Author Topic: Case Study: Please Help Me Get On Track  (Read 9909 times)

David Lurie

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Case Study: Please Help Me Get On Track
« on: November 21, 2014, 08:18:18 PM »
Current Monthly Spending:
Base Rent ($1,675.00) – annual lease with about 10 months remaining.
Electricity ($265.00) – Took the effort to change the retail provider about 40 days ago. Just received a bill for the first 30 days of service and the cost dropped all the way down to $33.94. Part of the drop is cooler temperatures which simply didn’t start until November, but expecting big savings here moving forward.
Water/Sewage ($30.00)
Mobile Phone ($96.00) – I have to have a smart phone for work purposes, and I need to keep my current number. I recently changed my plan to the lowest data plan available to see if this could get this number down. I haven’t been billed yet, but the website says the base charge will be $50 (but this is meaningless because wireless companies do not bill transparently). Does anyone know of any workarounds where I can keep my current telephone number and pay even less for cellular phone service?
Groceries ($900.00) – It looks like we’ve been spending about $900.00 a month on groceries. I think a lot of this is impulse purchases (like chips, etc.) or one time ingredients that we may or may not end up using. This also includes a lot of alcohol. I’ve been drinking way too much and need to cut back here. Not a lot to say, but we’re already trying to plan meals for the week and shop once a week. We always end up having trips sneak up on us though. Need to be much more disciplined. And cut out that booze!
Restaurants/Lunch ($300.00) – I’ve asked my wife to try and eat out only once a week. The problem is that we will get an invitation from friends or family who want to eat out. Then we end up eating out. Even at about 1x a week, this seems to end up being close to $75.00 a week. There are also smaller meals like $6-7 lunches maybe once every 2 weeks that add into this number.
Shopping/Travel ($500.00) – Looking over the budget, it looks like we’ve been making some big travel or consumer good purchases about every month. July: Trip + Anniversary gift (Waterford Crystal!); August: Clothes; Cricut Cutting Machine; September: Plane Tickets, Parking, Hotel, Rental Car; October: Vitamix Blender; November: Plane Tickets to distant relative’s house for an “away Thanksgiving” (not really sure how I even got talked into this).
Internet Service Provider ($73.00) – Interested in tips on how to get this down as well. There isn’t a lot of competition and these things are just expensive. I think we do rent a modem, but not really sure how much buying one would actually end up saving us in the long term.
Car Payment ($345.00) – I know. I know. The car is almost paid off (~$1,500.00 left) and has always been financed at 0.00% APR. It has about 84,000 miles and should continue to be a good car even after the note is over. I am not eager to go out and replace it. Our other car is paid off, and runs well for now, but may need to be replaced sooner rather than later. It’s a small super-compact, about 8 years old, 150,000 miles on it. We will look to purchase something used to keep our expenses down in the future. I’ll also add that this $1,500 is the only debt we have whatsoever. By prioritizing debt repayment (mostly student loans) over the last 4 years, we’ve come down from 6 figures of debt with annual carrying costs of $7,000-$8,000 to $1,500 with an annual cost of $0.
Car Insurance ($100.00) – We pay about $600.00 every six months for two cars and two drivers. I pay biannually because if you go monthly, they charge you a finance fee.
Car Maintenance ($62.50) – We do not get maintenance every month, but this is about what the monthly cost works out too overtime.
Car Registration ($11.00) – Not much to say about this.
Amazon Prime ($9.15) – Will probably try to get rid of this, I just keep forgetting and then I end up getting charged.
Medical/Pharmacy ($150.00) – This is expensive. I try not to ever go to the doctor, but my wife or I still end up having appointments form time to time.
Charitable Giving ($115.00) – We have a few charities that we give to throughout the year. I wouldn’t do this, but my wife insists and I don’t really have a good argument as for why we shouldn’t. We have an abundance so giving a little to church and PBS is just paying our share. In other words, I’d rather cut spending from other places rather than focusing on this.
Lawn Service ($75.00) – Our landlord requires us to have someone come and cut the grass and bushes and whatever. I work too much and do not have the gardening tools to do this myself. I also do not want to do this work because this is not my house and I don’t really care what it looks like.
Cosmetics/Personal Care ($225.00) – This is largely my wife’s spending. She buys a lot of things that seem expensive and I don’t really know what they are for. She gets an expensive haircut twice a year. She also goes and has someone pluck her eyebrows. All of this adds up. I have her cut my hair to save a little bit.
Online Yoga Subscription ($18.00) – This seems expensive to me, but she wants to have this available to her.
Hobbies ($100.00) – I don’t really have much of a hobby, but my wife does. She spends about $100.00. I think that this is all money well spent because she really enjoys it and it gives her the opportunity to hang out with friends and others. It’s very positive for her. Also, not a ridiculous amount of money to spend given how much time she puts into it.
Clothing ($200.00) – Don’t spend this every month, but this is probably what our clothing outlays end up being when you consider the entire year. Need to have a lot of professional clothes. Also, have outgrown a lot of things due to weight gain. Need to get that in check obviously.
Miscellaneous Expenses ($100.00) – This is a residual category to capture random expenses that come up from time to time.
Total Spending: $5,380.00
Income
Paycheck 1: $1,160.00
Paycheck 2: $1,160.00
Paycheck 3: $5,875.00
Total Paychecks: $8,195.00
Left Over Each Month After Expenses: About $2,815.00
Retirement Savings
401(k) 1: $1,458.33 monthly ($17,500.00)
401(k) 2: $750.00 bi-monthly ($17,500.00)
401(k) employer Contributions: ~$6,500.00 to both (annually-difficult to tell because these are based on numerous factors and come at 2 times during the year).
Roth IRA 1 – Fully funded for 2013/2014 ($11,000), will pay for 2015 on/about January 2nd with Bonus money
Roth IRA 2 – Fully funded for 2013/2014 ($11,000), will pay for 2015 on/about January 2nd with Bonus money
Checking Account/EF:
Currently have about 7 months of spending in cash. (~$38,000.00). Expect to get a lot more cash as bonuses will be paid within the next 45 days. Hesitant to open a brokerage or taxable account. I also haven’t opened an online savings account to at least get a little interest on our money. Will probably work on doing this so that we don’t have SO much sitting in our checking account earning virtually nothing, but I’m not going to beat inflation at 1%, so I haven’t really been all that motivated to move the money around. I know that that is something that I should do though, because it would mean something like $25 extra a month after taxes for doing nothing.
Future Goals:
Save for retirement and, if possible, early retirement.
Purchase a single family home.
Have children.
Questions:
Budget Related: What areas should I work on cutting first? What are tips for keeping at cutting the budget month after month? Assuming you and your spouse both work, what are tips for dealing with things like child care expenses once children come along? It seems like that alone would pretty much nearly eliminate our monthly surplus.
Lifestyle Related: I feel like I’ve been trying to get healthier for forever. I always end up getting nowhere. I’ve tried to establish habits and write down goals, but I end up never getting anything done. What kinds of motivational tricks have worked for others? Has anyone here successfully ever gotten up early for exercise before work and made that a long-term habit? As time goes on, I feel like that is probably the only way, but man is it hard to plan around getting up at 4:30 in the morning to go run or bike or swim or do pushups or whatever.
Investing: Any tips on how to dive into taxable account investing? I’m really clueless when it comes to this. I guess I could always just buy VTSAX and worry about the rest of our asset allocation in our tax advantaged retirement accounts, but I’ve been nervous to make this jump.
Housing: I feel like house prices are extremely over-inflated in my area. To have a chance at a house that we would want to buy, we’d need to put together a $150,000 to $200,000. That’s not only going to take a really long time, but then there’s the issue of how to save all of that or whether that should even be our goal at this stage.
Jobs/Job Security: Neither of us really like our jobs all that much. There’s also the issue of whether we will continue to be paid so well in the future. If something happens, we will need to be in a position to scale back immediately and be prepared to endure a prolonged period of unemployment in the event that we need to change careers for some reason, can’t find work, can’t work because of disability or medical, etc. It seems like this is another concern that lends itself toward focusing on taxable account investing versus trying to get into a house.
One final note. My wife and I are both 26 years old. We would like to start having kids in the next 5 years or so (probably earlier than that, truth be told). A house is not necessary for that, and really not necessary at all, but its always seemed like something that we should do. It’s kind of hard to give that lifelong dream/aspiration up.
« Last Edit: November 21, 2014, 09:29:49 PM by David Lurie »

horsepoor

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Re: Case Study: Please Help Me Get On Track
« Reply #1 on: November 21, 2014, 08:50:27 PM »
Buying a house sounds like a terrible idea in your situation.

You don't like your jobs
You're working crazy hours (per your other thread)
You're unhealthy/out of shape
Want to have kids but don't see how it fits in your current financial picture
You think you want to buy a house because it seems like "what you should do" - the logical next step

Buying an expensive house will:

Chain you to your location
Chain you to your job
You'll remain out of shape
You won't have time with your hypothetical children
Your net worth will be at the mercy of the housing market, which you say yourself is overinflated

Outside of your jobs, how tied are you to that specific area?  I'd seriously do a cost-benefit analysis of moving to a lower COL area and taking a lower paying job that allows you time to cook your own meals, take care of your health, and spend time caring for any future children.  You have lots of options, but you need to take a breather and really think outside the box a bit.

N

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Re: Case Study: Please Help Me Get On Track
« Reply #2 on: November 21, 2014, 09:23:33 PM »
Im confused.
8k in paychecks, but 2.8 net?

IMHO, from a mustachian standpoint, almost every single line in your budget is outrageous.

There are 2 of you? You both work?

Mobile Phone ($96.00) – see Communiation SuperGuide by I.P. Daley

Groceries ($900.00) – easily cut in half, or more.

Restaurants/Lunch ($300.00) – Consider this HOBBY
Shopping/Travel ($500.00) – Consider this HOBBY

Internet Service Provider ($73.00) – buy a used modem from CL, ebay, etc. shop around for rates, call and threaten to cancel and get reduced rate. TRY something, if it doesnt work, TRY something else. I live in Chicago and my internet +basic cable is 44$

Car Payment ($345.00) – keep car. reduce insurance as much as possible. save for replacement costs of car in the future. plan to buy a 4-8k$ car in 3-7 years.

Car Insurance ($100.00) – see if you can reduce coverage/costs

Car Maintenance ($62.50) – We do not get maintenance every month, but this is about what the monthly cost works out too overtime.
Car Registration ($11.00) – Not much to say about this.

Amazon Prime ($9.15) – HOBBY. also, just cancel it. it wont renew.

Medical/Pharmacy ($150.00) – This is expensive. I try not to ever go to the doctor, but my wife or I still end up having appointments form time to time.
Charitable Giving ($115.00) – Im not going to argue against this, since you arent in debt, but consider it discretionary spending, ie. HOBBY


Lawn Service ($75.00) – seriously? how much can it cost to find some secondhand equipment and get some exercise by doing your own yardwork? You could save at least 600$ the rest of your lease.

Cosmetics/Personal Care ($225.00) – HOBBY

Online Yoga Subscription ($18.00) – HOBBY

Hobbies ($100.00) – I don’t really have much of a hobby, but my wife does. She spends about $100.00. I think that this is all money well spent because she really enjoys it and it gives her the opportunity to hang out with friends and others. It’s very positive for her. Also, not a ridiculous amount of money to spend given how much time she puts into it.

Have you added up all the HOBBY yet?

Clothing ($200.00) – Reduce this to 100/month or less. Shop second hand, seek out clothes swaps, consignment shops, whatever.

Miscellaneous Expenses ($100.00) – More hobby.

Total Spending: $5,380.00

by my calculation, 1360+ is totally discretionary spending that is not necessary.

Yes, you can have hobbies. But do you need ALL OF THEM? ALL OF THE TIME?

Your rent is high, you can reduce almost all of your utilities, and your food could reduced massively.

MDM

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Re: Case Study: Please Help Me Get On Track
« Reply #3 on: November 21, 2014, 09:26:39 PM »
Income
Paycheck 1: $1,160.00
Paycheck 2: $1,160.00
Paycheck 3: $5,875.00
Total Paychecks: $8,195.00
After-Tax Monthly Net
About $2,815.00
Retirement Savings
401(k) 1: $1,458.33 monthly ($17,500.00)
401(k) 2: $750.00 bi-monthly ($17,500.00)
401(k) Contributions: ~$6,500.00 to both.
Roth IRA 1 – Fully funded for 2013/2014 ($11,000), will pay for 2015 on/about January 2nd with Bonus money
Roth IRA 2 – Fully funded for 2013/2014 ($11,000), will pay for 2015 on/about January 2nd with Bonus money
Good details on your spending - I'll let others pick on that. :)

Could you confirm the assumptions in the table below?  Some guesses to get to your $2815 but better to know than guess.

Good luck!

CategoryMonthly amt.CommentsAnnual
Salary/Wages$8,195$98,340
FICA base salary/wages$8,195$98,340
401(k) / 403(b) / 457(b) / etc.$2,917At maximum$35,000
Income subject to IRS tax$5,278$63,340
ESPP/After-tax 401k$1,083$13,000
Paycheck income before tax$4,195$50,340
Federal Adj. Gross Inc.$5,278$63,340
Federal tax$4622014 rates, stand. ded., 2 exemptions$5,548
State/City tax$290Guess, using 5.5% * Fed. AGI$3,484
Soc. Sec.$508Assumes 2 earners paying$6,097
Medicare$119$1,426
Total income taxes$1,380$16,555
Income before other expenses  $2,815$33,785

David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #4 on: November 21, 2014, 09:33:38 PM »
MDM: I'm not following your table. I think my numbers may have been confusing. The paycheck figures I posted have already had FICA, Federal Withholding, Health Insurance, and 401(k) withholding applied. The paycheck figures I used are the amounts that get deposited into the checking account on direct deposit day.

David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #5 on: November 21, 2014, 09:38:11 PM »
Im confused.
8k in paychecks, but 2.8 net?

I edited my post to make this a little clearer. I was trying to say that our net cash flow each month was the 2.8 (8.1 less the 5.3).

All of the rest. Way too many hobbies. $1,300 a month extra would be huge. What suggestions do you have for getting a better handle on the overall budget? Any thoughts about what I should be doing to develop a plan for the extra cash each month?

TonyPlush

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Re: Case Study: Please Help Me Get On Track
« Reply #6 on: November 21, 2014, 09:41:20 PM »
First off, congrats. You've taken a lot of heat in your other thread, and I'm sure you'll take some heat in this one for your spending habits, but you're clearly on the right track. You're 26 years old and you're already about 30 years ahead of the rest of the country just by being conscious about your retirement and spending habits. On top of that, you're maxing out your retirement accounts and you're still netting more monthly savings than many people earn.

In my opinion, chalk up another vote for you not buying a house yet. My reasoning is threefold:
1) There is a lot of uncertainty in your future. I'm in the same boat, and personally I plan on renting for a while. I know this is against common grain here on MMM, but it IS possible to early retire while renting forever.
2) More concerning, is I don't think you've yet figured out what you actually need in a house. If you're monthly spending is any indication, your wants in a home are probably mostly frivolous waste. If you're serious about early retirement, you need to address that ASAP, because you can't have one with the other.
3) Based on my assumptions from your previous posts about where you live, the housing market is hot. Personally I would feel uneasy jumping into that.

As far as where you can cut spending:
-Your grocery bill is ridiculous. I'm not even sure how you spend that much. Whatever you're buying, stop buying that and buy more healthy, basic options. Chicken, Beans, Rice, Vegatables. Lots of websites on how to make delicious food for cheap. Budgetbytes.com is my current favorite.
-Internet: $75 a month is too much. Don't buy into the BS about needing lightning fast internet. I have 3 MBPS and it's perfect for all internet tasks. Netflix is spotty, but I think that's a router problem on my end.

TonyPlush

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Re: Case Study: Please Help Me Get On Track
« Reply #7 on: November 21, 2014, 09:46:27 PM »
Regarding motivation to exercise, consider a home gym if your lease will allow it. Personally, my biggest obstacle is driving to the gym. It's a lot easier to walk into your garage and lift some weights than it is to allot time to driving to the gym. I'm sure you share the same obstacle with your long work hours. Weights can be purchased dirt cheap if you negotiate on craigslist, as most people have failed their workout goals and want to dump the stuff, or they are moving and don't want the hassle of transporting heavy weights. Don't buy into the need for expensive equipment. A barbell and a bench is all you really need. A basic set of dumbbells would be nice. If you want to do cardio, run outside.
« Last Edit: November 21, 2014, 09:48:10 PM by TonyPlush »

David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #8 on: November 21, 2014, 09:51:05 PM »
Regarding motivation to exercise, consider a home gym if your lease will allow it. Personally, my biggest obstacle is driving to the gym. It's a lot easier to walk into your garage and lift some weights than it is to allot time to driving to the gym. I'm sure you share the same obstacle with your long work hours. Weights can be purchased dirt cheap if you negotiate on craigslist, as most people have failed their workout goals and want to dump the stuff, or they are moving and don't want the hassle of transporting heavy weights.
I'd like to get myself in the habit of being more physically active and eating better. From when I've been temporarily successful in the past, it always seemed like the biggest thing was just doing something physically exerting everyday and the benefits came from that. After awhile, I would start eating better, then I'd start losing weight, then I'd end up exerting myself more, and it was just a good healthy cycle. I don't have a ton of time to exercise and I've never been huge into free weights (in the past doing things like pull ups, dips, push ups, lunges, sprints always seemed to do a pretty good job anyway). It's the waking up early and staying committed part. . .

MDM

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Re: Case Study: Please Help Me Get On Track
« Reply #9 on: November 21, 2014, 09:59:10 PM »
MDM: I'm not following your table. I think my numbers may have been confusing. The paycheck figures I posted have already had FICA, Federal Withholding, Health Insurance, and 401(k) withholding applied. The paycheck figures I used are the amounts that get deposited into the checking account on direct deposit day.

The table assumed, based on the un-edited OP:
  - the $8195 was total gross income,
  - you each contributed $6500 after-tax to 401k plans, and
  - your state/local tax rate is ~5.5% based on federal AGI
Result was exactly the $2815 "After-Tax Monthly Net" in the OP.  Merely coincidence.

It actually can be helpful to start with total gross income and enumerate all pre-tax deductions (e.g. Health Insurance and 401k) and taxes.  That way one can calculate the marginal tax bracket, evaluate "traditional vs. Roth," estimate whether withholding amounts are appropriate, etc.

See http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/msg274228/#msg274228 for a version of the spreadsheet that produced the table.

NoraLenderbee

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Re: Case Study: Please Help Me Get On Track
« Reply #10 on: November 21, 2014, 09:59:32 PM »
How much is in your retirement accounts, and do you have any savings outside retirement accounts?
Are your student loans paid off?

You are both young and making good money, but you haven't had a lot of time to accumulate yet. However, I see that you fully fund two 401ks and IRAs. On top of that, you have more than $33,000 surplus per year with your current spending. If you changed nothing else, you could have a 120K down payment saved in four years. If you work on your budget, you could save a good deal more.

Opening a brokerage account is super easy at Vanguard or Fidelity. Start it tomorrow (OK, Monday) and start feeding some of your surplus into a money-market account, until you feel more confident about investing.

Don't rush into a house now. First accumulate some more savings--and perhaps work on adjusting your perspective so you aren't comparing yourselves so much to the neighbors. You are only 26; you will reach your aspiration of home ownership, just not tomorrow.

David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #11 on: November 21, 2014, 10:07:36 PM »
How much is in your retirement accounts, and do you have any savings outside retirement accounts?
Are your student loans paid off?

You are both young and making good money, but you haven't had a lot of time to accumulate yet. However, I see that you fully fund two 401ks and IRAs. On top of that, you have more than $33,000 surplus per year with your current spending. If you changed nothing else, you could have a 120K down payment saved in four years. If you work on your budget, you could save a good deal more.

Opening a brokerage account is super easy at Vanguard or Fidelity. Start it tomorrow (OK, Monday) and start feeding some of your surplus into a money-market account, until you feel more confident about investing.

Don't rush into a house now. First accumulate some more savings--and perhaps work on adjusting your perspective so you aren't comparing yourselves so much to the neighbors. You are only 26; you will reach your aspiration of home ownership, just not tomorrow.

Our retirement accounts all together are about $118,000. This is invested in in index funds, about 98% equities (74% domestic /24% international). I was planning on using our $11,000 Roth Contribution to buy some more bond funds to start working on my asset allocation.  I guess I could also start putting money into my brokerage account (I actually do have one with Schwab, but it just sits there, with a single dollar, doing nothing).

MikeBear

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Re: Case Study: Please Help Me Get On Track
« Reply #12 on: November 21, 2014, 10:08:58 PM »
You know, IF you can't get your wife 100% on board with this, that's going to be a serious roadblock for you.

Work on a Mustachian master plan, but also work more on convincing your wife that you REALLY NEED to work together to get it tweaked to where you both can feel good and live on all of this for the rest of your lives. Both you and her are probably going to have to compromise a bit either way, but the "happy-wife, happy-life" saying exists for a reason...

That's my contribution to this part of all this, and possibly the most important part of it all.

David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #13 on: November 21, 2014, 10:11:43 PM »

The table assumed, based on the un-edited OP:
  - the $8195 was total gross income,
  - you each contributed $6500 after-tax to 401k plans, and
  - your state/local tax rate is ~5.5% based on federal AGI
Result was exactly the $2815 "After-Tax Monthly Net" in the OP.  Merely coincidence.

It actually can be helpful to start with total gross income and enumerate all pre-tax deductions (e.g. Health Insurance and 401k) and taxes.  That way one can calculate the marginal tax bracket, evaluate "traditional vs. Roth," estimate whether withholding amounts are appropriate, etc.

See http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/msg274228/#msg274228 for a version of the spreadsheet that produced the table.

I figured this out. Our Gross Income is kind of difficult to figure out at this point because of the big distribution at the end of the year. My monthly numbers are pretty concrete though, which is why I gave them. Last year our AGI ended up being about $169,000, and this year we increased our 401k contributions significantly to counteract the pay increase, so we should still be well within the Roth limits. Marginal tax rate is 28% because we do not have enough tax deductions to itemize.

MDM

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Re: Case Study: Please Help Me Get On Track
« Reply #14 on: November 21, 2014, 10:22:31 PM »
...this year we increased our 401k contributions significantly to counteract the pay increase.
Well done!

One other item: do you have a High Deductible Health Plan (HDHP) and the Health Savings Account (HSA) such a plan allows? 
You mentioned "have children."  That can be expensive, so a low deductible plan might still be better for you - but you should at least run the numbers, because 28% savings on your HSA is worth investigating.

David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #15 on: November 21, 2014, 10:33:01 PM »

One other item: do you have a High Deductible Health Plan (HDHP) and the Health Savings Account (HSA) such a plan allows? 
You mentioned "have children."  That can be expensive, so a low deductible plan might still be better for you - but you should at least run the numbers, because 28% savings on your HSA is worth investigating.

My wife has the option for a HDHP with a HSA, but the premium for that still exceeded the employee contribution for the plan subsidized at my job, which has much better coverage. So, we decided to pay less for much better coverage. We've consumed more in healthcare this year, so I still think that that was the right choice. The thing with the HSAs is that health plans are changing all the time now with the change in the law and the HSA seems like it only becomes advantageous if you have that for a couple of years, consuming no healthcare during that time, and then you have enough a few years down the road to start taking advantage of the relatively lower premiums. At least that's the way I thought about it. I'm not really up to speed on all of this because my employer doesn't have one and her employer doesn't have someone that can really explain these things to me. She just wants to be able to go to the doctor if she needs to and not get charged $2,500 for bloodwork or whatever the going rate is these days.

Spondulix

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Re: Case Study: Please Help Me Get On Track
« Reply #16 on: November 21, 2014, 11:19:33 PM »
A couple suggestions:
1. Make a budget spreadsheet - sort of like you did here, but with a column of you current spending, one with a new budget. Check out some "Budget Friday" examples on this site: http://www.iheartbudgets.net/budgetfriday/

2. You're going to have to change your relationship with spending money to make progress. Really question why you buy everything. If you're a reader, check out Millionaire Next Door (I recommended this in the other thread too); "The Seven Stages of Money Maturity: Understanding the Spirit and Value of Money in Your Life" is fantastic, as well.

3. Get that extra savings out of your account. MMM talks about this - if it's not easy accessible, you won't spend it. I've been doing this for a few months, and psychologically it works wonders. I know you're nervous about doing a brokerage, but I'd recommend even putting a couple thousand in general non-retirement investments (somewhere like Vanguard index funds or even a site like Betterment). It takes a few months of getting used to, but when you see that your money isn't all just going to disappear, it gets easier to put more in. If you have a good couple months, you'll definitely have incentive to put in more. If you want to see why index funds work, check out John Bogle's book, "The Little Book of Common Sense Investing".

4. Start with small goals, and make a few changes every week. One week's goal could be to cancel Prime and find something to do together other than eat out. Another goal could be to find another yoga service for your wife (there's great yoga apps for under $10 - a one time cost). The idea is to make small progress, add up your savings from week to week, and to feel good about what you're doing (vs making it a grunt or a chore). It's an ongoing process, so keep the focus on where you're winning.

5. Set a budget now for Christmas gifts, and stick to it. I'm guessing from your spending habits that things could get out of hand.

Neustache

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Re: Case Study: Please Help Me Get On Track
« Reply #17 on: November 22, 2014, 06:38:49 AM »
Whoa!  You are spendy, but you also kind of rocking it!  You took a lot of face punches in the other thread, so not going to do that, but if you can implement some of the smaller changes and save an additional 600-1200 or so a month you'll really be doing great.  26 and your net worth exceeds this 34 year old's.  I'm with the others..if you don't like your location, don't like your job, PLEASE don't buy a house!


Goldielocks

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Re: Case Study: Please Help Me Get On Track
« Reply #18 on: November 22, 2014, 07:01:54 AM »
Monthly allowances -- for you and for her.

I read a bit of resentment between the lines, when you itemize all the money that is your wife's spending only, and you don't really know what it is or why it is....  If not resentment now, it will grow into that very quickly.

You need to set up an agreed amount of monthly allowances, (equal) then you can stop worrying about what she spends on.  Who cares, as long as she is in budget.

Also..
The allowances also are where you would need to pull money from to top off the shopping / travel account.  Create a travel budget, of say $200 per month.   any travel or shopping beyond that comes from your monthly individual budgets.


Really, $345 in a car payment is peanuts compared to the shopping / travel and hobby / clothing / misc. spending going on.   Use your savings from the other categories to double your car payment to clear that one off ASAP.  or invest the savings, etc.

House -- if you don't like the idea of lawn care, then don't buy a house.   When you own a house, all of those types of tasks climb, from repairs to upgrading the light fixtures, to lawn care to maid service to ...???  unless you are wanting to take them on for the joy of it. 

If you are looking to move, this is a great time to look for something where you can bike or walk to work or at least for 100% of your shopping and after work activities.   Being local will get you out of the house more, and more active.   Look for a nice townhouse.  maybe a view would be better than a yard for you, etc...   Where you live is a great way to dramatically improve your life quality and enjoyment (as opposed to how nice your home is)   Your primary home is an investment in YOU. Not in the real estate market.   

Terrestrial

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Re: Case Study: Please Help Me Get On Track
« Reply #19 on: November 22, 2014, 07:22:13 AM »

Lifestyle Related: I feel like I’ve been trying to get healthier for forever. I always end up getting nowhere. I’ve tried to establish habits and write down goals, but I end up never getting anything done. What kinds of motivational tricks have worked for others? Has anyone here successfully ever gotten up early for exercise before work and made that a long-term habit? As time goes on, I feel like that is probably the only way, but man is it hard to plan around getting up at 4:30 in the morning to go run or bike or swim or do pushups or whatever.


I was recently faced with a similar problem, not because of work but because of the huge time commitment that came with children.  Had always been great at staying healthy and working out before kids.  Once we had kids I could no longer go to the gym after work, tried getting up even earlier to work out before work but just couldn't, too tired when dealing with babies at night...started gaining some weight slowly and feeling depressed about it.  The perfect solution (and a very strong advocacy on these boards) is:

BIKING.

I started bike commuting at least 2 days a week (24 miles roundtrip), and more if my schedule accommodates it (sometimes I need a car during the day for meetings).  I arrange my schedule so that I always have at least 2 days where i either don't have meetings or I can get a ride from someone else that's going.  It takes marginally more time than driving...maybe 15 minutes each way, plus a little time to clean up and change once i got to the office.  I was able to carve out that extra half hour relatively easily, get up only a tiny bit earlier, and getting home 15 mins later didn't affect the kids.  Combining exercise time with commuting time was a real winner for me.

Also started biking for other tasks.  Need to pick up a few things from a store a few miles away?  BIKE.
Headed out for a weekend restaurant lunch or to a friend's house to hang out?  BIKE.

Overall I've lost about 15 lbs and am back to around pre-gain weight.  My muscle mass is down a bit from not much gym time but my cardio shape is WAY better.  Entering middle age that is probably more important anyway.
« Last Edit: November 22, 2014, 07:26:11 AM by Terrestrial »

Tetsuya Hondo

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Re: Case Study: Please Help Me Get On Track
« Reply #20 on: November 22, 2014, 07:44:00 AM »
Encouragement: You're 26 and have a household income over $200k. You're realizing that you need to get your shit straight now. I didn't come to this realization until my 30s. Most people don't until their even older. This is a journey and you've made the first steps.

Cutting my budget was really, really hard at first. Mine was even worse than yours. Over two years ago, I cut $200/mo out and honestly felt that was the best that I could possibly do. Since finding this site, I've learned how to trim over $2000k/mo out. And, I don't even miss it. It was just fat.

There's tons of tips for whittling down your budget in the forums and MMM's posts. I suggest just focusing on an action plan for one thing at a time (e.g., this week, trimming my phone bill, next week it's groceries, etc.). But, just keep grinding. The good news is that it snowballs after a while.

GoCubsGo

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Re: Case Study: Please Help Me Get On Track
« Reply #21 on: November 22, 2014, 09:49:10 AM »
Props on taking a beating in the other post and still putting up a case study.  The most important takeaway for me is the fact that you are overweight and heading towards being unhealthy at 26.  All the money in the world doesn't matter if you don't have your health.  You have the income to easily afford a personal trainer.  I hired one and did a Saturday morning bootcamp with her followed up by some biking on Sunday. I would then get one good hard 1 1/2 workout during the weekdays and I dropped 25 lbs.  Follow this and you will only have to find one day during the workweek to get to the gym.  Pack your lunches, treat food as a "fuel" during the week and splurge on the weekends, build muscle and eat a lot of protein.  Do these things and you will feel better in a lot of areas of your life.

Financially, when does it EVER makes sense to buy something in an overheated market?  That's what your thinking of doing in regards to the house so think long and hard about it (if you do buy, buy a little starter house which are always in demand and are easier to sell and maintain). 

I'm not as hardcore as others on this site about cutting expenses as long as you  have the luxury of keeping a few of them due to a solid income but cut the easy things but don't worry about having a few niceties.  You absolutely need to be investing the money you make and have that money work for you.  I too made a lot of money in my 20's and by investing that money in various forms (rentals, stock market, small business) I was able to quit my corporate job and do something less lucrative but which I enjoy more with way less stress.  In summary.  Get healthy, don't buy the house, cut the low hanging fruit out of expenses, make your solid income work for you.

Breaker

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Re: Case Study: Please Help Me Get On Track
« Reply #22 on: November 22, 2014, 12:52:04 PM »
WALK, WALK, WALK.  It's easy, it's free and you already know how.

You don't mention how far away from work either you or your wife live but if it is less that 1.5 miles you can walk some of the time.  Or you can buy used bikes from Craig's list. 

Maybe a rule that if you need more than 1 trip to the store a week, you/wife will walk/bike to pick up extras.  This should do two things: 

1.  You will make a list before shopping so that you don't forget stuff.  (This will
 also cut down on grocery spending)  Buy only what is on the list.

2.  You will decide that whatever you want to buy can wait until the next shopping day. 

Do your own yard work.  Saves money and gets you needed exercise and gives you a sense of accomplishment.

You and your wife have to get on the same page in regards to unnecessary spending.  If you don't your marriage will suffer.

Good luck.

mozar

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Re: Case Study: Please Help Me Get On Track
« Reply #23 on: November 22, 2014, 06:04:51 PM »
For kids research the cost of daycare in your area. Where I live it's 20k-24k a year. Also consider that there might be out of pocket costs for hospital stay during birth. Another unknown is before and after school care since elementary school is only open from 9-3pm in most places.

David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #24 on: November 23, 2014, 02:18:14 PM »
Thanks everyone for the comments. Amazon Prime has already been cancelled and I've been over the blog posts about groceries and have some new ideas for implementation. I'm going to make short term savings goals (i.e., even with Christmas on the horizon, our goal is to spend no more than $5,200 in December). I'm also going to move the EF fund into some kind of savings account and commence taxable investing on a monthly basis. I really think that all of y'all helped give me the kick in the pants I needed to get started, so thank you.

Spondulix

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Re: Case Study: Please Help Me Get On Track
« Reply #25 on: November 23, 2014, 05:29:14 PM »
<high five>

lhamo

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Re: Case Study: Please Help Me Get On Track
« Reply #26 on: November 23, 2014, 09:16:03 PM »
Probably not a good idea to put bonds in your Roth accounts -- as the income on those accounts will be tax free when you retire, that is where you want to invest in stuff that will grow.  I would reallocate some of your mainstream accounts so that you have bonds there, and then focus on international or small cap investments in the Roths, or some kind of balanced fund if you don't feel comfortable with that much risk in one account.

You could also use some of your cash stash to buy individual bonds -- I think you can still buy 10k/year of Ibonds per person online. 

madmax

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Re: Case Study: Please Help Me Get On Track
« Reply #27 on: November 24, 2014, 08:20:15 AM »
You are trying to lose weight. You are also working 75-90 hours per week which by any measure is crazy. One of the two has to give. Can you find something with closer to 40 hours even if you have to take a paycut?

How is your eating? Are you sleeping 8 hours? Diet, sleep and stress are the biggest factors affecting weight loss for me. Exercise is important as well but work on getting the first three down first.

mollyjade

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Re: Case Study: Please Help Me Get On Track
« Reply #28 on: November 24, 2014, 09:05:21 AM »
Just wanted to say you're making a great start.

You mentioned concern about losing your job and adjusting your spending habits if that happens. A good place to start might be sitting down with your wife and discussing how you would reduce your budget dramatically if you suddenly had a huge decrease in income. What would you absolutely have to keep and what would be easy to cut? Including your wife will get her invested in the plan.


David Lurie

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Re: Case Study: Please Help Me Get On Track
« Reply #29 on: December 02, 2014, 10:57:32 PM »
Thank you everyone for the thoughtful comments. I am trying to implement these suggestions as we speak. So far to go. But every day is a new day. One step at a time.

Dee18

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Re: Case Study: Please Help Me Get On Track
« Reply #30 on: December 03, 2014, 10:00:50 AM »
Re:  keeping cell phone number.  There are Federal Rules so companies have to let you keep your cell phone number even when you switch providers unless you relocate.  You can read more here:
http://www.fcc.gov/guides/portability-keeping-your-phone-number-when-changing-service-providers

Re: exercise.  I really let my exercise lapse this fall.  I've now set a daily minimum of a mile of walking and this 7 minute NY Times workout:
http://well.blogs.nytimes.com/2013/05/09/the-scientific-7-minute-workout/?_r=0
On the week-end I add in bicycling and at least one good hike.

After just a couple weeks I can already feel a difference....of course, that's further evidence of how lazy I had become.  Oh, and I finally set up a stand up desk at work (just using stacks of books).  Baby steps.....