Author Topic: Case Study Me  (Read 2892 times)

kelo11

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Case Study Me
« on: September 20, 2016, 06:57:15 AM »
Life Situation: Naturally frugal but got into MMM about 2 or 3 years ago, single filer, 28yo male, no dependents, live in Washington DC metro with Fiance and two pups. Once married this will change as assets/debts will be pulled together and our NW will change.

Gross Salary/Wages: $94k

Pre-tax deductions:
Employer 401k - $51,000 - Just started maxing this year, has 5% employer match, have it in employer VG retirement funds
Wageworks HSA - $3,100 - Max out for last 2 years but had used some this year for medical expenses, now won't touch it and will pay out of pocket and collect after FIRE - Invested in VDAIX and VSMGX
Vanguard Roth IRA - $11,600 - Opened 2 years ago, max out each year - Invested in VTSAX
Investment totals: $65,600

Current monthly expenses:
Rent (utilities included) - $750 (half of total rent)
Phone - $100 - Need to drop this down but where to start?
Car Insurance - $55
Renters Insurance (required by landlord) - $15
Food - $100 (for 2 people)
Gas - $70
Internet (no cable, total cost) - $65
Alcohol/Bars - $100
Restaurants - $200
Shopping - $150
Misc costs: $150
Total: $1755

Assets:
Cash - $42,000 - Mix of checking and savings accounts, for emergency fund, daily spending, and long term saving (20% home down payment)
Car - $5500 (depreciating asset I know, but I use it as part of my NW calculations)
Misc assessed items of value (mostly jewelry/family heirlooms) - $8600
Total: $56,100

Debts: $0 - Car paid off ($17k), student loans paid off ($40k), reward credit cards used and paid off each month

Savings Rate: Not sure what it is before tax/retirement deductions, but after deductions, I am saving 47% of my paycheck over the last year. Trying to creep past 50%. Love the "every 50% you save is one less year to work" mantra.

NW: $121,000

Specific Questions:
1.) Just looking to see if I am doing things right, and where I can cut back. Going out/Shopping/Cell phone are big drains and I have started to try and cut that back.
2.) What to do with the extra cash I have. The original plan is to keep it as an emergency fund plus my 20% down for a home in the next 4-5 years. I wonder if my money would be better suited in another account other than the 1% Ally savings account it is in now. CD maybe? Should I open a post-tax investment account, or add to the 401k, or leave it as is? We are not in a rush to buy, we enjoy the flexibility of renting, and may be out of the area in a few years, so setting roots is in question.
3.)For my investments, should I be allocating them differently?

Thanks!
« Last Edit: September 20, 2016, 11:38:44 AM by kelo11 »

nereo

  • Senior Mustachian
  • ********
  • Posts: 10049
  • Location: la belle province
    • Here's how you can support science today:
Re: Case Study Me
« Reply #1 on: September 20, 2016, 07:16:32 AM »
Quote
Current monthly expenses:

Phone - $100 - Need to drop this down but where to start?
Google Fi if you go international, republic wireless if you stay in the US - both will offer you plans for 1/3 of what you are paying, including data, texting and loads of minutes.

It's always a bit hard to do a case study when the person's financials are going to change drastically in the next ~year (in your case, due to marriage, combining of NW and debts).
That said, you appear to be doing most things right; maxing out your 401(k), HSA and IRA.  At your salary you'd probably benefit from contributing to a tIRA rather than a ROTH.  Once you are married make sure your spouse is also contributing (it doesn't matter whether spouse has earned income or not as long as one of you does).

One final suggestion; if you haven't already, create your own Investor Policy Statement.  This will help guide you whenever you have an investing decision to make (such as; I got a bonus, where do I put that money?)
good work, keep it up.

Kyle Schuant

  • Pencil Stache
  • ****
  • Posts: 664
  • Location: Melbourne, Australia
Re: Case Study Me
« Reply #2 on: September 20, 2016, 07:29:58 AM »
Yeah, quit drinking so much and start cooking your own meals - $200 of restaurant meals, same ingredients cooked at home, that'd be $50 more on the food bill, net savings $150, plus the booze nixed makes it $250 saved. Or at least drink at home so it's $200 saved.

Prepaid mobile phone - email others and they'll call if they want to hear your voice. If you have home and work internet you don't need it on your phone, you can do without net access for the time you're travelling to and from work, or when you go out, etc. No reason to be spending more than $30 a month on your phone unless it's for your work but then work or tax deductions or whatever will be paying for it.

What is "shopping"? Clothes and stuff? Music? $150 for...?

What is "Misc costs"? $150 for...?

boarder42

  • Walrus Stache
  • *******
  • Posts: 7849
Re: Case Study Me
« Reply #3 on: September 20, 2016, 08:27:34 AM »
phone could be cut in half or less with options already mentioned.  if you had a large family/friends i'd say go to TMobile but TMobile just changed everything, so its not as good anymore. 

you have 600 dollars a month in expenses that dont really need to exist. booze out - restraunts -shopping/clothes - Misc(whatever the hell that is) if you got these 3 categories down to 150 you'd be saving 6k more per year(including phone).  and decrease what you needed to fire by 150k.   that 6k also increases your savings rate by ~7% give or take depending on your taxes.  could cut up to 2-3 years off your FIRE date

if you're paying half rent shouldnt your internet also be half that 130 for internet is high.

kelo11

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Case Study Me
« Reply #4 on: September 20, 2016, 11:44:06 AM »
Edited original post for some clarity.

Groceries: I put it down to $100 since we switch off month to month who pays, so I average $100 per month.

Cell: totally agree and will be looking into new options ASAP.

Booze/restaurants: let me try and  defend myself a bit, in DC, you can easily spend that much (when paying for 2 people) on 3 times out in a month to an average restaurant or bar. Others who live here can attest to that. I'm not saying we can't cut back, but it appears worse than it is.

Cable is total cost, I'm paying that all myself, we were paying $135 but cut cable and are now doing Internet streaming.

Misc spending - I budget for it but don't necessarily spend it, these are unforeseen costs like a medical bill, car part or other item that doesn't fit nicely into other columns. Totally up to chance what it might be spent on.

Shopping - also agree, I don't shop much, but budget for a new shirt or pants for work if needed, or other hobby item (outdoor and range gear mostly). Again, budget it but don't always spend it.




Sent from my iPhone using Tapatalk

boarder42

  • Walrus Stache
  • *******
  • Posts: 7849
Re: Case Study Me
« Reply #5 on: September 20, 2016, 11:57:24 AM »
Edited original post for some clarity.

Groceries: I put it down to $100 since we switch off month to month who pays, so I average $100 per month.

Cell: totally agree and will be looking into new options ASAP.

Booze/restaurants: let me try and  defend myself a bit, in DC, you can easily spend that much (when paying for 2 people) on 3 times out in a month to an average restaurant or bar. Others who live here can attest to that. I'm not saying we can't cut back, but it appears worse than it is.

Cable is total cost, I'm paying that all myself, we were paying $135 but cut cable and are now doing Internet streaming.

Misc spending - I budget for it but don't necessarily spend it, these are unforeseen costs like a medical bill, car part or other item that doesn't fit nicely into other columns. Totally up to chance what it might be spent on.

Shopping - also agree, I don't shop much, but budget for a new shirt or pants for work if needed, or other hobby item (outdoor and range gear mostly). Again, budget it but don't always spend it.




Sent from my iPhone using Tapatalk

just b/c "i live in a HCOL so i spend alot on booze and restraunts even though its only a few times a month" that doesnt get you away from the amount youre spending on it for what gain exactly.  esp. booze you have gas listed.  so now you're paying a super premium rate for alcohol and you may be driving after ... lots of great ways to decrease spending in this category if you really wanted to. 

and having a budget for something usually means you feel better spending up to that ... so quit the crap categories and figure out what you actually spend on clothes and misc then cut that in half and make that your budget.  or just try to not buy things at all til you absolutely need them.  or do what i do make deal alerts on slickdeals and buy one new shirt and pair of pants a year when a certain brand or style you know will last comes up for like 4-5 bucks each.  you can buy 150 dollar slacks and dress shirts for under 10 bucks if you shop the right way.

kelo11

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Case Study Me
« Reply #6 on: September 20, 2016, 11:59:42 AM »
Also, any insight into my investments? What about my cash reserves? Stick with what I'm doing or open a different account?

I'm curious about the TIRA versus Roth IRA... Can you explain why this suits me better? Always heard for for Roth over T IRA for younger people.


Sent from my iPhone using Tapatalk

kelo11

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Case Study Me
« Reply #7 on: September 20, 2016, 12:40:19 PM »
Edited original post for some clarity.

Groceries: I put it down to $100 since we switch off month to month who pays, so I average $100 per month.

Cell: totally agree and will be looking into new options ASAP.

Booze/restaurants: let me try and  defend myself a bit, in DC, you can easily spend that much (when paying for 2 people) on 3 times out in a month to an average restaurant or bar. Others who live here can attest to that. I'm not saying we can't cut back, but it appears worse than it is.

Cable is total cost, I'm paying that all myself, we were paying $135 but cut cable and are now doing Internet streaming.

Misc spending - I budget for it but don't necessarily spend it, these are unforeseen costs like a medical bill, car part or other item that doesn't fit nicely into other columns. Totally up to chance what it might be spent on.

Shopping - also agree, I don't shop much, but budget for a new shirt or pants for work if needed, or other hobby item (outdoor and range gear mostly). Again, budget it but don't always spend it.




Sent from my iPhone using Tapatalk

just b/c "i live in a HCOL so i spend alot on booze and restraunts even though its only a few times a month" that doesnt get you away from the amount youre spending on it for what gain exactly.  esp. booze you have gas listed.  so now you're paying a super premium rate for alcohol and you may be driving after ... lots of great ways to decrease spending in this category if you really wanted to. 

and having a budget for something usually means you feel better spending up to that ... so quit the crap categories and figure out what you actually spend on clothes and misc then cut that in half and make that your budget.  or just try to not buy things at all til you absolutely need them.  or do what i do make deal alerts on slickdeals and buy one new shirt and pair of pants a year when a certain brand or style you know will last comes up for like 4-5 bucks each.  you can buy 150 dollar slacks and dress shirts for under 10 bucks if you shop the right way.

I don't if someone pissed in your Cheerios this morning or if you're just a condescending person, but how about you cut the "keyboard tough guy" shit. And the fact that I own a car, pay for gas for said car, and drink, I'm a drunk driver? That's a pretty bold fucking statement my friend. Or was it because of the arbitrary order of my monthly expense places gas near bar spending? Nevermind the fact that I live a block from a stop on the number one public transit system in the nation, or that I can walk to over a dozen restaurants or bars within a half mile. So why don't you do what this thread is for and give useful advice and spare me your condescending assumptions. I won't go into why the fact of the matter is you don't know who I am or what I do for a living that makes your whole statement absurd.

But you have me pegged. I budget for unknown expenses so therefore I spend that money, just because I can. Well, I'll just have to go ahead and disagree with you there.




Sent from my iPhone using Tapatalk

nereo

  • Senior Mustachian
  • ********
  • Posts: 10049
  • Location: la belle province
    • Here's how you can support science today:
Re: Case Study Me
« Reply #8 on: September 20, 2016, 01:15:52 PM »

I'm curious about the TIRA versus Roth IRA... Can you explain why this suits me better? Always heard for for Roth over T IRA for younger people.

Briefly, a tIRA generally wins out whenever your current taxable income is higher than your anticipated expenses in retirement.  Because your salary is $94k and you are on this forum it's highly probable that a tIRA will be the better choice for you.  A very popular strategy is to contribute to a tIRA in your accumulation (working) years while your income and tax bracket is high, and then convert some or all of those funds to a ROTH once your income drops.  This is known as the ROTH conversion ladder.


However, it's always best to do some reading and decide for yourself.  A few useful links:
https://www.bogleheads.org/wiki/Traditional_versus_Roth
http://www.gocurrycracker.com/roth-sucks/
http://jlcollinsnh.com/2015/06/02/stocks-part-viii-the-401k-403b-tsp-ira-roth-buckets/

nereo

  • Senior Mustachian
  • ********
  • Posts: 10049
  • Location: la belle province
    • Here's how you can support science today:
Re: Case Study Me
« Reply #9 on: September 20, 2016, 01:23:02 PM »
@kelo11. There's a tradition around here of giving virtual "face punches" for anything that seems higher than it needs to be when someone posts a case-study.  It can be bruising to the ego, but generally it's all meant to get people to be more critical of their spending. You are free to accept or reject people's suggestions about areas where you can cut.  Some are more upfront and critical than others, which isn't necessarily a bad thing.
Ultimately, what matters is whether the things you are spending on improve your quality of life.  For some, spending $100/mo at clubs is worth the money and the extra time spent earning that money.  For others, they prefer to spend 1/3rd as much mixing drinks at home or abstaining entirely.   If working an extra few months of your life is worth a few dozen nights spent in bars, so be it.

kelo11

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Case Study Me
« Reply #10 on: September 20, 2016, 02:21:02 PM »
@nereo I fully understand face punching. I have done it to myself in recent years (student loans and financing a used car to name a few) and fully expected it. Restaurants and bars included I fully understand cutting back and plan on it entirely. What I do not take kindly to is generalizing comments linking have a car and drinking, drawing the conclusion that one drinks and drives. I took it as a low personal attack. For all boarder42 knows, my brother or mother was killed by a drunk driver. Those types of comments and sweeping generalizations no matter how innocent should not be tolerated. End rant.

But thank you for explaining why a TIRA may be better for me and providing reading material. I truly appreciate it.


Sent from my iPhone using Tapatalk

ashfo

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Location: Northern Ontario
Re: Case Study Me
« Reply #11 on: September 20, 2016, 02:23:08 PM »
I don't think he was upset about the face punches about his expenses so much as he was at the insinuation that because he drinks and owns a car that he might drink and drive.  I was a little taken aback too at that comment, and would be offended as the OP seemed to be when he read the comment.  Just because you drink and own a car doesn't mean you are going to do them at the same time, and its an offensive use of "logic" to suggest that is the case.

nereo

  • Senior Mustachian
  • ********
  • Posts: 10049
  • Location: la belle province
    • Here's how you can support science today:
Re: Case Study Me
« Reply #12 on: September 20, 2016, 02:38:05 PM »
@nereo I fully understand face punching. I have done it to myself in recent years (student loans and financing a used car to name a few) and fully expected it. Restaurants and bars included I fully understand cutting back and plan on it entirely. What I do not take kindly to is generalizing comments linking have a car and drinking, drawing the conclusion that one drinks and drives. I took it as a low personal attack. For all boarder42 knows, my brother or mother was killed by a drunk driver. Those types of comments and sweeping generalizations no matter how innocent should not be tolerated. End rant.


Got it.  wasn't entirely sure but i also wasn't trying to justify/defend anyone either. Just providing an partial explaination.

Also - glad you found the links to tIRA vs ROTH helpful.  There's a ton of additional discussion on this if you care to search "ROTH vs tIRA/traditional"

Bracken_Joy

  • Walrus Stache
  • *******
  • Posts: 8756
  • Location: Oregon
Re: Case Study Me
« Reply #13 on: September 20, 2016, 02:49:25 PM »
I don't think he was upset about the face punches about his expenses so much as he was at the insinuation that because he drinks and owns a car that he might drink and drive.  I was a little taken aback too at that comment, and would be offended as the OP seemed to be when he read the comment.  Just because you drink and own a car doesn't mean you are going to do them at the same time, and its an offensive use of "logic" to suggest that is the case.

+1. I was pretty shocked at that comment. Really not a useful comment, in addition to being unkind. Face punches are one thing. Baseless accusations with no potential for contributing to the conversation? Not cool.