Author Topic: Here's my situation any help apperciated!  (Read 2556 times)

Bea

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Here's my situation any help apperciated!
« on: October 01, 2013, 03:08:44 PM »
I've been reading this blog for a few weeks now and working up the courage to do a "look at my situation" post. So here goes! Please be kind and remember we are new to this, I so appreciate any  replies you choose to give me.
Basic info: We are a married couple expecting our first baby both 28 years old. My husband is a school teacher. I am an artist. I started a business making and selling my work, which was starting to get some traction but when I became pregnant it was too physically demanding to continue so it is on hold for now. I still teach classes and have another very part time job. I absolutely plan to rejoin the work force as soon as I can! My business will allow me to watch my child and make money, I love my work and can't wait to get things restarted.

Assets: IRA: $9500 invested in a mutual fund with a 1% expense ratio. This was not my choice but my husband wanted to invest in a fund that is socially responsible so we found this one and it has been a compromise since he was against investing in the stock market at all.
Car: 2001 Mazada protege paid cash for this several years ago, still going strong though large repairs may be in the near future.
Cash: $40000 in a savings account. OK I know this is crazy. Here is what we were thinking with it. $15000 in emergency saving the rest we are thinking of as a down payment for a house. We won't be ready to buy for another 2-5 years though. So the question of what to do with this money in the short term is kind of daunting.

Income: Husbands pay check: 2960 after taxes
My earnings: varies usually around 400 per month since quitting my main pursuit

September spending:
Health: $802-Includes FSA contribution of $200, a gym pass $100 lasts for three months, and several one time and pregnancy related expenses.
Rent: $775
Transportation: $103-includes $28 a month insurance, bus fair, the rest is gas.
Groceries: $512 OK I know this is insane! but it includes all household cleaning and hygiene items, dog food, basically anything you would buy at the grocery store. Also I'm pregnant and we like to do healthy/organic shopping. But I am trying to cut it back.
Utilities: $161-includes gas/electric and internet. This was high because September included two gas/electric billing periods. Also our internet just got jacked up and we haven't been able to convince them to give us a new promotion yet, argh!!!
Entertainment: $82-Includes netflix and two meals out.
Other: $84-includes anything not covered in the other categories including some baby items, random household needs. This category varies a lot month to month is the one I'd really like to get under control.

So that leaves around $840 saved this month. I have to admit that this was a kind of good month for us. We often have higher transportation costs due to getting to so many dr. apts with the pregnancy and we sometimes spend more on entertainment or have a random expense come up like emergency travel to see family, car repair, health issues, vet bills etc. We almost never impulse buy. We try to use energy saving techniques like hanging laundry out, living close to work (for my husband, I have to drive to teach my classes).

Ok so here are my questions, what do we do with the ridiculous amount of cash sitting in a savings account? what do we do with the money we save each month? (put in IRA or continue putting it towards a down payment) How can we reduce spending and increase income? Should we even be thinking about buying a house with such low incomes? Should we even be thinking about becoming FI with such low incomes or is it silly and we should just think about trying to retire at 65 safely. I generally feel pretty good about our budgeting abilities but I think we can do better. Thanks mustachians you are truly awesome!

iamlindoro

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Re: Here's my situation any help apperciated!
« Reply #1 on: October 01, 2013, 03:32:13 PM »
First off, congratulations for doing most of the hard work for us-- you have correctly identified more or less the issues worthy of attention, which are:

* Get the savings working for you, ASAP:  How firm is your timeline on the house?  If it's "We must have a house in two years," then put these into a conservative portfolio (Bonds, CDs, etc.)  If you could afford to wait a few years if the market dropped a bit, then consider a mix with more volatile (but ultimately higher-earning over the long run) assets like a total stock market index fund and maybe an international fund.  Were I in your situation I would invest in a mix of these, weighted slightly more towards the stocks, since I would be willing to wait a year or two in a down market.

* Utilities: Find an alternate provider and be willing to cancel your service.  Play them against one another.  I don't see cell or landline phones here, do you guys really have no phone of any kind?  If you have one or more cell phones, have you switched to a low priced, non contract MVNO like Ting or Airvoice yet?

* Groceries: $512 for two people (and one pre-person) is insane.  Eating like kings, even organic, shouldn't be anywhere close to this.  I am sure if you look closely at this there are a number of things you can do without for the sake of your family and child's future.  Healthy is one thing, luxury is another.

* Socially Conscious Investing: There is nothing wrong with attempting to consider your morals when making investments.  Ultimately, however, you need to take a long, hard look at the fact that this is likely to seriously hamper your gains and over the long run, it's going to leave you with fewer assets, a longer retirement timeline, and at a financial disadvantage to others who are at least willing to invest broadly (ie, a total stock market fund).  You say that the investment choice for the IRA was not yours, but you are partners and you should have a say too.  You do no have to invest in tobacco and gasoline companies directly, but maybe with your help your husband could see fit to at least invest in a total market fund (where the fraction of "really evil" companies is relatively low).

* Rent: Seems high, but I don't know where you live.  Are you living extravagantly rentwise?  Is there an option to move somewhere cheaper, take on roommates?

* Transportation: $108 a month is gas is a couple tanks, that seems like a 20-30 mile a day commute or so... could you guys move closer to your husband's work?  Could he find another job closer?

I would say largely you are doing quite well.  If you're willing to make some sacrifices for the long term, however, I think you could really supercharge your savings before the baby comes and before you're carrying the weight of a mortgage.

gimp

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Re: Here's my situation any help apperciated!
« Reply #2 on: October 01, 2013, 03:39:38 PM »
- $250 a person on groceries is ridiculous luxury. Organic schmorganic, for 250 a month I'd be eating ribeyes every day. I suspect you don't, so why spend like you do? You can cut that in half tomorrow and barely notice.

- At the very least, a money market account gives you some interest (still less than inflation) whereas a savings account gives you zero. (I won't argue 0.05% versus 0.00%.)

Bea

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Re: Here's my situation any help apperciated!
« Reply #3 on: October 01, 2013, 04:13:40 PM »
Thanks iamlindoro,

Here's some answers to your questions: *Yes the timeline on the home purchase is flexible.

*Our parents pay for cell phones. I know it's ridiculous but they insist and it's the one thing they still pay for for us and don't seem to mind. I've offered to pay my portion of the bill but my dad refuses.
*I know the groceries are ridiculous! will do better next month.
*Socially conscious investing is something we really need to talk about as a couple, it's a hard topic to grapple with. Any additional thoughts are appreciated.
*Rent is the absolutely cheapest we could find. It's a very, very modest  500sq 2 bedroom. So that isn't anything we can change.
* My husband does bike to work. I drive 60 miles a week to get to teaching and we have to drive a ways for other appointments. I am working on cutting back on driving. The $108 number also included care insurance and some bus fairs. We used two tanks of gas last month at $70 each.

Bea

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Re: Here's my situation any help apperciated!
« Reply #4 on: October 01, 2013, 04:24:30 PM »
OOps typo, we used two tanks of gas last month at $35 each, total $70.

MKinVA

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Re: Here's my situation any help apperciated!
« Reply #5 on: October 01, 2013, 04:28:04 PM »
Look at certificates of deposit if you feel better being more liquid. With the amount of money you have and the timeline, you should be able to ladder some CDs with a better than savings account interest rate. Laddering is where you have several coming due at different times so that some of the money is always available within a few months allowing you to use it if needed or take advantage in increased rates of return (if that isn't completely a thing of the past. You'll get the best rate for longer term CDs, so look at some coming due in nine months (baby money), then one year, eighteen months, and so on. I don't think I would go as long as two years with too much since the financial markets are so crazy right now.

If you don't want your parents to pay your cell phone bill, they can pay mine. Take it as a gift. Unless you know they can't afford it, let them do this for you.

Bea

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Re: Here's my situation any help apperciated!
« Reply #6 on: October 01, 2013, 04:33:26 PM »
Should clarify the large chunk of cash is in a money market account earning .84% interest I have looked for cds but haven't found anything that can match this under 2years.