Author Topic: Case study: New mustachian in McMansionVille  (Read 15803 times)

suburbandad

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Case study: New mustachian in McMansionVille
« on: June 27, 2014, 12:14:20 PM »
Hello,

I have recently converted to Mustachianism. I took the usual route here: Got a very good-paying job immediately out of college, got married, bought a McMansion and new car for the wife, had a kid, got extremely stressed and realized my lifestyle needed a whole lot of face punches. I started reading the well-intentioned but weak-willed advice columns on the mainstream finance websites, but hungered for more control than the 40-year-career retirement plan they advocate. After voraciously reading "Your Money or Your Life", ERE, MMM, Mad Fientist, JLCollins, etc, I feel I have a pretty good grasp on the basics and a decent plan but I'm putting this out there for advice and also to keep myself accountable. I'm 27 years old and I know I have a long way to get to bushy mustache-level but I'd like to think I'm doing much better compared to my fellow millienials.

 I'm working on increasing my Mustachianism and have a few unique circumstances, so bear with my ER-lite philosophy for now.
 My first non-mustachian circumstance is that I actually rather enjoy my McMansion in the suburbs and will not consider moving. It is extremely well-placed near the great bike path system in the town, schools, grocery store, and only 2 miles away from my parents and 6 miles from my wife's parents (extremely convenient babysitting). The neighborhood is full of friendly young families that we have quickly developed a great bond with. It was a new build, and while I now wish we had saved up for a bigger down payment and/or reduced the square feet and fancypants upgrades, I don't regret the decision overall.

 My second non-mustachian circumstance is that my dear little 1-year old was recently diagnosed with type 1 diabetes, which greatly improves my reliance on employer health plans. If we went private with the current options in our state the premiums/out-of-pocket costs would be devastating. We also plan on having a couple more kids to eventually bring the total family size to 5.
I accept that keeping the house and creating more adorable children will greatly increase the number of years I have to work, so take it easy on me.

Current financial picture:

Income
: $135,000 salary as your friendly neighborhood pharmacist, bonus/holiday pay/stock options usually amounts to $6000/yr. Wife is SAHM for foreseeable future, especially with kiddo's medical needs.

Debts:

259,000 Fixed rate mtg @ 4%
 13,300   Car  @ 3.55%
  5,700    Student loans @ 6.55%

Assets:
Liquid:
8,000  - Ally savings acct- emergency fund (Would like to get this to ~12,000)
5,500  - Vested company stock options. Don't have the spare change to buy-and-hold for tax savings right now, but also nervous about risk.
46,000  - 401k - 95% in low-cost index fund, 5% diversified bond fund
6,000   - Roth IRA - currently in Vanguard target fund, going to switch to VTSAX once possible
3,000   -Vested ESPP
4,200   - 529 plan

Not liquid:
320,000  McMansion (my best reasonable estimate - bought at 305,000 in 2012)
  15,000  Wife's car (I know, I know, dumbest financial move of our young lives) - it's a fuel-inefficient Jeep Patriot that we will rapidly outgrow and need a minivan
    5,000  My manual Mazda 3 which I plan on driving into the dirt
And a whole mcmansion full of consumer crap that I can't justifiably call assets. We're working on simplifying, I promise.

Current savings plan:

17,500 Max 401k (employer matches 5%)
  6,500 Max HSA
  5,500 Max Roth IRA
  2,800 ESPP (15% discount with 6-month look-back)

$400/month into emergency fund until satisfied

Monthly take-home and expenses:
+6000  = 2 x biweekly paychecks    (we've previously used the 2 'extra' paychecks for home-improvement projects and vacations, but dear wife promises that future extra checks and bonuses will be used to knock out debt)
+350 - currently have a sister-in-law renting out one of the McMansion bedrooms

-2100   - mtg - 1310 PI, 112 PMI, 50 ins, 25 HOA, 603 property tax  (I can see all your mustaches falling off your faces in shock right now, I'M SORRY, OK?)
-350     - wife's jeep
-122    - student loan
-450    - Roth
-150    - 529 plan
-1100  - groceries/medical supplies  (Brutal, I know. This is the result of many compromises between the Mrs. and I to reduce our eating-out costs while still having fancy pants food. Also, insulin for kiddo and trying to feed a 1-year old diabetic on a shoestring budget is impossible)
-250    - Gas/electric/water/sewage
-140    - Cell phone
-110    - Cable / internet   
-200    - Car insurance/ maintenance, gas
- 70   - Gym/ pool / zoo memberships.
-50    - my personal entertainment fund
-600  - happy wife, happy life fund. Again, result of many compromises. This is her home-improvement, hobby, kid clothes, etc all-in-one discretionary budget.

This means I still have some discretionary money to throw around even before I go ultra-mustache. Currently putting $400 per month into emergency fund and had been using remainder for extra principal payments on mortgage - I really wanted to knock out PMI, at least. But now I'm rethinking to use that money on a spousal IRA (deductible) or other after-tax investments. Looking for advice here.

Short term Mustache plans:
Easy to do:
1. Decrease personal clown car habit. Picked up a nice 70's Schwinn Suburban for $20 at a garage sale and found I rather enjoy biking. It's an old POS but it gets me from point A to B. I'm working my way up to using it for almost all in-town errands. Looking to upgrade via Craigslist to a bike I can reasonably take to work.
2. Decrease cell phone bill - Currently on family plan for Verizon with a small work discount, but really looking at Republican plans once contract is up.

Not so easy to do:
Going to take some convincing of the wife-
1. Decrease wife's clown car habit - we agree that the jeep is a fiscal nightmare but can't agree on what next step should be. I'm looking at a 2004 Odyssey and she's looking at a 2014 Town & Country, so obviously we got some things to work out. At least she's open to increasing bike usage.
2. Cut the cable. I love my sports channels and wifey loves her silly shows.

Mid-term Mustache plans:

- Develop skills/side hustle/passive income. Many options here, contemplating rental properties.
- Increase savings rate in general

That's the basics for now. I will write again soon regarding a couple dilemmas
1. At work, do I climb the evil corporate ladder for mo' money, mo' stress, but quicker FI vs taking the more leisurely scenic route?
2. In a fancypants suburb where you're more likely to see a Lexus/BMW than a Toyota, how do I sell frugality to family and friends?

Let me know where I most need face punched and if you have any thoughts, especially on the classical debt-paydown vs investing situation. I constantly grapple with where to put my hard-earned dollars to best effect. Thanks!

SunshineGirl

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Re: Case study: New mustachian in McMansionVille
« Reply #1 on: June 27, 2014, 12:38:04 PM »
Welcome!

I relate to many of the things you mention, such as staying in a neighborhood that's got expensive home prices because of non-financial factors and having the main breadwinner plan to continue to work while still embracing the MMM lifestyle.

Here are a few thoughts that jump out:

1. Become the guy in the neighborhood who bikes everywhere and plans no-cost activities to inspire your neighbors. Outdoor movie nights, tricycle parades, etc. People will appreciate it, and it will set you up as a guy who "gets" what life and childhood should be like. Simpler things, etc.

2. Personally, at this point in your life, I'd opt for the well-paying leisurely job over climbing any ladders. Your field has great job security, so I'd happily collect your paycheck and focus on quality of life.

3. It may be easiest to set a savings rate goal -- "As long as we get to the point where we're saving 30% of our income, we can spend the rest on whatever...." And have that 30% removed automatically. What I do is have all income go into a savings account, and then have a set dollar amount transferred automatically into my checking to spend for the month and go to longer-term budget categories. And, if you set the goal at, say, 30%, agree to increase it every year by 1-2%. Throw half of all future raises into savings.

A nice side benefit of dumping income into another account first before it hits your "spending" account is that those two extra paychecks per year will go toward savings automatically.

4. If at all possible, have your SAHW use YNAB or other tracking software to track expenses. By doing so, she will naturally be inclined to watch what she's spending on.

5. WIth your student loan interest rate so high, I'd focus on paying that off over building your emergency fund.

purplepants

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Re: Case study: New mustachian in McMansionVille
« Reply #2 on: June 27, 2014, 12:41:25 PM »
Hello,

I have recently converted to Mustachianism. I took the usual route here: Got a very good-paying job immediately out of college, got married, bought a McMansion and new car for the wife, had a kid, got extremely stressed and realized my lifestyle needed a whole lot of face punches. I started reading the well-intentioned but weak-willed advice columns on the mainstream finance websites, but hungered for more control than the 40-year-career retirement plan they advocate. After voraciously reading "Your Money or Your Life", ERE, MMM, Mad Fientist, JLCollins, etc, I feel I have a pretty good grasp on the basics and a decent plan but I'm putting this out there for advice and also to keep myself accountable. I'm 27 years old and I know I have a long way to get to bushy mustache-level but I'd like to think I'm doing much better compared to my fellow millienials.

 I'm working on increasing my Mustachianism and have a few unique circumstances, so bear with my ER-lite philosophy for now.
 My first non-mustachian circumstance is that I actually rather enjoy my McMansion in the suburbs and will not consider moving. It is extremely well-placed near the great bike path system in the town, schools, grocery store, and only 2 miles away from my parents and 6 miles from my wife's parents (extremely convenient babysitting). The neighborhood is full of friendly young families that we have quickly developed a great bond with. It was a new build, and while I now wish we had saved up for a bigger down payment and/or reduced the square feet and fancypants upgrades, I don't regret the decision overall.

 My second non-mustachian circumstance is that my dear little 1-year old was recently diagnosed with type 1 diabetes, which greatly improves my reliance on employer health plans. If we went private with the current options in our state the premiums/out-of-pocket costs would be devastating. We also plan on having a couple more kids to eventually bring the total family size to 5.
I accept that keeping the house and creating more adorable children will greatly increase the number of years I have to work, so take it easy on me.

Current financial picture:

Income
: $135,000 salary as your friendly neighborhood pharmacist, bonus/holiday pay/stock options usually amounts to $6000/yr. Wife is SAHM for foreseeable future, especially with kiddo's medical needs.

Debts:

259,000 Fixed rate mtg @ 4%
 13,300   Car  @ 3.55%
  5,700    Student loans @ 6.55%

Assets:
Liquid:
8,000  - Ally savings acct- emergency fund (Would like to get this to ~12,000)
5,500  - Vested company stock options. Don't have the spare change to buy-and-hold for tax savings right now, but also nervous about risk.
46,000  - 401k - 95% in low-cost index fund, 5% diversified bond fund
6,000   - Roth IRA - currently in Vanguard target fund, going to switch to VTSAX once possible
3,000   -Vested ESPP
4,200   - 529 plan

Not liquid:
320,000  McMansion (my best reasonable estimate - bought at 305,000 in 2012)
  15,000  Wife's car (I know, I know, dumbest financial move of our young lives) - it's a fuel-inefficient Jeep Patriot that we will rapidly outgrow and need a minivan
    5,000  My manual Mazda 3 which I plan on driving into the dirt
And a whole mcmansion full of consumer crap that I can't justifiably call assets. We're working on simplifying, I promise.

Current savings plan:

17,500 Max 401k (employer matches 5%)
  6,500 Max HSA
  5,500 Max Roth IRA
  2,800 ESPP (15% discount with 6-month look-back)

$400/month into emergency fund until satisfied

Monthly take-home and expenses:
+6000  = 2 x biweekly paychecks    (we've previously used the 2 'extra' paychecks for home-improvement projects and vacations, but dear wife promises that future extra checks and bonuses will be used to knock out debt)
+350 - currently have a sister-in-law renting out one of the McMansion bedrooms

-2100   - mtg - 1310 PI, 112 PMI, 50 ins, 25 HOA, 603 property tax  (I can see all your mustaches falling off your faces in shock right now, I'M SORRY, OK?)
-350     - wife's jeep
-122    - student loan
-450    - Roth
-150    - 529 plan
-1100  - groceries/medical supplies  (Brutal, I know. This is the result of many compromises between the Mrs. and I to reduce our eating-out costs while still having fancy pants food. Also, insulin for kiddo and trying to feed a 1-year old diabetic on a shoestring budget is impossible)
-250    - Gas/electric/water/sewage
-140    - Cell phone
-110    - Cable / internet   
-200    - Car insurance/ maintenance, gas
- 70   - Gym/ pool / zoo memberships.
-50    - my personal entertainment fund
-600  - happy wife, happy life fund. Again, result of many compromises. This is her home-improvement, hobby, kid clothes, etc all-in-one discretionary budget.

This means I still have some discretionary money to throw around even before I go ultra-mustache. Currently putting $400 per month into emergency fund and had been using remainder for extra principal payments on mortgage - I really wanted to knock out PMI, at least. But now I'm rethinking to use that money on a spousal IRA (deductible) or other after-tax investments. Looking for advice here.

Short term Mustache plans:
Easy to do:
1. Decrease personal clown car habit. Picked up a nice 70's Schwinn Suburban for $20 at a garage sale and found I rather enjoy biking. It's an old POS but it gets me from point A to B. I'm working my way up to using it for almost all in-town errands. Looking to upgrade via Craigslist to a bike I can reasonably take to work.
2. Decrease cell phone bill - Currently on family plan for Verizon with a small work discount, but really looking at Republican plans once contract is up.

Not so easy to do:
Going to take some convincing of the wife-
1. Decrease wife's clown car habit - we agree that the jeep is a fiscal nightmare but can't agree on what next step should be. I'm looking at a 2004 Odyssey and she's looking at a 2014 Town & Country, so obviously we got some things to work out. At least she's open to increasing bike usage.
2. Cut the cable. I love my sports channels and wifey loves her silly shows.

Mid-term Mustache plans:

- Develop skills/side hustle/passive income. Many options here, contemplating rental properties.
- Increase savings rate in general

That's the basics for now. I will write again soon regarding a couple dilemmas
1. At work, do I climb the evil corporate ladder for mo' money, mo' stress, but quicker FI vs taking the more leisurely scenic route?
2. In a fancypants suburb where you're more likely to see a Lexus/BMW than a Toyota, how do I sell frugality to family and friends?

Let me know where I most need face punched and if you have any thoughts, especially on the classical debt-paydown vs investing situation. I constantly grapple with where to put my hard-earned dollars to best effect. Thanks!

I'm resisting the urge to go super face punch on you, since it looks like a lot of your struggle is with your wife's spending. 

No judgement here on the house, it may delay your ER date by a few years, but if it's worth it to you then it's worth it.  Same with having more kids.  We're trying to maximize happiness here, not bank accounts.  I did poop a little when I saw your monthly property tax though.  Holy hell.  I feel for you.

Hubby and I make a combined income that is roughly the same as yours (A bit under $130k a year).  Your grocery and dining out line item would cover our car payments (on two cars), groceries, eating out, and clothing budgets.  It sounds like you're in a high COL area, but still... Keep working on her with this one.

I was going to suggest selling Wife's jeep and buying a 10 year old Civic, then upgrading to an  Odyssey once Baby #2 arrives.  But....

Can you sell some consumer crap on Craigslist and pay off some debt with the proceeds?

HWHL fund.  I'm sort of stunned.  I don't know what to say, just keep working on it. 

Cut the cable.  Your wife needs to see you sacrificing something.  Get Hulu and NetFlix so she can see her silly shows.  Work on side hustles instead of watching sports.

I think your best hope of convincing her is leading by example. 

Also, I think that I would dial back on retirement savings for a couple of months and knock out the car and student loan debt. 

FrugalSpendthrift

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Re: Case study: New mustachian in McMansionVille
« Reply #3 on: June 27, 2014, 12:47:10 PM »
2. In a fancypants suburb where you're more likely to see a Lexus/BMW than a Toyota, how do I sell frugality to family and friends?
If you are trying to sell frugality to explain your actions, then don't bother.  I've got some friends and family that will never understand why I don't have cable.  They were making fun of me for picking up a free oven last weekend.  Now I just tell them I have bigger plans for my money.

I constantly grapple with where to put my hard-earned dollars to best effect. Thanks!
The student loan is fairly small and your highest interest rate, you could knock that one out real quick and then the decision of where to put your money is a little clearer.

btw, You can open a Roth under your wifes name also.

When can you drop the PMI payment?

PindyStache

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Re: Case study: New mustachian in McMansionVille
« Reply #4 on: June 27, 2014, 12:58:53 PM »
You are brave for posting! A few initial thoughts:

I agree to kill the student loan first. This seems a better use of money than funding a 529 plan or building up emergency savings.

You should also split out your $1100 food category into: Groceries, Eating Out, Medications.

For the TV, I have faith you will get there! We were in a somewhat similar situation several years ago and currently have neither cable nor even a TV in the house (ok, technically it is unhooked & sitting in the back of our basement, but you know...). Interim steps that were helpful for us included:
1) Move TV to less prominent area of house (and reduce number of TV's if you have more than one)
2) Develop new routine to replace prompt of old TV watching--what triggers current TV watching, perhaps downtime during the day while your kiddo takes a nap? Maybe time after little one's bedtime when you + DW have a moment together? Consciously start to replace these with other routine activities (i.e. walk outside, make cookies together, even go get an ice cream or something if feeling especially fancy)
3) Realize TV is terrible for child development, lots of articles about this...

More broadly, have you talked with your DW about overall financial goals & plans? Is she on board to a FI or RE sort of option? What do you yourself want (you mention only FI specifically). Then you can determine together how quickly you want to move towards these goals. I think you will find that some things seem to be changing very slowly day-to-day and then you look back and realize that over the last couple years your DW has made some fairly substantial changes. That is my experience at least.

Cheddar Stacker

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Re: Case study: New mustachian in McMansionVille
« Reply #5 on: June 27, 2014, 01:31:38 PM »
Welcome to the forum suburbandad!

General thoughts:
I feel your pain. I struggle with some of the same issues. The more your wife is on board the better, but don't sacrifice your/her happiness for this. Take it slow, do what YOU can, and encourage her to do what she can. Nagging will get you nowhere. Just realize it will take you longer to reach your goals.

I climbed the corporate ladder. I'm currently stuck near the top, and will be on the top rung in 2 years. I know I have choices and can leave today if I need to, but it gets complicated up there. Don't do it if you can avoid it.

It matters not what your family(other than wife & kids)/friends/neighbors think of you and your ways. You need to understand this. Your wife might take longer (or never if she doesn't buy in) to get it, but once this sinks in your attitude on this will change.

Specific thoughts:
1) Get rid of PMI now. $320K value * 80%=256K and * 78%=249.6K (a lot of loans use 78%). Your 259K balance is very close. Get this done right away. $112/month is just wasting away. Refinance if you have to.
2) Get rid of SL next. Interest rate is too high. You're also in a very shitty spot in the tax code where this starts to become phased out.
3) Use your emergency funds to accomplish #1 and #2. You don't need them. Get a HELOC @ 4% with a $50 annual fee when you talk to your bank about PMI.
4) Cell phone. You already said it, just make sure you do it.
5) Pause the 529 plan contributions. You have plenty of time to save for this and it will be easy once you clear a few more important items from your plate.
6) Once all this is done, extra funds should go toward spousal IRA or any other potential tax deferrals you can get your hands on. Then investments. Then mortgage. Others will disagree on the order, but that's my two cents.

Notice there is nothing on the list above that your wife should really object to? These involve a few phone calls, emails, some web surfing, and minimal sacrifice. If you want to really accelerate things you and her both need to make a few changes, but this is the low hanging fruit that will have the biggest impact on your net worth with the least amount of sacrifice.

These are the changes I've been able to implement with no resistance. Beyond these, it's hard to accomplish much unless you're on the same page.

Good luck!

nereo

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Re: Case study: New mustachian in McMansionVille
« Reply #6 on: June 27, 2014, 01:33:29 PM »
As others have said, I'd make killing the SL a top priority, even if it means slowing down the growth of your emergency fund (you have $8k in there already, and a pretty stable job) and extra payments on the mortgage.
Sell the car and buy something that's both cheaper and more fuel efficient.
Cable and cell-phone plans - combined those cost you $3,000 per year.  Doesn't that seem more shocking than listing them monthly?
$7200 for a HWHL fund, hmmm.... no comment.

You can open an IRA in your wife's name, which would be a good thing to do.

surfhb

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Re: Case study: New mustachian in McMansionVille
« Reply #7 on: June 27, 2014, 01:35:27 PM »
I'm going to go against the grain here and say you're doing a pretty good job of things.    I could see possibly squeezing out $500 or so from the budget.   Pay off the debt ASAP though

The bottom line is that your kids needs medicine and clothes.   Your wife loves her hobby (or does she?)  You enjoy your sports, ect.   As long as you don't spend money on things that don't enrich your lives, then you're on a pretty good track.  It would be nice to get the wife on board more....show her the numbers and convince her.   I mean there are some changes you could make by it's not like your hair is on fire.   I hate to say it but it's up to your wife on this one.   Is she ready to make a change?  Can she eventually ?   That's a question for you to answer.   As you know, it's all about compromise :)

 In 20 years you'll have a paid off mortgage, kids will be in school and 3-5 million investments (??) Keep up the good work....it's not all about retiring when you're in your 30s ya know ;)
« Last Edit: June 27, 2014, 02:01:38 PM by surfhb »

Fishingmn

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Re: Case study: New mustachian in McMansionVille
« Reply #8 on: June 27, 2014, 01:57:54 PM »
I like Cheddar's suggestions. The only other one I potentially see is that if your food budget is that high is it possible that the sister in law is getting food in addition to her rent payment?

To play devil's advocate - we don't all have to be super mustachians. For example -

- I've never been as dedicated as many on this board
- We always lived in suburbs in nice house
- Wife isn't nearly as interested in cutting back as I am
- That said, I would never cancel cable as I love live sports too much
- "Only" saved 20-25% of our income so we will retire soon in mid-50's, not the extreme's like MMM

But the important part - we've been pretty happy with the choices we've made.

Don't lose sight of that.

Cassie

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Re: Case study: New mustachian in McMansionVille
« Reply #9 on: June 27, 2014, 02:10:13 PM »
I agree that many on this board are hard core which is fine. We are not-we have cable, eat out once per week, etc. We sacrificed a lot when younger and now this is our time to enjoy ourselves (55 & 59 yo).  Do what makes you happy as long as you save a significant amount of $ so you are not trapped into working until 65.  2 years ago we semi-retired with p.t. work for ourselves in our respective careers and have never been happier.

wtjbatman

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Re: Case study: New mustachian in McMansionVille
« Reply #10 on: June 28, 2014, 08:17:52 AM »
2. In a fancypants suburb where you're more likely to see a Lexus/BMW than a Toyota, how do I sell frugality to family and friends?
If you are trying to sell frugality to explain your actions, then don't bother.  I've got some friends and family that will never understand why I don't have cable.  They were making fun of me for picking up a free oven last weekend.  Now I just tell them I have bigger plans for my money

Since dropping cable a friend of mine never fails to comment every week on my lack of cable (specifically as it relates to sports watching). "Oh hey, did you see Pardon The Interruption yesterday? Of course not, you got rid of cable. I keep forgetting." I just laugh it off and make jokes. To him, not having cable is like living in a cave if you have the money for a house. Why would anyone do that? To me, it's $100 more a month in my pocket. Which, admittedly, is a much larger percentage of my take home pay than it is the OP's. But if MMM has taught anything important, it's that you cut everywhere it makes sense, not just rent/car/food.

Cheddar Stacker

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Re: Case study: New mustachian in McMansionVille
« Reply #11 on: June 28, 2014, 08:31:47 AM »
Since dropping cable a friend of mine never fails to comment every week on my lack of cable (specifically as it relates to sports watching). "Oh hey, did you see Pardon The Interruption yesterday? Of course not, you got rid of cable. I keep forgetting." I just laugh it off and make jokes. To him, not having cable is like living in a cave if you have the money for a house. Why would anyone do that? To me, it's $100 more a month in my pocket. Which, admittedly, is a much larger percentage of my take home pay than it is the OP's. But if MMM has taught anything important, it's that you cut everywhere it makes sense, not just rent/car/food.

A cave, yes.....a dividend cave. Explain that one to him. Then maybe he'll understand.

wtjbatman

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Re: Case study: New mustachian in McMansionVille
« Reply #12 on: June 28, 2014, 08:48:14 AM »
Since dropping cable a friend of mine never fails to comment every week on my lack of cable (specifically as it relates to sports watching). "Oh hey, did you see Pardon The Interruption yesterday? Of course not, you got rid of cable. I keep forgetting." I just laugh it off and make jokes. To him, not having cable is like living in a cave if you have the money for a house. Why would anyone do that? To me, it's $100 more a month in my pocket. Which, admittedly, is a much larger percentage of my take home pay than it is the OP's. But if MMM has taught anything important, it's that you cut everywhere it makes sense, not just rent/car/food.

A cave, yes.....a dividend cave. Explain that one to him. Then maybe he'll understand.

Apparently I'm naturally drawn to caves for some reason... Hmm, not sure why...

Sonorous Epithet

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Re: Case study: New mustachian in McMansionVille
« Reply #13 on: June 28, 2014, 09:38:57 AM »
First, welcome to the forums!

I will also go against the grain by withholding many facepunches. I don't even think your house is that ridiculous, as it's only 2.4x your household income, which qualifies as reasonable, although not mustachian. Keep in mind MMM himself had a gigantic house for a long time -- that's where he liked to put his equity.

I see the biggest financial risk in your house not in being the size of your mortgage, it's the "house full of crap" risk -- it enables lifestyle inflation. When you have empty rooms it's hard to play gatekeeper to keep crap out of your house -- especially if you are a SAHM who sees "unused" house all day, every day. My parents have a giant 4 bedroom house they raised their ONE kid in. Guess what's in the other 2 bedrooms, and the den, and the formal living room, and the formal dining room? If you guessed "a mountain of crap they were barely conscious when they purchased" you'd be right!

About the property taxes -- you may be able to get them lowered. See if your local county auditor has a GIS website, where you can look up the assessed value of your home. Call up your local auditor's office and ask how you would go about requesting your assessed rate to be lowered. You may have to pull some comps and do some legwork, but it can pay huge dividends. And frankly I think digging through real estate data is fun, YMMV.

With your savings over and above tax-advantaged accounts, you can also decide whether you want to pay off your house early or add to investment accounts. At 4% interest it's a fairly marginal decision; you will hear voices advocating for either way and neither is wrong.

The biggest hurdle is not financial -- you are actually in great shape. Your debt load is not really that bad and you've already built up a decent net worth, and you have given yourself needed facepunches. Your biggest hurdle is getting you and your wife to have the same goals (even if that means you are the one budging), and then work on them as a team. I don't know your wife, but I tend to find that what works for me is sharing my dreams, and talking about how my values are changing, and developing a vision. That's gotten my girlfriend and I closely aligned. But she's her own person and you can't MAKE her change her mind. You can't push someone to mustachianism. One cannot receive a facepunch unless one WANTS, deep down, to be facepunched. Gently, earnestly, lovingly, lead her to water, and hope she drinks.

lurker

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Re: Case study: New mustachian in McMansionVille
« Reply #14 on: June 28, 2014, 01:13:12 PM »
Are you putting the maximum your company allows in the ESPP?  The tax rules allow for you to purchase up to $25k worth of stock annually (21,250 at a 15% discount).  If you can buy more, I would actually suggest doing that first (assuming there is nothing preventing you from selling the stock immediately - the tax rules for this are not as punitive as they might seem).  A 15% discount provides a return of 17.6% (15/85), which may be even more depending on how your 6-month look-back works.

rmendpara

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Re: Case study: New mustachian in McMansionVille
« Reply #15 on: June 28, 2014, 02:53:05 PM »

That's the basics for now. I will write again soon regarding a couple dilemmas
1. At work, do I climb the evil corporate ladder for mo' money, mo' stress, but quicker FI vs taking the more leisurely scenic route?
2. In a fancypants suburb where you're more likely to see a Lexus/BMW than a Toyota, how do I sell frugality to family and friends?

Let me know where I most need face punched and if you have any thoughts, especially on the classical debt-paydown vs investing situation. I constantly grapple with where to put my hard-earned dollars to best effect. Thanks!

1) Your situation could change at any time. Pharmacists (chain pharmacy, anyway) could theoretically be replaced (completely or in part) by technology in a 10-15 year horizon. Imagine a RedBox type machine that used to distribute DVDs now distributes medicines when you scan your Passport.

Job security is a thing of the past. I'd boost the career, because it's easier to take a step back (i.e. take a new job with less hours/less responsibility/less pay) than it is to step up. If push came to shove, could your wife work?

I'm not trying to scare you, but just get you to realize that nothing is certain when you're thinking about the long-term. Industries change, your health may fail you... You can't prevent everything and eliminate risk, but don't be caught off guard.

2) You don't have to sell it to them. I think your problem is selling it to yourself. If you were on board and new your goals and what it takes to reach them, then you could ignore what the others say about what you do. You're a grown man, stop worrying about what other people think about you.

General thoughts: I think your savings rate is solid. It's not mustachian or early retirement solid, but you could have a great life and great retirement if you work until your 50s (probably even better if your income outpaces inflation and you invest wisely). It looks like your total savings rate is 24% (32.3 / 135). Well done!

I think many people on this forum look at a budget and start hacking away at everything that's "unnecessary". It's fine for people looking to retire in 10 years, because you really do have to get extreme, but for the rest of us with good incomes who don't want to quit work or live under a rock, more reasonable savings rates from 30-50% will be excellent.

My personal situation is 25/single/male, $95k total gross comp, and my savings rate for the year will probably come around to the high 40%'s. I could save more, but don't really care to. I imagine once a wife/family comes into the picture within the next 5-10 years, that rate may drop a bit, but I'd like to shoot for 1/3 (33%) as a solid middle ground between paycheck to paycheck and "mustachian".

My Advice: Baby steps.

1) Savings rate: You're at 24% savings rate now (pat yourself on the back!). Find a goal that both you and your wife can agree on, and go for it. Try and shoot for 1% savings rate increase every few months (tough to track perfectly, but it gets you thinking about saving more regularly). Maybe shoot for 30% by the end of 2015?

2) NW: Also set Net Worth targets by year for the next 5 years, and start tracking it on a monthly basis. You should do this because it helps to put your savings rate (#1) in perspective to your broader goal... growing your nest egg. Also, it helps you feel motivated to flex your frugal muscles if you feel like you're falling behind, or to relax the foot off the accelerator and just cruise when you are doing well.

I have two main targets, long-term savings >30%, and increase NW by $40k/yr. I think most people hit a sweet spot once you have investable assets of >$250k, as even a 5% return will be > $1,000/mo. Money that your money makes which makes even mo' money! Beautiful, huh? Think of it this way, once you reach $250k in assets, you have a second worker who makes $250/week for you. Can you feel your future grin across your face when you think about what happens when you reach $300, 500, 750k?

Happy investing! Remember, baby steps. Not even Rome was built in a day.

lifejoy

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Re: Case study: New mustachian in McMansionVille
« Reply #16 on: June 28, 2014, 03:29:57 PM »
Hey, kudos to you for being on here in the first place :) That is a great first step, and there are plenty of people here that offer advice and keep you honest!

My SO was slow to whole-heatedly adopt the MMM lifestyle, but baby steps and leading by example DOES work. So that is nice :)

Welcome!


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Fatmouse

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Re: Case study: New mustachian in McMansionVille
« Reply #17 on: June 28, 2014, 04:35:16 PM »
Looks like others have given great advice, I'll chip in with my two cents to join the chorus.

- Priority 1: Autos - You say you will keep the Mazda, but you also say that it's possible for you to bike to work.  Would you consider going down to one car for your household?  Maybe proceeds from Mazda could help purchase a nicer minivan with cash.  Hypothesis: Mazda proceeds + Jeep proceeds + some savings or selling consumer crap proceeds = minivan wife is happy with.

- Priority 2: Student loan - such a tiny balance!  I'd recommend you and/or wife drum up a side hustle or big garage sale to attack this. Maybe a "teamwork" project like this will be more appealing to your wife than dropping cable. (My dear fiancÚ had six figures of student loan debt, which has actually turned out great because he has a job he loves and it led us to MMM, both of which will probably make us richer in the not-too-long run).

- Priority 3: PMI - I hate PMI, it's so annoying!  Another poster noted that you are really close to being out from under this, so it's a great target.

All of these are really "big" things, not small daily habit things.  In my experience with my fiancÚ, the big things get us hooked, and the small things followed.  We didn't see the point of making small daily changes at first, until we were looking for ways to hit bigger goals.

Zamboni

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Re: Case study: New mustachian in McMansionVille
« Reply #18 on: June 28, 2014, 04:50:58 PM »
Welcome!  Lots of good suggestions already.  It sounds like you and your wife are pretty far apart on the next vehicle purchase.  After you get some of the higher interest debt paid off, focus on finding a compromise on that.  Perhaps a car that she picks but that is 3-5 years old?

Does your SIL eat with you?  Does she chip in for groceries, cleaning supplies, etc?

Quote
happy wife, happy life fund.

This is a good idea, although it's clear not everyone likes it.  You always have this so your wife has money that she specifically controls.  She can save it all or spend it all, her call.  I'll also chime for the group suggesting that you open an IRA in your wife's name and start kicking as much into it as you can.

Quote
In a fancypants suburb where you're more likely to see a Lexus/BMW than a Toyota, how do I sell frugality to family and friends?

Don't even try.  In fact, from experience I can say that you might find some in your circle of neighbors who can't carry on a conversation about anything but their latest purchase.  Figure out which folks have interests beyond shopping and try to mostly hang out with them.

You have a high salary, so what about giving back?  Are you interested in investing your time and money to a charity, perhaps the juvenile diabetes research foundation or some other cause that interests our family? 

AustinKat

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Re: Case study: New mustachian in McMansionVille
« Reply #19 on: June 28, 2014, 05:56:57 PM »
I've got nothing to add to the masses of excellent advice already offered; I just want to say how sorry I am about your child's Type 1 diagnosis. I've had it myself since I was ten. I can't imagine trying to manage it in a child so young. You and your wife have my sympathies.

suburbandad

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Re: Case study: New mustachian in McMansionVille
« Reply #20 on: June 29, 2014, 07:06:52 AM »
Thanks for all the responses already! I had a good feeling about joining the MMM community. I'll try to respond to as many points/questions as I can at the moment.

As a general clarification, I'm afraid I inadvertently painted my wife the portrait of the Mustachian-AntiChrist. She is actually extremely caring and concerned with my happiness, and still trying to catch-up with my recent change in attitude towards money- just not quite there yet. I'll defend her honor by pointing out some of her frugal skills:
- She's a very crafty/DIY person- our neighbors call her Mrs. Pinterest because she has single-handedly constructed built-in shelves, cabinets, desks, and a patio table for our new house, among many other cool and cost-saving projects
- She has started a vegetable garden
- She has always kept within the defined budgets without complaint. Recent change at work led to a small pay raise and she didn't bat an eye when I said I wanted to devote it entirely to long-term savings. She no longer "goes shopping" at the mall for fancypants clothes, though she has a true weakness for kid-stuff, garage sales, and Amazon.
- We also agree that we don't need McMansion once all the kids are grown and gone
Generally she just takes pretty damn good care of me, kiddo, dog, and home. My only real responsibility is the finance side, so it stands to reason that I will be a little more aggressive in that arena for now. I'm going to follow the advice of many of the responders and take it slow and steady to get her a little more Mustachy.

AustinKat: Thanks for your sympathies, it has been a really rough transition, just got the diagnosis a month ago. Obviously her young age makes things that much tougher, but we're getting the hang of it.

Zamboni:
 The first minivan conversation was a rough one, but we are moving towards an agreeable middle. We've shelved the minivan talk for the next few months for now.
Sister in law doesn't contribute financially beyond the $350 per month. I'll clarify that her situation is unique- she's got a fiancee currently deployed in Afghanistan, and needed a place to stay while she finished her final semester at college and her fiancee finishes his deployment. The $350 is essentially to cover her part in groceries, utilities, etc. I didn't really want to think of it as a revenue stream or anything like that. She helps out a ton around the house and has been very helpful with kiddo.
In regards to volunteering/giving back, I had been a volunteer coach/ref for local HS sports until this last year when life got a little more hectic. Definitely looking to get back into that, definitely already looking at JDRF and related opportunities.

Fatmouse:
 Mazda + Jeep sale = minivan is one possible solution. But- We are somewhat hesitant to drop down to a single car because of kiddo's diabetes- in her current "tiny and just-diagnosed" stage of the disease we've been having a lot of trouble with highs and lows.  Just the other night she had a stomach bug and we couldn't keep her blood sugar up, so we are nervous we might be in a situation where we need to rush her to urgent care / ER and be without a car.

Cheddar Stacker
I'm 100% with you on the PMI, the only problem is getting MF'in Wells Fargo on board. They'll only auto-drop it at 78% LTV of the PURCHASE price of 305k. They'll drop it at request after 80%. They are making it sound like we only have two options: 1. Make the massive principal payment to get to 78% OR 2. Get re-assessed at >325k (which might be a stretch right now) - they won't do a combination of both. Sounds like some redtape BS, I'm trying to work out a solution with them. Hidden option 3 is refinance with someone else but it would likely add 0.5% to the rate plus closing costs - not worth it just to drop PMI.
- Also looking into the HELOC options
- Pausing 529 contributions to knock out debt makes $ sense, but it makes my dad-heart sad.

I am agreeing with many of the responses that knocking out the student loan will likely be our #1 priority. Regarding using current savings to knock it out- I'm well-insured and steadily employed so I know that getting my emergency fund to 12k is probably extra-conservative, but for whatever reason I think I'll sleep better at night at that number.

Lurker:
The ESPP plan is a qualified plan with built-in restrictions - I can't touch the money until 12 months after purchase. Good for forced tax-savings, bad for flexibility.

rmendpara:
I'm ahead of you on fear for job security. There are currently a whole books of laws and regulations that require pharmacists to be directly involved in dispensing, so I don't see it vanishing overnight but with tech advances it's hard to envision the job being at all the same in 25 years.
Regarding savings rate and net worth goals - we just put all our accounts together on Mint and this is definitely helping us track where we've been and where we're going.

Many responders have asked what my goals & retirement plans are - I can't say I've got an answer locked down yet. I've tried to plot out the fabled "crossover point" where passive income /investment gains covers expenses but it is difficult to forecast future income, lifestyle changes, medical expenses, etc.

I know absolute bare minimum that if I'm working FT past 55, I've REALLY screwed something up.
My very loose goal is to build up retirement 'stache and pay off mtg within next 15-20ish years and that will get me well above bare-bones FI. Currently at my company I'd still be eligible for benefits working 30 hours a week as a floater pharmacist so I view this option as a possible semi-retirement when my kids are in HS/college. I figure even post-retirement I'll keep my license active because picking up a shift here and there is worth ~$500 a pop.
My more aggressive goal is to be fully FI by 40 but this would take a whole lot of lifestyle changes and a fortuitous career path. Probably going to land somewhere in the middle.

I'm running out of time to respond to specific points but thanks for all the support from everyone! I think my biggest issue is picking a priority and launching all available resources into tackling it. Right now I feel like my savings/debt plans are "diversified" across 20 different issues but I think I'll make a shift to a more "snowball" approach. I especially appreciate the sentiment to maximize happiness and find the path that works for us. But don't be TOO shy with the facepunches!

chasesfish

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Re: Case study: New mustachian in McMansionVille
« Reply #21 on: June 29, 2014, 09:23:08 AM »
Suburban Dad:

Facepunch #1:  Why the hell are you paying 6.5% on a student loan for the privileged of having $8,000 in a savings account?  You have an extremely stable/predictable job.

The rest can be accomplished bits and pieces at a time.  Biking to work is very doable in your profession, its a nice way to set an example.

I'm not quite sure about the mini-van desire.  Is there a specific reason a van is the best choice?

mm1970

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Re: Case study: New mustachian in McMansionVille
« Reply #22 on: June 29, 2014, 10:26:57 AM »
I can relate to some of this.  We have a high mortgage payment and taxes (based on where we live, Southern California), and we both work.

We've always been pretty frugal, however.  For us, baby steps work.  Meaning, as I flexed my frugality muscle, I suggested canceling cable.  My TV loving husband strongly resisted.  For a few years.  But he finally came around 2 years ago when he realized he could be happy with Netflix and Hulu.  Of course, he came around RIGHT before my 2nd maternity leave.  Hm...  I was also late to adopt the smart phone.  And now HE'S the one who says we should cancel the home phone because we've seen it go from $20/mo to $40/mo and why pay that when we have cell phones (pre-paid cell phones).

So, you live where there are a lot of fancy cars.  Me too.  BMWs, Lexuses, Mercedes, Porsche Cayennes.  You know, you just get over that.  Yes, most of my friends either have fancy cars or SUVs or minivans, and we squeeze in a Matrix.  Mine's paid for.

On the diet at home: I feel you for this, trying to cook for little ones.  And I don't have to deal with the Type I diabetes thing.  Decreasing the food budget is also done slowly and steadily.  You can help with this?  Do you cook at all?  Maybe once on the weekend?  You can't MAKE her become interested in a price book, or finding cheaper meals to cook, etc.  But you can take over some of it yourself.

Personally, I'd go for the less stress option.  I've tried to climb the ladder off and on, it's for the birds (I'm 44).  The problem with the ladder is that it's not a ladder, it's a pyramid. The further up you go the fewer spots there are.  That's from ERE I think.

LatteLaura

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Re: Case study: New mustachian in McMansionVille
« Reply #23 on: June 30, 2014, 01:24:58 PM »
We live in a 2000 sq. ft. house with property taxes at 500/mo  so I feel your pain with that!!

It sounds like you are doing well starting to think for yourselves and decide what really has value to you in your life.  :)

Cheddar Stacker

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Re: Case study: New mustachian in McMansionVille
« Reply #24 on: June 30, 2014, 01:39:05 PM »
Cheddar Stacker
I'm 100% with you on the PMI, the only problem is getting MF'in Wells Fargo on board. They'll only auto-drop it at 78% LTV of the PURCHASE price of 305k. They'll drop it at request after 80%. They are making it sound like we only have two options: 1. Make the massive principal payment to get to 78% OR 2. Get re-assessed at >325k (which might be a stretch right now) - they won't do a combination of both. Sounds like some redtape BS, I'm trying to work out a solution with them. Hidden option 3 is refinance with someone else but it would likely add 0.5% to the rate plus closing costs - not worth it just to drop PMI.
- Also looking into the HELOC options
- Pausing 529 contributions to knock out debt makes $ sense, but it makes my dad-heart sad.

I am agreeing with many of the responses that knocking out the student loan will likely be our #1 priority. Regarding using current savings to knock it out- I'm well-insured and steadily employed so I know that getting my emergency fund to 12k is probably extra-conservative, but for whatever reason I think I'll sleep better at night at that number.

A quick search online and I found 30 years, 4.125%, which at your $259,000 balance equals a $1,255 PI, a $55 reduction from your current payment. Add that to the $120 PMI and you would save $175/month. Any closing costs could very quickly be recovered in less than 12 months. Add to that a HELOC at the same time for any balance over your 80% LTV and your good to go.

...Facepunch #1:  Why the hell are you paying 6.5% on a student loan for the privileged of having $8,000 in a savings account?  You have an extremely stable/predictable job...

+1. Deplete the emergency fund if you really want to speed up your progress. Take a sleeping pill if you have to.

parsimonious

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Re: Case study: New mustachian in McMansionVille
« Reply #25 on: July 01, 2014, 12:53:28 AM »
Hey fellow pharmacist!

A lot of good advice had already been written in this thread, so I'll stick with the good news. You are a pharmacist, which is a very stable job (for the short term at least) that requires Very Little Work Expenses. Yes, there are the bi yearly license fee, and the costs for a couple of basic work outfits, but other than that you don't have any worry about keeping up with appearances. No one cares about the car you drive or where you live or where you went on vacation. In other fields, like management or sales you get a lifestyle creep / envy with your coworkers. I drive a total beater, shave my own hair, my shoes haves holes in them, but I am respected, loved and get great evals.

My best piece of advice to you is get in the mindset of living like a pharmacy technician. I've met a lot of really cool technicians that bust their asses all shift, and they live on a quarter of what I make. Everytime you think about buying something or just looking at your budget, ask yourself, "Could I even afford this if I were a pharmacy technician and not a pharmacist?"

Pharmacists make an insane amount of money so don't worry about climbing the corporate ladder, it isn't worth it. Managers seem to have less job security than actual staff pharmacists, at least where I am at. Plus they are salaried and don't get paid extra for overtime, while staff pharmacists can pick up extra shifts for ~$500 a pop.

darkadams00

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Re: Case study: New mustachian in McMansionVille
« Reply #26 on: July 01, 2014, 10:49:52 AM »
Several good finance authors have noted the tendency of lifestyle inflation with (1) increasing wages and (2) moving to more costly neighborhoods. Sounds like you've already begun on (1) and are working on issues from (2), so that's great!

I would add that the differences in perspectives between you and your wife is typical. When a couple doesn't marry under The Flag of Frugality, but one person later chooses to become a full-fledged citizen of The Frugal Nation, the spouse has to make a choice---and s/he often sees nothing wrong with life in The Society of Suckas. So the conflict begins. Tread lightly, embrace every discussion with kindness, and nurture the relationship. Make decisions that affect only you in the early months and lead by example. Over time, a truly supportive spouse will begin to notice and will do her part to help you succeed in your life goals, even if means an eventual change in hers. Let your examples exceed your discussions, else you become the nag in this relationship.

Regarding the HWHL fund---the name is rather a bad choice and has a negative connotation out of the gate. If this fund includes items you haven't listed here---Christmas, birthdays/anniversaries, travel, household miscellanae, charitable giving, etc---that can add up quickly and for reasons that benefit you both, not just your "happy wife." I would spend more effort to break this out for a year to see exactly what this money bought. Also, and I hate to say it this way, a SAHM often has more time on her hands, and after she figures out her weekly routine, that leaves plenty of time to think of new things to do--usually at a cost. So the SAHM is not only not bringing in an income. She can also be increasing the financial costs. Both of my grandmothers, my mother, and my wife spent time as a SAHM over the three generations of their respective kids. Having a SAHM in the family increased the respective family costs more and more with each generation. Grandmothers were extremely frugal (homemade/DIY everything), Mom was somewhat frugal (home cooked meals, shopping on sales), and wife was not frugal at all until we began to spend more time on finances. Not necessarily the case in your marriage, but your comments seem to indicate a strong possibility--also, not a slam on SAHMs but a reminder to be aware of "why" a wife might need a "happy fund."

Cheers and good luck. You have a great income and a great start. Keep reading, and you'll have your plans firmed up before you need long sleeves to ride your Schwinn.

La Bibliotecaria Feroz

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Re: Case study: New mustachian in McMansionVille
« Reply #27 on: July 01, 2014, 12:24:32 PM »
Book recommendation for you and your wife--The Millionaire Next Door. It's an older book now so the specifics are out of date, but I think as someone who makes a large but not ginormous income and lives in a fancy neighborhood, you'll really relate to it.

ch12

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Re: Case study: New mustachian in McMansionVille
« Reply #28 on: July 01, 2014, 02:20:30 PM »
Regarding the HWHL fund---the name is rather a bad choice and has a negative connotation out of the gate. If this fund includes items you haven't listed here---Christmas, birthdays/anniversaries, travel, household miscellanae, charitable giving, etc---that can add up quickly and for reasons that benefit you both, not just your "happy wife." I would spend more effort to break this out for a year to see exactly what this money bought. Also, and I hate to say it this way, a SAHM often has more time on her hands, and after she figures out her weekly routine, that leaves plenty of time to think of new things to do--usually at a cost. So the SAHM is not only not bringing in an income. She can also be increasing the financial costs. Both of my grandmothers, my mother, and my wife spent time as a SAHM over the three generations of their respective kids. Having a SAHM in the family increased the respective family costs more and more with each generation. Grandmothers were extremely frugal (homemade/DIY everything), Mom was somewhat frugal (home cooked meals, shopping on sales), and wife was not frugal at all until we began to spend more time on finances. Not necessarily the case in your marriage, but your comments seem to indicate a strong possibility--also, not a slam on SAHMs but a reminder to be aware of "why" a wife might need a "happy fund."

SAHMs do need funds that are under their own discretion. HWHL to me wasn't negative, but it showed me that you communicate with your wife and are sensitive to her needs.

Your house isn't a McMansion by value, although it might be one by square footage. (I have no idea about size.) That's a completely average home value where I'm from, in a suburb of Indianapolis. Also, remember that part of your mortgage payment is principal, which counts as savings.

Your property taxes are horrifying-which state is that? I agree with everyone else that you need to get rid of your SL and PMI as soon as possible.

About your sister in law living with you - I'd really call that a wash or net positive. Help with a baby is always appreciated.

About your numbers - you say
Quote
Monthly take-home and expenses:
+6000  = 2 x biweekly paychecks 

So if we say that you have 26 $3,000 biweekly paychecks, your take-home comes out to $78,000. If we add back in your 401k contributions of $17,500 (does HSA come out of your paycheck?), then $95,500.
Quote
$135,000 salary as your friendly neighborhood pharmacist, bonus/holiday pay/stock options usually amounts to $6000/yr.
$141,000 before taxes and deductions. There's a pretty large chunk missing there.

A married couple making $103,250 per year can pay zero federal tax:

https://blog.personalcapital.com/financial-planning-2/average-american-pay-no-taxes/
Caveats: Your wife is a SAHM, so she doesn't have access to a work 401k. Your kid isn't in daycare. You only have one kid. Even so, the bite of your income taken by taxes seems really large. Either you get an enormous refund that we aren't taking into account,  or you live in a state that has decided to Robin Hood money off of every high income earner.

suburbandad

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Re: Case study: New mustachian in McMansionVille
« Reply #29 on: July 01, 2014, 07:25:29 PM »
To respond quickly to many: We just started tracking EVERYTHING on mint so I hope to update the monthly budget with much more detail in a couple months, hopefully that will clarify a lot of questions.

Ch12: To explain most of the $ gap - 401k, HSA, Medical, Dental, ESPP, life insurance, all come directly out of paycheck. I do indeed get gouged on taxes- State works out to ~5%, local to 2.5%. Property taxes are simply absurd in my suburban area of Columbus, OH - definitely some of the worst in the nation outside of the east coast. I just started the heavy HSA/retirement savings midway through 2013 so we did end up getting a hefty refund of ~$4000 federal and state. Should have the allowances fine-tuned soon to avoid interest free loan to Uncle Sam.

Parsimonious I knew there had to be a few RPhs lurking in the MMM community! I'll make a more detailed update on my career trajectory once a few things shake out in the next few months but here's the basic outline so far:
- Immediately upon getting my license, I got placed as a staff R.Ph. in an absolute hell store - high volume, terrible customer base - right off the highway so plenty of junkies coming in with their various scams, 24-hour, untrained/understaffed techs, long commute. Survived it as well as one could hope but when I got an opportunity to take over a much-nearer, much quieter, neighborhood store as the pharmacy manager, it was a no-brainer.
 I have spent 2.5 years there and kicked a whole lot of ass, developed great relationships, and had it running super smooth- but alas, if you poke your head out too far in my company you get offered another "opportunity" which means getting transferred to take over a different store in full-blown crisis mode. So I get a pretty district-award plaque and starting in a few weeks, I get to go "fix-up" a store that will be much higher stress. It also puts me on the corporate ladder fast-track if I can turn the store around at all.
 You can all tell me I'm a damned idiot and I would wholeheartedly agree with you - I have infinite buyers remorse over the current trajectory - not really sure I even want to become a district supervisor anyway. Only perks are that I've risen from ~$110k salary straight out of school to current $135k and that it feeds my foolish ambition. It's not in my DNA to get "just good enough" scores where I could've gotten decent reviews and stayed at the nice store forever, I have to be the A+ asshole. I figure I'll try to do what I can at the new store for 1-2 years, and unless they dangle a big carrot to keep going, I'll find some alternate path.

Most floater pharmacists who used to be pharmacy managers say their stress is half what it used to be, and not a real significant salary cut for the QOL factor. I don't know how satisfied I would be as a "substitute" RPh essentially filling scripts for strangers every day, though.

Cpa Cat

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Re: Case study: New mustachian in McMansionVille
« Reply #30 on: July 01, 2014, 07:50:07 PM »
What's the deal with the minivan?

When did a minivan become a necessity as soon as people started even thinking about a second child? Last time I checked, there's still three seats in the back of normal cars - enough space for two car seats and a bunch of other junk. Plus one passenger seat up front for an extra person and more junk. Plus a trunk for more junk. I get that you're planning on a third, but it's not like they're going to come shooting out of her womb rapid-fire.

Your wife isn't unique. I just don't understand the phenomenon. It happens at my office all the time. It's like the signal that maternity leave is coming in 9 months. They buy an SUV or minivan the moment they start "trying." I asked a coworker to explain this impulse, but she seemed incapable. I assume it's some kind of secret offering to the fertility gods. It's the only logical explanation.

DollarBill

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Re: Case study: New mustachian in McMansionVille
« Reply #31 on: July 01, 2014, 08:18:56 PM »
Quote
Income: $135,000 salary as your friendly neighborhood pharmacist, bonus/holiday pay/stock options usually amounts to $6000/yr
Sorry I stopped reading at this point. Maybe I'm jumping to conclusions but this doesn't sound right. What stocks are giving you those options?

NoraLenderbee

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Re: Case study: New mustachian in McMansionVille
« Reply #32 on: July 01, 2014, 09:14:04 PM »
Quote
Income: $135,000 salary as your friendly neighborhood pharmacist, bonus/holiday pay/stock options usually amounts to $6000/yr
Sorry I stopped reading at this point. Maybe I'm jumping to conclusions but this doesn't sound right. What stocks are giving you those options?

I think the OP means nonqualified employee stock options, given to him by his employer.

Cpa Cat

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Re: Case study: New mustachian in McMansionVille
« Reply #33 on: July 02, 2014, 08:08:30 AM »
Quote
Income: $135,000 salary as your friendly neighborhood pharmacist, bonus/holiday pay/stock options usually amounts to $6000/yr
Sorry I stopped reading at this point. Maybe I'm jumping to conclusions but this doesn't sound right. What stocks are giving you those options?

There is nothing at all shocking about bonuses and stock options amounting to a whopping 4% of total salary. Did you stop reading because a Sharknado tore off your roof once you got to that point?

dude

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Re: Case study: New mustachian in McMansionVille
« Reply #34 on: July 02, 2014, 09:40:01 AM »
You sell frugality to the BMW/Lexus crowd by saying, "Man, do you have any idea what college is going to cost in 18 years?!" while laughing it off and saying, "I'm okay with sacrificing a sweet ride for my kids' future."  'nuff said.  Pretty sure that will end the conversation.

The price of your "McMansion" would not even cover an 800 sf. 1BR condo where I live.  It seems rather reasonable to me.

Work on the wife, Jeeps are pieces of shit -- get rid of yours as soon as possible and find a slightly used mini-van that meets her requirements.  Tell her buying a new one is a waste of money -- money that you'd rather direct to your kids' future.  You see a theme here?

You seem to be doing just fine.  Keep making incremental changes, but you're already way ahead of the game.

Cassie

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Re: Case study: New mustachian in McMansionVille
« Reply #35 on: July 02, 2014, 12:53:15 PM »
I would definitely always have 2 cars in decent running condition considering that your baby is a diabetic. My cousin had this by the time he was one ( 66 years ago) and my aunt learned how to drive so she could get him to hospital quickly, pick him up at school when needed, etc.  It is a very serious disease when it occurs that young. 

Able was I ERE

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Re: Case study: New mustachian in McMansionVille
« Reply #36 on: July 10, 2014, 05:23:42 AM »
I'm 100% with you on the PMI, the only problem is getting MF'in Wells Fargo on board. They'll only auto-drop it at 78% LTV of the PURCHASE price of 305k. They'll drop it at request after 80%.

Pay down the loan ASAP--it's costing you the equivalent of ~13% interest at the moment.  Think of the PMI as additional interest on the amount necessary to get rid of the PMI.   The math:

PMI balance = $259k - ($305k * 80%) = $15k

Yearly PMI "interest" cost =
  (12 months * $112) / $15,000 = 8.96% annual "interest rate"

Add in the 4% mortgage cost, and that extra $15k has an "interest rate" of
   4% + 8.96% ~= 13%


Thirteen percent interest!?!?!  That's hair-on-fire worthy!  (Note: changing the required LTV to 78% only changes the "interest rate" to 10.4%, so still hair-on-fire worthy.)

Anywhere you can borrow $15-20k for a short period?  That would allow you to get rid of the PMI.  Then, you could take out a HELOC and repay the short-term loan.   Depending on Wells Fargo's requirements, you may be able to take out a separate HELOC, and pay down the main mortgage to get rid of the PMI.  (A maneuver I used to pay off my PMI was to use a credit card balance transfer.)

cchrissyy

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Re: Case study: New mustachian in McMansionVille
« Reply #37 on: July 10, 2014, 08:13:08 PM »
I really don't think you're doing poorly, of course you can cut some expenses but the house and debts are not crazy for your age and income. no punches needed except for back when you bought the jeep. And I'm left wondering where the prop taxes are so high. Other than that, you have simple, realistic things to cut, nothing wild.

Another vote to pay off that student loan interest right away.  You are paying 6.5% interest for the opportunity to see dollars in your savings account.  Now, I am actually a fan of logging in to online banking and smiling when I see dollars there... but you are paying 6.5% interest to give yourself that happy illusion! : )   Pay it off today and then rebuild your savings.

as far as the car, yeah, buying it wasn't a great move, but it's here now and there is no need to rush into the next car. Babies do come slowly, even if and when you feel ready for the next ones.  Also, some of us raise 3 kids very happily without ever "needing" a minivan or SUV.  However, if she wants something else and doesn't like the jeep, I think you could sell it  and get a different more-efficient more-safe vehicle in this same price range. something like maybe a few years old Honda?  It is definitely NOT time to be looking for a town and country, you only guys only have one baby!  Maybe, just maybe, when #3 is born you could "need" that, but for the next 3/4/5/6/7/8 years something smaller will do.

Definitely look at cutting cable and using Hulu or similar. We haven't had a TV since 2007 but everything I want to watch I still do, it's just online now.

Open an IRA for her and fully fund it

I like the idea of picking a savings target (25%? 30%) and transferring it automatically to another account. that way you both only see what is left when you decide what to spend.

you really do need to split up groceries - restaurants - medicine. $1100 is too much to leave in one blob, especially since you might turn out to be overspending on one part of it. you can't do much to lower medical costs but what if you saw your groceries were soaring? shouldn't you at least know that?    2 of my kids are medically expensive (lymphoma and autism)  and my budget is broken out like so:  groceries- restaurants - alcohol - copays (for me) - kid pharmacy - kid medical bills (hospitals, doctors)


big picture questions
-  take the scenic route. you're making enough $ already. Make it a good life.
- don't bother selling anybody on your life choices. other than your wife, nobody's opinion matters and nobody needs to understand you.
« Last Edit: July 10, 2014, 08:15:13 PM by cchrissyy »

suburbandad

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Re: Case study: New mustachian in McMansionVille
« Reply #38 on: February 01, 2015, 10:18:18 PM »
Hello all,

Thought I would throw out a long overdue update. Took a lot of your feedback and succeeded on at least a few fronts:

Mustachian wins:
1. Paid off the student loans in full
2. Cut cable. Don't miss it at all.
3. Finally offloaded the Jeep Patriot via Craigslist, and got a good deal on a slightly used Honda Odyssey. Yes, still an absurdly luxurious vehicle, but the wife loves it, it's much more functional, has much better longevity prospects, and gets better mileage.
4. It'll take up to the filing deadline, but I'll come pretty damn close to maxing out my tax-advantaged savings space for 2014:
   -maxed HSA 6500
   -maxed wife's tIRA 5500
   -maxed Roth 5500
   -working on 401k - got 11000 in myself + 7200 company match (100% match to 5% salary). Should be able to hit max in 2015.
5. Working on maximizing happiness. I'm taking up MMM's article on hedonic adaptation as my mantra, especially his paragraph on the proven factors influencing human happiness: Meaningful work, private life, community, health, freedom, philosophy of life. Whole bunch of small projects in this regard- home sweat equity, expanding the garden, picking up hobbies, spending more time with family, friends, neighbors. Trying to get my butt in shape.
6. Got a good deal on a road bike... will be using it endlessly once the snow melts. Damn snow.
7. Negotiated a minor raise at work (6%, which isn't massive but pay range is pretty tight for pharmacists - I still figure it's 2-3 years of annual raises ahead of schedule) and got on a promotion fast-track. Not sure I'll actually enjoy the next level up but at least it gives flexibility. After my reassignment to fix the district's "Hell store" I'm please to report that we're already doing much better - it was worst in the district by many metrics, we're already back in the top half of the district now. Very stressful but looks good on the resume.

Face-punchable issues/ Ongoing dilemmas:
1. Still working on refinancing mortgage - hoping to finish by end of this month to refi to 20-years. Will knock out PMI and get a lower rate, knock off 6 years of mortgage with hardly any increase in monthly payments. Not ballsy enough to go 15 years, since I'm still contemplating leaving my $$$ retail position.
2. Couldn't pull the trigger on the cellphone. There were a lot of factors here, the biggest one being that a lot of the advances in the diabetic gadgets (continuous glucose monitor, omnipod pump) for our type 1 kiddo involve accessibility through mobile apps, and it sounds like a lot of them are being developed initially through Apple - so I'm sticking with my iPhone for awhile longer at least. Republic wireless was awfully tempting after all my research, though.
3. Still don't particularly like my job... had an opening at a nearby hospital but couldn't stomach the paycut to leave retail (would've been about 20-25% drop in total compensation, even after accounting for much better benefits).
4. Ended up taking getting a loan for the minivan... I still feel this was a tactical facepunch though because the rate is pretty low (1.9%) and at the time of purchase still had massive space in tax-advantaged savings to fill up. Will make additional principal payments to pay off ASAP because taking on additional debt, even if it was a rational decision, was a painful pill to swallow.
 And yes, I know the truly MMM solution would have been to buy a $200 junker and cut out the floorboards out and power it Flintstones-style with our feet, but had to make some concessions to the DW on this one.


Kiddo #1 with diabetes is doing much better now that we've got it under better control. Had to spend a small fortune on some of the devices for her but I honestly feel that we're adding years on to her life by getting her the best possible control on the disease. Plus, you try to tell me the difference between a hypoglycemic event and a temper tantrum in a 22-month-old (god bless the continuous glucose monitor) or how to deal with the panic of a toddler refusing to eat a bite after you just gave her a massive insulin shot (god bless the recently acquired omnipod pump)- gotta use all the tools in the arsenal at this point in her life.

Kiddo #2 is due in mid-April which is both exciting and a modest justification for buying a minivan. DW has had an abnormally rough pregnancy (never-ending nausea/vomiting) which has put a strain on some of our happiness initiatives but we're trying to power through nonetheless.

DW's frugality is blossoming in a very encouraging way. I think she's always had a latent bit of mustachianism but she's recently gotten on board, I think for 2 reasons: 1. I'm a pretty even-keeled person most of the time so I think I've surprised her a bit with my passion for changing our way of life, and 2. I think she's starting to really understand the strain my job takes on me.

Career dilemma is still sorting itself out... I've resolve to at least make a run at the corporate ladder. The incentives are more money and a higher degree of flexibility in work - I currently am completely locked into my shift cycle and would have to move mountains to accommodate the slightest hiccup in schedule. This is terrifying to the parent of a young diabetic. Getting promoted would be a mixed bag - different set of stresses and rewards in the daily work.
 I figure worst case scenario is that it doesn't work out, I've already got a good reputation as a staff RPh and pharmacy manager, if promotion is no longer viable I'd downshift to being a floater pharmacist- our area is currently hurting for quality floaters so I don't think I'd burn any bridges there. I would no longer be donating as much as my time as I do now as a pharmacy manager to get things turned around.

Thanks for all the MMM community advice and support!

FrugalSpendthrift

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Re: Case study: New mustachian in McMansionVille
« Reply #39 on: February 02, 2015, 06:45:45 AM »
Congrats on all of your progress!

Face-punchable issues/ Ongoing dilemmas:
2. Couldn't pull the trigger on the cellphone. There were a lot of factors here, the biggest one being that a lot of the advances in the diabetic gadgets (continuous glucose monitor, omnipod pump) for our type 1 kiddo involve accessibility through mobile apps, and it sounds like a lot of them are being developed initially through Apple - so I'm sticking with my iPhone for awhile longer at least. Republic wireless was awfully tempting after all my research, though.
Would the apps still work if you disconnected the phone from your cell plan?  We have an old iphone that was disconnected from the cell network, but it can still do quite a lot with a wifi connection.  My daughter uses it to watch videos online, it's like an ipad without a data plan.

tracylayton

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Re: Case study: New mustachian in McMansionVille
« Reply #40 on: February 02, 2015, 07:38:19 AM »
I might have missed it, but how much life insurance do you carry? Since you're the only breadwinner, make sure it's enough to take care of your family. At 27, I think you're off to a great start!

zolotiyeruki

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Re: Case study: New mustachian in McMansionVille
« Reply #41 on: February 02, 2015, 10:32:48 AM »
Hello all,

Thought I would throw out a long overdue update. Took a lot of your feedback and succeeded on at least a few fronts:

You've got a lot of good things going on.  I have a couple thoughts to add:

1) We also live in a McMansion in the suburbs.  Our PITI is higher than yours by a couple hundred a month, but we're on a 15-year mortgage.  For us, it was a way to enforce a higher effective savings rate.
2) Good choice on the minivan.  We upgraded from a 2001 Odyssey to a 2006 Odyssey last year (needed the 8th seat for kid #6), and we love it.  My understanding is that the domestic minivans just can't compete with Honda/Toyota nowadays.
3) Good move on the cable.  When we moved 4 years ago, we never got it hooked up, and didn't miss it.
4) It seems to me like you should be maxing out your 401(k) before hitting the Roth or the tIRA.  I'd prefer it to the Roth because you're likely in a higher tax bracket now than you will be in ER.  (for the same reason, I'd recommend the tIRA over the Roth for now).  I'd also prefer the 401k to the tIRA because of the income limits for the tIRA deduction.

5)  I've been in a not-so-different situation from yours.  Four years ago, I was working at a very dissatisfying job.  I had long commutes and had to leave my family on business trips frequently.  I changed jobs, taking about a 25% cut in pay+benefits.  I love my new job, love our new home (a McMansion similar to yours), love the <10 minute commute, and love having more time with my family.  Yes, finances were quite tight for the first couple years, but I can't see myself going back.

6)  You can get your iPhone unlocked, so that you can take it to any compatible carrier.

Scandium

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Re: Case study: New mustachian in McMansionVille
« Reply #42 on: February 02, 2015, 10:53:20 AM »
A $300,000 house is an unmustachian McMansion? Wow, then we really messed up then by buying one for $400K! It's barely 1800 sqft though, and no chandeliers, columns or vaulted ceilings.. That's just what houses cost around here. $300 would barely get you a cramped townhouse. And property taxes are $500/month, which is a bit high, but I don't consider too bad as it gives us great public schools, an amazing library, well-maintained public trails and parks, and lots of community activities (there are so many kids activities we are just discovering!). Overall not the worst thing to spend money on IMO. If you can afford the house (which it sounds like you can) then I don't see anything particularly wrong with that. Our mortgage too is <25% of take-home pay.

That said, my MIL pays $7K in property taxes and get a failing, bankrupt school district and generally awful community. It's all about what you're paying for.
« Last Edit: February 02, 2015, 12:44:11 PM by Scandium »

gt7152b

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Re: Case study: New mustachian in McMansionVille
« Reply #43 on: February 02, 2015, 11:42:49 AM »

1) Get rid of PMI now. $320K value * 80%=256K and * 78%=249.6K (a lot of loans use 78%). Your 259K balance is very close. Get this done right away. $112/month is just wasting away. Refinance if you have to.

Agreed. Also, the mortgage company is probably collecting much more in escrow for taxes and insurance than they need to pay the bills. They love having a big buffer and getting an interest free loan from you. With a favorable appraisal or paying down a little extra on the mortgage you should be able to have 20% down which will kill the PMI and allow you to cancel the escrow account. Just make sure you are creating your own escrow each month for taxes. You really don't want to be caught low on funds when that big property tax bill is due.

I won't comment on any specific spending habits. There are several that can be slashed dramatically. I'd just pick one or two to start with and you'll feel so great about the extra money you save that you'll be fighting to tackle the rest before too long.

hunniebun

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Re: Case study: New mustachian in McMansionVille
« Reply #44 on: February 02, 2015, 12:13:24 PM »
Thanks for sharing your story and congrats on baby number 2!   A great example that mustachianism isn't always a sprint, but it sounds like things are moving in the right direction.  I am glad your DW is more on board because it gives me hope that my dh will also have an awakening if given some time!  I have a 2005 Odyssey and after first discovering this blog...hated it for a time (with it's 14MPG) but after a recent accident with my kids safe and sound in their car seats, I have grown to love it again.  When they are older and the van dies, I will think about something smaller but they really are made with families in mind.  Good luck with find a less stressful career move and keep us posted :)