SavingWithBabies path to ER

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SavingWithBabies
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SavingWithBabies path to ER

Post by SavingWithBabies » Fri Jan 01, 2016 3:18 am

Background

I am 38 and my wife is early 30s. One kid (under 6 months) with one to two more on the plan. Working as a Software Engineer in SF Bay Area. Wife is in education but after looking at child care expenses, we decided she would stay home with the children until at least preschool (no local family).

I came to ER because I saw my parents struggle with income as a child. We always had food, stable home and so forth but there were some years my dad was out of work. I also observed him being really smart in one sense but really not so smart financially. It is a sharp contrast to how his father was. To me, as much as I love him, I still see him as slightly irresponsible.

FI to me is being able to make conscious choices in what I do each day much earlier than my father. He just retired recently and he is close to 70. I'm 38 and I want to get there by 45-50. I enjoy what I do. My minimal FI goal is $1.3M but if I'm under 50 and still have silly income, somewhere closer to $2.5M would be ideal. The last 6 months I've juggled thinking about the minimal side and the luxury side. Somewhere in the middle is being able to cover some or all of my planned 2-3 children's college expenses, have enough saved that my wife is comfortable with leaving employment and potentially being able to afford a boat to sail around the world (rough plan, going for enjoyment not speed so maybe 2-3 year voyage at least).

Time is the critical element. Too late and I get less time with my children and they likely won't be interested in the sailing around the world. I waiver back and forth on college expenses. On the one hand, I did it alone with my two final years of university being at 25+ in age so completely financially independent of my parents. I graduated with some debt but paid off half within 12 months and a grandparent gave me $20k (and I used half of that to pay off the remaining). Today though it is not so easy. There is definitely something to learn by making it on your own but after looking back at my late start to career, I see a lot of value missed in those 7 years I could have been working in my career while I struggled. So I think saving roughly 100% of a full in-state ride is on the table.

Plan:
  • See how far I can get along the path over next 5-6 years in SF Bay Area and try to bootstrap side projects and grow income.
  • Far along? Go for the boat and home school around the world while investments grow.
  • Not far enough? Relocate to midwest to be close to family and be able to buy a house. Keep on working as investments grow. I enjoy my work.
Income

$180k/year + stock options (value at $0 and/or negative -- see below). My salary has increased 3x over what it was 5 years ago.

Financial Status
  • $285k total invested with ~$120k post-tax (most in Vanguard) and rest pre-tax (401k or similar, Vanguard)
  • Adding ~$5k/month to post-tax investments (no pre-tax option at current employer)
  • 1 year of exercised options at a startup that I currently value as negative (value stock at $0 but exercised after a year for ~$6k and will have a tax liability of ~$38k due to increase in value -- likely going to tax professional this year due to how complex it seems to be)
  • almost at another year of exercised options at another startup but thankfully early-exercised

Monthly Expenses
  • $1,930 rent for 2 bedroom apartment
  • $105 water + sewer
  • $33 gas and electric
  • $326 car payment
  • $110 car insurance
  • $19 rental insurance
  • $120 pre-tax for commuter (I commute by train)
  • $75 cell phones (pre-paid with data)
  • ~$500-700 food and household (cleaning, baby diapers, etc)
  • $630 tuition for education program (wife, done in 7 months)
  • $72 student loan (at sub 1% interest)
  • $70 internet
  • ~$800 not accounted for here and hunting down
Total: ~$5,000/month

Why here?

This plan doesn't seem very extreme to me compared to a lot of plans for a single person or a couple with no kids. But I'm trying to figure out how to balance all the needs/wants and ensuring FI. I'm here because we can potentially get more extreme and even if we don't, we need to keep lifestyle inflation in check (and extreme seems to require that).
Last edited by SavingWithBabies on Fri Jan 01, 2016 6:52 pm, edited 2 times in total.

SavingWithBabies
Posts: 411
Joined: Mon Aug 31, 2015 2:50 pm
Location: Midwest, USA

Re: SavingWithBabies path to ER

Post by SavingWithBabies » Fri Jan 01, 2016 3:23 am

Current tasks:
  • wife is accounting with YNAB (with YNAB, we should get a better handle on saving towards trips to see family, spending money, etc. along with daily small costs that add up)
  • I'm going from the other direction and transferring half of each paycheck to savings
  • After holidays, I'm interviewing with some of the bigger companies to see if I can increase my earnings (and get 401k, etc).
Goal: Get savings on auto-pilot and likely keep a spending journal. Automate monthly reports of progress towards goal. Stop thinking about it too much beyond that.

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fiby41
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Re: SavingWithBabies path to ER

Post by fiby41 » Fri Jan 01, 2016 4:09 am

SavingWithBabies wrote: I waiver back and forth on college expenses.

...

Today though it is not so easy. There is definitely something to learn by making it on your own but after looking back at my late start to career, I see a lot of value missed in those 7 years I could have been working in my career while I struggled.
It'd have sucked if my parents did that to me but you can kill two birds with one stone by lending money to your children for college at zero or nominal interest rate. Better you than some bank or other institution doing it, especially since you can afford to and want to.

thrifty++
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Re: SavingWithBabies path to ER

Post by thrifty++ » Fri Jan 01, 2016 4:34 am

Welcome to the forum.
Wow sounds like you have made some great salary progress. I am sure you will similarly make great ERE progress.

Im curious as to what age you started and finished university? I got a little bit confused by your reference to 7 years.

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Fri Jan 01, 2016 4:16 pm

That caused some confusion. I should be clear, the 7 years was me comparing how I finally got to a well paying career compared to another person that goes directly to college and enters the workforce. It wasn't 7 years because of my parents not paying for my education -- it was because of my choices. I did learn a lot during those years they just weren't very effective towards FI.

I tried college at 19 but dropped out after a semester. At 24, I went to an excellent community college for two years then tried to transfer to a state university system but was judged a non-resident for tuition purposes. I need to work for 12 months and not attend school to gain residency. So I worked for an internet service provider. I only planned on a year but ending up doing it for 18 months because it was a lot of fun. I entered university at 28 and graduated at 30.

thrifty++
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Re: SavingWithBabies path to ER

Post by thrifty++ » Fri Jan 01, 2016 4:21 pm

Ah ok interesting. Thanks for clarifying. It sounds like you have made up for the lost time. I started professional post graduate work at 25 and now 9 years later I am still only just over $100k lol. Still much better though than what I would be likely to earn without any education.

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Fri Jan 01, 2016 4:25 pm

fiby41 wrote:
SavingWithBabies wrote: I waiver back and forth on college expenses.

...

Today though it is not so easy. There is definitely something to learn by making it on your own but after looking back at my late start to career, I see a lot of value missed in those 7 years I could have been working in my career while I struggled.
It'd have sucked if my parents did that to me but you can kill two birds with one stone by lending money to your children for college at zero or nominal interest rate. Better you than some bank or other institution doing it, especially since you can afford to and want to.
I cleared it up a bit in my reply above but the 7 years was purely my choices. I'm about 95% of the way towards being convinced that saving the full amount for college for each and giving it to them is the sensible choice. I worry they might squander the opportunity but realize that carries both a life lesson and hopefully will not happen.

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Fri Jan 01, 2016 4:32 pm

thrifty++ wrote:Ah ok interesting. Thanks for clarifying. It sounds like you have made up for the lost time. I started professional post graduate work at 25 and now 9 years later I am still only just over $100k lol. Still much better though than what I would be likely to earn without any education.
That is a great way of putting it. My salary progression has looked roughly like this:

2007 - $58k
2008 - $58k
2009 - $61k
2010 - $60k
2011 - $60k
2012 - $65k
2013 - $80k (slight salary increase plus decent bonuses)
2014 - $140k (after relocation to SF Bay Area) + stock options
2015 - $180k (switched employers) + stock options

I greatly enjoy software development and am really thankful for the opportunities I have today.

thrifty++
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Re: SavingWithBabies path to ER

Post by thrifty++ » Fri Jan 01, 2016 4:38 pm

Thanks for posting. This is quite helpful. You have had some great jumps with your move I can see.
I often wonder about moving to Sydney which could see me potentially making some big jumps. But I don't really want to move to a new city in another country where I know no one and far away from family and friends. Am thinking rather of a move to Wellington which will retain my existing salary and substantially reduce living costs, plus I have some friends in the city and it is much closer to Auckland. Funny my income growth has seen a similar pattern to yours. I stayed on peanuts salary for many years and then probably about the same time as you I smacked up suddenly from $65k to $80k.
Did your move to SF Bay involve shifting very far from family and friends?

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Fri Jan 01, 2016 5:00 pm

thrifty++ wrote:Did your move to SF Bay involve shifting very far from family and friends?
Yes, both of our families are over 2,000 miles away in the Midwest while we are on the West coast. My wife has some college friends in the area but otherwise we didn't know anyone. It has been a good experience though and I would definitely do it again. I feel a strong pull towards family but both of our mothers moved to the USA from another country so I feel like they understand. At least we're in the same country and in an interesting place to visit (California).

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Sun Jun 05, 2016 3:04 am

I finally purchased Jacob's book and am currently reading it. I was going to try to get it from the library but I realized it was going to take $7 round trip via public transit (or driving and a bridge toll). So $10 for the Kindle version became well worth it! It is making me reconsider some aspects of the path forward. In particular:

* the benefit of multiple income streams (or the danger of a single income stream)
* the social aspects of ERE
* realizing trying to accomplish your hobbies in a financially responsible way is important
* the benefit of DIY even if the DIY happens to cost more than paying someone else (at least at first)
* the fun that can come in trying to reduce spending money
* a bit more of an understanding of why I personally prefer to DIY over paying others

And no doubt a bit more that I'm overlooking.

I had a bit of a setback in employment so I've had two months to spend more time thinking about things. I start a new job on Monday but it involves a somewhat difficult commute for the next couple of months until we move closer. I was struggling with how to make it through the next couple of months without spending a lot of money or being stuck with a big choice driven by short term needs instead of long term. I was starting to think we would have to get a second car. My inclination was to buy a used Nissan Leaf however that would be extremely hard to make work until we moved closer and would constrain us in choice of housing (due to need for a charging). It would also cost a fair amount of money not only to purchase the car but increased insurance, registration, tax, etc. Then it was off to considering renting a car for a couple of months but that gets expensive quickly. So maybe buy a car to hold short term. But that is also expensive and it might be hard to sell or I might over pay.

Then I realized I could make this work with public transit. It's not going to be pretty. About an hour on the train and then either about an hour of bicycle riding or a 30 minute bus ride and 15 minutes of walking (bus can take bicycles so can mix it up more). However the driving alternative is about 1.5 hours one way coming home in extreme traffic. At least with the public transit route, I can spend about an hour reading or using my computer. And it is a reverse commute in terms of passengers so bringing my bicycle on the train should not be a hassle. The icing on the cake is I actually have a large amount of money on my local transit card that otherwise I would have to sell on Craigslist so I won't have to pay anything out of pocket.

Besides the benefit of not buying a second car there is also the immense benefit of getting back into commuting by bicycle. In Chicago, I had a 35-45 minute 7 mile commute by bicycle. I greatly enjoyed it but also had a couple of bad accidents. So I'd taken a break from bicycle commuting. But here, the new route would be 80%+ trail without cars or intersections.

So next week I'll do a few trial runs:

* train + bus + walking
* train + riding
* and maybe train + bus + riding

This is huge for me. I struggle with exercising even though I know I need to do it for both weight loss and combating stress. When it is part of my daily routine, it becomes easy for me. So I'm very excited!

Moving on, the other big realization was that my wife and I need to turn on auto contributions to savings. We've been using YNAB to get a better understanding so we have a good idea of our current spending but I think automating the savings and having a target checking balance (as a dipstick) will help us increase our savings rate. We still have a long road ahead of us. We are very fortunate with our income however being less than 1/5 to the goal yet already having itchy feet is bad. We need to focus on enjoying the path to ERE and enjoying financially responsible daily life. So that is the other aspect I'm starting to understand by reading the book and thinking things through.

Finally, one unexpected line of thinking that the book provoked was reconsidering our goal ER. Ours isn't very extreme and I started to wonder what we are giving up by taking that path. We have had the talk of what kind of house we'd like to buy when moving away from the SF Bay Area. It is fun to mull that over and we did so not thinking about ERE. It was very easy to up sell ourselves to $300-450k houses. After all, they seemed like a bargain compared to housing here. But thinking about this in terms of ERE suddenly had me realizing how stupid that was when there were perfectly good (if not smaller) houses near those for $80-150k. That could be a couple of years less working as an employee. And it's not just that! Our path to ER is like a puzzle and as we move pieces around suddenly other options that would reduce the time to ER arise. All are choices and have potential trade offs but the important thing is we're beginning to see them and we are talking about them. My wife is excited to read the book after me. She is somewhat skeptical about ER however I think she is beginning to come around and thankfully she is a better saver than me (I tend towards macro while she towards micro).

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Thu Jul 21, 2016 12:44 am

This month, I finally saw my Vanguard balance surpass $200k due to additional contributions. I've been putting post-tax money into Robinhood but I'm down about 13% on that -- I think both stocks will rebound in time so not overly worried. But my best results are still coming from Vanguard mutual funds so while I learn more, I'm going to go back to putting money into Vanguard.

Some recent changes in employer has meant I still haven't automated my savings but I think that area will be stable and I can setup automated transfers next month.

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Wed Sep 28, 2016 11:59 pm

Accomplishments:

* wife started reading ERE book -- preferred print edition, picking up from library
* I started reading Konmari book in exchange
* setup twice monthly automatic transfers to savings
* both of us are recording daily spending
* SaaS (software as a service) side business with a friend is going well -- we should have an agreement shortly to be paid mid-2017 by the first organization to use it (development continues to flesh out the whole system, I'm the developer, friend is more support/sales)

Setbacks:

* we go back and forth on cancelling Costco -- the diapers are nice for the toddler but it is a land of temptations (mostly in the unneeded snacks/food area)

Next:

* get out of the house by going camping on the weekends (although turns out to be somewhat expensive in California, investigating BLM camping now)

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Re: SavingWithBabies path to ER

Post by jennypenny » Thu Sep 29, 2016 8:06 am

SavingWithBabies wrote:* we go back and forth on cancelling Costco -- the diapers are nice for the toddler but it is a land of temptations (mostly in the unneeded snacks/food area)
I have the same concerns with BJs, I always spend more than intended. I've been using Amazon Fresh lately. Some of the products are more expensive, but I like that I know exactly what I'm spending and there are no impulse purchases. I'm going to try using our local grocery store's shop-at-home service because the prices are a little lower and it's free if I do the 'drive-thru' and pick it up myself.

Have you considered cloth diapers? It doesn't have to be all or nothing. Even if you only use them during the day or on weekends, it still saves a lot of money. Toddler messes are easier to manage in cloth diapers than baby messes. You can hold the diapers in place with regular 'fun' underwear and get them used to the idea of underwear instead of diapers. Never too early to start that campaign. ;)

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Thu Sep 29, 2016 3:21 pm

We tried cloth diapers in the beginning. I still have the washer hose hooked up to the toilet actually. For some reason, the baby got a really bad rash from them that didn't seem to go away until we switched to disposable. I can't remember off hand if my wife tried again but now he is too big for the ones we bought. We're thinking of trying again now but part time at first like you suggest just to see how it goes.

I left the decision about Costco to my wife. She decided to cancel after sleeping on it. Most of what we buy at Costco can be purchased in smaller units at slightly more expensive prices closer to home (Kerrygold butter, good eggs, cheese). We'll see how it goes -- I'd like to try Amazon Fresh too.

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Wed Oct 26, 2016 4:27 pm

We tried the cloth diapers and this time it was a success! We only ordered 6 for the first try but then ordered another 12. We're going to use both cloth and disposable as the situation warrants (ie travel disposable, sleeping probably disposable because how absorbant they are).

I sold enough stock to pay off our car loan and my wife's remaining school loans. I paid off the car loan today. Neither were particularly high interest; the car loan was ~4% with $11,000 remaining and my wife's loans were sub-1% but only $1,800 remaining. But something about clearing all outstanding debt was appealing enough to just get it done.

I am also considering relocating from the SF Bay Area to LA to work for a major corporation. I came out here thinking it would take 5 years to learn about startups but I think I got the majority of what I was looking for. I'll be back if I do a startup that requires VC funding but otherwise the idea of leaving here is appealing. The hit on quality of life is just too high to justify and startup compensation just doesn't add up if you're not getting more than money out of it (ie learning something, advancing the early stages of your career or being a founder).

My side project with a friend is still humming along. So far, everything looks good there but it'll take a while to grow. But our early users are happy which is a great sign.

SavingWithBabies
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Re: SavingWithBabies path to ER

Post by SavingWithBabies » Wed Jun 07, 2017 1:34 pm

I've been slow to post here. I think for two reasons:

1) Probably going to reboot my journal with graphs and I spent some time looking at how others were doing that.
2) My wife and I have been thinking about relocating away from the San Francisco Bay Area.

For #2, we did it -- we rented a house just outside of Ann Arbor, Michigan. I found a job that is full time remote. So far, things are really good but we've been busy.

My proudest update though is my side startup with a friend is going well! We received our first check from a paying customer. Now we just need about 39 more customers for our startup to be our full time jobs. We're bootstrapping it so growth will be a little slow but no investors/loans and the momentum is growing which is exciting.

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Re: SavingWithBabies path to ER

Post by onewayfamily » Sun Aug 20, 2017 3:43 am


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