I tire of gold and trinkets: MidwestCoder's Journal

[MidwestCoder]

NOTE: I am not yet living the ERE lifestyle, not even close. Do not read this journal as an example of how to ERE. Many of you would say I COULD retire in just a few years, if not immediately, with a huge lifestyle change.

Happily married and my wife and I have set a new emphasis on retiring early. We are in our early 40s, and while she is happy to wait until age 55 or so, I've got more of an ERE bent to me and am looking at 50-52 range.

Rough numbers here:

Assets:
230k house
90k cabin
10k or so for two older cars
290k in an IRA
150k in 401ks
80k in two Roth IRAs
20k savings

So about 870k or so, minus taxes to be paid on 401ks and IRA.

Liabilities:
98k Student Loan
66k mortgage

Future expense:
three more years of 25k tuition for son

Income: 250k - 300k (variable due to bonuses, commission, etc)
After tax income (minus 39k 401k, 7k HSA contribs): 150k - 175k
Projected expenses: 100k-120k
25k for tuition
10k vacations
3-5k pet expenses
3-4k cell phone costs (ugg)
The rest is mortgage, food, utils on both places, stuff.

Other notes:
We both max out our 401ks
My wife gets over 50% of her income as an annual bonus (not guaranteed, but pretty much is always 60k to 100k range), so we try to live on her salary and mine and only use her bonus to pay off debt (currently) or invest (future).
I would probably sell the cabin to pay off the student loan, but my wife loves the cabin and won't think of it. I'm ok keeping the cabin and just being more frugal, but would prefer to retire 2-3 years earlier (possible if sold cabin). She doesn't mind working, and thinks waiting until 55 is just fine. I've been working now since I was 16, and could be done now. Work in the last few years has given me anxiety I didn't use to have.

In 3-4 years all debt should be paid, our son out of college and we our expenses reduced to 80k/year or so. This depends on how many vacations we decide to go on, as we have friends that often invite us and we hate to miss out. This will put us in our late 40s with a sizable amount in retirement accounts but practically nothing in non-retirement accounts. At that point we start saving as much as we can (70k to 100k) in a brokerage account investing in stocks, bonds, etc. I did several spreadsheets. One has us reducing expenses to 80k in four years, saving 130k per year, which puts us at around 2 million by age 55 (after tax, using 30% tax rate), assuming a 5% rate of return in investments.

I think 2 million is an excessive amount. 80k is the 4% SWR of 2 million however. It is a powerful thing to see how the projections change for living off of 60k or 40k. Thus clearly is the power of ERE! If it was just me, I could probably do it, but the wife is not sold on ERE. Probably because she thinks we can retire comfortably at 55 so why bother pushing retirement to an earlier age?

I guess at the end of the day it might be I who retire at 50 or 52, etc.. and my wife may continue working, as she enjoys her work and enjoys the high salary she makes. I'm a software guy that is tired of sitting behind the computer for 8 hours a day. My coworkers are not social, so its kind of like going to work and being alone really. I could get another job, but this one pays well, is close, good benefits, decent work, etc.

[Jason]

You could retire in just a few years, maybe immediately, with a huge lifestyle change.

[MidwestCoder]

You could retire in just a few years, maybe immediately, with a huge lifestyle change.

I could see a few years being possible, but unless my DW was as motivated as me or more it seems unlikely.

One great lesson this book/site has taught me is how important and feasible for people to save 50-70%+ of their income. Good news is both my wife and I are all for making that happen. Just that will make a huge impact.

[mathiverse]

Welcome! I'm another high-earner, high-spender also looking to spend less in the future. Looking forward to seeing your progress!

[Scott 2]

Have you looked at using an aggregation tool like Personal Capital or Mint to track your spending?

Personal capital gets the transactions to you within a day or two, and it can be accessed via a phone app. It offers a powerful feedback loop.

You can also do some nice looking retirement projections, which could be more appealing to your wife than an excel spreadsheet.

[MidwestCoder]

Welcome! I'm another high-earner, high-spender also looking to spend less in the future. Looking forward to seeing your progress!

Thank you mathiverse, glad to here!

[MidwestCoder]

Have you looked at using an aggregation tool like Personal Capital or Mint to track your spending?

Personal capital gets the transactions to you within a day or two, and it can be accessed via a phone app. It offers a powerful feedback loop.

You can also do some nice looking retirement projections, which could be more appealing to your wife than an excel spreadsheet.

That is funny you mention that as I installed Personal Capital the other day. I only wanted to use the retirement calculator and was put off once I saw they wanted me to link all my accounts. I used Mint several years ago but we had so many different accounts that only 60% of them would be working at any given time, so we gave up on it.

[MidwestCoder]

Thoughts from January.

DW got her annual bonus. It was 98k! (her salary is around 75 for comparison) 11k of it went to prefund her 401k. Net remaining was 58k. 16k to pay HELOC from our cabin purchase. 13k to payoff remaining CC debt. 17500 paid off her smaller student loan. The rest to savings which is now at 19.5k. Son’s tuition in august will be about 13k, then another 13k come December 2020. That means we need to save up and avoid CC debt.

Slight risk to payoff so much debt and have a low savings but I convinced DW it was worth it. We had proved in January we could avoid eating out and buying crap on Amazon. Those items may have saved us 1-2k for the month compared to our past spending behavior.

Often we would spend without much thought saying to ourselves “we make a lot of money, we can afford it”. It is a trap. No amount of income can keep up with endless wants.

DW told me today that her large student loan was at 98k. Damn, I thought 80k. 4.7% interest or so. This is our next target. I consider paying it to be a risk free return of 4.7%, therefore a good investment. Hoping to build savings to 30k and then all extra towards that accursed loan.

Headed to Florida for a four day weekend to see friends and family. Should be cheap, 300-400 total. DW staying home.

Is it better to wait 7 years for one million or 11 for two million? The 2 mil feels a lot safer to me.

Did I mention I was into ebay selling for over a year? I bet I could make 10k a year in retirement just from thrift store and garage sale flips on ebay and the like. I have a huge amount of collectible RPG books I need to unload. This will provide extra income for years in the 1-3k range.

Been learning how to cook more and doing a better job of doing dishes promptly so DW cooks more. Both of us have been using the library starting January, a free entertainment alternative. Our library is amazing.

[5ts]

You seem rather gregarious, especially for a coder. If this is correct, would you consider a job where you interact more with people/customers? Is there a software sales job at your company?. Maybe that would get you to 55 with your wife.

[MidwestCoder]

You seem rather gregarious, especially for a coder. If this is correct, would you consider a job where you interact more with people/customers? Is there a software sales job at your company?. Maybe that would get you to 55 with your wife.

And you seem rather perceptive! To be honest, and not blowing my own horn here, I am a class clown personality, ADHD type who has work anxiety because I never know if I am good enough at my job. I have thought about a career change but the golden handcuffs have kept me in place.

The team I am on at work does not talk much, nor joke around. I have worked at places in the past where I got along great. Probably what I should do is switch jobs.

Sales job would be interesting actually. So far removed from where I am at, and I enjoy looking like a slob, ha!

[Scott 2]

Personal capital does pretty well at connecting to my accounts these days, better than Mint ever did. The times I've had trouble, support got it working eventually. I was surprised to find my spending higher than I'd estimated. Many "exceptional" expenses were not budgeted for, that come up every month.

I believe they are using a service called Yodlee (https://www.yodlee.com/) whose entire business is based on financial account aggregation.

Given your overall household income, the marginal value of another dollar earned is probably only 50-60 cents. I personally would emphasize quality of life over salary.

[MidwestCoder]

Given your overall household income, the marginal value of another dollar earned is probably only 50-60 cents. I personally would emphasize quality of life over salary.

Yes, true. The 98k in student loans bother me though. I'll feel better about settling for less income once we pay off our debt. Perhaps around that time I'll switch jobs and shoot for something I enjoy more and not worry so much about the compensation.

[5ts]

I realize I don't know you at all aside from this brief introduction, but I think a job where you interact with more people could alleviate your work anxiety and maybe enjoy work more.

That feeling of anxiety might come from the seemingly never ending supply of reasonably good coders and the eagerness of companies to drop the old guard for the cheaper new guard. However, a good personality who works with the customers and brings in the direct moolah is a lot harder to fire. That's rare. I sure don't have it.

I would at least explore the option or get/start some kind of side gig where you could try it out. I think you would excel at it. I understand the fear of quitting a good job and and unlocking those golden handcuffs.

I think you will be in a lot better shape when you are done with your son's tuition. You can attack the student loans hard then and you will be set. You spend more than some here, some of whom are quite hardcore because working is like poison to them, but I think you will be fine if you decide early 50s or take the plunge with your wife.

[Cal Bronson]

Just stopping by to say, cherish the cabin! (Seinfeld reference)

[Peanut]

Some like Dave Ramsey advocate putting extra money towards debt rather than investment first. I mention this because you said you and your wife max out your 401ks, which I’m guessing means you put in beyond company matching. May be worth considering, even with the tax advantages. Would you take out a loan on your house to invest in the markets? Tho I suppose in our current market the answer may still be yes.

Without mortgage payments and tuition (unless son is going to professional school ) I honestly think 60k should be very doable for you, even keeping the five-figure vacations, bc you’re based in a lcol area with corresponding property taxes. Unless you’re giving away a significant percentage to charity as well, or have undisclosed lux habits... collecting diamonds?

Oh btw definitely get a new phone carrier immediately. We let AT&T rob us for years before switching. Saved exactly 50% for the same services.

P.S. Just out of curiosity why did you take out a heloc instead of another mortgage for the cabin? Do you save money that way?

[MidwestCoder]

5ts:

Yes I should indeed look for some avenues to find a position that has me dealing with people a little more. One drawback for me is I have ADHD and am not a great listener, but I do get along with everyone.

The anxiety may be from a few events. I got laid off about 4 years ago, which turned out to be a blessing as I went from 95k to 115k salary, and luckily only took 3 weeks to get a new job. Still that was stressful as I hadn't been laid off since I burned chicken at KFC when I was 15 (forgot to press the timer!). Also recently my boss snapped at me for asking too many questions. He later apologized but that has had me in defensive mode. In reality I'm a decent programmer, I'm just not a genius like some of my coworkers. I don't think my job is at risk in reality. My lizard brain gets scared though.

Yes, when our son is out of college that will coincide with paying off our mortgage (66k) and also hopefully the student loan of 98k. All systems go at that point for saving a huge amount!

Cal Bronson

LOL! I love Seinfeld. My friend (who is a Seinfeld nut) says that line everytime we are talking about the cabin.

Peanut

I too have thought about cutting back on 401k contribs to pay off debt faster. It is a very close call that depends on how lucky you get in the market. I actually think the market is overpriced at the moment, but one never does know for sure. I have shifted into roughly 40% bonds as I think a drop is not out of the question. My investing style preference is value investing, but given such investments are hard to find these days I dabble in growth stocks as well. I'll probably have much to write about investing as I spend more time on these forums. I know a lot of people around here prefer the Dividend growth strategy (this strategy is less lucrative to me given my money is in IRA or 401k at this point).

60k/year, yes I agree. Should be just fine if we have no debt and don't go crazy with the vacations... I think it'll come down to how much my wife likes her job, I bet I bail out before her! Unless like 5ts recommends, I find a new position that I enjoy more.

I will look into that cell phone bill. We might still be under contract. Part of it is I think we are paying a 0% loan on an iphone. My wife needs a ton of data as she uses her phone for work constantly (and doesnt have the type of job they reimburse for cell).

The cabin is a special situation where no mortgages are allowed. The land that the cabins sit on are owned by a corporation, it is weird. Anyway, no one there can get mortgages, we all own our cabins and have a share in the corporation. Sounds funny but we got an amazing deal, paying 60k three years ago, and we think we can sell it for 90k now if we wanted to. Granted we had to put a 10k roof/gutters on it recently which sucked!

[MidwestCoder]

Detailed Budget - Feb 2020

Recurring bills:
1500 - Mortgage (66k remaining, 2.875% interest, 15 year loan, about 5 years left)
700 - Student Loan (98k remaining, 4.875%, 17 years left)
300 - Dogs (food, vet bills, treats, grooming every 6 weeks)
280 - Cell Phone (we have 4 lines. me, wife, son, cabin dedicated line. DW needs unlimited plan)
200 - Son's college allowance (if he gets bad grades we reduce ad-hoc)
120 - other insurance
105 - DirectTV w/ Sunday Ticket (80/mo with once a year payment of $300 for NFL)
94 - Internet (I should review this bill, thought it was supposed to be 59.99. Either way I'm paying for 1GB fiber, prly overkill)
85 - Gas bill (must be cheaper in summer)
80 - Water and Trash
55 - Electric
50 - Propane for Cabin (lower in summer)
50 - Electric for Cabin
50 - Cabin dues
40 - Life Insurance

Total : 4009 (lets call it 4000)

Other/Variable:
800 - Groceries (trying to get this down)
300 - Gas + Oil Changes
300 - Medical/Dental (we have a HIGH deductible of like 6k, so we are usually out of pocket)
200 - Eating out (a good target, we used to spend 3 times this)

Variable Total: 1600

8800: After tax income (reflects 401k, HSA, Health Insur deductions, and ignores DW's annual bonus which net's 50-70k)
-5600: Total Projected Expenses

$3200: Net Profit (I like to use this term as it how corporations would label income minus expenses)

Other:
-1250: Money we auto-transfer to Savings account (we want to build up 30k, presently at 19.5k, before paying off more debt)

$1950 remaining, out of which we buy clothes, "stuff", hair cuts, pay for misc things, and hopefully just direct to savings or paying off MORE debt.

Other income: (55k to 90k after tax)
DW gets after tax bonus worth $50k-70k annually (unless her industry implodes, potentially bonus is as low as 0)
DW makes random commissions of unknown amount, perhaps $5k - 20k after tax is a good estimate
I get a small bonus of $2800 or so annually.
I will make $500 - 3000 selling things on ebay/FB (depending on my motivation)

Other expenses: (30k to ??)
25k/year college costs for son (for next 3 years hopefully)
5k-20k/year for vacations
0-10k home maintenance
0-8k cabin maintenance
house needs new furnace soon probably
house may need new roof in 1-5 years
may need to buy a new (used) car in next few years
my dental bills are always a wild card
need to pay a tree trimmer soon


Summarized income and savings rates
My Income: 120k
DW Income: 170k
Other Income: 10k
Based on a total after tax income (300k * .7) of 210k we have:

210,000 Income
- 67,200 Core Expenses (5600*12, see above)
- 50,000 Estimated other expenses including 25k college, vacations, misc

92,800 Net Profit (Savings Rate of: 44%, or 56% once son out of college)

Net Profit will go into the following categories:
27,300 401k (39,000 gross minus 30% tax)
4900 HSA (7k gross minus 30% tax, actually probably will be tax free if we spend on medical which we plan to)
60,600 towards Debt Pay Off of Student Loan

Saving/Debt Payoff plan:
Essentially the basic plan is to live on our non-bonus income, while saving for our son's college so we always have at least 30k in the bank. When my DW's bonus rolls around we'll send large payments to the student loan until that is paid off. Once that is paid off we will either open a brokerage account and send all extra there (so we can have pre age 59 retirement money) OR we will pay off the house early. Given the house is at 2.875% I am almost inclined to invest that money instead.

Short term goals:
Optimize grocery costs
Get 30k into savings
Live frugally and continue to reduce our bills
Decide the right balance for vacationing with friends (Friend called last night and asked us to go with him on trip in July, we declined)


NOTE: I AM SO GLAD I SAVED THIS TO A TEXT FILE AS THE FORUM LOST MY POST WHEN IT ASKED ME TO RELOGIN!!

[basuragomi]

Is it really net profit when you're including principal payments on your mortgage? You're actively using that equity you're gaining via the HELOC too.

Would you ever consider moving into the cabin full time? I know a handful of people who've done that in retirement and they love it. If you have a HOA there (still a bit agog at the idea of a cabin HOA) then there are probably other services available to bring it up to a conventional living standard.

[MidwestCoder]

Is it really net profit when you're including principal payments on your mortgage? You're actively using that equity you're gaining via the HELOC too.

Would you ever consider moving into the cabin full time? I know a handful of people who've done that in retirement and they love it. If you have a HOA there (still a bit agog at the idea of a cabin HOA) then there are probably other services available to bring it up to a conventional living standard.

Agreed that its not exactly net profit in the financial accounting sense. Paying principal is more of a cashflow item in that sense. Our HELOC is currently at $0 and has a line of 29k, which is really low because we had a terrible appraisal 4 years ago. If we had the house re-appraised we'd be able to borrow much more. We don't really want to borrow more than 29k though (hopefully 0, but it you never know), so we probably won't bother. The interest on the HELOC is about 6%, so it is better than using the credit card, but still to be avoided.

Yes we have thought about moving to the cabin, and perhaps renting our house out. We think we could get $1500/mo for our house in rent fairly easy. There are a few obstacles to living at the cabin while working:
-Commute would be around an hour instead of 10-20 minutes that we have now.
-The cabin has no washer/dryer, nor really can it have them (well water limitation and potentially septic too), we'd have to drive 30 mins into town to do laundry.
-The internet is slow and limited (Cellular data only)
-We have a lot of crap to get rid of before we could do that. Our main home is 1800-2000 sq ft (depending what you count) and full of too much stuff. Namely by large library of collectible RPG books. (I made the mistake of buying a friend's collection years ago for $4000 and have only sold 20% of it)

So for the above reasons, moving to the cabin is hard to do right now. We could definitely consider it for actual retirement, when we no longer have to commute, and if we are ok bringing laundry into town (or washing stuff using some ERE setup that Jacob mentions in his book).

[MidwestCoder]

Small update,

Returned from four day trip to FL, only spent 350 total so a good success. Decided I wasn’t really a fan of deep sea fishing anymore. I just feel bad killing fish to some degree and the ocean is stressed. After catching four, I spent the last four hours on the boat just relaxing. My buddy thought I was crazy that I stopped fishing. I would have been more interested in fishing if I knew we were eating the fish, but my buddy wasn’t interested.

Trip:
120 flight
90 fishing
45 parking
100 food

The rest of the time I visited family and barely spent money.

My DW is a frugal champ, she stayed home this time and spent next to nothing. Our Fast and Furious 8 movie set arrived, bought cheap for 28. Will watch and resell for prly 18-20. I had to send flowers for a funeral, $105, was probably overboard.

It is weird being this frugal. We just buy so little now. We might end up saving 2k this month, and in the past with a vacation and a holiday we likely would have saved $0 or worse.

DW and I are doing well communicating about spending and finances lately. If anything I talk about them too much. She is cooking and I am doing the dishes and we are eating leftovers and wasting much less food! We even ate all but two potatoes from a whole bag. We made homemade salsa twice, homemade limeade, muffins and many meals that we make on Sunday and eat through the week. It is work but we enjoy it. Got a cookbook from the library with basics, and I have made a few.

Taxes will be due in April and we likely owe a lot, we’ll see, hoping for 2-4K.
May we travel for two weeks for hiking a national park, that is going to be pricey but we already paid for a lot of it.