow.
- take your kids out of school and put them to work. Put your wife to work.
Also - to add to George's example of housing costs.
I live in a small ranch house (800 square feet) with a family of four. Water+sewer+trash is $45 /month. Electricity averages $120 /month(with electric heating in winter, air conditioning in summer). High speed internet is $25 /month. Property taxes plus insurance is $90 /month. That's $280 /month total, with a wife and two kids...
Housing seems to eat up a lot of your budget...
I live in a small ranch house (800 square feet) with a family of four. Water+sewer+trash is $45 /month. Electricity averages $120 /month(with electric heating in winter, air conditioning in summer). High speed internet is $25 /month. Property taxes plus insurance is $90 /month. That's $280 /month total, with a wife and two kids...
Housing seems to eat up a lot of your budget...
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DividendGuy
- Posts: 441
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George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
@dragoncar -
> I'd love to take the next 3 years off (it's 100
> weeks now, plus the new bill will extend that,
> right?) and get paid around 2k/mo but that just
> seems wrong.
No, the new tax bill only extends the availability of the 99 week unemployment benefits. It does not extend the period for collecting. 99 weeks was an extension to whatever the normal amount used to be before the liquidity crisis pushed unemployment to 10%.
I don't really know much about collecting unemployment benefits... are contract/term employees, like Andre, eligible to collect?
> I'd love to take the next 3 years off (it's 100
> weeks now, plus the new bill will extend that,
> right?) and get paid around 2k/mo but that just
> seems wrong.
No, the new tax bill only extends the availability of the 99 week unemployment benefits. It does not extend the period for collecting. 99 weeks was an extension to whatever the normal amount used to be before the liquidity crisis pushed unemployment to 10%.
I don't really know much about collecting unemployment benefits... are contract/term employees, like Andre, eligible to collect?
Thanks you for the comments.
The recurrent theme seems to be that my housing expenses are too high and that FI would not be possible within the time specified.
"My goal is having residual income exceed expenses by February 2012"
One of my thoughts have been sell the house and buy something smaller. I have considered buying two properties and renting one out. To buy a home around Austin in a safe area for 100k is possible
http://maps.google.com/maps/place?cid=9 ... yAXv_oS1Cg
My second line of thinking is:
All I have to do is spend a year of my life investing my time in a business that will nett around $1,700 per month. The requirement would be minimal time investment after the year is up. I see this similar to planting a fruit tree, nurturing it and protecting it until it is strong and then picking the fruits for several years.
I guess my question is what kind of tree am I planting?
The recurrent theme seems to be that my housing expenses are too high and that FI would not be possible within the time specified.
"My goal is having residual income exceed expenses by February 2012"
One of my thoughts have been sell the house and buy something smaller. I have considered buying two properties and renting one out. To buy a home around Austin in a safe area for 100k is possible
http://maps.google.com/maps/place?cid=9 ... yAXv_oS1Cg
My second line of thinking is:
All I have to do is spend a year of my life investing my time in a business that will nett around $1,700 per month. The requirement would be minimal time investment after the year is up. I see this similar to planting a fruit tree, nurturing it and protecting it until it is strong and then picking the fruits for several years.
I guess my question is what kind of tree am I planting?
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miyatarama
- Posts: 50
- Joined: Thu Sep 09, 2010 7:27 pm
If there was a fruit tree like that, everyone would be planting it. I don't think such a thing exists, at least not in a reproducible way. Lottery tickets, inventing a better mousetrap, starting a tech company, multi-level marketing, late night real estate hucksters - these are the get rich schemes that play in to the desires that all of us have. Can they work? Sure, but can you pick the winning lottery ticket numbers?
If anyone wants to know why there are so many get rich scams out there, you only have to look for the desire for such a "fruit tree" within ourselves. I enjoy this blog and forum because Jacob has created a 100% reproducible fruit tree, but it depends not on buying in to some scam, but rather not buying things at all. Not to belabor the analogy, but this is an "extreme" fruit tree that you have to cultivate for 5 years (more or less depending on your savings rate) and then changing your appetite. That is to say, learning to enjoy a sustenance level of existence with as many or few additions as you want, with the caveat that each addition costs more time tending the tree.
The blog and forum are a way for you to ask yourself, what is the minimum that I need to make myself happy? That minimum is going to look different for everyone, but the fact is that you might be happier living there than at your current level. That's because the current level is so often determined, not by our desires, but rather by the desires foisted on us by marketing and the culture at large. Can one retire at that society-foisted level? Sure, but unless one is making a very large salary and saving a significant portion, it is only possible after a 20-30 year career of working.
If anyone wants to know why there are so many get rich scams out there, you only have to look for the desire for such a "fruit tree" within ourselves. I enjoy this blog and forum because Jacob has created a 100% reproducible fruit tree, but it depends not on buying in to some scam, but rather not buying things at all. Not to belabor the analogy, but this is an "extreme" fruit tree that you have to cultivate for 5 years (more or less depending on your savings rate) and then changing your appetite. That is to say, learning to enjoy a sustenance level of existence with as many or few additions as you want, with the caveat that each addition costs more time tending the tree.
The blog and forum are a way for you to ask yourself, what is the minimum that I need to make myself happy? That minimum is going to look different for everyone, but the fact is that you might be happier living there than at your current level. That's because the current level is so often determined, not by our desires, but rather by the desires foisted on us by marketing and the culture at large. Can one retire at that society-foisted level? Sure, but unless one is making a very large salary and saving a significant portion, it is only possible after a 20-30 year career of working.
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George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
I think you misunderstand our comments on the housing expense. You have a paid-for house, which is fine, but the cost of living in it is too much.
How are you going to get $1700 per month from a $100k rental home while you live in another $100k rental home? Are you going to be able to reduce the expense of living in the other house compared to your current house?
How are you going to get $1700 per month from a $100k rental home while you live in another $100k rental home? Are you going to be able to reduce the expense of living in the other house compared to your current house?
"All I have to do is spend a year of my life investing my time in a business that will nett around $1,700 per month."
That's pretty tough to do. Your resources seem pretty limited. You have essentially no liquid capital. Selling your house could easily take several months, if not the whole year. You could heavily leverage yourself, and by doing so risk planting a bomb in your financial backyard, rather than a fruit tree.
I don't know of any way to do what you are attempting to do that doesn't have a greater chance of failure than success.
If you manage to pull it off, feel free to share-- we'd all like to know how to do this.
That's pretty tough to do. Your resources seem pretty limited. You have essentially no liquid capital. Selling your house could easily take several months, if not the whole year. You could heavily leverage yourself, and by doing so risk planting a bomb in your financial backyard, rather than a fruit tree.
I don't know of any way to do what you are attempting to do that doesn't have a greater chance of failure than success.
If you manage to pull it off, feel free to share-- we'd all like to know how to do this.