Author Topic: Bare Naked: Budget and Accounts for Your Review!  (Read 7477 times)

MilStachian

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Bare Naked: Budget and Accounts for Your Review!
« on: October 11, 2013, 10:41:50 AM »
All,
I appreciate everyone in this community trying to help one another.  Hereís a snapshot of my financial picture.  Just wanted a third-party opinion on how weíre looking.

My wife and I are both 27, and we both work.  We have a 2 year old and a 3 month old.  Iím in the military, so unfortunately my duty station isnít in what we would consider an optimal community for a mustachian lifestyle.  We live off my income and my wifeís goes directly into investment accounts.  Weíre working on improving our savings rate.  Groceries, electricity, and the cell phone plan are in our sights for refinement.

Bottom Line:
Net Income: $8400/mn
Expenses: $4253/mn
Investing: $4020
Month Savings Rate: 48%
No debt. 

Investments and Savings:
Emergency Fund (cash): $5,000
Kid 1 (2 y/o) 529: $33,000
Kid 2 (3 mns/old) 529: $14,500
House Fund: $85,000
My Roth IRA and TSP: $47,000
Wife Roth IRA and TSP: $63,500

Net Income: $8400/mn

Expenses:
Rent: $1300
Child Care: $1500
Groceries: $550
Cell Phone: $160
Fuel: $160
Internet: $68
Electricity: $200
Natural Gas: $30
Water: $25
Insurance: $100 (life, renters, cars)
Eating Out: $60 (normally less)
Misc: $100
Total Spending: $4253

Investing:
5% of our gross pay goes right into our TSP accounts
Roth IRA: $920 ($460 for my wife and I each month)
Kidsí 529 accounts: $100 ($50 each)
Housing Fund (saving for our first home): $2500
Total Investing: $4020

gecko10x

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #1 on: October 11, 2013, 12:03:16 PM »
Investing: $4020
Month Savings Rate: 48%
No debt. 

Fantastic! Keep it up.

The only comment I have beyond that is that your electric bill seems high. Do you live somewhere particularly hot and/or have a very large house?

Numbers Man

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #2 on: October 11, 2013, 12:08:56 PM »
Keep up the good work!

bo_knows

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #3 on: October 11, 2013, 12:12:59 PM »
Investing: $4020
Month Savings Rate: 48%
No debt. 

Fantastic! Keep it up.

The only comment I have beyond that is that your electric bill seems high. Do you live somewhere particularly hot and/or have a very large house?

It does seem a tad high... but somewhat minor compared to their savings rate.  We have electric heating, and since our son was born have had someone in the house pretty much 24/7 (so, we can't turn it down/up to conserve when we're at work)... and it's usually a MAX of $200 for a 1500sqft townhome. I think the average is $130ish? 

Either their house is much larger or their electricity rate is much higher, since I'd guess their children are in daycare.

gecko10x

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #4 on: October 11, 2013, 12:34:01 PM »
Either their house is much larger or their electricity rate is much higher, since I'd guess their children are in daycare.

I hadn't even considered the daycare thing; they should be able to get this lower I think.

As another data point, we have a 1900sqft house that is all-electric. Our average for the year is around $100 @ $0.10/kwh, with someone home all the time. We are in a relatively temperate climate in WV.

MilStachian

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #5 on: October 11, 2013, 12:57:48 PM »
Everyone, thanks for the great replies!

I'm currently stationed in southern Arizona, so the electric bill the last few months has been high with the AC running.  We keep the house cool for our dog, and since it's a rental there's not much we can do for inefficiencies.  HOWEVER, we've definitely recognized that with some smarter programming of our thermostat we can bring the bill down significantly.  When averaged over a year we spend closer to $145.  I also just purchased a Kill-A-Watt electricity usage monitor to help me identify additional drains.

Also, since coming across MMM last month, my wife and I are reducing how much we use the electric clothes dryer.  I wish we had come across that article months ago during the pinnacle of Arizona heat!  In retrospect, very silly using a clothes dryer when we've got this great natural resource overwhelming us. 

Spudd

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #6 on: October 11, 2013, 01:08:47 PM »
Overall you're doing amazing, a 48% savings rate is fantastic.

The one area of opportunity that I can see is the cell phone. $160/mo is a lot of money. You should be able to reduce that.

dragoncar

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #7 on: October 11, 2013, 01:55:50 PM »
You seem to be doing well.  I'm sure you can use the various techniques we discuss here to really push the envelope (line drying, more cycling, make your own xyz), but nothing stands out to me as crazy except:

What does your wife do?  I'm assuming the numbers work out for daycare, but that struck me as a bit high.  But I don't have kids so I can't really say.

MilStachian

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #8 on: October 11, 2013, 02:15:01 PM »
Thanks for the encouragement everyone.

My wife is an architect with net pay of $4000 a month. 

Day care is stupid expensive, although it's mostly because of my infant.  Once he turns 1 y/o, the cost should come down about $300 a month.  Infants are more expensive because there can be fewer infants per caretaker, so they need more folks to cover the same number of children.  Once kids are toddlers the ratio goes up so the cost goes down.

Eric

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #9 on: October 11, 2013, 02:21:09 PM »
This is a small thing, but $68/mo for internet is a lot.  Find your local competitor's current offers.  Call your current provider.  I bet you can knock $20 off that monthly bill with very little effort.

aj_yooper

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #10 on: October 11, 2013, 02:47:51 PM »
MilStachian, you and your wife are doing very well!  Your savings rate for young parents is outstanding.  I love the no debt part. 

I would consider loading up on the deferred accounts more than the Roths to reduce taxes; in general, I would now put more into your retirement accounts so time can be your ally there.  Your emergency fund is fine as you have a bunch in your house fund.  I am sensing ?? that you want a big down payment so you can lose the mortgage eventually, which sounds good.  Does your wife qualify for a HSA?  If so, they are a sweet spot for tax deferral. 

Groceries, phone, and internet could be tighter.  I hope the Kill-A-Watt helps out.

Good job!


willn

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #11 on: October 11, 2013, 02:54:22 PM »
Looks great. A bit of shaving here and there as others mentioned.

Next big decision will be your house.  Buying in military when you can be moved can be tricky. Usually the rule of thumb I suggest is you'll want to be in a house 4 years or more to buy.  Lots of military families buy and then end up owning two or renting on three states away while they try to sell a house they have little equity or are upside down in, which can be emotionally restrictive and costly too.

CDP45

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #12 on: October 11, 2013, 06:38:45 PM »
Dude you are way overfunding your college funds and underfunding your TSP- your kids can borrow for college if they want, you can't borrow for retirement. Also think about your exit employment opportunities, wars over they are downsizing like cray.

MilStachian

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #13 on: October 11, 2013, 08:12:25 PM »
Everyone, thanks for the great replies.

Willn, my wife and I don't plan on purchasing a home while I'm in the military.  I'm looking to leave the service by the end of 2015.  It's been a great ride, but it's time to put down roots for my family in a nice community.  Once we've found a place to live, then we'll search for a house.  Definitely hoping to have a significant down payment saved up by then.

AJ_yooper, thanks for the ideas about managing the money to minimize tax expenses.  It's definitely an area I need to learn more about.  Can you recommend any books or websites that could help me get spun up on the topic?

CDP45; first, love the name.  45 is the only way to go.  I'm not too worried about downsizing in the military; I'm fortunate to have been recognized above my peers for promotion.  But as I mentioned, I'm looking to leave active duty shortly.

I will give you my logic on the college funds; my time horizon for my kids going to college is 18-20 years.  I figured that if I began with a larger principal at the beginning of the investment period (18 years), I would actually need to contribute less over the 18 years than if I broke up my payments into smaller monthly chunks to get the same future value. 

Now that I'm hooked on MMM, my retirement horizon has shortened quite a bit, but to be honest, I'd delay ER a few years if it meant I could get my kids through college. 

I actually just asked this same question regarding the 529s in the Investor Alley forum.  Basically, everyone agreed with you, CDP45, that my wife and I have saved enough and should just let it ride.  http://www.mrmoneymustache.com/forum/investor-alley/kid's-529-when-is-enough-enough/new/?topicseen#new

Our TSP is a little bit lower than we would like because we've decided to allocate more of our disposable income to our 'housing fund'.  My wife and I will set a target for the down payment, and once we reach that we'll up our TSP allocation.

Melody

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #14 on: October 11, 2013, 08:49:17 PM »
You are doing really well but childcare is eating you alive! Would a nanny be a better option? Perhaps share the nanny with another military family? Also the cell phone.... Try Boost Mobile prepaid... unlimited minutes and quite a lot of data.
Other than that you guys are awesome!

aj_yooper

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #15 on: October 11, 2013, 09:06:56 PM »
401k , 403 b, 457s are all mechanisms to shield income from taxes.  Your wife and you probably have the options with your jobs.  Roths are for money after taxes-good, but not quite as good.  Use the same concept as front loading the 529s. 

smedleyb

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #16 on: October 11, 2013, 09:26:10 PM »
I would like to see more of that housing fund money going into a taxable Vanguard brokerage account with fixed monthly contributions, but other than that, that's a great savings rate. 


MilStachian

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #17 on: October 13, 2013, 09:30:27 AM »
Thanks everyone.  I've picked up some reading that will help me better understand how to optimize my situation.

Smedleyb, I should have said so in the beginning; my housing fund is indeed in a taxable Vanguard account invested across a variety of funds.  My timeline for purchasing a house is 2-3 years, so I won't cash it out until I get a bit closer to the date.  Even if some crazy market fluctuations came my way, I wouldn't be totally bummed about the account losing value.  I would ride it out until it recovered and then throw it at the mortgage.

Melody, you're right, child care is a monster.  The average for the area I'm in a for a toddler and an infant is about $500 a week, so we're actually getting a bargain with $375 now.  For sure we'll keep looking for ways to reduce this.

mpbaker22

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #18 on: October 14, 2013, 01:17:56 PM »
Fuel (presumably car gas?) seems high.  Where are you driving, and possibly more importantly, what are you driving?

Cell phones are ridiculously high.  You should be able to knock nearly $100 off that.  Ask if you want info on what to get, but there's already many threads on that topic.

The Bearded Bank Builder

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #19 on: October 14, 2013, 03:26:07 PM »
Make sure to check out http://the-military-guide.com/ for any military-specific finance questions. It's a blog written by "Nords", a member of the MMM forums.

oldtoyota

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #20 on: October 14, 2013, 08:09:08 PM »
My advice is to see if you can reduce your cell phone bill. Using Airvoice Wireless, I got my bill down to $10/month.

IP helped me. His website is http://www.techmeshugana.com/ and has a lot of info about cell phones and plans, etc.

farmstache

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Re: Bare Naked: Budget and Accounts for Your Review!
« Reply #21 on: October 15, 2013, 12:03:21 AM »
As for childcare, lots of people in other threads suggested looking for a neighbor SAHM that would take care of the kids. It's quite possible you can get another military's wife or someone from your wife's network. Or maybe rotate between a few people every week (taking care of 4-6 kids).