I have read most of the posts, the blog, and the book. It all resonates with me a lot, a simpler lifestyle focusing on better priorities. I thought that I would come out and get your thoughts on my own situation.
I think of myself as high-income/high-expense, and in need of some help, but a lot of people I hang out with think I am actually fairly frugal. I make an effort to fight the current, but I am a long way from some of the champions on this forum! I am probably a bit of an outlier here in many dimensions, so I have been very hesitant to post, but I hope I am doing the right thing.
I will also say that I have three wonderful kids, that I am self-employed with a reasonable lifestyle and fairly enjoyable work -- in fact, I don't think I am looking to retire full-time, I just like the flexibility to take time off when I want, and I would like to work shorter hours. I think I am already part of the way there, but there is also a lot of room for improvement. My wife is not a major spender, but also not necessarily into extreme frugality.
Here is the rundown on my average monthly expenses:
Mortgage: $ 1,500
Property taxes / HO insurance: $ 550
Home maintenance: $ 700
Bills: $ 350
Cars (insurance, gas, maintenance): $ 400
Health expenses: $ 350
Food and groceries: $ 1,000
Travel: $ 800
Phone and internet: $ 150
Clothes: $ 150
Donations: $ 500
Tuition: $ 1,200
Other (gifts, etc.): $ 650
Total: $ 8,300
Being self-employed, my net income is a bit harder to calculate than if I had a paycheck, but it's probably in the $ 12-15,000 range. So my saving rate is 30-40%. I have $700k in assets and $300k in home equity.
So, for full FI, I am maybe 30% of the way there, but, on the other hand, I think I will keep myself always partially employed, since I can do it with flexibility, so I am not too worried about getting 100% there. Also, once the kids are grown up, my expenses will adjust (I hope), above and beyond what I can do now.
The three items that I am sure will leave people puzzled are:
1. Housing -- I live in an expensive area; I consider my house bigger than I need, but it's actually average in the area. I have tried to convince my wife to rent some of it out, but to no avail. The mortgage is @3.25%, so I have elected not to repay it back (for now) -- it's the only debt I have.
2. Travel -- I go visit my family in Europe every year. With 5 people, that goes up pretty quickly. But that's important -- it's about relationships, and less about extravagance.
3. Tuition -- I have one kid in private school. The school is great; it is truly out of the ordinary and he is happy there. It's not a snotty prep school, quite the opposite -- it's a small independent school run by people that have a taste for life (simple life -- no consumerism!) and transmit it to him. My wife eventually may do some work for them and could get free tuition.
Thank you, to Jacob and to all of you, for all the insight -- I gained tremendously by reading this forum.
with3kids' journal
Welcome. I know there is some hesitation from high income earners with expenses that reflect that to post their information here. I wouldn't let it concern you. I can't speak for everyone here, but I think there is plenty to learn from ERE principles regardless of where you fall on the income spectrum. I can learn just as much from the guy making 25k as I can from the gal making 300k.
I am curious as to what you are really wanting to achieve. I know you mention the goal of FI and the ability to have flexibility with your schedule, but it still seems a bit vague in your actual definitive goals. You may still be working this out yourself in which case a little bit of vagueness is to be expected. I'm curious about these goals and how you plan to reach them. Also of big interest to me is if your spouse is on board with the vision you have and your plan for getting there.
Glad to have you here and wish you the best...
I am curious as to what you are really wanting to achieve. I know you mention the goal of FI and the ability to have flexibility with your schedule, but it still seems a bit vague in your actual definitive goals. You may still be working this out yourself in which case a little bit of vagueness is to be expected. I'm curious about these goals and how you plan to reach them. Also of big interest to me is if your spouse is on board with the vision you have and your plan for getting there.
Glad to have you here and wish you the best...
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BeyondtheWrap
- Posts: 598
- Joined: Thu Jul 22, 2010 3:38 pm
- Location: NYC
@ExpatERE: you are right. I am not sure exactly what my goals are. I am trying to learn from Jacob and other people here. For now, I have always tried to maximize revenue (as long as the lifestyle is acceptable) and minimize expenses (if you can believe it...). I would say my main goals are:
a) have time for my family and my well being,
b) have financial flexibility to work less, and to help others (some friends who struggle, but we are also considering taking a foster/adopted child). I don't have an exact "number" or "scenario" in mind; maybe the closest thing would be working 1/2 time while paying for expenses and some savings. I think it's a continuous adjustment and gauging what makes sense. I am trying to learn (from you) what makes sense.
Kids will grow up, so I'd rather save a little less now in exchange for time, and work a bit after they are out of the house. Or, conversely, increase the savings out of reducing expenses, not out of increasing income (which I would actually like to decrease, since income is equivalent with time for me). It wouldn't make sense for me to do the ERE rush, i.e. work as much as you can for a few years and then quit all together
As far as my spouse, well, I am giving the ERE pill to her in small doses
She is on board with the idea of trying to spend less, but it's all on the margins. So, while I could live in an RV, or in a tiny home (before getting married, I was living on ~$600-700/month for a while), that's not the case for my wife. She likes the idea of me having more time, so anything towards that is welcome. She actually had me put away Jacob's book when some friends came over; interestingly, though, the reason is more a sense of shame that we are so lucky that we can even entertain the thought of "retirement" in our late thirties, while we have friends who struggle with making ends meet (even cutting expenses to the bones), unemployment, etc.
@DutchGirl and @BeyondtheWrap: yes, $700/month (12-month average) is steep and that's probably one area where I can do much better. In some ways, the house IS constantly falling apart (that's one major problem with owning a house!), but I have also had some bigger ticket items. I spent $3000 for painting, $3000 for a deck job, some patio work. Some of these jobs could be considered capital improvements and not expenses, but it's still cash out. Next year I am planning on putting up solar panels (also a capital improvement since it has a return in terms of lowering my bills), but I agree I don't need to continuously spend $700. I could also do some of it myself (for example, painting), especially after I read the Renaissance man ideal in Jacob's books, but I have to say that the time I would sink into it and the aggravation wouldn't make it worth it. Other jobs are more interesting and I take those on (tiles, etc.), especially if I can involve the kids somehow.
a) have time for my family and my well being,
b) have financial flexibility to work less, and to help others (some friends who struggle, but we are also considering taking a foster/adopted child). I don't have an exact "number" or "scenario" in mind; maybe the closest thing would be working 1/2 time while paying for expenses and some savings. I think it's a continuous adjustment and gauging what makes sense. I am trying to learn (from you) what makes sense.
Kids will grow up, so I'd rather save a little less now in exchange for time, and work a bit after they are out of the house. Or, conversely, increase the savings out of reducing expenses, not out of increasing income (which I would actually like to decrease, since income is equivalent with time for me). It wouldn't make sense for me to do the ERE rush, i.e. work as much as you can for a few years and then quit all together
As far as my spouse, well, I am giving the ERE pill to her in small doses
She is on board with the idea of trying to spend less, but it's all on the margins. So, while I could live in an RV, or in a tiny home (before getting married, I was living on ~$600-700/month for a while), that's not the case for my wife. She likes the idea of me having more time, so anything towards that is welcome. She actually had me put away Jacob's book when some friends came over; interestingly, though, the reason is more a sense of shame that we are so lucky that we can even entertain the thought of "retirement" in our late thirties, while we have friends who struggle with making ends meet (even cutting expenses to the bones), unemployment, etc.@DutchGirl and @BeyondtheWrap: yes, $700/month (12-month average) is steep and that's probably one area where I can do much better. In some ways, the house IS constantly falling apart (that's one major problem with owning a house!), but I have also had some bigger ticket items. I spent $3000 for painting, $3000 for a deck job, some patio work. Some of these jobs could be considered capital improvements and not expenses, but it's still cash out. Next year I am planning on putting up solar panels (also a capital improvement since it has a return in terms of lowering my bills), but I agree I don't need to continuously spend $700. I could also do some of it myself (for example, painting), especially after I read the Renaissance man ideal in Jacob's books, but I have to say that the time I would sink into it and the aggravation wouldn't make it worth it. Other jobs are more interesting and I take those on (tiles, etc.), especially if I can involve the kids somehow.
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Bingeworker
- Posts: 48
- Joined: Fri Nov 04, 2011 7:41 pm
Hi with3kids - I like your plan so far. I think it's a great idea to pare down your work but keep working- I've been semi-retired since age 25 and it's worked out fine for me, I started working 50% and whittled it down from there, and I'm not financially any worse off than my full-time friends (better off, in fact) so it definitely can be done.
I wouldn't worry either about being a relatively high-earning and high-spending ERE'er either. I worry a bit that some folks go too far on the frugality stuff, it's possible to do ERE without living in poverty to get there. At a certain point too going too far into a poverty lifestyle probably doesn't even give you enough extra $ to make it worthwhile, and sucks time that you could have more productively spent working a little more with less drudgery at a job. You'll find areas to trim, but even if you don't it sounds like you are in a good position to increase savings and back off on work over time.
I wouldn't worry either about being a relatively high-earning and high-spending ERE'er either. I worry a bit that some folks go too far on the frugality stuff, it's possible to do ERE without living in poverty to get there. At a certain point too going too far into a poverty lifestyle probably doesn't even give you enough extra $ to make it worthwhile, and sucks time that you could have more productively spent working a little more with less drudgery at a job. You'll find areas to trim, but even if you don't it sounds like you are in a good position to increase savings and back off on work over time.
Still mourning for Jacob leaving his creation (I wish Jacob all the best!!).. yet, I have run my numbers for November
Mortgage/property taxes/HO insurance: $ 2,052
Home maintenance: $ 121 (mostly a project with the kids)
Car: $ 296
Speeding tickets: $ 120 (ouch)
Bike: $ 23
Health expenses: $ 275 (includes life insurance premium)
Food: $ 1,202
Phone: $ 102
Clothes: $ 40
Miscellaneous: $ 444
Kids' tuition: $ 1,724
After-school sports: $ 570
Total expenses: $ 7,288
A little better than average, but:
- Food seems to be the item where there is room for improvement. We had a Thanksgiving meal, and the kids are growing, but I think we can do better
- I am also considering eliminating the house phone all together, since we use cell phones. Would probably save $30-40/month
- After-school sports for the kids was $ 570. I am curious to see what people with kids think of this
- Other expenses at $ 444... probably includes some babysitting, books, etc.; I could track them better, I guess
Income was very high this month, so saving rate is pretty healthy (50%+). I am thinking that right now my goal is to keep expenses around the $7,000/month level -- I know it may sounds crazy to a lot of people, but I am thinking that:
a) I am very much like Jacob -- I need new challenges; my work provides those challenges, and, as long as work doesn't control my life, I don't think I would be quitting all together. So, I would like to reduce expenses, but I am not willing to go to the extreme, just for the sake of having complete FI. Partial FI is good enough for me!
b) My income is high enough that pushing expenses down too far would meet significant resistance from my DW.
c) It is important to stay in front of what's present and real now. My effort is going towards that, and, although tempting, I am trying to avoid the trap of "if I could only have x, it would be great" (x could be FI, ERE, another job, material things, etc.). So, I am keeping my savings rate increase effort in perspective.
Mortgage/property taxes/HO insurance: $ 2,052
Home maintenance: $ 121 (mostly a project with the kids)
Car: $ 296
Speeding tickets: $ 120 (ouch)
Bike: $ 23
Health expenses: $ 275 (includes life insurance premium)
Food: $ 1,202
Phone: $ 102
Clothes: $ 40
Miscellaneous: $ 444
Kids' tuition: $ 1,724
After-school sports: $ 570
Total expenses: $ 7,288
A little better than average, but:
- Food seems to be the item where there is room for improvement. We had a Thanksgiving meal, and the kids are growing, but I think we can do better
- I am also considering eliminating the house phone all together, since we use cell phones. Would probably save $30-40/month
- After-school sports for the kids was $ 570. I am curious to see what people with kids think of this
- Other expenses at $ 444... probably includes some babysitting, books, etc.; I could track them better, I guess
Income was very high this month, so saving rate is pretty healthy (50%+). I am thinking that right now my goal is to keep expenses around the $7,000/month level -- I know it may sounds crazy to a lot of people, but I am thinking that:
a) I am very much like Jacob -- I need new challenges; my work provides those challenges, and, as long as work doesn't control my life, I don't think I would be quitting all together. So, I would like to reduce expenses, but I am not willing to go to the extreme, just for the sake of having complete FI. Partial FI is good enough for me!
b) My income is high enough that pushing expenses down too far would meet significant resistance from my DW.
c) It is important to stay in front of what's present and real now. My effort is going towards that, and, although tempting, I am trying to avoid the trap of "if I could only have x, it would be great" (x could be FI, ERE, another job, material things, etc.). So, I am keeping my savings rate increase effort in perspective.
I don't think too many folks with kids will be critical of paying $570 for athletics for your kids, so long as it isn't a recurring monthly cost. $570 per month would seem high, but $570 for a school year for 3 kids doesn't seem too much for me.
I have one kid, a baby. I never thought I'd buy a new camcorder for the baby, but a few months in I was doing it-- expenses for kids can be hard to predict.
For someone with a fairly high income, your housing expenses and car expenses seem below average.
You may want to consider paying off your house-- depending on your state this could be a good form of asset protection. Consider doing something to protect your $400k in assets that aren't home equity. Anything in a ERISA plan is protected in most instances. Depending on your situation, one potential option is structuring your brokerage account as tenants by the entirety. This isn't bulletproof, and has its own failings, but it offers you some protection from the simple, more common liabilities you might face.
I have one kid, a baby. I never thought I'd buy a new camcorder for the baby, but a few months in I was doing it-- expenses for kids can be hard to predict.
For someone with a fairly high income, your housing expenses and car expenses seem below average.
You may want to consider paying off your house-- depending on your state this could be a good form of asset protection. Consider doing something to protect your $400k in assets that aren't home equity. Anything in a ERISA plan is protected in most instances. Depending on your situation, one potential option is structuring your brokerage account as tenants by the entirety. This isn't bulletproof, and has its own failings, but it offers you some protection from the simple, more common liabilities you might face.
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jennypenny
- Posts: 6910
- Joined: Sun Jul 03, 2011 2:20 pm
The activity budget is hard. We have gone back and forth about this. We have come up with a seasonal budget for this. Every quarter, we have a budget and we sit down with the kids to work it out. Some seasons one kid will get to do something expensive and the other two will spend less, but then that sibling has to return the favor at some point. Most times they work it out and choose things they can do together to get more bang for the buck (I make them account for gas money so they learn it's not just the activity fee that adds to the budget). There is a budget for the summer as well. They used to pick a camp, but now they tend to go for season passes to the beach and pool so they get a whole summer's worth of activity.
You sound like us (3 kids, spouse that *tolerates* the ERE thing). My kids are probably older (9, 13, 16) than yours. Do you feel like you're pulling the family along the ERE path? Sometimes I feel like the designated rower in the captain morgan's commercial pulling the party along.
You sound like us (3 kids, spouse that *tolerates* the ERE thing). My kids are probably older (9, 13, 16) than yours. Do you feel like you're pulling the family along the ERE path? Sometimes I feel like the designated rower in the captain morgan's commercial pulling the party along.
@JennyPenny
I like your method. It seems also very educational for the kids in that it helps them make good choices, prioritize, etc (very much along the ERE philosophy). Otherwise, giving into their whims all the time will make them spoiled, and saying no all the time will not teach them anything either.
And, yes, I very much feel like I am at least trying to pull the family along on the ERE path. I would just like to pass along some of the ERE ideas, so that my kids won't turn into mindless consumers (it may still happen, though, since I leave them free).
Yes, my kids are younger (<9), but we probably have a similar situation. I don't know about the captain morgan's commercial since we don't have TV (one of our best choices!), but it sounds like it describes the situation well
@Mo
$570 is not every month, but it will be recurring more often than once a year. Also, very interesting point on the asset protection, I hadn't thought about it much at all. I will look into it; any more specific information would be welcome. I have decided not to pay down my mortgage because it's 3.25%, and I think/hope I can do better than that in the market -- stocks, but also other investments.
I like your method. It seems also very educational for the kids in that it helps them make good choices, prioritize, etc (very much along the ERE philosophy). Otherwise, giving into their whims all the time will make them spoiled, and saying no all the time will not teach them anything either.
And, yes, I very much feel like I am at least trying to pull the family along on the ERE path. I would just like to pass along some of the ERE ideas, so that my kids won't turn into mindless consumers (it may still happen, though, since I leave them free
).Yes, my kids are younger (<9), but we probably have a similar situation. I don't know about the captain morgan's commercial since we don't have TV (one of our best choices!), but it sounds like it describes the situation well
@Mo
$570 is not every month, but it will be recurring more often than once a year. Also, very interesting point on the asset protection, I hadn't thought about it much at all. I will look into it; any more specific information would be welcome. I have decided not to pay down my mortgage because it's 3.25%, and I think/hope I can do better than that in the market -- stocks, but also other investments.
Some more information on asset protection: I was once semi-self employed-- that is I was in a business with 2 other equal partners (I am a doctor) and we had about 17-20 employees (it varied). The odds are that you have some employees if you're earning over $200k and self-employed, though not necessarily true.
So, what happens if one of your employees sues you for discrimination, or sexual harassment? What happens if one of your customers or clients sues you for discriminating against them as a disabled person? For example, if you don't pay for a sign language interpreter for a deaf client, you could be hit with a judgment for $400k:
http://www.ama-assn.org/amednews/2009/0 ... ca0105.htm
If the asset can be seized to pay the debt, it will. States vary widely in what they allow to be seized by a creditor. In many states, your wages can be garnished-- but not all states. In some states your house cannot be seized, thus paying it off puts your money into something that cannot be forcibly taken from you. In certain states annuities and life insurance plans are protected. Most states seem to offer protection for ERISA plans (401k,403b, etc). 529s are sometimes protected too.
If you have a brokerage account held jointly with a spouse as tenants by the entirety, it is unlikely that a creditor would be able to seize this to pay a debt created by only one person-- that is if both you and your wife discriminated against someone you'd be screwed, but if your wife isn't in your business the asset may be protected. Okay so there is a big problem though with this protection-- imagine you are using this to avoid paying a creditor and suddenly you no longer have a wife either by tragedy or divorce. In the blink of an eye the asset is vulnerable. Still, you can set up a TBE account in a few minutes, for free, and it offers some protection against certain claims.
As you get more advanced into this kind of thing an attorney with expertise in this area can help you structure your assets inside of trusts and similar arrangements to allow you greater protection. These attorneys aren't cheap-- I pay around $400/hour and it totally sucks. But the flip side is this-- if there is no money to seize you are less likely to be sued. How much do you think it would cost to defend yourself against a single lawsuit? If you win, it could easily be $50k. If you lose, the sky is the limit.
Your biggest assets would seem to be: earnings potential, business, $400k non-equity, $300k equity. If none of these things are protected, any contingency based attorney with a client who has a grudge against you realizes that you can easily afford to pay him at least a few hundred grand.
So, what happens if one of your employees sues you for discrimination, or sexual harassment? What happens if one of your customers or clients sues you for discriminating against them as a disabled person? For example, if you don't pay for a sign language interpreter for a deaf client, you could be hit with a judgment for $400k:
http://www.ama-assn.org/amednews/2009/0 ... ca0105.htm
If the asset can be seized to pay the debt, it will. States vary widely in what they allow to be seized by a creditor. In many states, your wages can be garnished-- but not all states. In some states your house cannot be seized, thus paying it off puts your money into something that cannot be forcibly taken from you. In certain states annuities and life insurance plans are protected. Most states seem to offer protection for ERISA plans (401k,403b, etc). 529s are sometimes protected too.
If you have a brokerage account held jointly with a spouse as tenants by the entirety, it is unlikely that a creditor would be able to seize this to pay a debt created by only one person-- that is if both you and your wife discriminated against someone you'd be screwed, but if your wife isn't in your business the asset may be protected. Okay so there is a big problem though with this protection-- imagine you are using this to avoid paying a creditor and suddenly you no longer have a wife either by tragedy or divorce. In the blink of an eye the asset is vulnerable. Still, you can set up a TBE account in a few minutes, for free, and it offers some protection against certain claims.
As you get more advanced into this kind of thing an attorney with expertise in this area can help you structure your assets inside of trusts and similar arrangements to allow you greater protection. These attorneys aren't cheap-- I pay around $400/hour and it totally sucks. But the flip side is this-- if there is no money to seize you are less likely to be sued. How much do you think it would cost to defend yourself against a single lawsuit? If you win, it could easily be $50k. If you lose, the sky is the limit.
Your biggest assets would seem to be: earnings potential, business, $400k non-equity, $300k equity. If none of these things are protected, any contingency based attorney with a client who has a grudge against you realizes that you can easily afford to pay him at least a few hundred grand.
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jennypenny
- Posts: 6910
- Joined: Sun Jul 03, 2011 2:20 pm
I have many questions about asset and earning protection. Ill start a new thread as to not hijack this journal.
edit...I forgot about this thread.
viewtopic.php?t=148#post-3570
it even answered the question I was going to ask Mo if he kept disability insurance. The ERISA term was something I had not seen before. An LLC, or multiple LLCs, still seems like the best bet for low cost liability shielding.
It seems I should also add my wife to my Ameritrade account. Will that classify the account as held by tenants of the entirety?
edit...I forgot about this thread.
viewtopic.php?t=148#post-3570
it even answered the question I was going to ask Mo if he kept disability insurance. The ERISA term was something I had not seen before. An LLC, or multiple LLCs, still seems like the best bet for low cost liability shielding.
It seems I should also add my wife to my Ameritrade account. Will that classify the account as held by tenants of the entirety?
@Mo
Thank you for the precious insight. We should probably start another thread, since this seems to be an important topic that should be of interest to many people (not just those who are self-employed).
At a general level, it brings up another major factor in deciding investment allocation, e.g. what is more "protectable". I never gave it a serious thought until now....maybe I should reconsider a lot of my investment strategy and I should take your advice and consult an attorney.
At a personal level, I have tried to protect myself in a few ways:
- Everything business-related is through my LLC. Everything is kept separate. I know that's no guarantee of complete asset protection, but it's a step in the right direction.
- I have business insurance that covers me for a few millions, in the event something should happen.
- I don't have employees. This is something I have been considering, but, for the time being, I thought that it's just not worth the effort. And now, since you point out the risk, I am even less inclined...
Thank you for the precious insight. We should probably start another thread, since this seems to be an important topic that should be of interest to many people (not just those who are self-employed).
At a general level, it brings up another major factor in deciding investment allocation, e.g. what is more "protectable". I never gave it a serious thought until now....maybe I should reconsider a lot of my investment strategy and I should take your advice and consult an attorney.
At a personal level, I have tried to protect myself in a few ways:
- Everything business-related is through my LLC. Everything is kept separate. I know that's no guarantee of complete asset protection, but it's a step in the right direction.
- I have business insurance that covers me for a few millions, in the event something should happen.
- I don't have employees. This is something I have been considering, but, for the time being, I thought that it's just not worth the effort. And now, since you point out the risk, I am even less inclined...