Author Topic: First post, lets make it a case study!  (Read 2060 times)

Cooperstown

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First post, lets make it a case study!
« on: September 09, 2012, 06:41:19 PM »
I guys and gals, I just recently found the MMM way of life and I love the site.  After doing some reading I figured the best way to introduce myself and get involved with the community is to jump right in with a self case study.

No debts.

Assets:

Fuel efficient car, worth $1,500
Not so fuel efficient car(28 city 34 highway), worth $1,500
Home with ~36% equity, worth about $146,000, owe $96,000
IRAs (Roth & Traditional) worth ~$60,000
Checking(3% interest up to $25,000) $26,500
Checking(2% interest up to $10,000) $11,500


Household Income:

My Salary, $31,212/year
My Wife's Salary $32,700
Annual bonus ~$3,000/year
Wife's summer school earnings $2,500

TOTAL: $69,412/year, or ~$5,784/month before taxes and other deductions

Expenses:

Mortgage, Insurance, Property Tax, $746/month
HOA fees - None
Utilities (all electric, no gas), ~$200/month
Internet - $60/month
Netflix - $8/month
Gas, ~$200/month - expecting this to drop significantly, my wife just got a new job 2 miles from the house dropping her commute by 36 miles daily
Car insurance & maintenence, ~$131/month
Groceries & household items, ~$300/month
Restaraunts, ~$100/month
Lunch at work (days I don't bring lunch), ~$5/month
Alcohol at home & at meetups - ~$30/month
Gym membership, $60/month
Haircut, $35/month
Clothing, ~$40/month
Vacations/weekends away, ~$50/month
Gifts, special occasions throughout the year - ~$40/month
Marathons and other distance races ~$25/month
Funding for wifes retirement account outside of work $125/month
Funding for my retirement account outside of work $50/month

TOTAL: $26,460/year, or $2,205/month


A few expense notes:

The gym membership is something I plan on keeping.  I need access to the pool for ironman training.

I could bike to work in the summer but I have two issues, 1) my bike is worth about $1,500 and I have no place to safely store it while working 2) I sweat heavily and do not have access to a shower at work so I am struggling with the logistics of this.

Other Notes:

We are both on board with a frugal lifestyle and I'm sure there is plenty of excess in our spending.  I'm looking for ways to trim fat and possible expenses I could be forgetting as this was just a quick inventory off the top of my head.  We currently do not have a formal budget or track expenses all that closely.  We also use a rewards card that gives 5% on some expenditures and 1% on the rest.  I'm also looking for good invest options to invest our cash into.  I am not familiar with investing and I don't really know where to start so any advice or direction regarding investment opportunities would be greatly appreciated!  Also note we have our first child on the way so our expenditures are going to change greatly very soon.

Sparky

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Re: First post, lets make it a case study!
« Reply #1 on: September 09, 2012, 08:31:00 PM »
I'm not so great in the MMM math department, but it's looking like you can drop of the cars from your wife's new job and because I'm going to assume one of you will be staying at home with the new baby for a period of time.

How far is your job from work? Another solution to deal with sweaty bike riding is to ride a little slower. You don't have to ride like you race.

There is always a place to park a bicycle I swear. Is there no storage room, light pole, the back of a co workers truck, coffee room, neglected office or smoking pit that you put it in? Or in all honestly, pick up a Craigslist special and just chain it up anywhere.

Rather than that, I feel your doing pretty damn good :)

Russ

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Re: First post, lets make it a case study!
« Reply #2 on: September 09, 2012, 08:46:11 PM »
I could bike to work in the summer but I have two issues, 1) my bike is worth about $1,500 and I have no place to safely store it while working 2) I sweat heavily and do not have access to a shower at work so I am struggling with the logistics of this.

I feel ya on this one. I get nervous even leaving my $400 bike locked outside work all day. If I were you, I'd find a $200 or so beater on Craigslist - something rideable, but not something a thief would make huge bucks on. You can use it as long as you want, and if you find the right bike and take care of it you'll be able to sell it back at break-even or maybe even a bit of a profit. As far as sweating goes, just riding slow is probably the best option. I sweat a fair bit myself, and know that sometimes in the summer heat it's just unavoidable. But we're coming up on cooler weather any day now, and with that it should be possible to stay dry as long as you dress appropriately and ride within your limits. Yesterday night, for example, I had a social gathering to get to about 15 miles away, and since it was so nice out I decided to take the bike. At about 65 deg. F outside, I was perfect in a long sleeve button-up with the sleeves rolled up and all the buttons undone for a little extra air, and a pair of shorts. I gave myself an extra 20 minutes to get there compared to my normal faster pace, and I was just fine. If you like getting a little workout on your commute, you can still bust it home, get all sweaty, and take a shower then.

ShanghaiStashing

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Re: First post, lets make it a case study!
« Reply #3 on: September 09, 2012, 09:14:43 PM »
Spending side seems to be in order to me. It is the investment side that I think you could probably think through a bit more carefully.

Right now you've got ~38K cash sitting in an account that is earning roughly inflation. This is ~26% of your networth (38K cash / 148K net worth) and as a result is likely significantly dragging your overall rate of return down substantially.

There are a bunch of different things you can do, but the easiest is to buy an ETF you are comfortable with. Plenty of advice on this board and MMM posts that can easily get you into a fund you like with low MER.

Lars

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Re: First post, lets make it a case study!
« Reply #4 on: September 09, 2012, 11:49:56 PM »
As I see it your big picture looks something like this:

Gross Pay: 69k
Estimated Net Pay: 59k (15% total tax rate)
Expenses: 24k (28k*)
Estimated Savings Rate: 59% (52%*)
Net Worth: 148k
Time to FI at 4% real return (networthify.com): 9 years (12 years*)
Time to FI at 1% real return: 11years (16 years*)

* I didn't see anything in the budget for home improvement, home repair, car replacement, car repair, or out of pocket health care costs so your long term saving rate may be lower than your current numbers. I made a wild estimate so as to give you some additional info as the risk of some accuracy. Please substitute your own estimates.

If you'd like to shave a year off, I'd estimate you could:
Reduce your spending by $125/month OR
Increase net income by $300/month

Of course, with a kid on the way this information is not near as useful but at least I hope I could illuminate a little more where you stand now.

Lars

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Re: First post, lets make it a case study!
« Reply #5 on: September 10, 2012, 12:11:53 AM »
I forgot to say in my last post - Welcome to the boards, Cooperstown.

On the subject of investing, I think the Bogleheads wiki is a great place to start for information. I'd recommend this page http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit first.

As for reducing spending, would you consider:
Saving around $65/month and eating out one a month instead of the 3 or 4 times you likely have budgeted?
Saving maybe $100/month and dropping down to one car?
Have you shopped around on car and home insurance lately?
Have you done all the easy upgrades to reduce electricity use like fluorescent lights and programmable thermostats? Do you know your big contributors to your monthly bill?

Cooperstown

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Re: First post, lets make it a case study!
« Reply #6 on: September 10, 2012, 06:37:16 AM »
Thanks for all the responses!

I actually do have a beater bike off craigslist I could use, I actually just forgot I had it because it has been so long since I've ridden it.  I'll have to do some testing on how slow I can ride before I start sweating and see if it's feasible.  I work roughly 10 miles from where I work.

We do are best not to eat out much, but the reality is my wife has been getting cravings so we've been going out more recently.  We used to be very good in this department and I hope after the baby is born it will get easier.

Dropping a car is a definite option now that she works so close.  We actually talked about this a little bit, but didn't get that far into the discussion.

Car and home owners is about as low as it will get.  I work at AON and I have our personal lines department get quotes for us every 6 months.  Right now were paying about $110 per car per 6 months and $450 or homeowners annually.

We could get more fluorescent lighting to reduce the electric.  We have everything plugged into a power strip for the TV so when we are done using it we just unplug it.  My wife thought I was crazy at first until she saw our electric bill drop $30 a month because of it.  We also have a programmable thermostat so were doing ok here.  We just need to get on top of the lights.

I will checking out all of the investment options you guys have mentioned, thanks for all the insight!

galaxie

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Re: First post, lets make it a case study!
« Reply #7 on: September 10, 2012, 07:40:16 AM »
Even at times when your wife isn't willing to bike/walk to work (for instance, when she is super-pregnant or the weather is bad) you could probably drop her off if you're still driving.  That might make it easier to transition to one-car living.