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Author: SaveFarscape Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5076  
Subject: <$0 to FIRE in 15 years? Date: 1/4/2004 3:09 PM
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I'm wondering if it's possible. Right now, we have around $13k in debt, plus a mortgage and some acreage we are paying on. My husband works full time plus, and I have a part time job, that will eventually turn into full time (5-10 years). We have 2 children ages 8 and 3. I am 28 and my dh is 30. Our goal is to be able to quit our "real" jobs when our children have grown, and possibly start a renaissance business, selling clothing and leather goods.

Here's what we need (want) to do between now and then. First, we need to pay off our debt. Last year we grossed about 75k, we hope to keep our income at the same level this year, but that isn't certain. My husband works between 60-70 hours a week right now, but there have been talks to decrease hours to 40 a week, starting by the end of this month. That will cut a big chunk of our income, but it's possible that I can get extra hours at my job to make up about half of the lost wages. We have enough cushion in our budget now to absorb the lost income, but it will eat up our snowball payment to our credit card companies, which will make it take longer to pay off our debt.

Next, we want to build a larger house on the acreage we are buying in the country. There are 4 of us (plus the dog and fish) in an 1100 sf house in town right now. It's managable as the kids are small, but dh is 6' 4", so, if the kids get anywhere near that big, it's going to get really cramped. Plus, since we're wanting to start a business, we really need an area separate from everything else to do this. Currently, we have 2 computers, and a large garb closet, and our sewing stuff all crammed in with us in our 10x14 bedroom. The house we want to build will cost us between 150-200k, depending on how much of the work we do ourselves. It will double our living space, and give us a nice area for crafting. Not to mention the area for gardening and hunting :). Our current home will sell for enough to finance about half of the new home, after paying off our current mortgage.

We also have our 2 kids to think about. We have braces, and school stuff (band, cheerleading<heaven forbid!>, school trips and the like), and cars (maybe), and most importantly college to look forward to. Our eldest will probably not go to college. It may be that he lives with us forever, but we'd still like to think positively, and plan for the possibility that he may be able to go out on his own. Our daughter, while only 3, we're rooting for scholarships for ;). But in all seriousness, we do need to put something back for them both, whether college is in their future or not.

We will also need to replace our vehicle sometime in the future. My car, which is our family car, and also my work car, hit 100k miles on Christmas Day. I figure it's got another good 5-6 years left, but then it will have to be replaced. I'm looking at the new Ford Escape HEVs as a good replacement. It's big enough for work, gets excellent gas mileage, and will be able to handle the country roads when we move out of town.

So, to recap, we have $13k in debt, a mortgage and land payment, about $10k in a 401k, and $100 in an efund (yeah, you read that right, $100). What we want, is in 15 years, to quit working for "the man", and live comfortably on a self employed income until we "really" retire. Is this doable, or do I need to rethink some of my dreams?

Thanks!
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Author: Betsysmom Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1675 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/4/2004 4:09 PM
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I think it's doable if you can pay off all your debt in 15 years (including mortgage on the new house). I'd also let the kids rely on loans/grants/scholarships/work for college. That way, your overhead costs will be low (housing takes such a large chunk of income), and you can rely on the fluctuating self-employment income to live on.

Betsysmom


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Author: texandesi Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1676 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/4/2004 4:36 PM
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So, to recap, we have $13k in debt, a mortgage and land payment, about $10k in a 401k, and $100 in an efund (yeah, you read that right, $100). What we want, is in 15 years, to quit working for "the man", and live comfortably on a self employed income until we "really" retire. Is this doable, or do I need to rethink some of my dreams?


After you pay off your loans, you will need to have savings that will provide the initila seed in your business. Assumign you will not be profitable straight off the bat, you will need to take in considertaion the debt load arising from the clothing inventory and the cost of running a business. You can consider yourself FI when you have no loans except those for your business and your business is generating profits. You can say you are RE when your assets work on sustaining your net worth without active management by you.

- TD


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Author: mazske Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1682 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/4/2004 7:53 PM
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Ok, I'll try to keep this short and fairly simple.

Try to estimate in todays dollars how much you need to live on. That's easy to do as you can figure up how much you lived on in 2003.

However, in 15 years you will have a different situation. Your kids will be older and you will be in a different house.

Anyways, once you know how much you need in a year, you need to save approximately 25 times that amount.

Let's say you need $50,000 to live the kind of life you want to live. That means you need to save up $1,250,000. Using a safe withdrawal rate of 4%, that means you can safely withdraw $50K a year without fear of running out of money.

Ok, I am keeping that simple as there are more variables, but that will get you started.

You mentioned starting a business. Is this the kind of business that will keep going after you are FIRE'd or is it one you can sell or is it one that you will stop when FIRE'd? Ah, I just read it again and you would like to run this business when you are FIRE'd.

Do you have any pensions or any other guaranteed income?

Let's say you only have the money you save up to retire on. Let's assume you need $50K a year. Let's then assume you want to save up 1.25 million.

How do you currently invest or how do you want to invest?

I would recomment investing in the stock market and possibly in real estate.

Stocks can be simple to invest with because without knowing much at all about investing you can easily open up an account with Vanguard and then put your money into the account to buy and index fund.

You can buy real estate via a REIT or you could buy rental property.

You can also buy individual stocks if you think you can do better than an index fund will do.

Ok, let's say you have a successful business that brings in 20K a year. That means that you only need to provide for 30K from your pot. That means that 30K times 25 equals $750,000 that you will need to save up.

If your business brings in 35K a year, then you only need to provide for 15K. That means you will need to save up $375,000.

I hope my post is helpful a little bit to you. If any of this at all is confusing, just ask questions and myself or someone else will explain.

Oh, I'm assuming you know a little about investing and compound interest. If not, just ask away.





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Author: nukenick Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1684 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/4/2004 9:17 PM
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www.retireearlyhomepage.com


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Author: WeeBeastie Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1704 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/5/2004 4:45 PM
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So, to recap, we have $13k in debt, a mortgage and land payment, about $10k in a 401k, and $100 in an efund (yeah, you read that right, $100). What we want, is in 15 years, to quit working for "the man", and live comfortably on a self employed income until we "really" retire. Is this doable, or do I need to rethink some of my dreams

Of course you can do it! But you do need a plan. Matske's post should give you an idea of where to start to determine if your dream is feasible. Once you have determined that it is, then you can work on making it more concrete with various steps depending on your circumstances. For example you can develop a realistic plan for paying down the $13K debt, saving an E-fund, for making contributions to a 401(k), Roth etc. Once you start working out where the money comes from to make these deposits, you determine what amounts you can save comfortably and demonstrate that 15 years is indeed a realistic goal. Given what you've told us about the house, the planned purchase of the car etc, it would seem you've already begun to formulate a realistic plan already!



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Author: peteyperson Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1747 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/8/2004 5:24 AM
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www.nofeeboards.com

(far more useful than the retireearly website previously mentioned).

Petey

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Author: InLivingColor Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1767 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/13/2004 9:21 PM
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Sorry, late to the party. Have you considered easing into your intended business where you are now? Small scale, maybe selling through eBay or other online sites, a little at a time ... bootstrap yourself up. I know you've got two small kids, and that's a fulltime job in itself, plus you're working parttime and looking to increase your hours. But you could make yourself a worktable that folds up, maybe something along these lines:
http://www.findarticles.com/cf_dls/m1080/5_50/63124938/p1/article.jhtml
http://www.sportys.com/shoppl/information/products/Folding_Workbench.html

So you could set up, do a little, and store it away in a closet. Might could be, you could turn that into a growing concern instead of increasing your hours on the job? Just a thought.

ILC

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Author: llamalluv Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1801 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/18/2004 2:32 AM
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Our eldest will probably not go to college. It may be that he lives with us forever, but we'd still like to think positively, and plan for the possibility that he may be able to go out on his own.

At first I was thinking, well, why the heck not?! Then I realized--he's handicapped, right? As far as his future care goes, a great big pile of money and a smart, capable little sister is what he'll need to live a life somewhat on his own. Life insurance is probably the best way to handle the first, and good parenting with take care of the latter.

Our daughter, while only 3, we're rooting for scholarships for ;).

They are out there, big time. I did some digging for my little sisters and found out that I can send her to a (specific) private college for peanuts. And it has structure and just the right balance of independence and discipline for her.

So, to recap, we have $13k in debt, a mortgage and land payment, about $10k in a 401k, and $100 in an efund (yeah, you read that right, $100). What we want, is in 15 years, to quit working for "the man", and live comfortably on a self employed income until we "really" retire. Is this doable, or do I need to rethink some of my dreams?

I think it depends on how much you really want it. If you work your butt off and sacrifice for a few years (stuff like cheap vacations, shopping yard sales and 80% off sales for new clothes, limiting new purchases, etc), I think it's totally doable. You two have a great income, almost twice the average income. Basically, if you live on half your income, and put the rest towards debt and savings, you should be able to retire fairly soon, probably within your goal. The hard part, as we all know, is sticking to it.

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Author: SaveFarscape Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1892 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/27/2004 9:52 PM
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Thanks everyone for all the helpful responses! We're working on a plan now to get one whole income going straight to savings within 5 years, and we've estimated we'll need 25k a year to live on when we retire (in today's dollars). We'll live in a fairly rural area, where COL is cheap, so that will help a ton.

I really liked the folding workbench idea, and was even able to hunt up a picture of the DIY one for us to build. We're also putting off the house building for a bit. We had originally planned to wait 2 years, but now, we may not build until the kids are grown. We'll probably add on a couple of rooms to the house, for far less than building a whole new house would cost, which would let us live here much longer. If we don't do that, my parents may be foreclosing on the land adjacent to our acreage, and we may take over payments on it. It has a trailer which is larger than our current home into which we may move.

But, first things first. Pay off debt, build an efund, then start stashing away 1 income's worth of dough. It's hard, as I was raised as an only child (so what if I had a pony, it doesn't mean I was spoiled! :)), and am used to getting what I want, and getting it NOW! This is something we'll really have to work for, but I think the benefits are going to be HUGE when we get there :).

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Author: tutone Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1901 of 5076
Subject: Re: <$0 to FIRE in 15 years? Date: 1/28/2004 1:35 PM
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But, first things first. Pay off debt, build an efund, then start stashing away 1 income's worth of dough.

The way I look at it, if the second income is being used to pay off debt or build an efund then you are already stashing away 1 income's worth of dough.

Think about it this way: You currently have a net worth that is a combination of savings, bills, home equity, etc. At the end of the month you pay off a portion of a credit card bill. Your net worth just went up by that much.

Take pride in the little victories along the journey. It will help keep you motivated.

tutone

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