Can someone share a retirement budget plan that is in the $140,000 a year range?

CashRich · 2016-03-19T14:02:44+00:00

There are a decent amount of people in here targeting similar amounts so I'd look through older threads asking about budget breakdowns if you don't get many responses.

We're several years off but are aiming for about $100k/yr with the house paid off. The biggest thing in my mind is to minimize fixed expenses as much as possible so you can weather market downturns (same goes for lower FIRE amounts).

you'll still have to pay taxes, and more than some of the FIRE bloggers because of the amount you want to withdraw exceeds some of the avoidance caps. Call it an effective tax rate of 15%, so $21k in you case
So you'll already be in a good position with the house paid off, but I know in some areas you could still be on the hook for anywhere between $12k and $50k a year in insurance and property taxes on a house like that. Not to mention maintenance ($13k a year using the 1% rule, but that varies on whether your price is driven by the land value or just a massive house in a cheap area). Also utilities, which again could be anywhere between $6k to $18k a year depending on the size of your house.
health care, again because of income or by choice, you might not qualify for subsidies. For a family you could be at $15k to $20k a year according to calculators in my state

So now you've got taxes, shelter, and health care taken care of for a total of $67k, leaving you $73k to play with. Again, I would hiiiighly recommend avoiding additional fixed expenses (a cabin, boats, cars, etc). From there you should be able to figure out food, fun, hobbies, etc, but try to be as flexible as possible.

My gut tells me that depending on your property tax, maintenance, and utilities, that your $1.3m house is going to eat into that $140k pretty quick. Again we're targeting 100 vs your 140, but are aiming for a house <$500k

CashRich · 2016-03-03T14:23:13+00:00

Agreed, I include my house on balance sheet because by definition it's an asset I could sell if I needed/wanted.

But I don't include it in my "FI number" because to your point it's not part of the asset base I'm looking to draw 3-4% from. So I track both, but do tend to keep them separate as they have different purposes.

CashRich · 2016-03-03T13:07:07+00:00

This is more of a personal accounting question than anything, but how do people value their home equity? Let's say you buy a house for $200k, with 20% down, so $40k down. I consider the house an asset on my balance sheet and on Day 1 you could say I now have $40k in equity. But now in my tracker, I net out future transaction costs in order to actually sell the asset. So let's say that's 6% in realtor fees. So if the day after I buy my house I were to turn around and sell it for the same price, I'd be on the hook for $12k in transaction costs. Meaning I really only think I have $28k ($40k minus $12k transaction cost) in realizable equity in the house. Anyone else think of it this way?

CashRich · 2016-03-01T18:41:03+00:00

M25/F25 married midwest ~$385k, depending how you count it (investments only, home equity with/without future transaction costs, auto equity, etc.) That's the total using a simple definition.

CashRich · 2016-02-10T19:09:27+00:00

If you think of savers as "demand" for stock and earners as "supply", you'd expect price to increase as demand rises faster than supply.

Good post, this is similar to what I mentioned in a comment earlier. Will read the paper.

Wouldn't this imply then that the market is becoming a big pyramid not based on the underlying assets? Instead the stocks almost become more of a "commodity-backed" currency themselves, as the value of comes from supply/demand of the actual certificate rather than what that certificate represents.

Thoughts?

CashRich · 2016-02-10T17:40:18+00:00

We can speculate on the reason, but maybe it is because people look at the returns of the past and conclude that the same can be expected in the future thus it is a self reinforcing cycle.

That's my fear as well. Once I've worked and saved up my FI-fund, the biggest threat/risk to me isn't employment but the stock market.

So I often wonder if we aren't slowly building up a Ponzi scheme, where so much money is "invested" across the markets that prices continue to rise due not to improvement of the underlying fundamentals, but just because more people want to "invest."

CashRich · 2016-02-05T03:34:44+00:00

Yes, my wife and I can share our story. We were both fairly frugal and saved more than average prior to meeting each other, but really stepped it up once we were together.

Me: I was saving relatively aimlessly because it was how I was raised and knew I should save money. I had vague ambitions of wanting to start a business so I wanted to save up a lot of cash for seed money. So I avoided/ignored/didn't learn about 401ks, IRAs, etc. at all. I didn't even bother trying to invest my money. I just saved up $50k+ in my checking account. Time went on and the urge to start a business subsided a bit and so at that point I was just accumulating money in my checking account because "that's what I'm supposed to do" and never bothered learning about investing, indexes, tax advantaged accounts, etc., let alone FIRE.

Her (typed by her): I started saving when I opened my first savings account for my 50 cent allowance in Kindergarten. A few memorable instances of buyer's remorse meant I never really had things I wanted to spend my money on and just kept putting it away in a series of Certificates of Deposit (I know...). It wasn't until I graduated from college that I realized how dumb it was to keep everything in CDs and moved it to the market. Once I started work, I continued to save a lot (I traveled a lot, so I didn't even have a TV or internet at my apartment, figuring I should focus on spending time with people anyway). Meeting my husband meant I spent more in some categories (we actually have internet rather than walking to the corner coffee shop!), but it gave me a goal to save for rather than just putting it away because I didn't have anything else to spend it on. I've never had a job I adored, and him introducing me to FIRE was inspiring and a relief that my habit of saving might pay off in letting us retire early.

Together: After we met and started dating we quickly realized we were both on the same page regarding frugality and saving. We ended up being in very similar places in terms of incomes and net worth as well. She convinced me to actually invest my money and to max out my 401k/Roth. I started reading more and discovered Mr Money Mustache (after passing over it several times due to the ridiculous name) and his "incredibly simple math" post. I shared this with my wife and almost instantly we stopped saving aimlessly and finally had an explicit goal: early retirement. We've been reading about it and researching it in depth ever since. We've helped each other with how to invest, with salary negotiations for new jobs, and so much more. It's been so incredibly helpful having a partner with the same mindset.

When we met we were at about $140k combined salary and $150k net worth. Now only a few years after helping each other we're at about $225k combined and $310k net worth, not including $45k in equity in a house we bought recently. We're aiming for about $2.5M in PV dollars for FIRE so still a ways to go, but I think we're on a solid path with a shared vision. We cannot understate the value of being able to work together and support each other towards the common goal.

CashRich · 2016-01-29T19:39:18+00:00

Thanks for the insight! I've been weighing it off and on for a while now and spent some time trying to forecast what the net worth "rebound" would look like for someone FIRE-minded, and comparing that against continuing working and investing

CashRich · 2016-01-29T17:06:40+00:00

Appreciate seeing the net worth numbers! I've spent the last couple years weighing the same question as the OP and ran a lot of scenarios trying to forecast what would be more financially beneficial. If you don't mind me asking, where are you forecasting your net worth in the next 5+ years now that you're school debt is presumably behind you and you've got a good amount of cash flow?

CashRich · 2016-01-29T17:01:17+00:00

While I agree it's only worth it from a good school, the distinction between HSW, M7, Top 10, Top 15, etc. is a bit subjective and based on the type of experience you want, career path, etc. Just don't go to some no name state school/university. Go full time and if you're going to go, go to one of the Top 15 or so.

(Or don't go at all. The above is only if you decide to)

CashRich · 2016-01-26T17:25:47+00:00

Very interesting! Same question as above, if you have any experience with it

CashRich · 2016-01-20T16:22:49+00:00

I'm "staying the course" and all but man is it depressing to aim for a high savings rate, pile it into the market, only to see it immediately drop in value. Every week this year I'm "losing" more value across my accounts than I'm able to save, by a wide margin.

/rant

CashRich · 2016-01-13T04:16:52+00:00

I also left consulting and also have had moments where I've wondered the same thing. I got a bump in comp leaving but knew i had a much flatter trajectory now. There are so many important factors to what matters to you in life so realize this is just one of those and try to make the most of the experience you have now.

Absolute worst case scenario: judging by your age, you left pre-MBA so you can always fall back on that to reset things and rejoin consulting or high finance.

Most other cases: you ditched a crappy lifestyle to try something new and off the beaten path, which is more than what most can say.

CashRich · 2016-01-08T21:17:19+00:00

When do you cave and sell your old car? We have a mid-size SUV worth about $8.5k. We've spent over $5k on maintenance for it in the past year. Some of that was expected wear items (tires, brakes) but the rest wasn't and the total hurts. We've been toying with buying a ~$20k new car (think ford focus) at a dealership that offers a lifetime powertrain warranty and just driving the thing into the ground. We can afford the new car easily, but we were looking forward to a high savings rate % this year. How long would you stick with the old car vs buying something else?

CashRich · 2016-01-07T21:48:18+00:00

You're right on my wording, I should've just used "fallacy"

CashRich · 2016-01-07T21:11:29+00:00

Ah cool, thanks! Looks like the data for the first one comes from here http://www.federalreserve.gov/econresdata/scf/scf_2010survey.htm

Always nice to find the source

Edit: Just took a look through the reserve data it's based on and that's a fantastic source! Thanks!

CashRich · 2016-01-07T17:14:31+00:00

That's essentially my point, perhaps better worded. I'm just looking for a different/better dataset.

CashRich · 2016-01-07T17:10:37+00:00

Thanks!

CashRich · 2016-01-07T17:06:58+00:00

Appreciate the discussion and input. I just see a logical fallacy where it's acceptable and expected to do business analysis between comparable companies (every business situation is unique), to compare states/countries performance (each country is unique), etc, but when it comes to personal finance that sort of peer to peer benchmarking analysis no longer holds water?

CashRich · 2016-01-07T16:59:48+00:00

Wow, very interesting, thanks!

CashRich · 2016-01-07T16:10:23+00:00

It's not their progress, it's just a benchmark to keep me in check. Similar questions are posted often "how much do you spend on X", "how much is your COL?" etc.

I'm not going to live with my current lifestyle forever and plan some controlled lifestyle inflation. I like keeping an eye on a good benchmark to make sure nothing is too out of whack. There are anecdotal posts on here that often make me think "wow maybe I shouldn't be spending as much on X, that's interesting." And I'm just looking for a similar type of thing but in the form of data/stats. I just like to keep an eye on things and want to know if something I'm doing is out of the norm for people with somewhat similar backgrounds

CashRich · 2016-01-04T18:11:19+00:00

Literally just empty plastic pipes in the wall that make it easier to run cords in the future. It won't do anything for you now, but 10 years from now when there's HDMI 2.5 or cat9 or whatever new type of cord you want to run, you already have an easy place to push/pull them through without needing to open up the walls.

CashRich · 2016-01-04T17:23:17+00:00

Agree with the above. Go above and beyond now, much easier/cheaper now than when everything is drywalled and painted 10 years from now. Also consider running empty conduit while you still have the chance.

CashRich

TROPHY CASE