FI in 10 years

[Rickardo]

Have you thought about converting your principal residence into a rental, and renting a slightly more affordable house? Depending how old your house is, the tax benefits could make it worthwhile, which you could pump into the mortgage and lower it faster.

[steveo73]

Have you thought about converting your principal residence into a rental, and renting a slightly more affordable house? Depending how old your house is, the tax benefits could make it worthwhile, which you could pump into the mortgage and lower it faster.

I'm not sure if it would work and truthfully I can't be bothered. I'm not a true ERE type person where retirement is the only goal. I'm happy with my house and I am prepared to stick with it. The only other option I would consider is moving to another country. That makes sense to me however my wife and 3 kids wouldn't want too. I would happily do this and this is no disrespect to Australia. It is just that we have crazy house prices.

My approach is pretty clear from this point on - pay off the mortgage and save as much as possible to reach FI as quickly as I can whilst living where we currently live. Our savings are really good and our expenses are under control if I compare our lifestyle to the standard admittedly freaken crazy lifestyle. In saying that I think that we are pretty good compared to most people in all situations. I have 3 kids and regularly feed other kids that come over to our house.

[steveo73]

I'm on 2 weeks leave at this point and all it does is remind me why I want to retire.

Life is good. Eat well, get plenty of sleep and exercise.

[steveo73]

I just increased the mortgage repayments to $3000 per fortnight. If we keep this up I think we will basically have this paid off by the end of next year.

My daughter needs braces and this will cost $5000 over 2 years.

Still its all going well and I reckon we should be pretty well set in say 7 years from now. I'm starting to think what I will do at that point. At this point I figure the best option is to slowly start working less via taking more leave or working less days until I feel really safe and then just quit.

What is funny is that I'm looking to retire at about 50 and I feel I'm unique. So few people appear to be into this lifestyle.

[steveo73]

So an end of year or close to it update.

Super:- 225k.
Mortgage:- $90k.
Emergency fund:- 5k

I'm pretty happy with the situation that we are in now. I really want to pay off the mortgage next year though and then start saving.

If we continue as is I think in about 5 years we will have a 5% WR which I think is pretty close to being safe. I can't see myself retiring at that point though but possibly I could work part time.

One thing I'll state is that the kids expenses are hitting us at the moment. My daughter needs braces and that is $5k. She also needs a laptop for school and that will be at least $300. The letter the school sent had recommended laptops which were all about $1k or more.

My wife is getting pissed off at her job and it is a shitty job. My job is going really well and I actually enjoy it. I still though enjoy Jiu-Jitsu and playing chess a lot more than work.

I've been eating better in the form of lots of fruit and vege juices & smoothies (typically once per day for breakfast) and minimizing the junk food. My kids are all doing well.

[DutchGirl]

What is funny is that I'm looking to retire at about 50 and I feel I'm unique. So few people appear to be into this lifestyle.

I sure don't meet a lot of early retired people either, here in the Netherlands. However, that could also be because I'm moving in the wrong circles: I'm meeting people at my work, so they most often are working, too. Thinking over the last five years or so, I think I know some people who are financially independent but who then have decided to put their time in things like charities, creating a business, pursuing a hobby with all their heart, etc. So they don't present themselves as "hello, I'm X and I'm retired", but as "hello, I'm X, and I'm working on Y project, could you help me with Z... ".

You're making great progress, well done! So the mortgage could be done by next year? That will sure free up some income for other goals and end some of your worries...

[steveo73]

Thanks DutchGirl. Paying off the mortgage is like step 1 or to me reaching the base of the mountain. There is still plenty more time to go to get to FI however once the mortgage is paid off I think we can push forward relatively quickly.

[Hankaroundtheworld]

Just read your blog. 50 is a great age for ERM, basically my target as well (next year is D-day). With that age, you still have a life ahead with plenty of opportunities to explore more of it, broaden your skills, feel the peace of being FI, focus on your kids, etc...(and playing chess what I have read of you ). Regarding the house, that is a nice "bonus" once your kids have left the house, then you could choose for a different lifestyle, and cash-in some of that value, and make it work for you. All in all, a very rosy perspective, part of the 2% of the world (although not important, happiness is, but good to realize how fortunate you are)

[steveo73]

Hank - thanks for your comments. It is good to realize how lucky we are. The house does like you state also provide a buffer.

It will be interesting how I invest over the next 8-10 years and how I manage retirement. My thoughts at this point are a predominantly sock based portfolio with some buffer in the form of cash, maybe bonds and maybe some commodities. There is no way I am putting a cent into housing as I already have a massive housing portfolio by owning my house. When it comes to managing retirement I think I may slowly move towards retirement and work less days per week rather than just quit outright.

[steveo73]

2 weeks off work over Christmas is great.

Every time I get a break we don't go on overseas holidays and as my wife said then other day our holiday spending is like the normal average family weekend spending. We actually increase our spending a little because we might buy take away food and go out for the day. We may even go out for Yum Cha as well. We might drive to the beach. The typical day though is doing some light exercise in the form of a bike ride or a walk and then eating a nice dinner and watching some TV.

Every time I do this I realize how little I need to spend to be happy.

It'll be back to work not next week but the week after however I have to try and enjoy it as much as possible and think of it as counting down the time to being FI and being able to quit work.

[Geetar28]

Super:- 225k.
Mortgage:- $90k.
Emergency fund:- 5k

So dumb question here...if you have 5k in emergency fund..How much do you keep roughly in cash accounts (checking say) for paying monthly bills? Also, is the 200k Super is that in a 401k type account or IRA or what is that? Thanks.

[steveo73]

I'm Australian so I think Super is the US version of a 401k. You can't touch that money until you are 55 at a minimum but its more like 65 and they will raise that limit. I don't really care about that though because I intend to have enough money to last for at least 50 years. So I don't really care if I can't touch that until I'm 65 or even 70.

We don't have a set amount in our the Emergency Fund. We just put $50 per pay (which is per fortnight) into there. I don't count this as part of my savings as I expect it to be spent and refreshed over time. The emergency fund is completely cash. We don't really use it for monthly bills. We pay our bills out of our fortnightly wage.

My daughter needs a laptop for school and braces. I expect that this year we will spend all of that emergency funds on bills like that.

[steveo73]

I just bought a laptop today. It cost $1066 and I think that was a decent deal. The school gives out specifications that are probably ridiculous however it means we had to buy something at about that price unless we got it 2nd hand and I honestly couldn't see much on Ebay that would match the supposed requirements. My wife was budgeting for $400 and is spewing.

Add to that over the next 2 year we are going to be paying $5k for braces.

I should also reiterate that we have 3 freaken kids.

[m741]

I suppose it's too late now, but you should question what the school is recommending. In particular - what will your kids be doing with the laptop?

Video editing or photoshop? Enterprise-level software development? Probably worth springing for the recommended laptop. Researching on wikipedia and writing some papers? A chromebook or cheap laptop is probably plenty (I spent $300 on a budget laptop 2 years ago, no need to upgrade). I suspect that schools will recommend high-spec systems because it's less work for them; also because teachers may be more familiar with Apple, or some people just like Apple better.

In particular, system specs in laptops haven't improved signficiantly for 95% of non-gamers in years. That's because laptops 2 years ago already did everything that most people need. Battery life and weight are improving gradually, but those are comfort factors and not a game-changer.

[DutchGirl]

Hmm, steveo93 might still be able to return the laptop? Often there's something like a 2-week-no-questions-asked return policy... ?

[steveo73]

I agree with the 2 posts above. Its stupid. I'm not going to do anything about it though. I'm just going to put my head in the sand and recognize that I'm a stupid bastard.

I use desktops at home and we have Linux on them. We just bought a brand new computer for home and it cost $400 and it is kicking ass.

My daughter is 13. These costs are going to start to disappear or at least I keep telling myself that.

[steveo73]

I just fixed a toilet that was running all the time today. It was actually difficult. Changed the inflow and outflow valves but I also had to change the pipe connector from the inflow valve to the tap. It cost about $50 but I had to buy 2 wrenches as well.

I really like doing stuff like this though because I figure its a skill that I have learned and something that I achieved. It also saves a lot of money. There is no way a plumber would have been that cheap.

[steveo73]

I figure now is as good a time as any to list down my goals for the year.

I should state though that we are basically on autopilot now. Stuff gets bought and money gets spent but its not over the top and it doesn't really require too much thinking or self-discipline.

1. Save at about 70% or more of our income. We reached 75% last year however I think we will spend more money this year and I doubt I will get the same bonus.
2. Diet better. I really see this as a key. I'm not fat however I'd like to lose 5 kgs (10 pounds).
3. Exercise better. I do jiu-jitsu and its tough and a great exercise but I think I really want to exercise in a less intense fashion. I basically want to take it easy. So do jiu-jitsu about 3 times per week but also spend more time stretching and recovering.
4. Read plenty of good books.
5. Play chess and try do be more disciplined when I play. I find I blunder too much and it makes me freaken scream.

If I get these aspects right I figure the mortgage will be close to paid off by the end of the year and then we can really start building our FI assets.

I don't really have anything excessive listed down and I don't really see too much behavioral change apart from eating a little less and a bit better quality more consistently as well as moderating the alcohol intake. I realize that most of my FI goals are not really financial but I feel that moving towards FI will just happen and other stuff particularly my health is just as important.

[steveo73]

I should talk about work. I really quite like my job. The pay is decent and I get a lot of flexibility. I work with good people and have a great manager.

In stating that I really don't like going to work. I'd just rather do other things.

[andystkilda]

Steveo have you considered moving to a cheaper residence - perhaps further out from the city? - especially if you can downsize to less bedrooms in the future as the kids leave home.

I know this would be a significant (perhaps unworkable) disruption to your wife/kids but it could potentially free up a lot of capital to add to your retirement/savings funds.