The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Next in the series is FMF reader MAB. He answered my questions (in red below) as follows:
Tell me about yourself.
I am 35 years old, with my wife of six years being 30 years old. We recently relocated from California to the Kansas City area for family and for overall cheaper costs of living.
Describe your financial situation.
We both hold full-time jobs, myself as a scientist and my wife as a retail banker, and combined have a gross income in the lower six figures which has been stagnant over the past five years. We owe approximately $90,000 on our mortgage, which has 13 years remaining. We purchased the house using money saved up for that purpose while we lived in California, and its value is around $180,000.?
We have no other debt, as student loans have been paid off and our two cars, while both nine years old, still run perfectly and we have no intention of upgrading until repair expenses become an issue.
We are both avid but conservative savers, each fully funding our 401(k) and Roth IRAs in a mixture weighted towards various domestic and international index funds (stocks only comprise around one-third of our retirement portfolio) and treasury securities. In addition, we are able to save some left-over money each year, primarily utilizing I-bonds due to their superior state tax and deferred tax treatment, as well as more competitive interest rates compared to a CD.
Through our work, we both will receive pensions, probably covering around 35% of our current income at retirement. With disciplined saving, we have managed to accumulate around $350,000 in retirement assets and an additional $200,000 in other assets (gold, CDs, and I-bonds), with an additional $90,000 as the equity in our house.
We tend to live a rather simple life, foregoing such commonalities as cable TV and cell phones, and by having insurance with high deductibles.
What financial issues are you facing?
Kids may be a consideration within the next five years, but we are still unsure. We are fortunate to live in an area with outstanding public schools, which is definitely a plus.
Despite our savings, we tend to be very risk averse, which means that our return on investment is poor.? Additionally, neither of our jobs offer? much in the way of additional promotion potential, so as retail prices climb for food, health care, insurance, and energy, we feel our standard of living is falling and will probably continue to do so. Furthermore, both of us love challenges and do feel constrained and perhaps not fulfilled in our jobs (but we?re blessed in this time to have them!!).? We both love to travel, and enjoy a couple of large trips per year (Hawaii, Australia, Caribbean).?
What are your plans for the future?
Ideally, we would love to retire very early (when I reach 50) and do something entirely different in a place we love. It may sound clich?, but we both really love the Big Island of Hawaii, and would love to open up an ecotourism-based business utilizing a telescope observatory (I am a scientist with a passion for space and atmosphere, after all), bed and breakfast, and, of course, Kona coffee plantation. But that is our dream. We would obviously like to accomplish such a feat that is self-sustaining and allows us to enjoy our lives and not worry about money issues.
However, it is clear that I will need to seek more return (and risk) in our investments for that to be a possibility, which is also terrifying to us given the dismal stock returns and volatility of the past 13 years. We may be open to owning rental real estate, as valuations versus monthly return look reasonable in Kansas City currently, but don?t feel we know enough at the current time to make an informed decision, but would like the monthly cash flow. Perhaps we should pay off the mortgage early since we do not have enough expenditures to deduct for taxes, and even at a 3.875% mortgage rate, that is still more than I can routinely get from safe investments.
Does anyone have any suggestions on how to best reach our goals?
What is your best piece of financial advice/general philosophy in personal finance?
Be a contrarian but do what is comfortable for you, and reason with common sense. We refused to buy a house in California during the boom years, despite widespread market commentary that ?real estate only goes up? because seeing such rapid price increases with people camped out to buy their third, forth, and fifth homes seemed unreal. We also purchased gold when it was in the lower $400 range, while it was very unpopular, but have been incrementally selling it recently. Real estate has become the despised asset, so maybe over the next few years will be an optimum time to buy investment properties. Above all, there needs to be a balance between enjoying your life and money while you?re young and saving for the future.
Source: http://www.freemoneyfinance.com/2012/03/reader-profile-mab.html
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