Inheritance coming - best options?

[nomadscientist]

Given all this, what are my best options to reach FI within 5 years?

I'm just going to answer the question you actually asked: reduce your spending to less than $15k/year. With this method, you can even reach FI the day you receive the inheritance.

[C40]

But what really got me thinking (and then discussing with my wife), was the thinking around money, and the Wheaton level. We discussed where we are, and where we want to be on that level, our past money habits, etc., throughout the day (and various tangential topics related to all this).

I have read, and own, personal finance books. Currently reading "The Simple Path to Wealth" by JL Collins, with "ERE" and "YMOYL" waiting in the wings (our daughter is reading YMOYL). I would say intellectually I'm beyond Dave Ramsey, but practically not.

If you actually want to be FI:
1 - Do NOT spend any of the money. Just get the money and put it in some safe account(s) - plain old savings accounts are ok at this point. If you really want to invest some of it, do so conservatively
2 - Read those other books. (YMOYL and ERE). Advice from us isn't entirely relevant until you read those books.
3 - Have numerous conversations with your wife (with at least a few days in-between for contemplation) about what is important to the two of you. What it means to have a good life. How you get fullfilment and self-actialization. And, together, draft up (write down!) some visions for your lives -about how you want to live, what you want to do, how you want to feel, etc. Then you can start doing some thinking and planning related to your spending and to what things you may need capital tied up in (land/home)... And, likely, you can also cut out some of your current spending right away.
4 - Spend some time (>1 year) reducing your spending, and living more like you drafted in your life visions. Find ways to do some of the things you want without needing to spend a lot of money..
........
5 - Then -- some time later, after you've reduced your spending... after you've made significant progress shifting your life towards the ways you want to live... then, maybe you will be more ready to make a wise decision about buying land or a house.

What I'm saying is: DON'T BLOW THE MONEY! Don't buy the land. Set up your life yourself - without throwing money into some plan/solution.

----

Here's a declaration challenging your property buying idea: What was your plan and progress before, related to buying some land? You've been living many years without accomplishing it. Without saving money for it. That shows how important it was to you. Now that you suddenly have money to blow, you want to spend it. You have a spending problem. It appears that now you suddenly have money and you have an inclination to throw the money at something to make your life better. If you don't rid yourself of that problem (throwing money out) your inheritence will be gone soon, you may be spending even more than you are now, and you'll be working until 70.

[slowtraveler]

https://www.bogleheads.org/wiki/Managing_a_windfall

The above link has probably better advice but you could dump it into indexes or Wellesley and Wellington and likely live off 3% for life. Your expenses are high. This is 10 years of expenses at your current burn rate. If you can comfortably cut your expenses 20k/yr, you're in a solid position to retire in 5 years. 480 capital + 5yrs * (60 income-20 exp) = 680. Enough for those 20k of expenses indefinitely at 3%.

[JWJones]

I'm just going to answer the question you actually asked: reduce your spending to less than $15k/year. With this method, you can even reach FI the day you receive the inheritance.

The above link has probably better advice but you could dump it into indexes or Wellesley and Wellington and likely live off 3% for life. Your expenses are high. This is 10 years of expenses at your current burn rate. If you can comfortably cut your expenses 20k/yr, you're in a solid position to retire in 5 years. 480 capital + 5yrs * (60 income-20 exp) = 680. Enough for those 20k of expenses indefinitely at 3%.

So I have to wonder: Reducing my spending to $15k a year amounts to $1250/month. I pay about half market value to rent a house for $900/month (most houses in this neighborhood with these specs go for $1800+). That leaves me $350 for everything else. My utilities alone come to about that.

My question is: Are you folks that are living on $15k(+/-) a year already mortgage-free homeowners, or getting some kind of fabulous deals on rent (or a squat!) in rundown slums in Mississippi?

If you actually want to be FI:
1 - Do NOT spend any of the money. Just get the money and put it in some safe account(s) - plain old savings accounts are ok at this point. If you really want to invest some of it, do so conservatively
2 - Read those other books. (YMOYL and ERE). Advice from us isn't entirely relevant until you read those books.
3 - Have numerous conversations with your wife (with at least a few days in-between for contemplation) about what is important to the two of you. What it means to have a good life. How you get fullfilment and self-actialization. And, together, draft up (write down!) some visions for your lives -about how you want to live, what you want to do, how you want to feel, etc. Then you can start doing some thinking and planning related to your spending and to what things you may need capital tied up in (land/home)... And, likely, you can also cut out some of your current spending right away.
4 - Spend some time (>1 year) reducing your spending, and living more like you drafted in your life visions. Find ways to do some of the things you want without needing to spend a lot of money..
........
5 - Then -- some time later, after you've reduced your spending... after you've made significant progress shifting your life towards the ways you want to live... then, maybe you will be more ready to make a wise decision about buying land or a house.

What I'm saying is: DON'T BLOW THE MONEY! Don't buy the land. Set up your life yourself - without throwing money into some plan/solution.

Here's a declaration challenging your property buying idea: What was your plan and progress before, related to buying some land? You've been living many years without accomplishing it. Without saving money for it. That shows how important it was to you. Now that you suddenly have money to blow, you want to spend it. You have a spending problem. It appears that now you suddenly have money and you have an inclination to throw the money at something to make your life better. If you don't rid yourself of that problem (throwing money out) your inheritence will be gone soon, you may be spending even more than you are now, and you'll be working until 70.

Yes, here's where we are at now:

1) We are not spending the money. It will be deposited into 3 separate savings accounts at hopefully 1.5% (we'll see what's available come July).

2) That's the plan. I'm a pretty quick reader, although I don't get as much time to do so as I used to.

3) Yup, we've been doing lots of this; progress is looking good.

4) Yes, thinking a lot about this...

5) To be continued...

We have determined that we won't be buying ANYTHING for at least a year. We are, however, paying off debt IMMEDIATELY. This is not negotiable. But then, it's a lot less than most Americans.

[slowtraveler]

Paying off debt is a great start, I applaud that action.

300+/month of utilities? That's huge for me. That could be all your expenses if you were hardcore.

I spent 12-20k/yr for the last several years. This is for 2 people and includes a lot of travel, eating out, massages, and eating pretty much everything I want - so lots of expensive, imported foods. This has felt luxurious most of the time.

Most of this time was in 2 countries in Southeast Asia but now, I'm in another continent and expenses are lower than ever.

I find that where I live and the lifestyle I choose have the biggest impact on spending. I always shopped around for housing, food prices, all that. In countries where eating out is cheaper, I do that, otherwise, I cook.

If massages are 3-6usd/hr, I'll take them, if not, I won't. I came into a situation where I took a 17 hour bus ride that cost as much as an airplane ticket because of poor planning and not checking. After that, I always checked and planned a few days in advance. I found a plane ticket for 10 dollars more than a bus ride after that situation and I took it. I was happy to pay extra for the luxury. Point is, I always compare the value I'm getting between different choices. It's not about the absolute lowest dollar cost but dollar cost is always accounted for.

I reduce the basic needs and add in after that in the most efficient way I can find.

Rob Greenfield travelled across 6 coastal countries in South America for free. I wouldn't go his style but am extra 1-1.5k/month adds a huge amount of options.

Many of us garden, compost, and cook to some degree when we have space and a stable long term home. We do repair on vehicles, electronics, clothes.

I mean, you could get food for free through dumpster diving and live in a fixed up van so your expenses are a couple hundred per month for mostly car/home related expenses in most any city. Jacob lived in Silicon Valley for a fraction of what you're spending.

To start, track every single expense. It's not permanent but it'll help you understand where every dollar is going. Question every expense. Some will be worth keeping, others won't. Some changes will be temporary, others, permanent.

Start from 0 and add in only what adds value to your life.

[davtheram12]

So I have to wonder: Reducing my spending to $15k a year amounts to $1250/month. I pay about half market value to rent a house for $900/month (most houses in this neighborhood with these specs go for $1800+). That leaves me $350 for everything else. My utilities alone come to about that.

My question is: Are you folks that are living on $15k(+/-) a year already mortgage-free homeowners, or getting some kind of fabulous deals on rent (or a squat!) in rundown slums in Mississippi?

I live in a very nice neighborhood in Santa Monica, California with my DW and we are currently renting a 1 bedroom apartment. We are currently paying $1880 ($940/each) for rent each month. I still manage to keep my spending under $15,000/year. It is definitely possible to keep spending down and not have to resort to squatting or living in the slums. Like others have mentioned, learning to keep spending down without compromising quality of life is possible. It takes times to adapt but once you've done so, you'll wonder how you managed to blow so much money living a relatively similar lifestyle.

Slowtraveler has some great insight on how to reduce spending. Spending money, to a degree, compensates for the absence of some skills.

Cooking well > eating out = saving money
DIY car repairs/maintenance > hiring a mechanic = saving money
Shopping in bulk while focusing on staples > purchasing pre-packaged meals = saving money
Streaming entertainment > going to a theater = saving money

Just keep in mind there will always be a trade off depending on how you approach this. Good luck!

[2Birds1Stone]

If your rent is $900 and utilities $350, how do you spend the remaining $2,750/month?

[Laura Ingalls]

People are reducing housing lots of ways

-small paid for house/condo (our strategy)
-roommates
-LCOL places (rentals, owned, US, other places)
-RV full-timing/ camp hosting
-property management/maintain in exchange for housing
-house sitting

I think the bigger issue is that you haven’t developed the mindset needed to live on less dollars. DH and I are of a similar age and stage in life (three years to kid launch). If either of us got an inheritance of the size you are getting (which is actually pretty likely) it wouldn’t be that big of a deal. It might impact spending some but it would be finite and subtle. It wouldn’t encourage or discourage paid employment or current location. We mostly live a life of our own choosing right now.

[Frita]

There is a point where one just has financial habits that mesh with one’s value system. Having more money doesn’t mean having to spend it because that cash is just a tool and one is satisfied. This is a huge step, thinking about what to do and enacting that plan rather than a reflexive shopping spree, congratulations!

[nomadscientist]

So I have to wonder: Reducing my spending to $15k a year amounts to $1250/month. I pay about half market value to rent a house for $900/month (most houses in this neighborhood with these specs go for $1800+). That leaves me $350 for everything else. My utilities alone come to about that.

My question is: Are you folks that are living on $15k(+/-) a year already mortgage-free homeowners, or getting some kind of fabulous deals on rent (or a squat!) in rundown slums in Mississippi?

I've never been to Mississippi, but here's a 3bdr house in a good neighbourhood of Jackson for $150k:

https://www.zillow.com/homedetails/1639 ... 0271_zpid/

That would give you $10.5k/year for other costs before property tax. Google suggests $9.3k/year after tax.

[Frita]

Or as a middle-way with Bigato’s suggestion, pay off all debt but pay it back to your inheritance windfall with interest?

[Jason]

I've never been to Mississippi, but here's a 3bdr house in a good neighbourhood of Jackson for $150k:

https://www.zillow.com/homedetails/1639 ... 0271_zpid/

That would give you $10.5k/year for other costs before property tax. Google suggests $9.3k/year after tax.

Those are nice surroundings, but Is it my imagination, or are the ceilings in that house low? Is there a reason for that? Like climate or something? Makes me think of Dostoevesky saying low ceilings are bad for the soul. So you might want to factor that in, unless you're a dwarf or in a wheel chair or spend most of the time lying down.

[JWJones]

Paying off debt is a great start, I applaud that action.

300+/month of utilities? That's huge for me. That could be all your expenses if you were hardcore.

I find that where I live and the lifestyle I choose have the biggest impact on spending. I always shopped around for housing, food prices, all that. In countries where eating out is cheaper, I do that, otherwise, I cook.

I reduce the basic needs and add in after that in the most efficient way I can find.

Many of us garden, compost, and cook to some degree when we have space and a stable long term home. We do repair on vehicles, electronics, clothes.

I mean, you could get food for free through dumpster diving and live in a fixed up van so your expenses are a couple hundred per month for mostly car/home related expenses in most any city. Jacob lived in Silicon Valley for a fraction of what you're spending.

To start, track every single expense. It's not permanent but it'll help you understand where every dollar is going. Question every expense. Some will be worth keeping, others won't. Some changes will be temporary, others, permanent.

Start from 0 and add in only what adds value to your life.

We live in the Willamette Valley in Oregon, which has become quite spendy in the last 20 years. And, we rent a large, inefficient older home. We have at least another 2 years committed to stay here, to see our son through high school, and then move on. Our daughter of 23 also lives with us, working and going to school (and paying a small rent).

So, there's 4 of us currently. Sorry, no dumpster diving or living in a van. Reminds me of my misspent youth.

But tracking expenses, yes, that is a priority.

Cooking well > eating out = saving money
DIY car repairs/maintenance > hiring a mechanic = saving money
Shopping in bulk while focusing on staples > purchasing pre-packaged meals = saving money
Streaming entertainment > going to a theater = saving money

Just keep in mind there will always be a trade off depending on how you approach this. Good luck!

We do our own cooking and eat out infrequently. Too expensive, and not as good as what we make ourselves. And shop bulk. Very few packaged foods, and when we do buy those, it's mostly for our son and his ravenous teenage appetite. We know we'll be spending a lot less on food when it's just the two of us.

I do some of our own car repair, but not the big stuff. We only own one car (no car payment), and I am a life-long bike commuter.

We don't really go to the theater often, and do stream entertainment. Actually, if I had it my way, there'd be no TV, no streaming services, etc. I read books, don't really care for "entertainment."

If your rent is $900 and utilities $350, how do you spend the remaining $2,750/month?

That's what I'm trying to determine.

People are reducing housing lots of ways

-small paid for house/condo (our strategy)
-roommates
-LCOL places (rentals, owned, US, other places)
-RV full-timing/ camp hosting
-property management/maintain in exchange for housing
-house sitting

I think the bigger issue is that you haven’t developed the mindset needed to live on less dollars. DH and I are of a similar age and stage in life (three years to kid launch). If either of us got an inheritance of the size you are getting (which is actually pretty likely) it wouldn’t be that big of a deal. It might impact spending some but it would be finite and subtle. It wouldn’t encourage or discourage paid employment or current location. We mostly live a life of our own choosing right now.

I've actually thought about asking the owner of this house to consider a huge reduction/elimination of rent, in lieu of managing/maintaining the property. It's a beast, though, with lots of issues.

I've never been to Mississippi, but here's a 3bdr house in a good neighbourhood of Jackson for $150k:

https://www.zillow.com/homedetails/1639 ... 0271_zpid/

That would give you $10.5k/year for other costs before property tax. Google suggests $9.3k/year after tax.

Dang, that's a great looking place for the price. Those 50s ranch houses are a great value; solid, well-built, decent prices. We had a nice 1955 ranch up until 2014. Can't find them in these parts for those prices, any more.

I'm going to disagree a bit regarding using the money to pay debt. Sure, if you don't, you'll pay interest because you'd be paying your debt more slowly. But on the other side, if you just pay it using the windfall, you just wasted a valuable learning experience. You won't have the pleasure of paying it by your own effort and won't have the teachings that the process can give you. You probably want to lower your expenses, don't you? So why not use the motivation of the debt to do so? Make your goal to pay it fully as soon as possible, but without touching the inheritance. Because if you are not able to, you can be sure that you'll spend all the money in no time.

I understand what you're saying and agree to some extent, but we'd really like this monkey off our backs asap.

[flying_pan]

@JWJones, after reading your replies I start to agree with @bigato that paying debt by your own money might be a good exercise. It is a small amount, only $15k, and you have $2,750 after rent + utilities. You said that car is paid off (and it is the only one), you don't eat out often, and in general, pretty frugal. In order to pay off this debt you will have to sort it out where exactly your money goes, rather than just throwing inheritance money at it and having an option to ignore your current expenses.

Anyway, I think the secret of your retirement lies in accurate spending and eliminating non-important things.

[JWJones]

Anyway, I think the secret of your retirement lies in accurate spending and eliminating non-important things.

As it turns out, our credit union has great online tools for financial management. They recently did a website update, and now I can tap into the "Budget" feature to see exactly where the money comes and goes. Very helpful. We sat down yesterday and started working on a plan while using this tool. So yes, as you say, accurate spending and eliminating non-important things.