M is for Money

I’ve laid out our early retirement goals and projected the growth of our investments over time to see how much we need to set aside each month to meet our timeline. Unfortunately, we can’t meet our goals on our current income in our current time frame. We’re shy around $1500 per month depending on the economy and the future returns of the market. So what are our choices?

Work Longer

This is the first piece of advice financial experts give when it comes to a secure retirement – work longer. Each year you are contributing to your retirement savings is another year of growth and one less year of living on those savings. If we push out our timeline just a few more years to say, retire by 55, we can meet our milestones without needing more income. Just giving our money a few more years to grow will take care of most of the shortfall. But it’s a hard alternative to stomach when the stress of my job is giving me ulcers.

Scale Back our Plans

This is the choice that most people hate, who wants to scale back their dream? If we can survive on less money then we don’t need to income of two rental houses. The cost to acquire, payoff and maintain two houses is a huge part of our shortfall. Houses in LA don’t come cheap, if we’re lucky the next home we buy (to raise a family in) won’t cost more than $400,000. That is for a modest home in a middle class town, certainly not high style living!

The biggest hole in my plan is the cash needed to refinance our current place and for a down payment on the next. These are goals that must be met soon to make our timeline, buying a new house in our 40’s will make it impossible to retire by 50. But it will be very difficult to come up with enough cash in a short time, we won’t have the magic of compounding or market gains to help. For now I’m sticking with our original plan until I get a better idea, and saving as much money as we can.

Earn More Money, Invest it More Wisely

The final solution is to earn enough money to make up the shortfall. To have $1500 to invest we would need to earn at least $2000 more per month, not exactly pocket change! I have the opportunity to work overtime at my current assignment and I’m taking every hour I can get. But this is only a temporary solution, once this project ends it is unlikely that my next job will be as generous.

Mr. M currently earns very little money, but there are problems to growing his income. We want to start a family in a few years and given our respective careers and earning power, he will most likely move into the role of stay at home dad. Daycare in Los Angeles runs around $15,000 per year for one child, it will be hard for him to earn enough to justify working. Instead we are looking into part time work that will allow him to also do childcare duty in the future. I don’t think his income will ever be enough to fill that gap.

The last option is for both of us to earn some side income, which we’re already working on. The money from surveys, rebates and rewards will help to fill some of the gap. Maybe some day this blog will earn a little to help as well. For now we will work towards earning every extra dime we can since all of it goes to our ultimate goal. Who knows what the future holds, I would still be in debt if I hadn’t landed my current job. I can only hope that similar opportunities will appear and lift us across that finish line.


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