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Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-12-2014, 10:56 AM Reply   
This is a topic I obsess about. I tend to spend a lot of my free time reading and planning. My overall goal is to be able to retire in 10 years at the age of 52.

I am constantly on the fine line between being cheap and being frugal. There are a number of things I am contemplating right now:

1. How much do I need in retirement to support a similar lifestyle? I have a number but I am not sure how realistic it is.
2. I am getting married this year - my expenses are going to go up quite a bit especially with children not too far off in the future. I am having children much later in life than most people.
3. Life Insurance - I need more but I feel like it is a scam - although I know it isn't.
4. I manage my own money - with reasonable returns but am I being aggressive enough - tend to be more conservative.
5. How do I reduce my expenses - my goal is to save 50% of my income annually.

Sometimes I feel like I am on an island because people do not love to talk about this kind of stuff. Just curious how much planning you are doing.
Old    Shawndoggy (shawndoggy)      Join Date: Nov 2009       05-12-2014, 12:00 PM Reply   
If you plan on paying for your kids college, private schools cost upwards of $75K a year in 2014 dollars. That's $300K for a bachelor's degree. If you make enough to live off of half, I'm assuming you'd be over the "don't get no help" financial aid threshold (which again in 2014 dollars is about $185K). It's a huge huge nut to try to amass in 18 years of working. Can't imagine trying to amass it in retirement.

I have the same worries about #1 as you... how much is "enough"?
Old    Jeff D (Jeff)      Join Date: May 2010       05-12-2014, 12:13 PM Reply   
I can only really comment on #5. We've been working on a fully automated budget for the last 4 months and I'm pretty close to having it perfect. In the past we've budgeted but then after a few months we lose interest in it and the our spending gets out of check. That process has repeated itself for most of my adult life hence my desire to automate things. I've tried using Mint.com which is a great tool to start figuring out what your budgets should be for each category but it was far from hands off for day to day and controlling spending in my opinion.

Hopefully a few months down the road when I don't care much anymore the process that I've got in place will make it easy to stay on track.

1) Monthly pay is deposited into checking (I only get paid once/month)
2) Savings is automatically moved into another savings account with another bank (So it's not so easily accessible).
3) "Sinking Fund" money is automatically moved into individual savings accounts (i.e. money to pay expenses that don't occur every month such as vehicle insurance).
4) Spending money is automatically moved onto prepaid debit cards for each budget category (i.e. Groceries, vehicle/home maintenance, entertainment,etc).
5) All bills are set to pay automatically as early in the month as possible
6) Any remaining balance at the end of the month is transferred to savings. This is the only manual step in the process.

The automatically debited "sinking fund" savings accounts have worked really well. CapitalOne360 will let you have as many savings accounts as you want. One example would be vehicle insurances. I added up what we have to pay for both cars and the boat and divided it by 12. Then I setup an automatic transfer for the 1st of the month to move that amount into the "Vehicle Insurance" savings account. When a bill comes due the money is sitting right there rather than being like "Oh yeah, it's June already and I need several hundred dollars that I forgot about". Once we have a bit more general savings in place I'm going to create a new, automatically debited Sinking Fund for our next vehicle purchase. We'll automatically make a "vehicle payment" to that account each month so that when we need a newer one in a few years the money will be ready. I'll probably put that in a Mutual Fund or ETF though since it doesn't need to be as liquid and should earn a bit more interest vs. the regular savings accounts I'd use for more frequent expenses.

I use Akimbo Card for the budget category cards. We actually have cards that have "Food and Groceries", "Dining and Entertainment", etc imprinted on them and we use the appropriate card for the appropriate expenses. This puts a "hard" limit on spending because you can't overdraw a pre-paid debit card. These are great and free if you look at the fee schedule carefully and avoid the behaviors that they charge fees for. They don't work great for gas or hotels because those merchants tend to put a hold on significant amounts of money in the account until the transaction is finalized. You can use them for gas if you really wanted to but you shouldn't pay at the pump but rather pre-pay on the card inside for a specific amount to avoid the hold.

All of this may sound like a bit of a pain but after the initial setup it all happens automatically and makes our checking account very easy to look at. Don't use credit cards, don't use checks (unless it's billpay so they're debited immediately), etc so that there's nothing that can be forgotten about that can come back to bite you later in the month. By the end of the first week of the month all of our money has been transferred to other accounts or spent on normal bills. What's left in the checking can be used for unexpected small expenses or moved to savings when I get paid again.

Thus far we've been saving several hundred more a month than we have in the past. We'll see if that lasts after my desire to micro manage it subsides and we go back on auto pilot. At the moment it feels like this will work even when I don't care to monitor everything closely.
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-12-2014, 12:27 PM Reply   
What is interesting is that "money needed for retirement" number is constantly changing. My goal is to be able to live entirely off of interest and never touch my principal. I know what that number is - just not sure I can get to it by 52 assuming a $5-7% return on my investments.

I am planning on zero Social Security and zero inheritance for planning purposes.

There is another philosophy that says for every $25 in retirement savings you get to spend $1 a year. I am not sure I completely understand the math behind that one but it is kind of depressing to think about it.

Jeff - you and I are not that different. I have a very similar budgeting/spending plan. I think the only difference is that I pay everything on a cash rewards credit card and pay it off every month.

Because I have been saving for a long time - the college burden is not a huge issue for me and my kids would likely not qualify for assistance. Today I live way below my means but that will change as a wife and kids come into the picture. Don't get me wrong - I have expenses that I clearly do not need - but everything is in moderation. I just want to get to the point where I don't have to work even if I choose to.
Old    Jeff D (Jeff)      Join Date: May 2010       05-12-2014, 12:30 PM Reply   
Oh, and I didn't talk directly about it but before you setup the automated system you have to plan out a budget. The automated system is just a way I've found to make it easy to enforce the budget on myself. Look at what you're spending currently. Mint.com makes this very easy and can pull in several months of history from all relevant accounts. It will categorize your spending pretty accurately on its own and you just have to go in and "touch up" some charges to make them fall into the right categories. Then you can see where it would be easiest to cut back. Start with your take home pay and subtract the proposed budget amounts for each category from that number (Including your 50% savings goal). When you get to zero and still have categories left then something has to give. Keep revising the numbers for each category until you have a $0 balance. If you have to you could start only saving 40 or 30% and have a plan to get to 50% over the course of several months or a year.
Old    Jeff D (Jeff)      Join Date: May 2010       05-12-2014, 12:36 PM Reply   
Quote:
Originally Posted by phatboypimp View Post
I think the only difference is that I pay everything on a cash rewards credit card and pay it off every month.
We did this for years and it always seemed fine when we were doing it. During months where we were involved in our spending and paying close attention to things it worked well and there was a payoff in the form of rewards. At some point I realized that we were inadvertently overspending by more than the amount of the rewards during those months where I had a lack of desire to manage our money. Unfortunately we've had more of the latter and less of the former over the years. We never got "into debt" or even carried a balance from one month to the next but I'm sure those "rewards" cost us several thousand in the long run. We stopped using the credit cards a couple of years ago and started overspending less but I really like the pre-paid cards for each budget category now with their hard limits.
Old    Andy Graham (ottog1979)      Join Date: Apr 2007       05-12-2014, 12:36 PM Reply   
Wait... Is that an MC X-Star in your profile!!!? Just kidding & having a little fun with ya.

I think everyone worries to some extent. But here's what I've learned over the years (I've been married, divorced, re-married, have two kids now in college, worked corporate jobs in the first half of my career and self-employed the second half, survived the 2008 recession and still in business):

1) Do your best and things tend to work out. Best doesn't mean super-human or compared to anyone else, it just means using good info, decent analysis, making decisions based on that and moving on.
2) As you do your best, time tends make things accumulate (significantly so in later years).
3) Worry beyond reasonable effort is wasted energy, keeps you from enjoying the present and is not productive (often counter-productive).
4) If you have opportunities along the way for equity vs. more income, take the equity (see #2 above). Equity will pay off very handsomely later.

That's my 2 cents.
Old    Adam Curtis (acurtis_ttu)      Join Date: May 2004       05-12-2014, 1:01 PM Reply   
wanting to save 50% of your annual income? I can't stop reading this.... That is not normal.
Old    Jeff D (Jeff)      Join Date: May 2010       05-12-2014, 1:02 PM Reply   
"Long-term consistency trumps short term intensity" - Bruce Lee
Old    David Stockton (Flavadave)      Join Date: Oct 2013       05-12-2014, 1:41 PM Reply   
Plain and simple answer... Meet with a CFP.
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-12-2014, 1:48 PM Reply   
I bought that x-star used when it was three years old. I am all about a bargain lol. I have some habits that are hard for me to break and boating is one of them.

I can see the over spending with the credit card - it is easy to do.

Adam - I think you are right that saving 50% of your income is not normal. I am in a pretty unique situation and I have been a bachelor for most of my life so my expenses are unusually low. I have done this consistently for the last 7-8 years.

I am constantly struggling with how much to spend and how much to save. I could die tomorrow or live to be 100. Hard to plan for both. It is like I have a split personality about money.

I am excited to learn about how other people are doing their financial planning...
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-12-2014, 1:49 PM Reply   
I have to be honest - I have met with a number of CFP's and they are bringing very little to the table.
Old    Jeff D (Jeff)      Join Date: May 2010       05-12-2014, 2:17 PM Reply   
I've been married for 10 years without issue and I can tell you that from a budgeting perspective you're better off dividing duties when it comes to flexible spending categories in such a way that you don't have to get too involved in each other's business (i.e. "You spent $xxx.xx on what?!?!" type conversations).

For example: figure out what you need to spend on groceries and then let the wife spend that amount however she sees fit on a month to month basis. Don't even look at the individual transactions and don't question her on how she's spending it unless you're running out of money in that category or coming up with a significant surplus each month. Figure out what you need for home improvement and vehicle maintenance and the same goes for that category. You spend it as you see fit or save it over the course of a few months for larger expenses and she won't try to micro manage your spending either.

Each of you should also individually have a reasonable amount of spending money each month and can treat it the same way. Blow it the first week or save it for 6 months and you don't have to ask her if it's ok to buy something with it and vice versa.

I've found if you set it up that way then you will rarely, if ever have to argue about money. All you have to discuss are financial emergencies (i.e. vehicle failure, unexpected medical expenses, etc.) and re-evaluate the budget categories as needed. The problems come in when you have a big pot o' money at the beginning of each month and you each have your own ideas for what you "need" for the month.
Old    S. R. (stingreye)      Join Date: Oct 2012       05-12-2014, 2:37 PM Reply   
I think you actually have most of your bases covered.

1) you pay attention to spending
2) you weigh current spending vs future outcomes
3) You put your savings to work (regardless of whether its too conservative or not, its actually more important that you do something with it).

You said you like reading, have you read Richest Man in Babylon? Its an old book that covers the basics in the form of parables. It was written in the 1920s and has held up to the test of time.

http://www.amazon.com/The-Richest-Ma.../dp/1607960664

Regarding #1 I tend to believe in the 4% rule of thumb, its not perfect but its a decent starting point especially when retirement is years away. (A portfolio moderately invested that you withdraw 4% from SHOULD last 30 years).

Re #3 My opinion on life insurance. View it as income replacement. When single with no dependence and no one that will be hurt if your income disappears, then you don't need life insurance. Married with kids - generally you will need life insurance to replace your income should something happen to you or your spouse. Term insurance is the most bang for your buck in my opinion.

Re #4 - Far better to be too conservative and not sell when market inevitably drops that be too aggressive and panic. Since it sounds like you enjoy DIY finance. Check out AAII. American Association of Individual Investors. Good stuff on there less marketing B.S.

Good luck!
Steve
Old    Mike (BCPMike0663)      Join Date: Apr 2010       05-12-2014, 2:57 PM Reply   
Take your money and invest in guns and drugs
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-12-2014, 3:02 PM Reply   
Great advice Jeff - that approach makes sense to me.


Steve - thank you for your comments. I likely spend too much time thinking about this but I actually enjoy it as a hobby. I haven't read that book. I will check it out. I know the 4% rule has fallen out of favor recently but I still believe it is pretty accurate. For me - I am focused on generating a post-tax income in retirement that would enable my family and I to live at the same level of consumerism that I have now. I just don't know what that will look like with a wife and two kids. A 40% increase ?

I am investigating life insurance now - I would agree with you that term is a better bang for the buck but I will likely head towards a combo of term and whole life. I will continue to be the primary earner for my family and I need to protect that income stream.

I don't know much about AAII - I will check them out.

I also need to get my act together on a Will and Medical POA. Oh yeah and that pesky Pre-nup.
Old    John Anderson (fly135)      Join Date: Jun 2004       05-13-2014, 9:13 AM Reply   
Planning to have kids and retire in 10 years seem mutually exclusive. Spending a dollar of every $25 of investment savings sounds like an anticipated return of 4% to not touch the investment.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 10:04 AM Reply   
if you are serious a blog full of wakeboarders who own 100k boats probably isnt the best place to ask this question. But i'm planning to retire by 40 at the latest and be Financially independent by 35 ... basically i wont have to work another day after 35.

Check out this blog

Mrmoneymustache.com

it will answer all your questions and more. Go join the forum there and ask away. quick easy ways to reduce expenses:

practical car - 30 mpgs or better - old but reliable
get rid of cable
if you're paying more than 25 bucks per cell phone switch to republic wireless
energy - keep you house cold in the winter and warm in the summer
lowering your expenses is a double edged sword. B.c you are saving more AND you are now spending less meaning less total savings for retirement.

Easy way to make sure you have enough ... get your expenses to the lowest point you are comfy then multiply by 25 ... that will allow you a 4% safe withdrawal rate and chances are you wont have to make another dollar ever again. to be 100% safe a 3% rate is better. but you will probably make some money after retirement. so i'm shooting for a 4%
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 10:09 AM Reply   
i ran across this blog 3 months ago. my wife and i (no kids both engineers) now max out 401k's and Roth IRAs and when you account for or principal payment on our mortgage we save over 50% of our post tax income a year. this wasnt hard for me b/c i was raised frugal... we dont eat out. we dont buy anything unless its on sale.(like really on sale not just a 50% markup on sale 50% off like kohls does)

There is a lot of waste in this country bent around consumerism. things dont make you happy... and once you reach that level they will try to tell you experiences make you happy ie extravagant vacations. Well you dont have to spend alot to have a great vacation either. i travel 9-10 times a year to decent places and do so for about 5-6k total for my wife and i. its all doable you just have to get to a level you're comfortable with
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 10:12 AM Reply   
and John those arent mutually exclusive. they are anything but actually. kids give you more things to do when you are retired. to each his own but that blog will get you from nothing to retirement in 10 years if you really want to follow it and dont just throw it out like its not possible.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 10:14 AM Reply   
i would also say life insurance is a scam and not worth the money... if you save 50% of your salary you should have plenty to leave your family if you die
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 11:05 AM Reply   
Quote:
Originally Posted by acurtis_ttu View Post
wanting to save 50% of your annual income? I can't stop reading this.... That is not normal.
no its highly abnormal but pretty easy to get to
Old    Shawndoggy (shawndoggy)      Join Date: Nov 2009       05-13-2014, 11:26 AM Reply   
Quote:
Originally Posted by jhartt3 View Post
if you are serious a blog full of wakeboarders who own 100k boats probably isnt the best place to ask this question. But i'm planning to retire by 40 at the latest and be Financially independent by 35 ... basically i wont have to work another day after 35.

Check out this blog

Mrmoneymustache.com

it will answer all your questions and more. Go join the forum there and ask away. quick easy ways to reduce expenses:

practical car - 30 mpgs or better - old but reliable
get rid of cable
if you're paying more than 25 bucks per cell phone switch to republic wireless
energy - keep you house cold in the winter and warm in the summer
lowering your expenses is a double edged sword. B.c you are saving more AND you are now spending less meaning less total savings for retirement.

Easy way to make sure you have enough ... get your expenses to the lowest point you are comfy then multiply by 25 ... that will allow you a 4% safe withdrawal rate and chances are you wont have to make another dollar ever again. to be 100% safe a 3% rate is better. but you will probably make some money after retirement. so i'm shooting for a 4%
That site is great, thanks for sharing!
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 12:17 PM Reply   
oh its legit i love that site ... few favorites:

http://www.mrmoneymustache.com/2012/...ly-retirement/

http://www.mrmoneymustache.com/forum...an/4-withdraw/

http://www.mrmoneymustache.com/2012/...ss-to-kickass/

http://www.mrmoneymustache.com/2011/...-in-ten-years/
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 12:24 PM Reply   
also a note on the 4% withdrawl rate from the trinity study. It didnt assume 100% stocks.

http://www.cfiresim.com/input.php

this is a site that you can input what ratio you want to spend at... so if you assume 3% as a SWR you put 30k in the expenses box and run it.

FYI the market has never failed anyone before they died if they withdrew at 3% over 70 years, its about 98% good throughout history at 3.5%, and drops to 76% on a 4% SWR. and just because you retire doesnt mean you can make money doing other things you love. and if the market hits tough times you do have places to cut down on expenses if needed.

other things i've learned in the past couple months. A cash account can be like a roth IRA over time if you keep yourself in the 15% or lower tax bracket. LCG's and QDs are tax free at the federal level if you are in that tax bracket. Trad 401k will get you to FI much faster than Roth 401k. This last statement may be touchy... but Obamacare greatly lowered healthcare costs for retired people good at living frugally and controlling their spending, since tax breaks come for those who are earning the least AND all you earn in retirement is what you spend
Old     (tarheelskier)      Join Date: Mar 2013       05-13-2014, 12:35 PM Reply   
Re #2: without even thinking about college, you have no idea idea how expensive kids are. I would say retiring at 52 and having kids under the age of 10 are definitely mutually exclusive. Just be prepared, raising kids will put a major dent in your retirement plans.
Old    John Anderson (fly135)      Join Date: Jun 2004       05-13-2014, 12:36 PM Reply   
Quote:
Originally Posted by jhartt3 View Post
and John those arent mutually exclusive. they are anything but actually.
Well, to be fair I was assuming that you weren't going to put them to work on the farm shortly after birth.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 1:08 PM Reply   
http://www.mrmoneymustache.com/2011/...sing-children/

here you go man. pretty straight forward. you dont have to spend what society and your social circles dictate you spend on children.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 1:11 PM Reply   
or on anything else for that matter. its a pretty cool and simple concept. it may not be for you but just blatantly telling a guy he cant do something because you CHOSE not to isnt really sound advice.
Old     (tarheelskier)      Join Date: Mar 2013       05-13-2014, 2:00 PM Reply   
Great article, but daycare and disposable diapers are only the beginning. The older they get, the more expensive it gets. I am not telling anyone what to believe, but if you haven't been there then it is hard to imagine. Just saying to the OP that what he can live on now and what he will need to live on during 10-15-20 years of child raising are completely different.
Old     (tarheelskier)      Join Date: Mar 2013       05-13-2014, 2:04 PM Reply   
And I am not talking about extravagance. Food, clothes, healthcare, insurance, braces, shoes, school supplies, the list goes on and on. I spent over $6,000 on a knee injury my son had last year playing basketball. Certainly wasn't my choice, but what are your going to do?
Old    Andy Graham (ottog1979)      Join Date: Apr 2007       05-13-2014, 2:18 PM Reply   
^Just wait 'til college years. It's most painful right before you're free.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 3:39 PM Reply   
older and less expensive as he points out goes more hand in hand than more expensive. if you're going to waste money on the AAU leagues thinking your kid will be the next lebron etc. i can see more expensive... if you're going to flat out pay for your kids college and teach them nothing about the value of money or personal finance i can see how that would get expensive.

to each his own but with kids as with anything else in life you CHOOSE how expensive they are... why does a cost of owning a childcare calculator ask you how much you make... b/c people who make more typically spend WAY more on their kids than people who make less.

IF the OP has been living alone and saving half his salary for the last 7-8 years... hopefully he was saving some before that and hopefully he was invested in something along the lines of VTSAX. then he should be 5-10 years away from retirement. adding a wife shouldnt add to your expenses ... combined it should subtract from expenses... cohabitation has benefits of combining costs on things you would have paid seperately. I'd be willing to bet that savings would cover the cost of 1 kid at least.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 4:03 PM Reply   
they really need to teach personal finance as a series of classes throughout school so people understand money... My engineering college did quite the opposite... they had a personal finance session that was optional for seniors to attend. I went to humor myself. The session was lead by a CAR SALESMAN.. talking about how getting 0% financing may not be as good as the rebates with a 3% rate...

are you F'n kidding me. dont buy a brand new car with a loan right when you graduate. Thats GOOD personal finance. better yet dont buy a brand new car ever. Or i guess you guys keep doing that so i can get a great deal on them used.

To the OP in the end it can be done and you can accomplish your goals. Dont let the people here tell you that you cant. it may take reworking you life a bit and setting expectations with your new wife but if you want to retire by 52 i'm sure you can. Some may say you're sacraficing life and living a boring life.. its not true ... i'm not planning on living on 24k a year. i own a boat i'm not full mustashian but any of his principals you apply will help you get closer to your goals much faster.

rant done....
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-13-2014, 6:39 PM Reply   
I must admit that I know the least about the cost of child rearing. I think I have reasonable expectations but it will dramatically change my life in many ways. I can tell you that I don't agree (easy to say because I don't have kids) how people spend money on their kids. 95% of the time it is wasteful. I am PLANNING on running my family similar to my father which was the classic "millionaire next door". I prefer a simpler life and financial independence is more important to me than it is to other people - I respect that. I am just always trying to find new ways to do it better.

I was just introduced to Mr. Money Mustache by another blog I follow called get rich slowly. He is much more aggressive on spending than I am but I appreciate many of his principals.

I am confident I can retire at 52 if I stay in a similar path I have been in the last 10 years assuming my income, investments and expenses stay in line. Wish I could have some of my 20's back where I burned up every dollar I earned.

I am still struggling on the Life Insurance piece. I am pretty sure I should have more than work offers me but I am not sure how much more. Trying to educate myself and balance the risks in both directions.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-13-2014, 6:48 PM Reply   
i assume you have more money already saved than the life insurance policy would be worth. how is that not in itself a life insurance policy?
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-13-2014, 7:08 PM Reply   
Here is the thing with the Life Insurance.....you can buy as much as you want. So if I am looking at a wife - who likely will not be working - "hopefully" two health kids who will go to college - if I die in three years after my kids are born it would be tough to make that money last for the next 18 years. It is a reasonable sum with a 11.9% rate of return over the last 5 years BUT they would likely be drawing on principal and they would eventually run out of money assuming most variables stay the same.

It is more of a safety net than anything but I would feel better knowing they were covered, she could stay at home and be focused on raising the kids without having to get a job.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 3:48 AM Reply   
if you really want a good answer i would ask this question in the MMM forums. I'm sure someone there has been in your shoes and has some good advice. AND its a finance forum.
Old    Adam Curtis (acurtis_ttu)      Join Date: May 2004       05-14-2014, 6:36 AM Reply   
I’m surprised no one has mentioned focusing on making more money?
Why does everyone assume personal finance and retiring early is focused on cutting expenses and saving more? Granted it’s one way to get there……but not the most fun.lol
About 3-4 years ago, I decided to stop focusing so much on my spending…and start focusing on how I can make more money. The light bulb came on.
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-14-2014, 7:20 AM Reply   
Good point jhartt3 - maybe I should post it on a different forum. I just like to get feedback from a wide audience.

Adam - I don't disagree with you on the making more money option. I have been on 100% commission for my entire career - there is an entirely different strategy that I have created for increasing my overall income as well as a strategy for generating an income in retirement. I suspect that controlling my costs will have a greater impact on my overall retirement strategy because my income with fluctuate with the overall macro-economic conditions but my cost structure will stay relatively the same.

Last edited by phatboypimp; 05-14-2014 at 7:22 AM.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 7:23 AM Reply   
because making more money is 50% less valuable to retiring early than spending less money. If you save 100% of the extra money you make over what you currently make you arent decreasing your spending just increasing your saving... a single edged sword. (and when you make more people typically spend more) every time you spend 1 dollar less and save you decrease the amount of money per year you need to retire so its a double edged sword.

Lets say i make 100k per year and spend it all .. and i have 2 paths one path allows me to save 50k of my current income and the second allows me to make 50k more. Lets assume 4% SWR for the sake of this case.

Path 1
I'm making 100k and spending 50k . i'm putting 50k to retirement. i need 50k*25 to retire and never work another day. 1.25MM

Path 2
I'm making 150k and spending 100k. I'm putting 50k toward retirement i need 100k*25 to retire and never work another day or 2.5MM

So i need 2x the money and i'm saving the same amount. From the chart on this blog post http://www.mrmoneymustache.com/2012/...ly-retirement/

I can very easily see that if i save 50% of my salary i will be to retire able 8-10 years earlier than if i only save 33%.

This is the reason the focus is put on saving more instead of earning more. Most people think they need to make more to retire earlier... and while this does help it puts the emphasis on the harder part of the equation to achieve the same end goal. So making more and maintaining expenses leads to a longer working career than just focusing on a very controllable factor. how often you pull out your wallet
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 7:47 AM Reply   
http://www.mrmoneymustache.com/2012/...ly-retirement/

bad link..

Now if you can do both thats even better. But the point is to put your efforts into cutting your spending as low as possible. once you get to that level i would say it would make sense to look at how you can make more
Old    Adam Curtis (acurtis_ttu)      Join Date: May 2004       05-14-2014, 8:01 AM Reply   
I see your points.

But cutting spending to as low as possible sounds like a terrible way to live, if you ask me. But I know some people enjoy that. My dad was like that.


But the typical saver mentality has a glass cieling on income...b/c they are so "thrifty" they don't imagine making a $1MM/yr.

focus on making money and your example of making 100 or 150k turns into making 400, 500, 600k+ yr.

I know I'll never be the guy who NEEDS $500k/year to live...it's not my style, but I luv making money.
Old    Jason Buffalow (buffalow)      Join Date: Apr 2002       05-14-2014, 8:42 AM Reply   
Hilarious that we are talking about this with $80-100K boats, $4-5/ gallon. A typical day on the water for most of us is $250-400 by the time you take in all expenses for travel, food, beverages, tow vehicle fuel,etc..

I do a ton of planning, but never watched every nickel like you all. I live my life to the fullest and feel I have a great balance of living, retirement, family, work, play. Of course I have no considerations of retiring at 50-55. My father at 75 still works for me and my grandfather before him worked till he was 80, not because they have to, but because they want to. We love what we do. We are challenged every day and employee lots of people and enjoy the responsibilities that includes. It keeps the mind fresh, the feeling of value higher, and keeps you interacted with human beings. I could retire today at 45 and live on a tight budget and watch every penny, but not a life I want to live. I would rather work longer and harder and have my family enjoy the fruits of our labor. If my family wants to take a trip, than we do. We live below our mean and after 24 years of marriage, still act as though we are broke. That's not to say I drive a junker, but every toy I have is paid for and could be sold tomorrow if need be. We are old school and take care of our things, wether it is limping along a 10 year old drier or doing remodels by ourselves, we make sure our things stay nice. I realized as a self employed person of over 20 years, it allows me lots more flexibility in my investments and write offs.

I think the key is a solid balance of it all which is very difficult. You have to save, you have to spend, you have to earn, but most important is that you have to live.
Old    Phatboypimp (phatboypimp)      Join Date: Apr 2005       05-14-2014, 8:50 AM Reply   
I recognize that one financial philosophy will not please the group. I know people who in their 40's who are still not saving for retirement - as they are live in the moment people who need to have the best of the best material goods.

I know people who bring their lunch to work every day, don't eat out, take public transportation and don't purchase fancy items.

I am somewhere in the middle. I don't feel like I am missing anything by not having the baddest G23 on the market, my "lake house" isn't on the water, my car is older and has a lot of miles (with many more to come). For me it is about priority setting. I hope that by the time my kids are 8-10 years old that I have the freedom to not work and watch them grow up right in front of me.

The funny thing is I love nice things. I am a car guy, a boat guy, a motorcycle guy, a travel guy - I am into just about everything that could make me broke. That is the b*tch of it all. I am constantly fighting my wants with my longer term needs. It is literally a daily battle for me. But I figured out 10 years ago that financial security brings me more joy and satisfaction than these other material items (which almost always immediately fades). Should be interesting to see how my philosophies change as I enter this next stage of my life with a wife and kids.
Old    Boarder85 (fouroheight68)      Join Date: May 2006       05-14-2014, 9:30 AM Reply   
Great thread. I'm 28, but in a similar situation. One of the things that has made my marriage so easy has been my wife and I are on the same page as far as money. We both like nice things, but aren't willing to pay full retail, or finance. I'd like to retire at 55, and have been working on figuring out how. We recently purchased our third home, walking distance to folsom lake. She purchased her first home in 2008 at 21 years old. We sold that for a modest profit right before buying our current home, and used the proceeds as a down payment. We put 100k cash down, which I think is a good accomplishment at our age. I kept my first home until my tenants recently gave notice, and I am in escrow to sell in 2 weeks. I stand to net about 60k profit. We currently have about 100k saved in retirement, my boat is paid for in cash, and we have small loans on both our cars at extremely low interest rates. We each put away 10% our paycheck a into retirement (with 3% co match) and put 120 a week into savings automatically. I'm selling my rental property for a few reasons - mainly I am exempt from cap gains since I lived there 2 of the last 5 years. If I kept it, I would sacrifice a good 30% of the profit to the government.

I'm thinking of using the 60k proceeds to a) pay off the little debt we do have b) do some landscaping projects at our new house and c) invest the rest in a Tahoe (Nevada) condo. My sister and brother in law have been wanting a place in Nevada, and they recently had a baby, so I thought this would be a good opportunity to have a place for our families, that could also generate income thru renting.

I am going to read mr mustache blog, I like a lot of the points he makes. Otherwise, I feel pretty good where I am today.
Old    John Anderson (fly135)      Join Date: Jun 2004       05-14-2014, 9:35 AM Reply   
Quote:
Originally Posted by jhartt3 View Post
or on anything else for that matter. its a pretty cool and simple concept. it may not be for you but just blatantly telling a guy he cant do something because you CHOSE not to isnt really sound advice.
You need to have kids before you can give advice on what they cost. You really have no idea how your life becomes no longer under your control after having kids.
Old    Shawndoggy (shawndoggy)      Join Date: Nov 2009       05-14-2014, 9:36 AM Reply   
Quote:
Originally Posted by phatboypimp View Post
The funny thing is I love nice things. I am a car guy, a boat guy, a motorcycle guy, a travel guy - I am into just about everything that could make me broke. That is the b*tch of it all. I am constantly fighting my wants with my longer term needs. It is literally a daily battle for me. But I figured out 10 years ago that financial security brings me more joy and satisfaction than these other material items (which almost always immediately fades). Should be interesting to see how my philosophies change as I enter this next stage of my life with a wife and kids.
First of all, don't feel bad about bringing this topic up. Even if we disagree, it's validating to share ideas.

I'm a car guy too. I've just kinda decided to stay 6-10 years behind the times and buy older "fun" cars outright. My current DD is a rather moustachian civic si sedan, which can be driven conservatively to 29 mpg+ suburban driving, and yet can still be fun in the twisties. I do subscribe to the idea of only paying cash for a car... and in that context I have a hard time paying more than $15K for anything. Thankfully, as a life long car enthusiast, there's lots of cool stuff at that pricepoint.
Old    Shawndoggy (shawndoggy)      Join Date: Nov 2009       05-14-2014, 9:39 AM Reply   
Quote:
Originally Posted by fouroheight68 View Post
...invest the rest in a Tahoe (Nevada) condo. My sister and brother in law have been wanting a place in Nevada, and they recently had a baby, so I thought this would be a good opportunity to have a place for our families, that could also generate income thru renting.
Nevada needs you. Please bring your friends and their money too!
Old    Boarder85 (fouroheight68)      Join Date: May 2006       05-14-2014, 9:41 AM Reply   
Quote:
Originally Posted by shawndoggy View Post
Nevada needs you. Please bring your friends and their money too!

My brother in law is a gun nut and wants a place to register certain firearms to. I just want a place to go to a couple weeks a year, I'm pretty happy here in Ca!
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 10:08 AM Reply   
i still find that statement incredibly hillarious, having children means you lose 100% control of you life and finances. it could just be me but i think you might have done it wrong if your life is went out of control upon the production of tiny humans. I wonder how our species has been able to survive and reproduce with the chaos without instituting martial law upon the birth of every child.

sorry but i just find this line a similar line most people give about everything... "oh well you dont have this mortgage"... "wait til you buy a house you wont be able to do anything"... "dont buy that old car i had one once and all it was, was work, i only buy new now" ... There are always people out there who make blanket statements that are just as absurd as the one you just made about losing ALL control of EVERYTHING once you have kids... i've never subscribed to these statements... it gives you an excuse to make that statement on here and justify wasted spending. but if thats what it takes thats what it takes.

when it comes to money and how you spend it or dont spend it there is almost no limit to which way you can go..

My wife and i live in a great house in a lake community my boat sits on a lift 2 mins from my house i paid 14.5k for a 99VLX this last fall and sold my old Dyne for what i had in it... we go out to eat with friends (probably spend way more here than we should) we travel every month ... and somehow we still manage to save half our income. You can have cool stuff and fun hobbies and interests... it does take some time to figure out how to stretch a dollar but its how i was raised. i live a very happy comfortable life style. But equating the amount of money spent on something to the quality of the lifestyle or quality of the service received is about the worst way to analyze value.

I love what i do too... but just having the ability to not rely on a paycheck and becoming financially independent is more important to me that the way a starbucks coffee tastes every morning. i'm not saving b/c i hate working i'm saving to actually come financially stable. and you cant be that until your earning from savings or investments is equal to or greater than your expenses each year.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 10:34 AM Reply   
sorry i get on rants about things i am passionate about. money mainly... live how you want to live but dont negate the dreams of someone who just asked a simple cost of children question. in my area its about 300 bucks a month for a child ... not counting daycare expenses. I dont know how much you make OP but a few of my friends at the office spend around that figure... so you figure 4k a year to be on the high side and you will have a stay at home wife so no daycare. you could even throw 1k a year in a college fund for them and make it 5k by the time they get to college they will have 40k .. will that cover it all probably not. but i personally feel the kids need some investment and not to just have mommy and daddy pay.. whether that be scholarships or loans.

I still feel the same way on health insurance... dont really think its necessary... i trust my wife can support our family on what i will leave her if i die. if you do feel you need it to feel secure... then definitely go Term.
Old    J (Jmorlan)      Join Date: May 2013       05-14-2014, 11:14 AM Reply   
Are any of you/your companies hiring?

All of you guys with those thirsty wakeboats, attending Folsom lake need to come fill up at my station so I can have a king ranch and a G series also!

Last edited by Jmorlan; 05-14-2014 at 11:17 AM.
Old    John Anderson (fly135)      Join Date: Jun 2004       05-14-2014, 2:15 PM Reply   
Quote:
Originally Posted by jhartt3 View Post
There are always people out there who make blanket statements that are just as absurd as the one you just made about losing ALL control of EVERYTHING once you have kids... i've never subscribed to these statements... it gives you an excuse to make that statement on here and justify wasted spending. but if thats what it takes thats what it takes.
You've never subscribed to these statements because you are very naive and totally clueless. Trust me... when you have kids and your wife stays at home with them you are not totally in control of your financial future. BTW, the phrase "not totally" does not contain the words 100% as you seem to believe. Half your income and your assets belong to your wife. After she has spent 10+ years at home taking care of the kids she is also eligible for lifetime alimony in many states should your marriage not be going well because you want to be frugal and maybe she doesn't anymore.

The idea that you can predict what everyone's wife and marriage will be like in the future is laughable. There are plenty of women who after working and raising kids for a number of years with no pay will have a different idea of what that money in the bank will be and should be used for. And you won't have much to say about it. Kids change everything, and sometimes in ways you can't predict.

BTW, when my ex filed for divorce in 2001, after 20 years together I just happened to be working for a company that went bust. I took a much lower paying job ($60K) across the street from my house and my ex had just earned an RN degree worth $40K starting out. The Florida state guidelines for child support for my 2 kids with those earning numbers was $1,200 a month. Then you need to add lifetime alimony. Without going into detail I ended up with the house and kids and gave her $300K cash with no support in return and no future alimony obligations. And that was a total fluke. I dodged a huge bullet due to some very unusual circumstances and the ability to just drop a huge sum in one shot.

You cannot plan everything on paper. Having kids changes the whole dynamics of your life. If you want them, then go for it. Just recognize that you are not in total control of your financial future once you make a plan to have your wife stay home and forgo the advancement of her career. When the woman thinks she needs to spend money on the kids your frugal a$$ is going to be grinding some gears. And this is coming from a very frugal person.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 2:35 PM Reply   
first off my scenario was for the OP my wife is and engineer who plans to work full time and loves her job. sorry you had such a rough life man.
Old    John Anderson (fly135)      Join Date: Jun 2004       05-14-2014, 2:55 PM Reply   
Actually I've got a great life. No regrets at all. I'm 58 years old and wakeboarding better than I ever have. I live on a lake and have a cabin on 7 acres in the forest. I wakeboard at the cable park 4-5 times a week. I'm down to the same weight I was in college except with zero body fat, and in perfect health with zero joint or back issues. I work at home for a company that gives me complete freedom with my time. I only have $50K debt on my house that I expect to be paid off within the next 2 years. I could easily work well into my late 60's because the computer programming I do is a pretty cushy job.

Just won a GoPro Black in a "best crash off the kicker" contest. And I just landed my first HS 540 and BS 360 in the last month, and nearly stuck a crow mobe. I've got very little complaints about my life. I do what I love and love doing it! Here's a clip....

https://www.youtube.com/watch?v=-WHR9I2eJDw

When you can do this at 58, you really shouldn't be complaining about life...


Last edited by fly135; 05-14-2014 at 3:04 PM.
Old    Shawndoggy (shawndoggy)      Join Date: Nov 2009       05-14-2014, 3:38 PM Reply   
Quote:
Originally Posted by fly135 View Post
You've never subscribed to these statements because you are very naive and totally clueless. Trust me... when you have kids and your wife stays at home with them you are not totally in control of your financial future. BTW, the phrase "not totally" does not contain the words 100% as you seem to believe. Half your income and your assets belong to your wife. After she has spent 10+ years at home taking care of the kids she is also eligible for lifetime alimony in many states should your marriage not be going well because you want to be frugal and maybe she doesn't anymore.

The idea that you can predict what everyone's wife and marriage will be like in the future is laughable. There are plenty of women who after working and raising kids for a number of years with no pay will have a different idea of what that money in the bank will be and should be used for. And you won't have much to say about it. Kids change everything, and sometimes in ways you can't predict.
Well said.
Old    Seahawks #1 Fan Robert T (cwb4me)      Join Date: Apr 2010       05-14-2014, 4:19 PM Reply   
I'm retired and i will live very comfortable debt free. I saved all my life and didn't choose to have children. Probable saved at least half a million since average family has 2 kids.
Old    Shawndoggy (shawndoggy)      Join Date: Nov 2009       05-14-2014, 4:51 PM Reply   
doesn't make a lot of sense financially to have kids. Emotionally, socially, spiritually... heck yeah. Financially they'll bleed you dry. But you'll still love 'em.
Old    Andy Graham (ottog1979)      Join Date: Apr 2007       05-14-2014, 5:11 PM Reply   
Mr. Anderson speaks the Word. I would second all of that. (Well, except I can't second his bag of wakeboard tricks.)

Last edited by ottog1979; 05-14-2014 at 5:18 PM.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 6:32 PM Reply   
no offense to your life or your previous statement but all you did before this was tell the OP he had to work til he died b/c after he had kids he would get a divorce pay way more than lump sum 300k and just spend money out his ass..

you're comparing an unlikely situation to the typical situation of marriage and kids (and dont feed me the 50% of people who get married get divorced BS yeah b/c some of those people were married more than once... and if you get divorced once you're 2x as likely to get divorced a 2nd time)

props you actually threw your real life out there but to tell a guy he cant retire in 10 years and have kids b/c he should expect to be divorced and ripped of a ton of money would have been the better way to explain your case for "cost of children" in the first place.

IMO he should expect the cost of children to cost per year what they cost in his area to raise them frugally... and if he is 42 and not married yet i would assume he was interested in how his wife managed her finances before he decided to marry someone who planned to be a sahm... maybe i'm wrong but thats the ass i'm gonna make

but after hearing all this i plan to live my life a completely different way...

1. make sure my wife wants to be sahm
2. get divorced and weasel my way out of the law after 20 years(i agree the law is dumb)
3. buy some lake front land and program from home
4. this will ensure my 6/4 frame wont be damaged by wakeboarding b/c thats where you're at.. should eliminate my right knee pain i have too since thats how your life worked out following this plan... ( i know it wasnt your original plan this is all a joke but to equate an extreme circumstance to everyday life is a bit of joke IMO as well)

end of the day its better to try to plan to retire in 10 years and have kids than to plan to have kids and burn thousands of dollars... (bc guess what if you plan to waste money ............ YOU WILL its human nature)

yes kids arent financially responsible... BUT you CAN be FINANCIALLY RESPONSIBLE and HAVE KIDS....these 2 items are anything but mutually exclusive.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 6:43 PM Reply   
also i realize all you are 2x my age.. but why do you all live to the former standard of life that the woman has to be the one who stays home... why wouldnt both of you stay home an equal amount of time if you really feel this need to understand and hang with you kids ... all of your assumptions are based 100% on social stereotypes that have been dying for the last 30 years... yes kids will probably affect my life in ways i cant predict but why should they affect my wife's career and not mine as well.. .they are our kids not hers not mine... ours... i'm sure you'll poke holes in this and explain this is 100% improbable and you probably cried when a gay football player got drafted but life has changed a bit...
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       05-14-2014, 7:06 PM Reply   
this isnt 1900 jackie broke the color barrier... Rosa parks happened... i think this women staying at home issue is more or less discrimination... from both sides... we have moved from men working and women care taking to both working and outsourcing care taking ... why cant both work and both caretake.... or better yet...

become FI and both caretake. nurture and raise your kids vs worrying about how much they could cost. and be there with them...thats why you have them right??? not to work 50+ hours a week and barely see them b/c you're on the road BC someone has to pay for that next AAU trip for the undersized kid who has a .0000001% chance of making the NBA...
Old    Shawndoggy (shawndoggy)      Join Date: Nov 2009       05-14-2014, 7:57 PM Reply   
dang, sombody's got an axe to grind.
Old    Nicolas Kohler (monkey_butt)      Join Date: Sep 2011       05-15-2014, 3:20 PM Reply   
... wise words Mr. Anderson - and I really liked the last words you said in your video ... lol ...still wonder if I get even half of those tricks into my bag in the 10 years until I catch up on you ...

sweet 27 ...
Attached Images
 
Old    Jo Shmoe (joeshmoe)      Join Date: Jan 2003       05-16-2014, 1:44 AM Reply   
"BUT you CAN be FINANCIALLY RESPONSIBLE and HAVE KIDS"
NO!
YOU can be FINANCIALLY RESPONSIBLE and Have KIDS.

and hows this for a blanket statement...IF we had to pay for kids UP front, $100,000 or $500,000, whatever it is, NOBODY would have kids!

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