Where we started
We were a dual income couple without kids that lived in an expensive city. High incomes 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 co-workers, 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 stuff. 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:
|Income after tax||Monthly (Dec 15)|
We’re now doing a little bit better than a 2nd Lieutenant and a college junior eating ramen in the temp army lodging. Going to business school and law school at Stanford helps with that part. 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 about $200k per year. 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 much we had let our lifestyle expand as we climbed the salary ladder. Net we were saving around $100k per year. Compared to most folks this is doing very well. But our goal is to achieve financial independence by the time our daughter turns 3. That’s two years from now.
Time to Financial Independence
|Target net worth (how much we need at current spending levels)||$5100000||$204k * 25, 4% annual withdrawal assumption (we’ll cover this later)|
However, based on our current spending levels, we wouldn’t get to that point until 2035. But at least we’ll be able to visit her in college – kids love that! This is assuming our salaries don’t go up. But the BIGGEST assumption is that our lifestyles wouldn’t go up. That is a terrible assumption. There is always a bigger house, always another trip, and always another fancy car to buy.
I’m showing all of this to illustrate a point. We made high salaries, but it wasn’t enough. We let our lifestyle expand. We made a lot 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!