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|Subject: A short story.||Date: 10/21/2004 3:39 PM|
|Author: Ceberon||Number: 2744 of 5084|
My wife (well, soon to be wife at that time) and I graduate from college, as computer programmers (I'm 21, she's 20). We both get nice jobs, that pay almost exactly the same. We grab an apartment that costs approximately 1/8th our salary, and we have two old cars our parents had given us.
During the next year, we manage to have our budget flex like mad.. we go out to eat for just about every meal, still have our checking account buldge to 10k within a couple months, at which point we buy a 3.5k TV, go on a 3.5k honeymoon cruise (alaska, nice room on the back with a deck, very pretty), give extremely expensive gifts at christmas (DVD player & 10 dvd's for one parent, $200 for each sister of mine (3), etc). Every time our funds got large we'd find some way to spend it.
We decide to buy a house afterwards and don't quite have the money available and we're impatient so we take a loan out from the wife's grandfather. We get the house, and with raises it's costing about 1/6th our take home. Now fast forward: Wife manages to buy a decent amount of company stock at a high price, we end up selling at it's lowest level in many years. We cancel contributions to both of our 401k's at the very top of the market, missing the dollar cost averaging during the crash. We buy a 16k car, change our mind, sell it back for a 12k car (still have 15k in auto-loan), and then buy another car (25k loan this time). Through the wife going back to school (thinking about switching professions) and me becoming a scuba instructor, buying a pool table, a pinball machine, re-painting the house, we go through a 15k home equity loan and 15k in c-card debt.
Shape up time (about 3 months ago), I'm 27 (she's 26)
I start to read the Fool website and read finance/investing books. The wife decides after some discussions to stay in her current profession since she has some good chances for promotions (and she'll like management better than coding). I turn back on our 401k's, and within a couple months get them up to 16% and 18% respectively (should max out the before tax contributions approximately). Open 2 Roth IRA accounts and slightly fund them just to get them started. Transfer the c-card debt to a 0% c-card (until march) and start paying it down as fast as possible (around 2.5k per month). Down to around 9k c-card debt. Thankfully the auto loans are at fairly low %'s, but I'll get to those next, since I have discovered that I really hate debt. I re-enrolled us in my wife's company stock purchase plan, and have a few thousand in stock already. I also enrolled us in 2 drips, at $100 per month each.
Since restaurants were taking a huge portion of our budget (up to 1.5k-2k per month, don't ask how we did it), I implimented a $100 "envelope" budget per month. On the 1st of each month, I put in $100 into the restaurant envelope. That money can be used for eating out whenever we want. Of course once it's out, no more going out to eat. I make sure we always have some quick cooking food around incase we're starving (since we both work late, it's too easy to just pick up something on the way home). It helps because we don't need to feel guilty about going out to eat since it's already budgeted for.
So I figure some time around February or March I can finish paying off the c-cards. Then we can start on the car debts. I figure if we get raises, we might be able pay off at least one of the cars by the end of next year if not both.
As for long term planning, I made a very large spreadsheet with all credits, debts, and plans for where the money will go. Assuming 6% gain on equities each year, 3% raises, only $100 per month into Roths, paying off c-cards at $200 per month, no additional saving, we should hit the $1M net worth sometime around my age of 41. As a broad figure (that can be estimated better once we've been doing this longer), I estimate we'd want around 60k per year in retirement (this would even allow for housing payments if we still have them). For even safer margin, I'm going for $2.5M net worth as a retirement point (2.4% withdrawl rate, certainly should be safe), which we would theoretically hit around my age of 47 or so.
If we stay focused, we should easily be able to beat my income goals, and easily beat our savings goals. I figured in no additional savings beyond the drips the $100 for roths and 401k's because we are fairly sure we will want a child (possibly 2, but not sure). I figure our extra income will be taken up by caring for a child even if we're careful parents. If we decide to have children around the age of 30-32, we could have teenagers with retired parents.. I think it'd be great to be able to spend time with my kids before they head off to college. I know my parents were always so busy with work.
Speaking of my parents, my dad still makes more than my wife and I combined, plus my mother makes a teachers salary, yet they're having troubles making ends meet. One issue is sending my 3 sisters to private expensive colleges, plus my parents are clueless about investing. I mentioned we might be able to retire around 45 if everything goes well, and they were a bit shocked and said they would quite possibly still be working (they're 53 and 52 right now).
So hopefully we're heading towards FIRE. I am keeping my eye on other sources of income, perhaps starting up a small business of my own, or getting into rental properties. Anything that will make it more likely we'll beat our estimates :) I figure we're ahead of the game simply by knowing it's possible.
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