Where we started
We were a Dual Income No Kids (DINK) couple that lived in an expensive city; just like many other SF Bay Area or New York City or London dwellers. Basically – privileged white folk who make too much money, send their kids to private schools, buy fancy cars and big houses, and smile in annoying Instagram photos. High incomes, high spending, and the jobs that come with it – Grizzly Mom working as a corporate attorney, me working in operations at a tech company. Along with our friends and coworkers, we went to the restaurants, bought the clothes, and purchased the houses that were the default assumption for that life.
However, when we looked around no one was satisfied. We worked crazy hours, never saw our friends, barely saw our families. Everything was a never ending chase of MORE: more money, more stuff, more prestige. We were locked on a path that leads to an early grave after accumulating a large pile of expensive shit. Since this is supposed to be a blog about money, let’s get into some cold hard numbers. What did this life look like? Here’s where we started. As of January 1st of 2016:
|Dad’s Old 401k||$12,345||A bit left over from a previous company|
|Dad’s ROTH IRA||$40,848|
|529 Plan||$22,564||Baby Bear’s College Fund|
|House||$1,100,000||Up by about $65k, $0 down – Thanks VA!|
|Liabilities||Student Loans||$(94,677)||5% interest – Thanks Sofi!|
|Home Loan||$(948,576)||3.25% interest – Thanks VA!|
|Total Net Worth||$484,768||Most people would say – ‘Not Bad!’|
34 years old and sitting on half a million dollars! This was purely the product of diligent saving and investing. We’ve only been anywhere near our current salaries for a couple years (Unfortunately, Army Lieutenants don’t make as much as tech executives). But we’ve always maxed our 401ks, IRAs, and I managed to sock away a little bit every year in a taxable Vanguard account. That $485k represents our previous 10+ years of savings starting from the day we left college. Starting early helps. Never forget this simple truth. Start early, save often.
|Income after tax||Monthly (Dec 15)|
But now we’re bringing in a ton more. Our current income is over $300k per year after tax. But where was all that going? Unfortunately, after we left grad school we did something we had avoided during my years in the army – we let our lifestyle expand. Below is our spending as of December of last year:
|Student Loan Interest||$400|
|Lawn + Cleaning Service||$230|
We were spending over $200k per year. I would love to say that some of those categories were just holiday expenses, but there’s always family to visit, always gifts to buy, and we had a subscription to Trunk Club and Stitch Fix to maintain! This could support 4 normal US households. Or 20 normal human households. I’m a big guy, but not that big. When we started looking at it this way we realized just how ridiculous our life had become.
Net we were saving around $100k per year. Compared to most folks this is awesome. But our goal is to stop working by the time our daughter turns 3. That’s two years from now. Let see how we were doing on that…
Time to Financial Independence
|Target net worth (how much we would need at current spending levels)||5100000||$204k * 25, 4% annual withdrawal assumption|
|Retirement year||2035||Starting with our $428k and saving $100k per year, 7% return|
Not so good on that front. But at least we’ll be able to visit her in college – kids love that! Sure, this is assuming our salaries don’t go up. But the BIGGEST assumption was that our lifestyles wouldn’t go up. That is a terrible assumption. There is always a bigger house, always another trip, and always another Tesla to buy.
I’m showing all of this to illustrate a point. We made high salaries, but it wasn’t enough. Our lifestyle was ridiculous! We make tons of money, but every day still started with us packing our daughter off to daycare and ended with us both exhausted. In order to actually make our goal, we’d need to make some changes.
So let’s see if we can do better… see you in the next post!