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Our Early Retirement Plan: Where We Are Now (Part 1)

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If you are just starting this, I suggest you start at The Introduction - Part 0

You can't figure out where you are going if you don't know where you are...

My wife and I are each 32 years old. To some degree our finances are separate - we never felt the need to combine them other than opening up a join savings account. I have around $200,000 in assets. My wife has about the same. My money is mostly in a retirement accounts (things like 401Ks, IRAs) and equity in my old home (now an investment property that just about breaks even). Her money is invested in much the same way, but more in mutual funds and money markets than equity (though she does have some equity in the property she had before she met me).

Our Current Income

  • My Wife's Income - She's a pharmacist working with the military. She gets a tax-free housing stipend, which for San Francisco is quite healthy.
  • My Wife's Extras - She is required to travel from time for work. When she does travel she gets money for meals. Rather than a reimbursement system, they simply just give her the cash. If she's frugal with her meals that extra money adds up. She also gets the standard 58.5 cents a mile for her driving. For 20 miles, they'll pay her $11.70. Since that's about a gallon a gas, it's $8.70 to cover maintenance costs. I think we make out well with this.
  • My Income - I make some money from my websites. What I like about this income is that I can do it from anywhere that has an Internet connection. I can also write it at any time. For instance, by the time you read this, it'll be at least a week since I've written it. In addition to this, the start-up business that me and my business partner have is making us each around $2,000 at this point. For a company that's about 5 months old, we are quite happy with it.

Our Current Necessary Expenses

  • Home - We rent our current place. It currently doesn't pay to own in our area. Rents are proportionally cheap. We spend $2075 a month on rent, which may sound like a lot, but it's San Francisco. For the year that's roughly $25,000.
  • Transportation - My wife and I each own our cars outright. My wife gets a free bus pass from her work. I work from home. This makes our gas expenditures extremely cheap. We still have to pay for maintenance and insurance. I would estimate that this is around $5,000 a year, and that might be on the high side.
  • Food - We save a lot of money shopping at military commissaries. I wish this were an option for everyone but it simply isn't. I think we typically spend about $125 every two weeks. That rounds up to about $3,500 a year
  • Utilities - Our Internet and cable prices are pretty standard. We have intro deals with Comcast and save a little money that way. Our cell phone plans are around $40 each for almost everything Sprint has to offer. Our heat and electricity expenses are very minimal - the weather in Silicon Valley is fantastic requiring no air condition and very little heat. Our phone service is a $15 plan with Vonage. Adding all this up, it looks like it's around $3,500 a year (again rounding up)
  • Insurance - We have standard insurance - home, rental. We don't currently pay for any extra life insurance as we don't have any dependents. However, our insurance company, USAA wins awards each year for it's great rates and customer services. It's another military benefit that I wish I could share with the rest of you. The cost for this is insurance is around $2,000 or less for the year. I have to admit that I don't have the actual numbers on this and I'm too Lazy to look it up.
  • Additional Stuff - There's always going to other costs to factor in. I'm probably forgetting more than a few things here already. I'll build in another $6,000 for these miscellaneous things.

That's a rough outlook. I intention didn't want to get too bogged down in the details at this stage. It looks like we spend around $45,000 a year. Our income covers this and leaves us with enough money to build up significant savings.

Last updated on November 1, 2008.

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10 Responses to “Our Early Retirement Plan: Where We Are Now (Part 1)”

  1. Hi Lazy Man,

    Since you live in SF, have you considered going down to 0 or 1 cars and using ZipCar? I’m guessing since your rent is only $2075 that you don’t live in SF proper, so this may not be an option, but it sounds like the two of you don’t really need 2 cars.


  2. I would have thought that part one in this series would be your definition of “retirement.” Some people would consider working on websites from home and an unspecified “start up business” to be retirement. The other part of this is who is planning on retiring – you, your wife, or both? If both, since you have separate finances, who goes first? Do you get to retire on her assets? Vice-versa? Or is it every spouse for himself/herself? Looks like you have some unanswered questions and missing planning steps, right out of the gate. It would be interesting to read how you work these issues out.

  3. Lazy Man says:

    We are in the peninsula (middle of Silicon Valley), but it’s easier to just say San Francisco for those who aren’t familiar with the area.

    We have thought about going down to 1 car. As you mentioned a Zipcar doesn’t really work well in suburbia. The biggest issue is that about once or twice a week, we really need two cars or would have to spend about 3-4 hours trying to plan our trips around the car. That 3-4 hours a week is definitely worth the cost of maintenance and insurance.

    It feels like there should be a solution, but I can’t come up with one. Maybe I can use this to convince my wife that I need a Segway ;-) – nah that won’t work.

  4. Lazy Man says:

    Mr. ToughMoneyLove:

    Shhh, you are giving away the good stuff :-). I had written about a definition of “retirement”, before, but I’m saving that for tomorrow where I talk about my retirement plan in detail.

    The series is going to be both of our retirement plans. As for the timing, I cover that in part 3 to some degree. My wife has 11 years before she’s eligible to retire from the military with 50% of her base pay for life. So that timing is specific to the day.

    For me, the timing is going to be fluid. Maybe I just end up outsourcing more stuff and winding down my responsibilities. In some way, I’ve tested that this week by writing this whole series in a few hours on Friday and Saturday. That matches my definition of retirement quite well.

    While I’m taking each of us separately in parts 2 and 3, it’s mostly for ease of explaining it. It also gives the reader insight into two ways one could “retire” early (again depending on definition). I don’t want to give the impression that this isn’t a team effort.

  5. Lazy Man – Sorry for jumping ahead on you. I’m looking forward to reading the next installments.

  6. Lazy Man says:

    No problem, they were very valid questions. They may still be valid when the series is done. I should have probably outlined all the parts in the Introduction so that people know how I attacked it.

    Early retirement (by any definition) is hard to plan, and the organization of how I present that information could have been better on my part.

  7. Miss M says:

    Do you plan to buy a house in SF in the future, if prices come down? Just curious if your retirement planning figures in owning a home or renting for life. Also I think working a limited amount can still be called retirement, there are a lot of experts out there pushing semi-retirement as a way to live the life you want without the worry of saving a huge nest egg.

  8. Lazy Man says:

    We do plan to buy a house, but we aren’t sure if it’s going to be in SF or in Boston. It doesn’t make much sense to buy in San Francisco now, the rents are proportionally much cheaper than the mortgages.

  9. Hi Lazy Man,

    I feel your pain on both the ZipCar and on owning a house… I live in San Jose, so no ZipCars here too, although my friends in SF swear by them.

    Also, I will definitely agree that owning a house is more expensive than renting — although many from outside California have a hard time understanding this! :) (Happy renter here.)


  10. Tim says:

    if you already own a car and have car insurance, zipcar makes no sense is expensive. it’s cheaper to rent a car. why not get a scooter for SF? but you say your wife gets a bus pass

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