SWB's path to financial independence

Where are you and where are you going?
SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Sat Mar 16, 2019 10:28 pm

The TL;DR of the entire prior post is if we don't buy a $250-300k house locally but instead move somewhere else to rent or buy that lowers our monthly housing costs to reasonable amounts, we could likely be FI within a couple of years. Yes, it's all a bit hand wavy but I think it makes sense and next we have to try it to see.

Where to move though?

The bigger problem of where to move is vexing. Once you have kids, it makes everything harder in terms of where to live. First off, you have to think about schools. Even if you decide to home school like we have, we still have to factor in that okay, maybe by high school, if not potentially sooner, we might want to send our kids to school. At that point in time, we could move to a good school area. Or we could move to one now in preparation if we can find one that aligns with our other goals of cost and...

Then you toss in grandparents and wanting your kids to see their grandparents. Even though both your mother and your spouses mother emigrated to this country leaving their own parents far behind. You still want your kids to see their grandparents. But after thinking about this for years, you also realize it might be easier for those grandparents to make a move. So living your life around the grandparents becomes a bad idea. Plus they don't even live that close to one another so you have to pick sides or live in the middle or <insert head explode emoji>.

Another factor is you realize after living somewhere a while with kids is the kids pull you into the local community more. And you start to consider you do want to have some stability there. Mostly because it's hard for say your spouse to leave the friends they acquire via the children. Plus maybe eventually it's hard on the kids (although I don't know about that -- seems like some pros to moving as a kid and getting to start over).

Then you also kind of want to live close to your siblings. On the spousal side, they are far enough away this isn't really a factor. But on my side, my siblings haven't really made that much effort to visit me although one certainly does more than the other. After mulling this over, it's getting relegated to would be nice but schools win (plus area that is #1 is an area that interests my sibling too and they might move there later on down the road).

Lastly, there is what do you imagine you and/or your spouse want after you get to FI? Kind of a guessing game that, right?

So... Yeah. Where to move is painful. But we think we narrowed it down and we're going to go try it for a year and see. Probably rent there. Maybe buy if we see something we can afford and want to go for it[*]. But it took a while to get here.

[*] I actually want to get to FI and then build a house ourselves.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Sat Mar 16, 2019 11:07 pm

With all that hand waving in the last two posts, the big thing missing is healthcare. I thought I had a lot more time to figure that out but now I want to know and I'm unsure what it would cost us here in Michigan or what the requirements would be (if we would end up on Medicaid, Michigan did pass a work requirement but the newly elected governor doesn't want to implement it). So healthcare is something I have to figure out and might impact that goal amount.

bigato
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Re: SWB's path to financial independence

Post by bigato » Sun Mar 17, 2019 6:45 am

I'd say most of your worries are arguments for renting instead of buying. Also, regarding the school, it's hard do predict in advance if it will still be a good school area so many years in advance - this can change.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Sun Mar 17, 2019 11:44 am

I could see having that impression but I wasn't meaning to argue for buy versus rent. I'm tired of renting at this point and want to buy/own. When we move, we'll rent for another year to get to know the area but by the end of that, I want to have solid plans to either buy, build or move to another area. If build, that would mean more renting but we would commit to that path and go forward on it (find land, figure out how much we're going to do ourselves, etc).

I don't disagree about schools. We've noticed though that the areas we are attracted to that have good schools also have colleges/universities. The place we want to move to matches that pattern. No guarantees of course but I'd be willing to make that bet that the schools will continue to be okay.

To get back to rent versus buy: I get one can use the New York Times tool or similar to compare costs and make the decision on the financial analysis. But I'm tired of other aspects of renting:

* I'd like to be able to fix the house I live in and/or modify the land around it.
* I want to be able to predict future costs more accurately.
* I want to put down roots. In a very real sense, we have family who are waiting for us to figure out where we want to put down roots so they can consider relocating closer to us (short term my parents and longer term my brother).

Renting has given us the option to move when we want to (for jobs or family) without the financial penalty of buying/selling real estate. I do appreciate that and we have made use of it. All that flexibility including pushing decisions off into the future is very convenient financially and mentally. But I am tired of deferring those decisions. I see FI as the freedom to no longer have to optimize around being able to relocate for employment. I want to see the other side of the rent vs buy coin.

bigato
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Re: SWB's path to financial independence

Post by bigato » Sun Mar 17, 2019 6:49 pm

I agree on all your points, also see how renting can get old, and think that renting for a year is actually the soundest move you could make. Just go for it, all those doubts will be cleared by the time you reach the end of the one year rent contract.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Mon Mar 18, 2019 1:26 pm

@bigato I realized though through your questions that I think the person I'm trying to convince the most is myself. I do find it easy to focus on the monthly payment of a mortgage instead of the 30 year term. In that I find it easy to compare our monthly rent to the mortgage + tax + ... total and even factoring in maintenance, it's tempting to make the leap. But that 30 year part is the painful part even if it doesn't seem like that much money now. I know that when the income stops, those amounts seem quite big even though we have many years of savings. When more money goes out than comes in, I get nervous.

So I guess what I'm doing is pushing myself to move to somewhere with a lower cost of living now (or shortly once winter is gone) as otherwise I worry we'll end up spending a fair amount of money to buy in this area without a compelling reason to do so (it is quite nice but I think there are other areas that are nice too and that we would be happy in with housing that is more affordable).

bigato
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Re: SWB's path to financial independence

Post by bigato » Mon Mar 18, 2019 1:51 pm

Congratulations, now I sense the system 2 type of thinking, using your brains more than your guts. I thought you meant you were going to buy a property paying cash; if this is not the case, some more math and simulations would be wise. A thirty years commitment is not something to be taken lightly.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Sat Mar 23, 2019 1:35 am

I hadn't meant that but I think you are right. I would either buy in cash or buy something that I could pay off within 5 years. But I realized thinking about your post that it would likely be silly to incur the fees on a mortgage if I were to pay it off so fast. So hopefully, it can be cash.

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Re: SWB's path to financial independence

Post by SavingWithBabies » Sat Mar 23, 2019 11:59 am

Over the past 3-4 months, I've jumped between being dissatisfied with my job and trying to think of it as being more like a consultant where I'm just there to do the job for the day and not worry about it outside of that scope. The later has worked except when there is little actual work to do. The former I've tried to turn into something more productive. Perhaps the problem is me? Or at least partly me -- the company for sure has problems too. But if we focus on me, I think the problems are:

* lack of assertiveness
* smart enough to know when to just let things go instead of trying to control things but not smart/savvy enough to know when it's time to step in
* tendency to not feel like I am in control seen as a tendency to assume the way someone else wants to do things is the way it will be done -- that lack of assertiveness makes it hard to get my foot in early enough to do a course correction without it being a big deal (at least to me emotionally)
* confusing "is"/facts with "oughts" or "should be" -- the later can be very negative emotionally, focusing on the facts is usually more constructive
* direction-wise, I've reached the logical end of my path of learning as much as possible to do a complete SaaS (software as a service) project from start to launch/beyond -- there is always more to learn but I've covered the major areas and I'm not sure where to go next on that path (the logical one is something like business development or sales but I don't know if I can pivot into either of those -- perhaps sales engineer?)

What I'd like to work on the most is assertiveness. As an introvert, that is a struggle. My father is introverted too so it's not like I had a role model of how to be an extrovert. I am the most outgoing of my siblings. I feel more alive when I got outside of the shell of the introvert. But it's also very tiring. I can become overly rambunctious and loose my logical reasoning facilities due to "heat of the moment" emotional responses instead of calculated thought. Later on, I rerun conversations in my head and am very critical of myself (although I've gotten much better at not doing this or at least talking to my wife about it so I can let it go). So perhaps "thinking on my feet" belongs on the list above too. I also worry about saying the wrong thing -- I tend not to have a strong filter. My life long friends know that but I feel like I have to be careful with new people. And it's not like I have any local friends anymore to talk to (besides my kids and wife). But I would like to change that.

So next I need to figure out assertiveness and "thinking on my feet". After writing all of this, the sales engineer role is starting to make more sense. I could see doing that as the next job or doing it for a side project and taking it seriously (in terms of hitting the phones and trying things until I figure out what works). For my current side project, I won't do it. It is making money but almost half of it belongs to my partner who I assumed would take on selling it. That has not worked out and I realized I have a version 2.0 of that project in me but I would redo it from scratch under the roof of a new corporation by myself. This would no doubt cause some hard feelings but I think that is what I should do. So on that front, I need to push my partner to produce results and until we see progress or agree to concede. In the meantime, I have some other projects I want to try with some "new to me" tech so I'll do that and only do maintenance/support on the existing project.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Fri Mar 29, 2019 5:15 pm

I'm consolidating all of our investments and extra cash to Vanguard. Most of it was there already but the contracting money was sitting in a low performing savings account and there were a couple of investment accounts sitting around. Now all the cash will be in a better performing money market fund.

I paid out a dividend from the side business! Just over $6,500 or roughly the equivalent of having another $162,500 invested at 4% (6500/0.04). Hopefully, we can pay out the same or more next year. This is the first actual income from the side business! Yay!

The contracting work last year didn't go as expected on the business-side. It's a long story but basically the company didn't pay out the last month of payments to the contractors on the project. I wasn't sure what to do about this and there was some background activity that had most of us just waiting for things to settle but a couple weeks ago it was clear it was over and in the meantime, I found commercial collection agencies exist. So I engaged one and it'll be interesting to see if they can collect anything. I didn't expect to see any of this money so I'll be happy if they have any success. I'm also happy to get some experience with this now in case I do more contract work in the future.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Mon Apr 01, 2019 10:33 am

Progress: 55% ($659,800/1,200,000 -- minus some 1099 taxes), ~25% cash holdings (money market)
Weight goal: ~215 pounds, focused on maintaining this weight for now
Side business goal: 2 schools (goal: 20, 50 desired)

We sold a bunch of things this month including an expensive no-longer-used computer monitor ($350) and our dining table set ($650 although they are picking it up tomorrow so not a 100% done deal -- we're excited to buy something much less expensive after moving[*]). Still more to go.

We also let our parents know that we are going to move (maybe relocate is better word as moving a ways away but still in Michigan). The wheels are in motion.

* Little kids a like to stab things with forks -- I'm excited for them to be stabbing something less expensive. Probably something used from Craigslist that ideally has a surface that can be sanded.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Wed Apr 03, 2019 1:04 pm

After some thought, I realized it would be best to figure out my next employment before we move instead of after the fact. I've put out my feelers and am interviewing and one opportunity might impact our plan to move. But it's too hard to predict which would fit better so I'll go through the applications and see what options are present at the end. I also got hard rejected by some bigger startups without even an initial conversation so not all roses (perhaps I need to tweak my resume or adjust my approach or ??? -- maybe they just want new college grads to mold and shape).

I also found a kind of developer network for software developers that connects them with early stage companies in a contracting role. I applied and didn't think I'd get in due to some of the requirements around companies you've worked for in the past (only discovered/read about that after applying) but I did get in after all. So I completed an application for the next step on that. There was also a more generic consulting company I applied to and I'm debating going forward with them but I will probably do so (there is a take home coding challenge of some sort -- I've been on both sides of that and it's fine just eats up some time).

I decided to move on from the day job because I'm not getting good value out of it. The pay is fine but what I'm actually doing day to day is not increasing my knowledge or in areas I like to work in (actually coding versus a jumble of different things with a little bit of coding but without the appropriate title and compensation).

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Sat Apr 13, 2019 9:27 am

Progress: 53.5% ($642,000/1,200,000)

Taxes done. I'm nervous as I've never done 1099 before or solo 401k but hopefully it's all right (if not, I'm sure the IRS will send me some helpful but ominous letters). We owe just over $27,000. I had expected a big bill with the ~$100k of 1099 income. That means our true net worth is approximately $642,000.

If I do more 1099 work, I'll figure out how to do quarterly payments to lessen the suspense :).

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Sat Apr 27, 2019 4:09 pm

Got my wife's road bicycle back together. She wanted in line brakes for when her hands are on the upper part of the bar so I put those in. But she has an older Bianchi (bought used in Chicago) that has non-aero brake levers. So that means the brake cables come out the top of the levers instead of out the side (so you can hide the brake cables under the handlebar wrap). I got it rigged up though with new brake cables. I hadn't cut brake cable before but I used my Dremel knock off with a Dremel cut off wheel. A reamer I had for RC car bodies worked to get the melted inner cable housing out of the ends. Then new handlebar wrap and it was all set. We'll probably get some aero brake levers (Tektro makes some inexpensive ones) but going to see how it goes.

Then we got the trailer hooked up and went for a bike ride. It's crisp here in Michigan but it was fun to be on the road again! And the kids liked riding in the trailer. My wife wanted me to get her bike setup with it so she can take them to the library in it (and post office and ...).

bigato
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Re: SWB's path to financial independence

Post by bigato » Sat Apr 27, 2019 4:21 pm

the tektro are great

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Mon Apr 29, 2019 1:02 pm

@bigato I'm really happy with the inline brake levers from Tektro. I'm going to order the Tektro aero levers (RL340 I think) so I can get rid of the funky looking brake cables that are going back under the bar tape to get to the inline levers! If it was just looks, I think it would be fine but I worry about in a panic stop the cables being in the way. I think it's unlikely to be a problem but the levers are only about $20.

Totally unrelated, I've been reading about bus conversions as in converting big city buses into RVs. I started with school buses and then ended up reading about the lower riding city buses which have even more space inside. But reading about it got me to thinking about these systems that people are building/relying on. It's similar to the catamaran/yacht although at least with a sailboat, your (hopefully) primary motor is simpler (sails). A lot of people seem to crack off these big projects when they are a certain point in their life that they can afford to do so. It requires some innate conviction that it's a good idea and it certainly is impressive to see what people build however one can put so much of your life into these endeavorers and they don't always end up being utilized to the extent that I would call the effort worth it. For example, one of the people I was reading about accidentally overheated their bus engine and that took the bus out of commission. They could have got it on the road with a in-frame rebuild but that might not have lasted so they were planning on removing the engine and doing a more thorough rebuild. But it ended up getting parked and they moved on to other things -- no doubt, life intruded on the dream*.

There is nothing wrong with that at all. Things happen. We all make changes in our decisions. But it definitely makes me think about how you can apply more iterative loops on what you work on and how one might do so in a way that also lets you more easily exit the project and move on without having say a bus parked in your backyard. Maybe that is just fine but it's clear some projects are just hard to shift. For example, you could spend a lot of time building a big catamaran** and then end up with two huge hulls that are maybe connected and partially finished out, invested years of your life and probably $60-120,000 USD in expenses but without it floating, it's hard to get out of it for even the cost of your expenses...

The flip side of this though is if you don't take any risk at all, you don't get to build anything and for some of us, the building is a big part of the fun. Although figuring that out in an iteratively loop of more and more complex projects is probably a good idea so you don't find yourself out of enthusiasm before the finish line on a huge project. And some people do/build amazing things and appear to make full use of the fruits of their labor.

* To be fair, it was a multiple year thread (maybe 5-8 years) and they did get quite a bit of use out of it just it never quite got to the finish line as far as I could tell in terms of being mostly done. They did live in it full time for a while and did take trips in it. So part of me thinks "who am I to judge" but my judgement is done for the purpose of looking at big projects for myself and if I would enjoy them and and if it worth the it to me.

** One of my dreams but that is why we have a small sailboat right now as still figuring out if my wife is compatible with the motion of the ocean and if it is something we'd actually want to do. Lots of steps between where we are and potentially starting a project like that.
Last edited by SavingWithBabies on Mon Apr 29, 2019 1:20 pm, edited 3 times in total.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Mon Apr 29, 2019 1:08 pm

On the job front, still in interview cycle with 3 opportunities but that developer network bought up another option doing more contract programming. It would pay better but be 1099. So maybe 1.6-1.8x salary. I'm tempted by this as I do like working on projects and then rolling on to a new one after 6-12 months. I'm okay with some downtime (I'd welcome it assuming now that we have financial resources my mindset stays relaxed). I already have a corporation and a solo 401k so that part would be fine. They recommended doing COBRA for 18 months which would work for us (right now, I pay about $100/month for health care and my employer pays about $800 so with COBRA I should be paying $900/month for family coverage).

It might not pan out but if it does, I think that is the route I'll go.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Wed May 01, 2019 10:18 am

Progress: 55% ($656,500/1,200,000)

Partner had an accident in our sedan. Nobody hurt and the other car was fine but we need a new bumper cover, probably new grill insert and foam for behind the bumper. Insurance deductible is $1,000 and looks like I can do it* for about $600-700 with new OEM parts and local paint guy I know that works out of his garage (did some other work for me and I was happy with that).

* Watched a video on the bumper cover removal and doesn't look too hard. Lots of plastic clips.

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Lemur
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Re: SWB's path to financial independence

Post by Lemur » Wed May 01, 2019 10:44 am

SavingWithBabies wrote:
Sat Apr 13, 2019 9:27 am

If I do more 1099 work, I'll figure out how to do quarterly payments to lessen the suspense :).
Find your effective tax rate if you can estimate or just use your marginal tax rate if you want to be conservative and add that on from the revenue.

Example:

$100,000 in Business Revenue for Q1
$60,000 in Business Expenses for Q1
----------------------------
$40,000 in Net Profits
-$6,000 (*15% for Self-Employment Tax)
-$8,8000 (*22% for Income Tax)
= $14,000 total Federal Tax. Make payment via:

https://directpay.irs.gov/directpay/pay ... ution=e1s1

You also need to do the same for your state. You can go really rough here if you simply google your states income tax and just use that. A lot of the state websites have estimated tax payment calculators as well. This is all to say that the way I do my spouse's business tax is we take the net profit for each quarter and just multiply by 33% for Federal and 8% for state. Usually we get a refund. Not exactly optimized but easy if you just want to get it over with.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies » Wed May 01, 2019 12:35 pm

@Lemur That makes sense. I got overly focused on the social security payments (and trying to figure what I would pay when it appeared I was maxed out on my W2 income) when the regular income taxes (federal, state) were the elephants (compared to the mouse I was focused on). So next time I'll just ignore that and try your approach.

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