Where Are We Now?

The woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.

– Robert Frost, Stopping by Woods on a Snowy Evening

[ Day 4 of 2000 ]

On Day 1, we talked about how we would need a million dollars to retire. And I announced that we would be doing that in 2000 days. BusyDad was not keen on putting our financial details on the internet because he doesn’t want people to know we are “rich”. I didn’t want it out there because reaching a million dollars in 2000 days will seem impossible once I tell you how much we have right now. Especially when we take into account how long it took us to make what we now have.

Let’s start with a bit of history:

We moved to the USA in early 2014. We did earn and save some before that. But not much. I went back to school for my PhD effectively reducing the years I earned anything. I then proceeded to drop off when GBoy was born. After that, I took a two year break to take care of him. I am glad I did that, but it didn’t help our wallet at all. But all our single income years didn’t really matter, and I will tell you why.

I am pretty sure that you have read somewhere that there are places you could retire on about a thousand dollars a month. Have you ever stopped to wonder how? Things are much cheaper, and your money covers a lot. Before we moved here, we had an awesome life. We had a cook who came in every day(54 USD per month), someone who cleaned the house every day (23 USD per month), someone who would wash our car once a week(5 USD per month), someone who would pick up clean clothes and bring it back ironed (3 USD per month). We lived luxuriously with less than 1000 USD per month – not including our mortgage. We could go back today and not work for another day of our lives. We will not – because of all the health issues BusyDad and GBoy had from all the pollution. We are happy where we are now. Even if that means that I do all the cooking and cleaning while the cars stay dirty and clothes un-ironed.

To get back to topic – The reason everything stays so cheap there is because the salaries are also way less when you compare it with US salaries. Whatever we saved there is peanuts when we bring it here. We still have some property there. After all the taxes we will be paying, we will be lucky if what we saved in 10+ years and the amount we got in rent since then, will reach about 60000 USD. Keep in mind, we were among the best paid, and we saved religiously. I am glad I got to spend those 2 years with GBoy. Even if I had saved everything, it would have been very less. And I wouldn’t have saved it all, a part of it would have gone for childcare.

Essentially, we started from a big fat zero in 2014.

We didn’t have a car, or a credit history. We bought two cars on relatively high interest car loans. We didn’t buy fancy cars – One Honda Accord, and one Honda Civic. But we bought new ones. We didn’t have the know-how or the time to deal with cars breaking down. We paid the loans back as soon as we could. With the interest rates we had, I am pretty sure we paid a lot in interest even then.

A 2 bedroom apartment rent where we live was around 1700 dollars. So we bought a house in less than 18 months. We had a credit history of 18 months and 5% down payment. That meant higher insurance rates and a Private Mortgage Insurance (PMI).

In short, we did everything that all the early retirement blogs tell us not to do. We threw away hard earned money.

Our monthly expenditure was high – We paid 365 dollars per week for child care before GBoy could start school. After that, we were slightly better off. 400 dollars per month so that he could go to all day kindergarten, and 600 dollars per month for extended day at school. We breathed a huge sigh of relief when he reached first grade and it was down to 600 dollars per month. We try to buy organic food, and I don’t do any couponing or use any such money saving ideas. Our food expenses are high. We were planning to work for ever, and didn’t watch where the money went. Anything that could make our lives the slightest bit easier, bring it on – We didn’t stop to think. Money was not an issue.

The only saving grace was that we just didn’t have expensive tastes. We didn’t buy a fancy sports car. We didn’t buy the costliest house we could afford. It also helped that we were too busy to spend – How ironic!

We have an outstanding debt of about 300,000 dollars on our house. Our mortgage is about 2500 dollars a month, about a 1000 of which goes towards principal. If we can pay about 3500 dollars a month, and then pay all our bonuses towards it, we might just barely make it. Right now we have a 5 year ARM, so the interest rates are going to go up in 2020. If the market takes a down turn, our bonuses will disappear. With all our other savings goals, I don’t think we can pay more than 3500 dollars a month. In short, this is a hard ask.

Right now, we have about 160,000 dollars in our 401Ks. By 2023, we can save about 300,000 more. This is how I get that number – If the rules don’t change much, with employer contributions, both of us together can save about 50,000 dollars a year. If the markets behave well, we could get it to a nice 500,000 dollars in 2000 days. It looks scary – we saved 160,000 in 4 years, and we are planning to save another 340,000 in 5.5 years. Scary, but it is doable because our retirement depends on that.

That leaves another 500,000 dollars to make. Right now, we have saved up about 70,000 dollars that we have invested in index funds. We also have about 60,000 dollars that we can bring to the US from our pre-USA lives. If we can invest 5,000 dollars every month, we can get to 500,000 in about six years. If the markets behave well, we could get there slightly early (in 2000 days!).

So there we go. We have 2000 days to go from 290,000 dollars to 1,000,000. And pay off a 300,000 dollar debt. We took about all our life so far to get to 290,000 dollars. Can we make about a million dollars in the next 2000 days? Wish us luck!

We will need all of that luck to make it work.

We are counting on the markets to do its thing. Everyone who knows anything about it says that we will have a recession soon. I don’t know a thing about economics, but the data on past recessions makes me think that it might be true. That would mean lost jobs, lost income, and the value of what we have by then falling by a lot.

We are both software engineers – Either of us could lose jobs any time. And we don’t have to be in a recession for that. However, both of us are highly qualified and extremely good at what we do. I haven’t had an interview so far that I couldn’t crack. Hopefully, we will find a job if we are not in a recession. The lost income in the meanwhile, we will just have to deal with it. We could definitely cut down on our expenses any time! We wouldn’t have to pay for child care or home cleaning if one of us didn’t work.

I am not too worried about the value of everything falling in a recession. We would be in a belt-tightened-penny-pinching state if that happens, and invest more at a discount. That will get us closer to our retirement the moment we are out of it.

In my next post, I will share hardest item – our current expenses, and a budget that I have, going forward.