Author Topic: Case Study - Good Income but High Food Expense and Limited Tax Deferred Savings  (Read 7292 times)

Monocog

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Life Situation: 31, DW 37, Child 2

Gross Salary/Wages: $8,500 take home pay per month

Pre-tax deductions: My 401k, limited to 2% with 1% match because of company policy for HCE's and non-discrimination(opts for way too much safety there), insurance is 100% company paid, DW 7% to retirement account, maxed.

Post Tax Savings: $500 per month each to Roth, $500 to savings account, quarterly clearing of anything left in checking to brokerage account(Roths finally maxed this year!).

Current expenses: $5500-$7000, $6600 average

Mortgage: $1800, 12 years max left on 15 year, considering paying $2000 to shorten period

Regular Bills: $800-$1200 per month made of $350 Student Loan, $125 Electric+Gas, $75 Water/Sewer, ~$400 medical per month, sometimes more(autoimmune disease), $60 gym, $60 internet (need fast connection for work), $50 phone

Gas + Car Repair + Insurance: $300

Capital Expense: I allow $400 per month for house repairs and car savings

Clothes: $100 per month

Food: $1,200-$1,500 (gluten free for autoimmune disease, mostly organic, almost all fresh, 1-2 restaurants a month)

Household goods/diapers: $100-$200

Misc: $800 per month (Vacations to out of state family, early childhood classes, dog food and vet, bike and running races(Cat 1 Bike), beer and wine)

Nanny: $600 Per Month (DW works full time from home)



Assets: Traditional IRA $30k, Roth $7k, 401k $5,000, $40k in home equity, own two older cars outright, $10k cash savings, $4k vanguard brokerage

Liabilities: $7k student loan at 3% and 6%, 50/50 allocated

Specific Question(s): We have recently paid off some major student loans and credit card debt (6 figures combined) and are starting to really get our feet on the ground for retirement savings. However, I feel like we make way too much money to only save 20% of our income.

I have listed all of our expenses, in the manner that I track them month to month. The two glaring issues that I see are food expense and the fact that my 401k is capped at 3% total.

Since DW and I participate in qualifying plans, we are limited to Roth IRAs instead of traditional, based on income as well. Are there any other options? Our retirement expenses vs current income definitely make tax deferral preferable.

As far as food cost, DW has an autoimmune disease that limits gluten, plus several other grains, and we eat a largely fresh diet, with a fresh vegetable and poultry or fish each night. We also go through about 5 dozen cage free eggs each week ($5 each). On top of this, we eat lots of nuts, fruit, and coffee. How do people eat a high quality, restricted diet on a budget?

Are there any other glaring issues that could be addressed? I would love to shorten our working careers by a large amount, and going from 25% to 40%+ would help greatly. I'm looking to increase our "defense" as opposed to working more. I want to be FIRED by 50

norabird

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Would a CSA cut those food costs? I'd also say there's no need to spend $100 a month on clothes.

Mother Fussbudget

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At a minimum, I would put your laser focus on killing that $7K student loan. 
Once it's dead, save that $350/month.

SilveradoBojangles

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We eat a fresh, mostly organic diet in a very high cost of living area, and we spend $500 a month on groceries for 2 adults (which includes ~$50 alcohol). We also like nuts, coffee, etc. We spend $24 a week on a CSA subscription, and then plan our meals around that. Caveat - we are not gluten free, so we occasionally make our own bread and eat pasta ~2 times a month, but gluten is not a mainstay of our diet. We do eat oats, which I can't remember if they have gluten. We keep prices down in the following ways:
  • Lots of meals based on beans, lentils and legumes, both cooked and raw (as sprouts)
  • You mentioned a limited ability to eat grains, but rice, quinoa, amaranth, and polenta may be options for you
  • Buying seasonal fruits and vegetables if we need to supplement our CSA box
  • Minimal meat - maybe once a week? We eat fish more frequently, which includes low cost things like tilapia, clams, and sardines, as well as high end items like salmon or sushi grade fish a couple of times a month
  • Buying in bulk when possible (Costco), mostly Trader Joes for the rest (very affordable)
  • Buying almost no processed/snack foods. I make my own granola, and popcorn is a frequent snack of ours, as are fruit, veggies and hummus, nuts, etc. Tortilla chips and chocolate are about the only junk we buy, and those only occasionally
  • Buying green coffee beans and roasting our own coffee. This has been a huge savings for us, we were spending $14 on a 12oz bag and going through about 5-6 a month. I just ordered 5 pounds of green beans for $30, and that will last us about 6-7 weeks
  • Cooking large meals and taking leftovers for lunch
 

A typical shopping list for us (this morning's, actually):  eggs, bananas, olive oil, greek yogurt, grapefruit juice, milk, half and half, onions, carrots, garlic, string cheese, tofu, polenta, walnuts (all veggies, dairy, and nuts are organic). This was ~$45 at Trader Joe's.

Paired with our CSA box (this week it's green beans, lettuces, sweet peppers, persimmons, pomegranates, cabbage, and greens totaling 7 pounds), and the staples we have on hand in the form of dried, canned, or frozen (just a few - bacon, shredded cheese, some tomatoes I roasted earlier this summer) items, most of which were bought in bulk or on sale, I've planned out our meals for the next week.

At some point during the month we'll do a big shopping trip and stock up on those staples I mentioned (and spend about $120 doing so), but I would say that the $50/week is average for our weekly maintenance shop (not including the $24 CSA).
« Last Edit: November 03, 2015, 06:26:57 PM by SilveradoBojangles »

mandy_2002

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Mega Back door Roth - There are details in many places (like the forums or Mad Fientist), but you need to check some things first. 
1.  Does your company allow after tax contributions (non Roth)?  These contributions do not count toward your limit, and you've got a lot of wiggle room, since the government limit for all 401k contributions between employer and employee is $53,000 I think.  (I know several highly compensated employees at my company doing this.)
2.  Do they allow in service roll over of these after tax contributions?  (My company denies in service roll overs, but allows non-tax-advantaged in service roll-overs twice per year.)

When you put this already taxed money into the 401k, you are allowed to roll the principal into your Roth IRA, making it tax advantaged.  I believe that any growth can either be taxed and rolled over to the Roth IRA or put into a Traditional IRA without being taxed.  My 401k provider charges something like $25 to do this, however the tax advantages it provides are worth it for me.

(The proposed 2016 budget closed this option, however these changes did not yet make it any further than proposed.  They will definitely work until the end of 2015, and most likely still be around at least through 2016)

cchrissyy

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She works at home - is it self-employment?  If so, the Simple IRA or solo 401k could be useful.


Your food costs are wild!  you're worse than this guy : )   Read this thread for how thye turned it around. tons of good advice from other healthy eaters.

http://forum.mrmoneymustache.com/welcome-to-the-forum/i-need-help-from-fellow-frugal-healthy-eaters-groceries-are-killing-us!/msg787941/#msg787941

PS - did you say $5 per egg?! and you eat 60 per week! omg, get chickens!

ShoulderThingThatGoesUp

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So you put a lot of effort, thought, and money into what food you bring into the house...and then two times a month you go out to eat at restaurants? Are you thinking that through? You know they just cook everything next to everything else, right?

Mother Fussbudget

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Mega Back door Roth - There are details in many places (like the forums or Mad Fientist), but you need to check some things first. 
1.  Does your company allow after tax contributions (non Roth)?  These contributions do not count toward your limit, and you've got a lot of wiggle room, since the government limit for all 401k contributions between employer and employee is $53,000 I think.  (I know several highly compensated employees at my company doing this.)
2.  Do they allow in service roll over of these after tax contributions?  (My company denies in service roll overs, but allows non-tax-advantaged in service roll-overs twice per year.)

When you put this already taxed money into the 401k, you are allowed to roll the principal into your Roth IRA, making it tax advantaged.  I believe that any growth can either be taxed and rolled over to the Roth IRA or put into a Traditional IRA without being taxed.  My 401k provider charges something like $25 to do this, however the tax advantages it provides are worth it for me.

(The proposed 2016 budget closed this option, however these changes did not yet make it any further than proposed.  They will definitely work until the end of 2015, and most likely still be around at least through 2016)
+1.  Great advice.

Monocog

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She works at home - is it self-employment?  If so, the Simple IRA or solo 401k could be useful.


Your food costs are wild!  you're worse than this guy : )   Read this thread for how thye turned it around. tons of good advice from other healthy eaters.

http://forum.mrmoneymustache.com/welcome-to-the-forum/i-need-help-from-fellow-frugal-healthy-eaters-groceries-are-killing-us!/msg787941/#msg787941

PS - did you say $5 per egg?! and you eat 60 per week! omg, get chickens!

Sorry for the confusion, they are $5 per dozen, and it adds up to about $70 per month. We go through 4-5 dozen a week, so assuming average hens, we would need about 20-30, not really feasible.

The work from home is in online education, and the qualified plan that we participate in is capped at 7% of salary and kind of sucks for investment variety.

Monocog

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I also saved all receipts from September and finally got around to putting it into a pivot table to show how much of each item we eat. Here are the heavy hitters, 2/3 of the total:

sweet potatoes    $150.57
almond butter    $74.24
eggs    $65.95
chicken    $65.21
Restaurant    $57.99
berries    $55.26
Nuts    $55.10
bananas    $42.39
fish    $41.17
greens    $38.91
yogurt    $36.42
vitamins    $29.57
cheese    $28.08
dates    $27.33
apples    $26.45
kombucha    $23.54
coffee    $23.50
turkey    $22.92

Almond butter was crazy because sams had it on sale and we stocked up, but we go through a container a week, so it isn't far off. That is the first thing to get removed.

Sweet potatoes are a staple, and we bought 80 lbs in bulk. Almost a daily item for at least one family member for at least a single meal. Sept was high, but that is the true cost. Incredible.

At $0.99 per pound for organic bananas, we are looking at 40 lbs! We don't throw a single one away either.

I can honestly say that there is less than 1% food wasted for spoilage in our house.

Bringing up the argument of organic vs standard is nearly a fighting point. Organic is higher quality/nicer looking around here, but costs 30% more. DW is "convinced" that organic food is better, while I couldn't care less. She insists on organic for veggies/fruit, antibiotic/hormone free for poultry, and wild caught for fish. I enjoy the quality, but the cost is bothersome.

Monocog

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So you put a lot of effort, thought, and money into what food you bring into the house...and then two times a month you go out to eat at restaurants? Are you thinking that through? You know they just cook everything next to everything else, right?

This is closer to one time a month, and only when we are out of town with no other option. It takes a while to pick a good restaurant too...

ShoulderThingThatGoesUp

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I think you can cross vitamins off the list too unless a doctor has told you to take one. You're eating an extraordinarily (some might say extravagantly) varied and rich diet.

I don't even know what kombucha is.

norabird

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Your food seems pretty reasonable given your constraints--or at least, like it won't be budging. You're not buying convenience foods, which is great. So start by focusing on household goods, misc, and clothes. Those are low hanging fruit and it's easier to go without there than in food. Maybe do fewer races, or lower cost ones? Find free classes for kids at the library, etc?

At a certain point, if you're fine with your spending, it's not an issue, but you say you want to cut back, so some things will need to go.

mm1970

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If you are going to be "picky" about what you eat, it will be harder to bring down your food costs.   By "picky" I mean organic, free range, and fresh.

Does your food bill include the nanny?

My recommendations for bringing down the food bill (these are generic):
1.  Figure out how to get what you currently buy, cheaper.  Your bulk buy of sweet potatoes is a good example.  Build a price book, and do this with all of the heavy hitters.  My neighbor shops and eats much like you (and spends $2k a month on food).  She buys free range chickens from a local farm at the farmer's market, and gets a free one once in awhile because of it.  This may mean:
- talking to farmers about bulk meat buying.  And bulk egg buying.
- Checking out "other sources" for other foods.
- Price checking different stores
- bulk buying things like nuts

2.  Figure out how to make what you currently buy.  This would be things like hummus, yogurt, etc.  Cook your own turkey instead of buying cooked turkey.  Wash lettuce and kale instead of buying bagged, for example.

3.  Figure out the cost per meal or cost per item.  Then increase the rotation of the cheaper items.  For the gluten-free part - list the things she *can* eat, and how much they cost.  Rice, beans, quinoa, potatoes, etc.  So a typical meal is, say, chicken and vegetables.  Can you make a stew instead, for cheaper?  Bean and chicken stew.  If the "chicken and vegetables" dinner is $20, and the bean stew is $5, eat the bean stew more often.  I love fish!  But we only eat it about 2x a month.

The same goes with fresh fruits and veg.  This has helped me decrease my bill in half this year.  I love strawberries, but only buy them in season and/ or on sale.  I calculate the cost per fruit.  That means more bananas and oranges and grapes in my region, fewer apples and pears.  Cost per item.

4.  Rethink the organic.  Aim for organic for "dirty dozen" only.  Consider CSA/ local instead of organic.  Consider frozen fruit or vegetables on occasion.  (A few times a week?)

5.  Do not waste food.  Eat everything you make.

In order to drop my bill this year, I've had to do all of these.  And I've had to find new sources of food - new grocery stores that are smaller, less convenient, and out of the way.  So I have to go there FIRST to see what's good and a decent price, THEN move on to the other stores.  So I shop at 5 places each week (and probably a total of 8 stores overall).  I'm interested in quality also, so if it doesn't look good, I don't buy it.

We eat a lot of similar things to you, but I am on track to spend about $100 a week this year, or about $5200.  I think a big difference is the frequency in the rotation of the expensive items.  I'm not willing to give up wild salmon, avocado, and nuts.  But I eat wild salmon sparingly (sometimes canned), I measure out 2 Tbsp of nuts for my salad, and we generally only have 2-3 avocados a week.  During the season (which ended early this year because of the drought) I get plenty of greens and fresh organic veg from the CSA.

garion

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I also saved all receipts from September and finally got around to putting it into a pivot table to show how much of each item we eat. Here are the heavy hitters, 2/3 of the total:

sweet potatoes    $150.57
almond butter    $74.24
eggs    $65.95
chicken    $65.21
Restaurant    $57.99
berries    $55.26
Nuts    $55.10
bananas    $42.39
fish    $41.17
greens    $38.91
yogurt    $36.42
vitamins    $29.57
cheese    $28.08
dates    $27.33
apples    $26.45
kombucha    $23.54
coffee    $23.50
turkey    $22.92

Almond butter was crazy because sams had it on sale and we stocked up, but we go through a container a week, so it isn't far off. That is the first thing to get removed.

Sweet potatoes are a staple, and we bought 80 lbs in bulk. Almost a daily item for at least one family member for at least a single meal. Sept was high, but that is the true cost. Incredible.

At $0.99 per pound for organic bananas, we are looking at 40 lbs! We don't throw a single one away either.

I can honestly say that there is less than 1% food wasted for spoilage in our house.

Bringing up the argument of organic vs standard is nearly a fighting point. Organic is higher quality/nicer looking around here, but costs 30% more. DW is "convinced" that organic food is better, while I couldn't care less. She insists on organic for veggies/fruit, antibiotic/hormone free for poultry, and wild caught for fish. I enjoy the quality, but the cost is bothersome.

Do you really go through 80 lbs of sweet potatoes in a month?? If so, I'm impressed!

Other food things:

- You could switch to frozen organic berries if you've been eating fresh out of season
- We do bulk meat purchases to save money, but I don't know if that works for chicken. My MIL occasionally will do some sort of co-op/group order for wild salmon, so that might be a thing.
- You could look into making stuff like kombucha and almond butter yourself. Not sure how much you'd save with almond butter though, almonds are also expensive. Honestly that's part of why I switched back to natural peanut butter, but I'm assuming your wife can't eat that.
- A garden might also be a good idea if you're set up for it.

You could also look up the dirty dozen and clean 15 lists for buying organic, if you think there's a chance your wife will be okay with buying conventional produce on the clean 15 list. Sweet potatoes are on the clean 15!

birdie55

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You are a great candidate for Costco.  You might want to check Costco in your area and see if they carry the food your family eats. 

Last week I paid $9.99 for 10 lbs of organic sweet potatoes, $1.99 for 3 lbs of organic bananas and $6.49 for 24 organic eggs.  They also carry organic apples, grapes, frozen berries, chicken and almond butter....etc. 

I find Sam's club has few organics compared to Costco, but what both carry locally depends on where you live. 

zephyr911

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OH my fucking god! Nothing to add... good inputs provided already.

mandy_2002

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- You could look into making stuff like kombucha and almond butter yourself. Not sure how much you'd save with almond butter though, almonds are also expensive.


You would definitely need to do a cost benefit analysis for this, but almond butter is about as easy as it gets:  Place almonds in heavy duty blender/food processor - Turn on - wait.  That's it.  It will eventually reach the consistency of almond butter.  There's no better way to regulate what's going into your body than to make it.

FLBiker

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I don't know where you live, but here in FL you can very easily grow sweet potatoes.  I do it casually, but I could easily get a couple of 100 lbs every summer.

2Birds1Stone

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Yikes! Good to see some sound advice.

You have come to the right place for facepunches!

Your grocery budget alone is our entire non housing expense for a couple in a HCOL area.

There has to be a way to cut that by 25-50% almost instantly!

Aside from that I think if you trim other areas bit by bit you will be in a great place soon enough! Depending on interest rate I would avoid paying more on the mortgage than you need to.

MoonShadow

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https://www.omlet.us/

The only thing I have to add, is that you guys are seriously good candidates for your own small chicken coop.  Might be a great project for the kid when s/he is a bit older.  In the meantime, find a more local source for your cage free egg habit.

cchrissyy

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where are you?

Where I am, bananas are $0.19 each at Trader Joes.   That's not organic but I can't be convinced to buy organic for something that has such a thick peel. Buy organic for the "dirty dozen" only


another good tip was to buy frozen berries when they are out of season, not the expensive fresh berries shipped from afar. And, when they are IN season, buy in bulk and freeze your own for next year.

perhaps you can get better egg prices in bulk. 2 weeks at a time is 10-12 dozen... try costco? direct from a farm?

backyardfeast

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Yup.  If you really do want to take your food quality this seriously, and you don't want to spend $1000+ per month, it's time to cut out as many middle-men as possible, and start DIYing.

Don't know if you have space to garden, but a CSA in some places (costs seem region dependent) could save you money.  Otherwise, Costco for nuts and other bulk items (price compare with other bulk food stores in your area), direct-from-farmer meat and egg sales, a chest freezer for buying bulk, in season, direct from farmer or co-op, and then DIY the rest.  Finding farms that use organic or better methods but that aren't certified can save lots, too.

DIY means make your own yogurt, butter, kombucha, other ferments like sauerkraut and pickles, bone broth.  These are all SUPER simple to do and really are designed to be done for free with surplus farm supplies.  It makes me so sad when we pay huge amounts of money to buy them now boutique-style!  It makes NO sense to spend $23/mo on kombucha when it's a tea bag and a couple of tablespoons of sugar! :)

Then, above posters are right: figure out what your cheaper meals are in the rotation, and make more of those (soups, stews, curries, rice and beans, etc) and fewer of the other things.

Good luck!  And ditto about the vitamins.  Unless you've got a specific deficiency that a doctor has prescribed these for, they're not worth the money.

garion

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Also, I don't think anyone has said this directly, but you should definitely be buying whole chickens if you aren't already. They are usually a much better deal, especially compared to the boneless skinless chicken breasts.  You can use the meat for a number of meals and then make broth from the bones. We also buy thighs sometimes as those are usually not too expensive.

Monocog

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Thanks for all of the replies. If I were easily offended by people questioning our ways, this would NOT be the place to ask! I am looking to change, and there is some easy gains to be made. Lots of small gains can really help.

We live in the far north of the midwest, and the growing season ended a month ago, even with this warm year. I have a garden that is 20'x40', but I need to grow the things we actually consume. This year was heavy on tomatoes and green beans, but neither are really a staple, so I could have done better. Definitely doing potatoes next year, we have sandy soil and some veggies don't do well. I will likely expand next year, I have another 20 sunny feet to stretch it. However I still doubt I can grow more than 5% of my annual food, it is more of a fun hobby. Learning more every year.

On the same note, we did a CSA last year but the price vs quantity was comparable to the grocery store. I think the farmer wasn't the best, so I'm going to shop it over the winter and get a referal for which CSA is the best. They are all done for the year now. I'm a little jaded after not getting my money's worth last year. Farmers markets get way better value, but are unfortunately done for the year.

Raising chickens is not really an option, the city limits it to 5 birds, which would make a dent, but the payoff of the coop and food would take a long time to pay off, and not eliminate the expese.

I need to look into making yogurt. It seemed too occasionally purchased to be significant, before compiling the data. That would be $400 a year, and making more would replace other potentially expensive food. I started brewing kombucha last month, instead of buying. Way easy and worth it. These combined have potential to cut $70 per month, significant in my eyes. Almond butter will be substituted with peanut butter, usually $4/LB for freshly ground, vs $8 LB for bulk almonds to grind.

The idea of looking local for bulk purchases of eggs and whole chickens seems like it could be a good one. Buying 10 birds at a time isn't out of the question, if the price is right. They are usually $8 each from a store, so the value is already there, and it can only get better. That is currently $1500 per year, so I'm sure someone local would love to supplement their income with my business.

I need to educate myself better on where organic is beneficial. It would make for a more educated discussion instead of using blanket statements of one being better than the other.

I wish there was a costco closer than 100 miles away. Sam's is the warehouse store in town, and the selection is good, but not great, maybe 25% of our fresh food and 80% of bulk ingredients are from there. It also kills me a little to support Wal Mart, not enough to stop going there though. Shopping around to several stores seems like a hassle, but at our spending level, it could pay off. Better analysis is needed. It is hard to get to the store more than twice a week, since we both work full time, and shopping is lower on the priority list than spending time together and with our child. We prefer a big trip on the weekend and a fill up trip for fresh items mid week. The time/cost is something to look at, with busy schedules during the week.

Putting a cost on each meal that is made is a good idea. I think we can discover a few regulars that cost less and make them more frequent.

While still high by standards here, I have an intermediate goal of $800 per month. From there, we will assess and see if anything is lacking and where additional improvements can be made.


Monocog

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PS, in Sept I am pretty sure we ate the entire 80 lbs of sweet potatoes. I was training and racing a ton, and had a lot of days with them for lunch and dinner. Bike racing burns a huge amount of calories when there are frequent races. This is an area I am winding down some, definitely less racing next year, more time at home, less food and entry fee expense. Bike racing is unmustachian, even if done "frugally". I feel frugal with my 5 year old bike that is worth $1500, and it is a little sickening to see people my age with a current model year $5000 bike, who will turn around and do that again next year. I race semi pro, so people are good, but not good enough to get free bike.

I could start a whole thread in the Wall of Shame forum about bike racing, there are so many people who are addicted to the gadgets that give marginal to no gains in performance. Plus people will do 2 races each weekend, all spring, summer, and fall.

The misc category will feel the benefit of cutting back and prioritizing, since racing makes an estimated 25% of that category. It is not something I want to give up though, since I am very passionate about it and it is by biggest social outlet.

Monocog

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Mega Back door Roth - There are details in many places (like the forums or Mad Fientist), but you need to check some things first. 
1.  Does your company allow after tax contributions (non Roth)?  These contributions do not count toward your limit, and you've got a lot of wiggle room, since the government limit for all 401k contributions between employer and employee is $53,000 I think.  (I know several highly compensated employees at my company doing this.)
2.  Do they allow in service roll over of these after tax contributions?  (My company denies in service roll overs, but allows non-tax-advantaged in service roll-overs twice per year.)

When you put this already taxed money into the 401k, you are allowed to roll the principal into your Roth IRA, making it tax advantaged.  I believe that any growth can either be taxed and rolled over to the Roth IRA or put into a Traditional IRA without being taxed.  My 401k provider charges something like $25 to do this, however the tax advantages it provides are worth it for me.

(The proposed 2016 budget closed this option, however these changes did not yet make it any further than proposed.  They will definitely work until the end of 2015, and most likely still be around at least through 2016)

I am capped at 2% pre tax, with the company matching 1% of my wage, due to being part of the "Highly Compensated Employee" or HCE group of employees. We have few participants in the 401k, and conservative HR, so to remain compliant for non-discrimination, they have to cap HCE's at a very low amount so we don't exceed the non-HCE group. I believe that this includes post tax contributions as well. Non Discrimination of Qualified Retirement Plans is a pain in the ass, since you don't know the amount until they year is completed. It is also tough to rock the boat on this one with my company, 401k is not a priority for most employees, high and low earning. Even if we could go to the max allowed to be compliant, based on last year, I would be still under 5%, all moot points because HR limits me.

Your company likely has a higher limit for HCE's due to higher participation in the 401k by non HCE's.

In the next few years, when the school age years start, I will expand my side tax business from the occasional income that it is, to something low 5 figures and do an Simple IRA or Individual 401k for all of that, but that is all future income. I am looking for benefits to shelter from taxes now, since my retirement expenses will allow for much lower income that what we have now.

Am I missing a product for tax deferral if 401k has a low cap, and I am disqualified from Traditional IRAs?

This is a good learning experience for me, to say the least.

charis

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PS, in Sept I am pretty sure we ate the entire 80 lbs of sweet potatoes. I was training and racing a ton, and had a lot of days with them for lunch and dinner. Bike racing burns a huge amount of calories when there are frequent races. This is an area I am winding down some, definitely less racing next year, more time at home, less food and entry fee expense.

Wow, thank god you mentioned this.  I was thinking, that is A LOT of food!

I have complained many times about our situation, but yours seems much worse.  I have no retirement accounts through my employer.  We have our IRAs, an HSA, and my husband's 403b. I have been researching other options to no avail.

mandy_2002

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Mega Back door Roth - There are details in many places (like the forums or Mad Fientist), but you need to check some things first. 
1.  Does your company allow after tax contributions (non Roth)?  These contributions do not count toward your limit, and you've got a lot of wiggle room, since the government limit for all 401k contributions between employer and employee is $53,000 I think.  (I know several highly compensated employees at my company doing this.)
2.  Do they allow in service roll over of these after tax contributions?  (My company denies in service roll overs, but allows non-tax-advantaged in service roll-overs twice per year.)

When you put this already taxed money into the 401k, you are allowed to roll the principal into your Roth IRA, making it tax advantaged.  I believe that any growth can either be taxed and rolled over to the Roth IRA or put into a Traditional IRA without being taxed.  My 401k provider charges something like $25 to do this, however the tax advantages it provides are worth it for me.

(The proposed 2016 budget closed this option, however these changes did not yet make it any further than proposed.  They will definitely work until the end of 2015, and most likely still be around at least through 2016)

I am capped at 2% pre tax, with the company matching 1% of my wage, due to being part of the "Highly Compensated Employee" or HCE group of employees. We have few participants in the 401k, and conservative HR, so to remain compliant for non-discrimination, they have to cap HCE's at a very low amount so we don't exceed the non-HCE group. I believe that this includes post tax contributions as well. Non Discrimination of Qualified Retirement Plans is a pain in the ass, since you don't know the amount until they year is completed. It is also tough to rock the boat on this one with my company, 401k is not a priority for most employees, high and low earning. Even if we could go to the max allowed to be compliant, based on last year, I would be still under 5%, all moot points because HR limits me.

Your company likely has a higher limit for HCE's due to higher participation in the 401k by non HCE's.

In the next few years, when the school age years start, I will expand my side tax business from the occasional income that it is, to something low 5 figures and do an Simple IRA or Individual 401k for all of that, but that is all future income. I am looking for benefits to shelter from taxes now, since my retirement expenses will allow for much lower income that what we have now.

Am I missing a product for tax deferral if 401k has a low cap, and I am disqualified from Traditional IRAs?

This is a good learning experience for me, to say the least.

I learned more about the option of doing this from a person that is limited because he is an HCE.  You should specifically ask your benefits department about it (the HCE I spoke with worked with and learned he was eligible from the CFO of our rather large company).  This is not the same as a Roth 401k, which does have the same limit for HCE.  This is not a widely used practice, but it is completely legal, and should not be affected by your HCE status.  The issue may be that after-tax non Roth contributions are not done by your company, but this should be verified by you, not assumed.

You could also invest after tax money in a traditional IRA (non-tax advantaged) and immediately roll it into a Roth IRA (a regular back door Roth).  You are disqualified from taking a tax benefit from a traditional IRA, you are NOT disqualified from investing in one, and a roll-over to Roth is so common that my Vanguard account had a button that I could push to do the roll over immediately after my investment posted.

TomTX

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I don't know where you live, but here in FL you can very easily grow sweet potatoes.  I do it casually, but I could easily get a couple of 100 lbs every summer.

I had a couple get forgotten last winter and so I planted the mass of sprouts in the spring on a whim. Got almost a 5 gallon bucket of sweet potatoes when I dug it up today. Admittedly we're looking at ~20% wastage due to some insect damage, but still...

pbkmaine

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With the amounts you are eating of certain items, I am a bit worried that you are not getting enough variety in your diet. My understanding is that eating too narrowly can make autoimmune issues worse. Why so many eggs?

JRA64

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I'm also GF, and for digestive issues a few years back found the GAPS diet (www.gaps.me). This diet is supposed to be helpful for autoimmune diseases; it really helped me. The bone broth soups, and the homemade probiotics (yogurt and kefir) made a huge difference for me. For example, I'm not sure how you are preparing your chicken, but save all bones, joints etc. Put them in a soup pot for a couple of hours (crock pots are wonderful). Fish out the bones and other parts you don't want to eat, add some spices, meat if desired, and some veggies and cook until the veggies are tender. When you refrigerate it, it should gel. The higher fat, the collagen is very healing for the gut; and fat has a lot of calories which helps to feel satisfied, and helps fuel all of the biking. I'm familiar with that sense of wanting to eat everything in sight - usually means my body need some high quality fat.

As I felt better, I started questioning all of the organic produce (I won't tell you what my food bill was when I started; but I was at the point I would do whatever it took to start feeling better). I've transitioned to only buying the dirty dozen organically. Vitamin Cottage / Natural Grocers -  maybe not in your area? - often has the cheapest organic vegetables. My traditional store is also carrying a lot more organic items. I'm good at remembering numbers, I keep track of who has what cheapest and shop accordingly.

Since getting more serious about my own food bill, I've started stocking up on items when they are on sale. With the kind of costs you're mentioning, I'd start buying fresh veggies in bulk while in season and freezing them. If they're headed for soup anyway, the change in texture doesn't both me. Freezing works well too for meat and berries and even pomegranate seeds. My mom used to freeze milk - I've not tried that one. I bought a bunch of red peppers and dehydrated them. I started making my own soup stock https://www.cooksillustrated.com/recipes/8204-vegetable-broth-base.

I make my own yogurt and kefir. Kefir is really easy, once I started making it I quit buying probiotics which was another big savings. I've stayed with organic milk for kefir but switched to conventional milk for yogurt.

For berries, start doing the survey at https://driscolls.co1.qualtrics.com/SE/?SID=SV_5towCJkmquraK9v&. Coupons start at 50 cents per survey, I'm up to $1 per survey. Check to be sure you're getting coupons for the US; for some reason mine were for Canada only but customer service got it straightened out.

I'm also questioning if you are disqualified for Traditional IRAs. You can't deduct your contributions, which is what the income limits apply to, but I think you can still contribute. You'll need to fill out a form 8606 with your taxes which you use to keep track of non-deductible contributions.

Good luck! And please share the other tips and tricks you find.