$234k/Year + Wants to Retire EARLY | Millennial Real Life Budget Review

Dual income, no kids, dual income, no kids. This is a sweet spot. Okay. And I have a couple who are making $234,000 a year and they want to retire early. I cannot wait to get into this with you. Hey guys, it's Justine. Welcome back to the Debt Free Millennials channel. And welcome back to another episode of Millennial Real Life Budget Review. Here we go through a real millennials budget. We review their income, their expenses, their hopes, their dreams, their financial struggles. And in return, they get some free financial advice from yours truly and some recommendations on what next steps to take. So let's hop into this application because I was very excited to see what was going on with this particular couple. All right. All right. All right. So the first question I asked was, what do you do for work? This person says I'm self-employed. I own two businesses, a dog photography business and a dog daycare boarding business. We are dog lovers. You guys, they probably shouldn't say dual income, no kids because they got fur babies. Their annual salary before taxes and deductions. This is a new question that I started to ask because I'm like, wait, I really truly want to know what we're looking at here. This person said $234,000. They live in Atlanta, Georgia. The biggest thing that they are struggling with financially is planning for early retirement. Just trying to figure that out. Their top two to three financial goals they want to accomplish is to buy a new car in one to two years and reach my fire number in five to seven years. It sounds like they know what that fire number is. Although they did not share that they have zero debt. They have over $38,000 in savings for an emergency fund. And the budget is for them and their wife, no children. I am 38, an elder millennial, if you will. So I want to hop over into their budget and show you exactly what their expenses look like. So the latest budget that they sent me was they had plan on a $7,857 monthly income. They actually for this month brought in a $12,420 and 94 cents. The 12,000 actually feels more in alignment with the $234,000 salary. So I'm curious why you're planning on such a low income month, assuming it's because you own your own businesses and the business revenue can fluctuate from month to month. So maybe that's it. I'm not sure what your wife does. So there's a little bit of unknowns there, but killer income month, $12,000. They have a mortgage payment of $1,770. It includes $370 per month set aside for annual property taxes, cell phone and internet paid by the business. Bravo. Love that. So that's not included here. They did include medical bills and prescriptions. They planned on $250. They only spent $41 here. So it seems like this might be a good sinking fund and probably what that is is sinking fund of like $250 just for medical bills, pet insurance of 119 electricity was three 50, but actually $479. So either they live in a really big house or it's Atlanta and it's hot groceries. They budgeted for $700. They actually spent 600. Wow. You guys do a lot of driving $650 in gas. That is insane. That is insane. I can see why you want to retire early so that you don't have to do so much traveling and commuting. You've got car maintenance of 250. Wow. 125 for car insurance. Okay. Homeowner's insurance of 150 per month home. I'm assuming like home repairs, home maintenance of 150 vet expenses of three 50 a month. They spent $1,600 in this area. So I would advise, and if this is already set up as a sinking fund, great. I would advise a pet emergency fund for emergency vet visits. I'm telling you this has saved other people in the past. In fact, I have a coaching client that I'm working with where we are actively building a pet emergency fund for her and her animals, because it happens, especially as your animals get older, you're going to be doing more vet visits. So that's something to consider. And that's something that I would do restaurants. You're budgeting $800. You actually spent 571. So it looks like you guys really like to eat out. You don't have any debt. Um, let's see how much of this is a like portion of your actual income. Cause this $800 is a lot, but compared to the 12,000 that you brought in percentage 6%, not bad. You know, we, you want to look at budget percentages according to the government, which we all know the government has their ideas and opinions are always just spot on for my life. What I found is that they like to look at about like a 7% of your annual income going towards restaurants. So knowing this is a looking at a monthly scale, you're actually not doing too bad here. Um, shopping clothing, nothing for haircuts could probably add that in. If you want to do fun money subscriptions, like all of your fun money stuff looks really, really good. Got a hundred bucks in a buffer. And then you've got $350 going towards a new car, fully funded emergency fund, fully funded vacation fund to $10,000. Um, amazing. And then I was asking a little bit more about their mortgage and then their investing situation because they had talked about fire fire is financially independent, retired early fire is when your net worth is equal to 25 times your annual expenses, not your annual income. How much you are actually spending per month and then spending in a year's time on your expenses. That is when you can achieve fire. That is when according to the fire experts out there, and I love fire. I don't consider myself like gung ho fire person just yet. Maybe I will. It's definitely something I'm interested in fire. When you get to that level, you can, you have the option to leave your job and then live off of the 4% rule with your investments. That is if you withdraw 4% annually from your investments, it is at a safe withdrawal rate in such that you won't run out of money during your retirement years. It gives you permission and allows you to retire earlier than the traditional age of 65. Now, a lot of people opt for getting part-time jobs, even though they're technically retired. They also opt for part-time jobs that they've been passionate about or have fun doing just as a way to kind of bolster the withdrawal that they're taking from their investments, or just a way to maybe withhold some of those withdrawals and still work for fun because work can be fun. So I thought, obviously I'm not doing a debt reduction calculator here. There's no debt, but I thought it would be fun to plug in some of their numbers in projection lab and see what is happening because they have a lot in retirement accounts here. And, uh, let's just see, let's just have some fun. Okay. So this is projection lab. You've probably heard me talk about it in a couple other videos, but I thought I'd profile it here. This is a financial planning simulator tool in which you can plug in all of your numbers. So what you would do is you'd go over here to current finances, and there's a whole walkthrough where you can add these as you set up your profile, but you can go through and update all of your savings. And I just did this very quickly. So I'm sure they're going to want to relabel some of these things, all of their savings, all of their investments, real assets, what they own, any secure debt, and then stuff about them. Now I didn't get their birth month and birth year. So I just set it to the default of January, 1990. Obviously you're going to want to keep that as accurate as possible because your net worth and your investments are going to grow at certain times of when you're alive. And we want to know what age we're going to be when we hit these milestones. So what's cool about projection lab is it is not linked to any of your financial institutions. So there's no secure, like two factor authentication you have to go through. There's no chance of a data breach because even if somebody were to log into your account, all they're seeing is numbers. They don't have usernames or passwords or any of that stuff. Your data is truly your data. Also there's no backend financial advisor selling component, making you work with a financial advisor, just like empower tries to do none of that. This is just for you. So I plugged in all of their numbers and then that plotted a little data point here that shows, okay, they have a net worth combined of about 1.7 million. They have 1.9 million in assets and they owe about $263,000 on their house. But here's where it gets interesting because I put together a financial plan for them. You can actually do multiple plans if you want. So you can do a new plan starting from today's date, and then you can create and go through this, this Q and a basically like setting up the milestones. They want to achieve financial independence. If you want to add a different milestones here, such as getting married, starting school, maybe you want to have a gap year, different types of fire, which actually, uh, the software developer gives you different links to different articles where you can learn more about lean fire, coast fire, fat fire, if they decide to have a kid. But honestly, you know, dink life I've been there. It is amazing. It is a place you want to be and that you want to be for a while. So I'm actually going to go back out into this plan cause I already plugged in their numbers and you can see their net worth just skyrocket over time. Okay. So they have these little milestones plotted on their progress chart that shows by age 50, they have paid off their house mortgage. And by age 60, if they were to truly retire at age 60, then they would have a net worth about 6.8 million. But honestly they're hitting fire, the fire life at age 37. That is if they are technically 34 now, I have no idea. So what that's in three years. And I'm pretty sure they said they want to hit fire between five and seven years. You're going to hit it because even if you're not actively contributing, and that was one of the things you can go over here to cashflow priorities. I said that you wanted to buy a car for $35,000 in cash. So that's going to happen very soon. That's going to happen next year. I can also add another priority that says we want to take that 401k and we want to maybe max out your contributions. So we can say amount in today's currency, and then we can set that for, and set that for the max contribution of 23,000. I'm not sure if there's any employer contributions. So I could just leave that as zero and then see what happens. That actually does increase your net worth because your end of plan here, the end of the plan is set at 85, but come on, you're going to be living until you're a hundred. If you are actually like amazing humans that I think you are. So a hundred, whoa, this just continues to go on $62 million net worth. That is insane. Now this plan in this calculator is only as smart as the information that we feed it. We need to feed in other things. Like I put your living expenses as 5,200 a month based off of what was inside of your budget, but there are going to be other things that are going to be going to pop up in your life such as healthcare costs could definitely go up. Um, let's say that you want to buy a cabin in the woods, you know, those types of things are, and you can add that as a real asset here. And what's cool about this is you can actually add this. Let's say I want to buy a $350,000 like cabin on the lake. And we're going to do this. I don't know by the time we reach 42, that's not going to do anything. Okay. You're still going to be mega millionaire by the end of your life. You're still actually a multimillionaire by the time you purchase this, this cabin. And what's cool about this is you can also deactivate that to see how that changes things. So I can reactivate it and see how it pushes things around. And I can take it off. Also the little scissors icons here are the start of the RMDs or the required minimum distributions for some of those retirement plans. So specifically looking at your 401k, if you have not withdrawn on those accounts, by the time you reach age 75, the government says, Hey, we want our fair share and you got to pay your taxes because the 401k has been, you know, tax deferred all this time. So time to pay up. That is what that is. Chances are you're going to be withdrawing on that much sooner, but FYI. So there's that we can change your retirement date. Obviously this is when you're hitting fire, but you could also continue to work. Like I was saying, you could do part-time you could add in. And I don't even think I added in your annuity because I needed to add it as a custom actually as a pension income is what I wanted to do it as. So the annuity was 118. They have $118,314. And we can start that at retirement. Yeah. I mean, it's only going to get better, right? It's only going to get better. I think for you guys, it's continuing to max out the retirement vehicles that you currently have. So if I'm going back to your investments, that's maxing out the 401k maxing out your Roth IRA. However, because you guys are making $234,000 combined, make sure that your modified adjusted income, make sure your modified adjusted gross income. If you are married filing jointly for your taxes is less than the $240,000. You're right at that cusp right now. And so it's just something to watch and be mindful of as you make more money in your business, as you increase your salary. So very good on the Roth IRA. You can max that out $7,000 a year. It's going to go up next year, probably likely you've got taxable investments of 631,000. Now this is why fire is so key for them because they can actually withdraw from the brokerage account at any time. So they could actually play this to their advantage and withdraw from the taxable brokerage account first, and then let that 401k and Roth ride. And they've got, they've got this other one here. What's the 89, seven. Oh, the a hundred percent employer sponsored plan. So that's included as well. I think, I think there's, you're not struggling to hit fire. Let me tell you, you're actually, according to this plan, you're going to hit fire much faster than five to seven years. As long as nothing like major catastrophic happens, but that's why you have your fully funded emergency fund in place. You know, you got 38 K there. You're going to hit, um, a $35,000 savings, uh, next year for your car. I mean, you could buy an awesome car for 35 K. If you wanted to do even more, you can, because if I'm looking back at your budget, you got three 50 going in there per month. You could, and you've got 500 going towards the brokerage. Oh, nice. Very good. You could reduce. I mean, if you wanted, if you wanted to, you have so many options, you could reduce maybe restaurants, you know, groceries. That one is a hard one to try to lower unless you magically happen to live next to an Aldi, just like I have done recently. And it's just, it is a magical, magical place where you save a ton on groceries. And I've lowered my grocery bill significantly since shopping there. But if you wanted to, I think those would be two big items. The gas is probably unavoidable. If you are commuting for work, my only thing would be, is if you used that car fund money to buy an EV. And if you bought an EV, then that would save a ton, even a hybrid, even if you could get a hybrid, I think that would do really well in your favor in terms of gas gas and maybe even lower your car insurance. I loved looking at their budget because this couple has it going on. They're doing so well. It just shows like when you prioritize the right things in your life, and I'm not sure if they ever had debt at any point or how financially well off they were before they started the fire endeavor, regardless, they have been smart with managing their money and being smart about what they want in life, which is to leave their jobs early as quickly as possible. I mean, we're talking about the next three years, really. And I would encourage them to really look at planning ahead of like, what do you want to do when you are no longer obligated to go to a job? What would your day look like? Are we talking more travel? Are we talking about getting into new hobbies or even picking up a part time job that you're passionate about? Those are some of the things that in conversations you might have with your wife to figure out exactly what's going on and how you want to spend your time. Well done, you guys, if you would like your budget reviewed for free on the channel anonymously and get some advice from yours, truly fill out the Google form below. The more details you give me, the better. Also, I prioritize those that use my budget toolkit spreadsheet. It's much faster for me to get through the reviews because I know exactly what I'm looking at. If you like this series and you continue to love it, be sure to give it a big thumbs up and I'll catch you in my next episode.