Hello, all! I’m new to MMM, and I’m psyched to be getting a better handle on our finances and starting to plan for the future. A bit about me: I’m a recently married (6 wks!) 27-year-old woman, and my partner is 33 yo. At the moment, we’re both students. My partner (a recovering member of the money-is-there-to-be-spent club) has 1 more year left in his master’s program. I’ve been a student all of my life and have 3-4 more years left -- I’m in an MD/PhD dual degree program. While both of our graduate schools are paid for, we both have debt from undergrad. I’m looking for advice on how to tackle our goals, particularly with some big changes in our lives in the next 10 years, both income-wise as we finish school and lifestyle-wise as we move for my residency and start a family (2-4 kids planned).
Goals, both immediate and long-term:
*Pay off all debt (!!!)
*Establish emergency fund (~$5000 to start)
*Buy a house (after I finish school and move for residency – 3-4 yrs at the earliest. We don’t have a lot of say in where I will go, but we’re hoping for the northwest)
*Start/afford a family (very circumscribed windows available for this, giving my program and future training/career. Earliest would be 2.5 yrs away, more like 4+ yrs (sigh))
*Achieve financial independence! (Although we both will probably always work, working part-time would be fabulous. This is a goal so far in the future that I’m not yet at the point of calculating when/how much)
Income:
$31,000 – my scholarship stipend (paid quarterly; I am required to pay estimated taxes on it). Increases ~$500 every 1-2 years.
~$27,000 – my partner’s job ($14/hr; after he graduates, he will looking for community college teaching jobs)
~$24,000 – my side job as a contractor doing editing. Pay is variable, but I aim for $2000/mo (~100 hours), . I am required to pay estimated taxes and the ~15% extra for social security, etc. This may disappear or at least significantly decrease in the last 2 years of my program, when my schedule will be insane.)
~$4400 – income from TAing 2 quarters/yr. Variable, so I don’t count on this in planning.
= ~$5,000/mo after taxes (including estimated taxes and self-employment tax)
This will change by a large amount in the next few years, as my partner looks for adjunct prof work (he plans to be our part-time stay-at-home parent; no idea what he’ll be making) starting next year and I move on to residency in 3-4 yrs (~$50,000/yr with likely no side income) and eventually an attending (3-6 yrs after that) (~$150,000??? Hugely dependent on the specialty I choose).
Expenses (worth noting that we live in Chicago – not a budget-friendly city!):
Rent: $925/mo
Auto insurance: $144/mo (insanely high because my beloved has had 2 cars totaled in the past 5 years. Yes, I have shopped around. A lot. We have a $2000 deductible)
Auto payment: $135/mo (currently paying $400/mo because we can, but this is the minimum. Yes, I know – oh, do I know. It’s a used 2010 Prius we bought last fall, and my partner will not entertain the idea of selling/downsizing. Auto expenses and auto habits are the source of our biggest fights, but we’re both working on being better – including all of MMM's tips)
Auto gas: $100/mo (my partner has to drive to school 2x/wk; the rest is grocery trips, visiting family, etc. As a point of comparison, about a year ago, this was $300-$400!! (granted, the car was different, but still))
Electricity: $70/mo (average; recently started hang-drying and will be really working on AC bills)
Heating/cooking gas: $84/mo (average; we keep our apartment 62 deg in the winter)
Phone: $65/mo (under contract)
Student loan: $65/mo (only one loan is in repayment; all others are deferred until we graduate – see below)
Internet/cable: $45/mo (cheaper w/ cable than internet alone)
Groceries: $400/mo (I think this is a bit of a face punch. I’m working on getting this down (Costco and LOTS of lentils and rice))
Pets: $100/mo (includes insurance, food, etc. We have 1 Great Dane and 3 cats. We could live without the cats if we found them a good home, but the dog is a non-negotiable. I recently found much cheaper pet insurance and we switched to Costco food to get this to this level)
Personal care: $25/mo (haircuts)
Identity insurance: $7/mo
Health insurance: $183/mo (partner only. My health insurance is paid for as part of my scholarship)
Dental insurance: $85/mo (both of us)
Vision insurance: $7/mo (me only)
Renter’s insurance: $14.5/mo
Discretionary: $200/mo (Face punch? $100/ea -- covers any clothes, gifts for holidays, dining out, personal items, etc. I’m working on bringing this down, but it’s a MAJOR sticking point for my partner.)
ROTH IRA contribution: $916.67 (neither of us have any other employer-sponsored retirement plan available – we’d make full use of it if we did!)
= ~$3,570/mo (or $2,653 if you exclude retirement savings)
Income – Expenses = $5000 - $3570 = $1430
Assets:
Emergency fund/savings account: $1,500 (0.87%)
House fund/savings account: $4,700 (0.9%)
My IRA (Vanguard Target Retirement Account): $1,700
Spouse IRA (Vanguard Target Retirement Account): $4,000
(Car: ~$15,500)
Total (excluding car): $11,900 (whomp whomp)
Liabilities:
Car loan: $5274 remaining (2.49% interest; required payments of $135/mo; currently paying $400/mo)
Student loan #1: $2,200 (5%; $65/mo required)
(all below loans are deferred but accruing interest)
Student loan: $16,600 (6.8%) (repayment begins in ~1 year)
Student loan: $16,100 (6.8%) (repayment begins in ~3 years)
Student loan: $21,300 (5.25%) (repayment begins in ~3 years)
Student loan: $3,500 (5.125%) (repayment begins in ~3 years)
(all below loans are deferred and do not accrue interest until graduation)
Student loan: $5,600 (4.5%) (repayment/interest begins in ~1 year)
Student loan: $5,600 (3.4%) (repayment/interest begins in ~1 year)
Student loan: $2,200 (6%) (repayment/interest begins in ~3 years)
Student loan: $2,300 (2.35%) (repayment/interest begins in ~3 years)
Student loan: $4,800 (3.25%) (repayment/interest begins in ~3 years)
Total: ~$83,000 at 2.3%-6.8% (ahhhh!!!)
So, we’ve basically got $1,400 a month to work with (with lots of possible changes in income in the future), and I’m looking for recommendations as to how to spend it. Although I really, REALLY would love to be in a position to buy a house come residency (3-4 yrs), my gut tells me that it’s best to pay off the bulk of these student loans (all loans above 5%?) before saving up 20% for a down payment. Am I correct in thinking this way? My current plan for that $1,400/mo is below, but I would love any suggestions or advice! Am I right in assuming I should be socking away the max $11,000 in our ROTH IRA funds each year for the benefits of compounding interest, or should I be using that money to pay off student loans faster? Can anyone see any good spending areas to cut (I would cut the car and all of its associated costs in a heartbeat, but that is a battle with my spouse that I cannot win)?
Emergency fund: $400/mo (until reaching a balance of $5000. Approximately 9 mo. remaining)
Extra car payments: $265/mo (for a total of $400/mo – although it’s a low rate, I HATE having this loan. Approximately 13 mo remaining at this payment level; otherwise, ~3.5 yr)
House fund: $25/mo + extra income (the $25/mo is to avoid fees)
Student loans: Anything left! $710/mo (in the order listed above – I assume I should tackle one at a time instead of splitting payments up? (unless they are in repayment – then pay at least the minimum, obviously))
Eventually, all of this money would go towards saving for FI!
Thanks, all!!