Author Topic: Case Study; Where can we tweak?  (Read 11262 times)

mrgrump

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Case Study; Where can we tweak?
« on: January 20, 2014, 05:09:07 AM »
Hello, I just completed reading all of the blog posts and was even inspired to begin my own blog. However, in order to get are financial ship to smoother water and to learn I wanted to open are finances to the mustachians to see where we can improve.

Gross Income $115,000 My and I are 27. We have a son who is 1 and would like to have 0-2 more children (depends who you ask!)

Loans:
$312,970 @ 4.25% mortgage loan
$17,000 @ 0.0% car loan on 2012 CRV exl

Expenses

House/per month
$1,556 mortgage principal and interest.
$600 property taxes
$155 PMI
$86 home insurance
$150 gas and electric
$40 water/sewage/trash
$83 HOA

Cars
$450 car payment on CRV (37 months remain)
$87 car insurance on 2 cars

Misc/month
$200 gasoline
$75 for 2 cell phones.
$27 internet
$550 groceries (includes diapers and formula)
$125 charity
$125-200 vacation/entertainment/eating out/all gifts
$100-250 unforeseen costs...vet visits, vacuum belts light bulbs and other such items

Savings/month
$850 wife's 401k
$650 Extra on Mortgage
$100 for sons college fund. (1 year old)

We usually have an extra $700+ at months end to move where we see fit. (Up until November this was going towards higher phone bills and life style inflation for the most part).

Assets
$20,000 home equity
$47,000 wife's 401k
$36,000 wife's profit sharing
$28,000 my 401k
$14,700 2011 honda accord (paid off)
$15,000 to invest or save
$6,000 (6ish weeks expenses saved)
$1,000-$5000 in checking to cover current months expenses.
$1,500 college fund
$1,500 brokerage account

My questions

Do we minimize my wife's 401k contribution, sons college fund to pay off debt?
Do we keep debt and invest?
Where do we put the $15,000 we have to "spend" ... PMI, rainy day account (where it is now), invest it?
What expenses can we cut....in December we downgraded phones and cut cable. We have began to walk everywhere we can and the bikes w/ a trailer will be up an running soon.

My current plan is to put the $15k on the house and any additional savings (tax return/cutting expenses/gift money) on the house. If we are able to pay it off in 2 years it will save us almost $12k in PMI premium alone. However, this would require is to pay off $46,500 principle in that time frame

Other than PMI I think we are in a pretty good spot. I am looking for some different perspectives or strategies. Thanks

Mr. Grump



« Last Edit: January 20, 2014, 08:06:02 AM by mrgrump »

Blindsquirrel

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Re: Case Study; Where can we tweak?
« Reply #1 on: January 20, 2014, 07:24:02 AM »
   Just on the first glance, Good job on having no credit card debt or student loans. Your age and gross income would help a bit. However that house is a budget killer. It is the reason for your negative net worth, about (-150,000?)  and also chews up $2397 a month not including utilities. Can you sell and rent or buy something much cheaper? High COL areas I know can be very different. One good rule of thumb is never buy a house more than 2-3x your gross pay. Unless you expect really good appreciation, that house alone will stunt the growth of your stash. (30 yr or 15 year loan?) I would also count what ever principle is in the payment as savings. Thoughts?

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #2 on: January 20, 2014, 07:51:02 AM »
Hi Blind Squirrel, I have added our gross income to the previous post ($115k) to help out. The house we purchased ($333k) has a huge upside for appreciation. The family we bought it from paid $375K for it 4 years ago and then he was relocated. As part of his relocation program we got it for as low as he could go. (10% lower than what he bought it for. As can be seen in the rest of the country home values are starting to fight back, are area is no different. Can you share with me you net value calculation? I come up with a positive 180k not great, but no where near your number. Thanks

Blindsquirrel

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Re: Case Study; Where can we tweak?
« Reply #3 on: January 20, 2014, 07:54:58 AM »
-312970 House loan
-17000 Car loan
20000 Home equity
47000 various investments/car
36000
28000
14700
15000
14000
-155270 net worth I came up with. May well have missed something.


rocksinmyhead

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Re: Case Study; Where can we tweak?
« Reply #4 on: January 20, 2014, 07:58:47 AM »
my first thought was that the CRV looks pretty expensive. I am not berating you for buying a car new with a 0% loan because I actually did the same thing in 2012 :) (maybe we both deserve facepunches? ;)) but it just seems like it is tying up a lot of money you could throw at the house. you might have to do the math to see if selling it and getting a cheaper car with a non-zero interest rate is worth it, but if there isn't a super good reason for having that specific car I think you should at least look at it.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #5 on: January 20, 2014, 08:12:41 AM »
blindsquirrl, Doesn't the value of our home ($333k) cancel out the negative of the mortgage in a calculation like this?

oscarsmom, we have thought about downsizing the car, so to speak, but at 0% interest and it being very new and very reliable car we were going to keep it until at 200k miles. but thanks for the recommendation, we have thought about. This might get me a face punch but there isn't many better feelings than heated leather seats on 0 degree days.

Another Reader

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Re: Case Study; Where can we tweak?
« Reply #6 on: January 20, 2014, 08:13:51 AM »
You need to count the house's value against the amount of the loan, not the equity.

For the OP, you are living up to your income.  Not sure I would sell the CR-V, but a $450 payment to get a sunroof and a leather interior?  That money would be better invested.  Start trimming across the board, and you will likely come up with a few hundred extra per month.

Blindsquirrel

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Re: Case Study; Where can we tweak?
« Reply #7 on: January 20, 2014, 08:18:16 AM »
333000
-312970
-17000
47000
36000
28000
14700
15000
14000
157730 positive net worth
 Very sorry!  My bad, definite error on my part. Still, think the house is on the spendy side. The CRV is also pretty high end. The house and car are roughly $3000 a month of your little employees fleeing your stash and I think those are the 2 items that give you the most bang for the buck.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #8 on: January 20, 2014, 08:25:16 AM »
blindsquirrel, no problem dude.

another reader, I found the abbreviate rule book on the FAQ page but couldn't find OP, can you help me out? For laughs my guess was Ordinary Person...

Another Reader

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Re: Case Study; Where can we tweak?
« Reply #9 on: January 20, 2014, 11:18:31 AM »
Original Poster...

And it took me some time to figure out what that meant, too.

Catbert

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Re: Case Study; Where can we tweak?
« Reply #10 on: January 20, 2014, 03:27:49 PM »
I would not cut back on 401k savings to pay off debt.  Yeah, its a bitch to pay PMI, but once a particular year is over you can't go back and "make up" the lost 401k contribution.  I would throw all you other extra money to pay down the mortgage though.

Thegoblinchief

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Re: Case Study; Where can we tweak?
« Reply #11 on: January 20, 2014, 04:07:33 PM »
Outside of the house and fancypants cars, your expenses are in-line considering your paying for formula and diapers (never cheap even when they are!).

Your biggest tweak would be selling the cars and using recovered capital to get cheaper but still reliable cars. ($6-10K is a nice sweet spot).

The mortgage *rate* isn't bad, but definitely throw $$ at it to get PMI off early (if you can, ask your lender).

Otherwise you're doing solidly. Keep it up, but don't get too fancy with baby food/snacks for convenience. Consider making your own. Definitely AVOID the toddler finger food stuff. Ridiculous what they get for things. Buy "new" toys and clothes at rummage sales or thrift stores. Heck, don't buy anything. Kids love sticks and dirt!! If I could tell my in-laws to stop buying plastic crap every year without offending them, I would!

abhe8

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Re: Case Study; Where can we tweak?
« Reply #12 on: January 20, 2014, 04:28:22 PM »
Hello, I just completed reading all of the blog posts and was even inspired to begin my own blog. However, in order to get are financial ship to smoother water and to learn I wanted to open are finances to the mustachians to see where we can improve.

Gross Income $115,000 My and I are 27. We have a son who is 1 and would like to have 0-2 more children (depends who you ask!)

Loans:
$312,970 @ 4.25% mortgage loan
$17,000 @ 0.0% car loan on 2012 CRV exl

Expenses

House/per month
$1,556 mortgage principal and interest.
$600 property taxes
$155 PMI
$86 home insurance
$150 gas and electric
$40 water/sewage/trash
$83 HOA

Cars
$450 car payment on CRV (37 months remain)
$87 car insurance on 2 cars

Misc/month
$200 gasoline
$75 for 2 cell phones.
$27 internet
$550 groceries (includes diapers and formula)
$125 charity
$125-200 vacation/entertainment/eating out/all gifts
$100-250 unforeseen costs...vet visits, vacuum belts light bulbs and other such items

Savings/month
$850 wife's 401k
$650 Extra on Mortgage
$100 for sons college fund. (1 year old)

We usually have an extra $700+ at months end to move where we see fit. (Up until November this was going towards higher phone bills and life style inflation for the most part).

Assets
$20,000 home equity
$47,000 wife's 401k
$36,000 wife's profit sharing
$28,000 my 401k
$14,700 2011 honda accord (paid off)
$15,000 to invest or save
$6,000 (6ish weeks expenses saved)
$1,000-$5000 in checking to cover current months expenses.
$1,500 college fund
$1,500 brokerage account

My questions

Do we minimize my wife's 401k contribution, sons college fund to pay off debt?
Do we keep debt and invest?
Where do we put the $15,000 we have to "spend" ... PMI, rainy day account (where it is now), invest it?
What expenses can we cut
....in December we downgraded phones and cut cable. We have began to walk everywhere we can and the bikes w/ a trailer will be up an running soon.

My current plan is to put the $15k on the house and any additional savings (tax return/cutting expenses/gift money) on the house. If we are able to pay it off in 2 years it will save us almost $12k in PMI premium alone. However, this would require is to pay off $46,500 principle in that time frame

Other than PMI I think we are in a pretty good spot. I am looking for some different perspectives or strategies. Thanks

Mr. Grump


first, what is your goal? i know you mentioned paying off debt (which is good) and you have a college fund, so paying for kids college must be another. but what is the specific financial goal? that will really play into what suggestions i would make. in general, i would never buy a new car. save the cash (which you could do pretty quickly) and buy a 3 or 4 year old low milage CRV. it will last basically as long as the new one and cost about half as much. put the extra money to the mortgage to get out of that pmi. (you can get heated seats on a used car too. :))

for your questions:

1. is the college fund tax advantage? if not, (and maybe even if it is!) i'd put that money to PMI. the 401k is tax advantaged. do you max it out every year? if so, i'd keep that up.
2. i would not be investing at the same time as paying PMI!!! that PMI is an additional 10percent every month. ouch!
3. i would for sure put the 15k to the mortgage to try to get out of the PMI.
4. expenses to cut: phone (my Republic Wireless is $45 a month for 2 phones. thats 50 bucks a month right there). diapers and formula, that is a huge expense. if you can't change for this child, please look into cloth diapers and breastfeeding for the next 2. that will save you thousands of dollars over their babyhood.

seattlecyclone

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Re: Case Study; Where can we tweak?
« Reply #13 on: January 20, 2014, 04:43:10 PM »
I do think your plan to pay off enough of your mortgage to get rid of PMI is a good one. The PMI makes your effective interest rate be higher than what you'll make in a typical year on the stock market, so that should be one of your top savings priorities at this time. I might even consider postponing contributions to your son's college fund to make that goal happen faster, but would probably leave the 401(k) contributions as they are for the reason Mary W. stated.

After you get rid of your PMI, there are conflicting opinions on whether paying off the rest of the mortgage at an accelerated rate is a good idea. I like to think of a paid-off house as like buying an insurance policy against the next Great Depression (think extremely high unemployment, deflation, and a stock market crash all at the same time). It's an unlikely event, so chances are you'll do better by putting your extra money in the stock market, just like chances are you'll be better off foregoing any other type of insurance. But if you do find yourself out of work and with your stocks severely depressed in value, a paid-off house could very easily make the difference between weathering the storm and ending up on the streets.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #14 on: January 21, 2014, 02:15:01 AM »
Seattlecyclone, We plan on cutting back the extent of our extra mortgage payments after PMI is gone. Maybe to only $200-$250 a month. I figure this will serve as a little diversification to other investments and give us a rock solid 4.25% return.

abhe8, Our short-term goal is to crush PMI, medium term goal is to save $50k for each child's college fund. (Only 1 child now, but over the next few years that may change) Long term goal is to just have the freedom of choice. The choice to say "no thanks" to business trips you don't want to go on or work you don't want to do. My wife did breastfeed for about 11 months but we had to switch to formula. Baby Grump will be "off the bottle" here in about 2 weeks so that spending will be going down slightly.

The college fund is tax advantaged and also allows grandparents and even you (if interested :) ) to contribute. With my wife's annual raise in the fall we hope it will be enough to max out her 401k. $7300 to go.

Thegoblin, The cars and house are fancy you got that right. My wife and I made a pact to only buy the boy 1 toy per holiday. Similar to you the grandparents drown him in cheap plastic. (Anything they buy must stay at there house, but a toy here and there makes it home with us).

maryw, thanks for confirming our plan!

Ohio Teacher

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Re: Case Study; Where can we tweak?
« Reply #15 on: January 21, 2014, 06:40:39 AM »
Sometimes I find it's helpful to look at things from my perspective.  You and your wife combined have about 1.5 times the income of my wife and I, but you have 3 times the house.  The second thing I see is the car. 

But, seeing as you have already nixed altering the house and the car in previous posts, I'm not sure how much tweaking can occur.  The charity isn't really even enough to make a difference so I would keep that.  Beyond getting that mortgage down to the point where you no longer pay PMI, I'd say you are well on the way to righting your financial ship which you tipped over when buying a huge house with hardly any money down and a new car.  Good luck in your endeavors.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #16 on: June 12, 2014, 03:49:34 AM »
Just wanted to give an update. I think we have made some pretty good strides over the past 5 months. Here are the improvements...

Loans
$285,000 @ 3.375% (15 year mortgage)
$13,780 @ 0%

House per month
$2,019 principal and interest.
No More PMI

Misc per month
$60 2 cell phones

Savings per month
$920 wife's 401k
$107 sons college fund

Assets
$10,000 rainy day fund

The assets have changed a little bit we invested our money on paying down the house. All the other balances have increased based on the monthly contributions.

We freed up about $300 a month with the refinance and after doubling our rainy day fund we will put excess cash into our brokerage account index fund and work on increasing my wife's 401k to the max.

So after 5 months did we do good? Could we do better?

Now do we just sit back avoid temptation and watch our stash grow a little each month?


Travis

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Re: Case Study; Where can we tweak?
« Reply #17 on: June 12, 2014, 04:24:56 AM »
Quote
$285,000 @ 3.375% (15 year mortgage)

Quote
So after 5 months did we do good?

You kidding? That's awesome!

From your original list of expenses are you still spending $500 a month on groceries?  That looks excessive for two adults and a toddler.  Where do you live? How big is your house?  Keep an eye on your energy use too.  What do your summer bills look like since you gave us winter numbers? I imagine that amount could be dropped by quite a bit (depending on where you live).  There are a few topics on the forum for measuring energy usage and finding ways to cut back.  It's been discussed a few times, but keep an eye on your transportation expenses.  You said you have two cars.  Do you need both?  What is the monthly upkeep on them?  It's great that you're not paying interest on your car note, but that's still an expense you might not need.  As long as you don't find ways to creep your lifestyle you're looking pretty good.

NewStachian

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Re: Case Study; Where can we tweak?
« Reply #18 on: June 12, 2014, 05:05:42 AM »
mrgrump,

I think you guys are doing very well. Based on your property taxes I'm guessing you live in a pretty high cost of living area, so your house is probably pretty Mustachian all things considered.

Loans
$285,000 @ 3.375% (15 year mortgage)
$13,780 @ 0%

Very awesome. I would personally pay these debts off as slowly as possible assuming the car payment stays at a good rate. I don't think there's anything wrong with buying a new car if you intend to drive it into the ground. It's not financially optimal, but there's a certain peace of mind you get with a new car. I think the real new car danger is people who buy new cars very often and don't have any financial legs to stand on. I also think it's smart to pay a mortgage off slowly and not put more money into principal while you have a better investment option on the table (once you're past PMI which you've already done)

Do we minimize my wife's 401k contribution, sons college fund to pay off debt?
Do we keep debt and invest?

Also, have you looked into ROTH IRA's much? I think a ROTH will win in the long run if you qualify for it.

I wouldn't go too crazy with the college fund. I think $100/month is a good amount. There are so many variables at play for college tuition that $100/mo for 15+ years will be more than enough to lighten the burden when it's time to pay, or more than pay a state school.

Overall, I think you're doing great. It looks like you've done a good job of trimming the obvious fat out of your budget. I'd shift my focus to increasing revenue generation. The great thing about that is a small percentage change in income is a massive percent change in savings.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #19 on: June 12, 2014, 05:30:06 AM »
Travis, to answer your questions the grocery budget is about the same. We have been able to dump the formula. I would say $550 is on the high end with most months coming in $50 or so lower. We will be back stateside soon so I expect this number to be more in $400-$450 range. The monthly upkeep on the cars is minimal, other than oil changes we haven't paid for anything. At this point they are necessary but I have thought about downgrading but I am currently leaning towards keeping them forever (to me that's 200k miles) we are at 35k or so on each.

The house is a bonafide McMansion similar to the one MMM just moved out of. I am very interested in the energy consumption and lowering it but other than a few lightbulbs here and there not sure where to start.  We could probably downsize but with a growing family and having lived aboard for the past 9 months we have decided that is our forever home.

Newstachin, I hope to get back to work in the next 1-3 months and with that we would be out of the roth income limits. With me going back to work it would add the expense of caddilac daycare but we would be able to max out 2 401ks, the college fund, pay a little extra on the house and invest heavily in our brokerage account.

I consider max on the college fund $167 and extra on the house maybe $150. Just a little but to diversify.

Now that our financial boat is out of the hurricane (kinda) and into smoother water it seems like there ain't much to do now. Other than wait.

NewStachian

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Re: Case Study; Where can we tweak?
« Reply #20 on: June 12, 2014, 06:19:13 AM »
Newstachin, I hope to get back to work in the next 1-3 months and with that we would be out of the roth income limits.

Keep in mind the ROTH contribution limit is based off AGI. We make about $220k, but deduct $35k from both maxing 401(k) and $25k in home mortgage deductions. This puts our AGI well below the $171k limit for the ROTH IRA. Maybe your numbers are north of ours, but it's something to keep in mind.

Groceries: try this for a month: try not throwing away any food leftovers... I bet you start saving $75/month simply by eating all food leftovers.

This is definitely good advice if you can do it. My wife and I tried to cut our food budget by about $100 a month and finally decided it wasn't worth the effort. If you're out of ROTH IRA range, then you're making over $200k a year, or >$16k a month. The question becomes: is altering your eating habits worth trimming 0.6% from your budget? That's a question you have to answer. For me the answer was no, but for many it is yes.

I've learned I need to pick my Mustachian battles at home. My wife is on board with 95% of my changes, but nagging her about lowering the grocery bill is too much (She already agreed to switch to the local military commissary which is a longer drive). Again, I think you've maximized all the low hanging fruit. I like your idea of just waiting to see how it plays out. If you're making progress in the right direction and content with your rate of achieving your financial goals, it might be time to step back and forget about it for a while.

nuprinmmm

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Re: Case Study; Where can we tweak?
« Reply #21 on: June 12, 2014, 06:44:51 AM »
$107 sons college fund
from previous discussion i am  guessing that you use 529 as you college savings plan

from above and below it appears you do not have a roth IRA.

since both 529 and roth are both post tax money (unless you get a state income tax deduction, none in my state) and grow tax deferred, a ROTH IRA is probably a better college tool as it offers flexibility

http://www.cnbc.com/id/101323957
here is a nice article but briefly my argument is the following:

1) ROTH gives max flexibility. you can use it for any child and withdraw without penalty for qualified expenses in case 18 years from now baby 1 decides against college and baby 2 decides for expensive private du jour.
(admittedly you can use 529 for other family members by changing beneficiary but what if none of the babies decide to go to college. then withdrawal is ordinary income and you get a ?10% penalty)

2) even if you're above the roth number you can do the backdoor roth. google or the FAQ can tell you about this

3) the roth for contributions can act as an emergency fund. your CONTRIBUTIONS (not earnings) can be withdrawn at any time

4) you kids can take loans for college if you have to wait out an extended 2007-8 financial crisis from investment losses

5) if your kids (god forbid) have a huge problem in life e.g death disability, or you or your family does, you can't take out loans for retirement but they can take out loans for college

6) more flexibility for balancing your portfolio in a roth than 529 plans.

7) best yet is max 401k/529/ROTH, i know easy to say hard to do.

my first post so hopefully i haven't broken any etiquette rules.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #22 on: June 12, 2014, 06:55:15 AM »
Nurpri, I have thought about switching to the roth plan but have nixed it because the 529 allows grandparents to contribute and we get a state tax writeoff up to $2k. We have somewhat forced the grandparents to stop buying him plastic junk and instead deposit the money to his college fund. Most of the gifts have come at the holidays/ birthday but they have chipped in close to $1k since he was born.

I think if we shifted away from his account and into our own IRA the grandparents wouldn't be too happy and begin buying junk again.

NewStachian

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Re: Case Study; Where can we tweak?
« Reply #23 on: June 12, 2014, 07:10:26 AM »
I think if we shifted away from his account and into our own IRA the grandparents wouldn't be too happy and begin buying junk again.

Maybe I'm misunderstanding you here, but I don't see how these are related. 529's are tied to a child. Either the grandparents are contributing to the one you opened, which they shouldn't be able to view, or they are contributing to their own which you shouldn't be able to view. Unless they ask you where you're sending your money each month it shouldn't be an issue.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #24 on: June 12, 2014, 07:17:56 AM »
Newstachin, for the most part correct. We set up the account for the child so we have full access to the account and can do as we please. The grandparents cannot "view" the account but they can still take up to a $2k tax writeoff by contributing. They just need to save their cancelled checks and what not for proof. I understand what your saying about them "not knowing" but they do inquire from time to time how the investment is doing and I would feel bad saying "we stopped contributing to the 529 and are putting it in our own roth account" even if the intent is the same.

GRSConstruction

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Re: Case Study; Where can we tweak?
« Reply #25 on: June 12, 2014, 08:47:00 AM »
Some good info given already, I was looking at your house expenses...your homeowner's insurance, mortgage insurance, and utility bills all seem very low. Property taxes seem really high though. Either that, or for me, living in Oklahoma is expensive!

Our house is a little under 2,000 SF, single story custom home built within last 5 years, valued at about $200,000 and my homeowner's insurance is $1,800/yr ($150/mo), mortgage insurance is about $2,200/yr ($183/mo), my average electric and gas is about $200-$225/month and I leave it set on 75 in the summer and 68 in the winter typically, and lastly my water/sewer/trash is freaking $75-$80/month. However my property taxes are only about $2,500/yr ($208/mo). Still, just crazy to me the difference in cost and your house is worth almost double mine! Do you mind me asking what part of the country you're in and SF of the house??

Sorry for no good advice at the moment, just blew me away reading that info! :)

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #26 on: June 12, 2014, 09:35:25 AM »
Cincinnati, Ohio - I guess what they say is true location, location, location.  For our area the taxes we pay are astronomical but we're exactly in our perfect house and perfect location. Thankfully we just got out of PMI but the way I understand that is it's a huge function of LTV, credit score, and total debt load. Our house is just over 3,400 sqft (too big for us right now) all brick 2 story with unfinished basement on a 1/2 acre. It was built in 1999 so it having such a big lot, and being all brick is unheard of since all the recent builds (last 15 years or so) in our area are mostly cookie cutter, plastic siding homes on a quarter acre or less.

I am in the process of shopping our home insurance and have already got 2 quotes back lower than he $85.  Our heating and cooling strategies are similar.

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #27 on: June 12, 2014, 12:07:16 PM »
Blah blah, huh? The pic is of the Eiffel Tower?

frugaliknowit

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Re: Case Study; Where can we tweak?
« Reply #28 on: June 12, 2014, 01:20:01 PM »
I agree with what most have said:  Get rid of the PMI and stop buying new cars.

Do you really NEED 2 cars?  If you cannot eliminate the second one, can you downgrade it?

mrgrump

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Re: Case Study; Where can we tweak?
« Reply #29 on: December 26, 2014, 09:14:36 PM »
Update

Income:
$187k

Debt:
$280k @ 3.375% House
$11k @ 0.0% Car

Investments:
$120k wife's 401k
$40k my $401k
$22k rainy day fund
$20k brokerage account (all com free ETFS, VTI, VEU, BND, VNQ at 60/20/10/10%)
$4k college fund

Monthly Savings:
$3000 into $401k (maxed out)
$1500-$2000 brokerage account.
$167 college savings (2 year old)
$100 into loyal3 account
$100 overpayment on mortgage
$100 overpayment on car

This post seems ridiculous to me but I can't help but ask. Are we doing enough? What can we do differently?

We have a second baby due in April but other than that no real changes planned. We are very comfortable in our house and cars and have no major expenses planned.

I am just concerned we will end up like the rest of society broke and working until we are 89. We are only 28 and don't really have any concrete plans on when to retire but we have kicked around the idea of 15 years as that would coincide with when we are mortgage free.

Any thoughts?



wtjbatman

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Re: Case Study; Where can we tweak?
« Reply #30 on: December 26, 2014, 09:37:19 PM »
Good news is if you keep maxing the 401k from 28 until 89 years of age you'll have approximately $35 million to live off of. Assuming 7% return after inflation.

thedayisbrave

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Re: Case Study; Where can we tweak?
« Reply #31 on: December 27, 2014, 08:44:40 AM »
Update

Income:
$187k

Debt:
$280k @ 3.375% House
$11k @ 0.0% Car

Investments:
$120k wife's 401k
$40k my $401k
$22k rainy day fund
$20k brokerage account (all com free ETFS, VTI, VEU, BND, VNQ at 60/20/10/10%)
$4k college fund

Monthly Savings:
$3000 into $401k (maxed out)
$1500-$2000 brokerage account.
$167 college savings (2 year old)
$100 into loyal3 account
$100 overpayment on mortgage
$100 overpayment on car

This post seems ridiculous to me but I can't help but ask. Are we doing enough? What can we do differently?

We have a second baby due in April but other than that no real changes planned. We are very comfortable in our house and cars and have no major expenses planned.

I am just concerned we will end up like the rest of society broke and working until we are 89. We are only 28 and don't really have any concrete plans on when to retire but we have kicked around the idea of 15 years as that would coincide with when we are mortgage free.

Any thoughts?

Congrats on #2!!!

I think you're doing great.  Keep on swimming.  Didn't read earlier posts in detail but have you considered dumping money into an IRA before doing any more taxable investing?

mm1970

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Re: Case Study; Where can we tweak?
« Reply #32 on: December 27, 2014, 09:10:16 AM »
Well for one thing, I see your income has gone WAY up, so great job there!

Just keep doing what you are doing.  Avoid lifestyle inflation, and in fact,  keep trying to trim here and there so it becomes a habit.

kib

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Re: Case Study; Where can we tweak?
« Reply #33 on: December 27, 2014, 09:42:24 AM »
"I am just concerned we will end up like the rest of society broke and working until we are 89. We are only 28 and don't really have any concrete plans on when to retire but we have kicked around the idea of 15 years as that would coincide with when we are mortgage free.

Any thoughts?"

You won't.  :-)

My only thought to you would be to consider a glide path into a "retirement career".  Not that you should start worrying about retiring in a concrete way, but perhaps come up with a side gig that you enjoy doing that would provide a secondary income stream. I personally think your situation is amazing, but that would give you a place to gradually shift your energy, give your end date a push, and also perhaps make you feel less anxious about the future.   
« Last Edit: December 27, 2014, 09:44:32 AM by frufrau »

athomeintheworld

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Re: Case Study; Where can we tweak?
« Reply #34 on: December 27, 2014, 10:39:15 AM »
Wow good job for you - inspiring.

I may have missed it - but were you able to update your home insurance for less expensive? Seems really high. (We are in a high cost of living area in CA, 400k house and paid 439 this year). Suggest increasing your deductible if necessary - you have the assets to cover for a true emergency, and you shouldn't be tapping the homeowner's insurance except for really big issues.

Is your wife planning to take awhile off after baby? May slow things down a bit but I don't think it's a problem. You guys are doing great.