What would you do in my situation? Help!

[mattixc]

I first wanted to thank you for taking time to read my question and welcome all advice.

• Married w/2 kids
• My (42yrs old) annual income: Net: $41,400/ Gross: $48,000 as Independent contractor in Technology Sales
• Wife (44yrs old) annual income: Net: $50,400/ Gross: $68,400 as Teacher of 18 yrs
• My retirement: $10,600 in Vanguard Traditional IRA (I know, not much huh? and not currently making contributions)
• Wife retirement: Teacher: $113K/ Vanguard 403b(7): $29,600/ Vanguard Roth IRA: $882. (Total: $143,000) She’s contributing 7.5% into teacher retirement through school
• Debt: only a mortgage $291,000
• Residual monthly income: $1,200-$1,800
• College savings $7,500 in 529 for daughter who starts college in Fall of 2019 (not contributing currently)
• Son would start college 2022 (not contributing currently)
• I don’t want my kids to have student loans after they graduate from college
• I want to retire as soon as possibleMy wife doesn’t want to stop working only work part time

Here are my questions:

• Where should we be putting the residual income?
• Should it be divided? If so, how?
• I could change jobs and make more money plus benefits and only do it until we have enough to retire. Should I do this? It would mean more commuting time (less time at home and with family). Would probably make as much as $20,000 more per year plus benefits.My wife has the option of increasing her contribution percentage to her school retirement. Should she do it or does it make more sense to start contributing to her Roth instead? Or should we not increase her contributions at all and instead do something else?

[mxt0133]

I would personally try and eliminate the mortgage as fast as possible, but others might recommend maxing out your wife's 403b, but since contributing to her teacher retirement, pension?, already it might not make sense.

Idea is to contribute as much as you can to retirement accounts to lower your taxable income and then get rid of debt, even mortgage, and then start investment accounts.

I know you want your kids to be debt free after they graduate from college, but there are ways to go to college without going into debt and without mom or dad paying for it.

It will really help them realize that college is not free and that the will have to work for it academically and monetarily.  I have seen so many instances where kids are going to college that is paid for by mom and dad, and treat it as spring break.  It breaks my heart to seem them take it for granted and waste their parents hard earned money.

[SwordGuy]

I know you want your kids to be debt free after they graduate from college, but there are ways to go to college without going into debt and without mom or dad paying for it.

It will really help them realize that college is not free and that the will have to work for it academically and monetarily.  I have seen so many instances where kids are going to college that is paid for by mom and dad, and treat it as spring break.  It breaks my heart to seem them take it for granted and waste their parents hard earned money.

Yes!   

[Unionville]

I also think you should reconsider paying for your kid's education.  They can go to a state school, work part time, and take out a small loan to cover tuition. (I'd rather see them have a  school loan debt than a car payment or credit card bill).   That's what I did.  Also, kids should not have cars when going to college.  Too expensive.  Take a bus.  BTW-I just read a report that in TN people who got degrees at 2 year colleges now make more money than people who got BA's.  That's because education is changing.  Practical job skills are more valued that general education.  My brother in law supports an entire family, has a paid off house in an upscale area and he never went to college.  He is a computer programmer.

[MissStache]

I could change jobs and make more money plus benefits and only do it until we have enough to retire. Should I do this? It would mean more commuting time (less time at home and with family). Would probably make as much as $20,000 more per year plus benefits

An extra 20K is a lot of money in your situation.  If you could make that extra, and funnel as much as possible into retirement accounts, it will really make an impact on your ability to RE.

What are you doing with the extra income now?

[NewStachian]

My personal thoughts:

- I would setup some automatic deposits into the 529 plans on a monthly basis. I started these for my niece/nephew (I have no kids yet) and the name of the game is steady contribution. $50-$150 is enough each month to see a good appreciation over 8-10 years. My view on this money is it doesn't have to be at a point where it can cover 100% of all costs ever for the most expensive school. I view it as a way to mitigate the costs down the road of a potentially high college tuition. There are some amazing inexpensive state schools, full scholarships (I went to a military academy for free and it set me up very well). I'd rather not be stuck with a ton of money in a 529 that ends up not being used, but having some in there is good. You can also change the beneficiary on a 529 so if one of your kids doesn't use it, you can easily set it up for the other.

- Many Mustachians view mortgages as bad and vow to pay them off as quickly as possible. My personal view is if you are disciplined enough to put that money in the market instead and your interest rate is low enough to return more in the market with inflation considered, it will help you out in the long run to be dumping that money into aggressive growth stocks. Many Mustachians here like index funds and Vangaurd... those are certainly great. I choose to keep a 70/20/10-ish allocation in my Fidelity account with 70% being domestic stock, 20% international stock, and 10% bonds. If you know you want to stay in your house and you've already had your mortgage for a while, it makes more sense to pay it off since you've already reaped the benefits of the large compounding effect and you're paying a small premium for peace of mind.

[mattixc]

I could change jobs and make more money plus benefits and only do it until we have enough to retire. Should I do this? It would mean more commuting time (less time at home and with family). Would probably make as much as $20,000 more per year plus benefits

An extra 20K is a lot of money in your situation.  If you could make that extra, and funnel as much as possible into retirement accounts, it will really make an impact on your ability to RE.

What are you doing with the extra income now?

Right now we are putting towards a emergency fund which we have approx $4,300.

[ch12]

I first wanted to thank you for taking time to read my question and welcome all advice.

• Married w/2 kids
• My (42yrs old) annual income: Net: $41,400/ Gross: $48,000 as Independent contractor in Technology Sales
• Wife (44yrs old) annual income: Net: $50,400/ Gross: $68,400 as Teacher of 18 yrs
• Debt: only a mortgage $291,000
• Residual monthly income: $1,200-$1,800
• I don’t want my kids to have student loans after they graduate from college
• I want to retire as soon as possibleMy wife doesn’t want to stop working only work part time

Here are my questions:

• Where should we be putting the residual income?
• Should it be divided? If so, how?
• I could change jobs and make more money plus benefits and only do it until we have enough to retire. Should I do this? It would mean more commuting time (less time at home and with family). Would probably make as much as $20,000 more per year plus benefits.My wife has the option of increasing her contribution percentage to her school retirement. Should she do it or does it make more sense to start contributing to her Roth instead? Or should we not increase her contributions at all and instead do something else?

If your household is taking home $91,800 net, then where is everything going? Your residual income adds up to $14,400 or $21,600 per year, which to me seems pretty small compared to your net income. Are you spending $77,400 a year? Where your money is currently going, to me at least, seems at least as important as where it should go.

[Travis]

Put up your household budget. With a $90k household income there has to be money out there for you to be able to do some combination of retirement savings, mortgage, and college.

[mattixc]

Monthly Budget: (this is everything dime we make and spend monthly). I was a little off on income before. Some of the expenses are annual cost but we put money away each month to cover them when they come up. These are our savings pockets.


INCOME (net)

• My wife: $4,250 for half the year then $4,800
• Me: $3,450
• Rental Income: $1,600
• TOTAL: $9,300 to $9,900 (includes rental income. see rental expenses below)

EXPENSES

• Church $90
• Primary Mortgage $1,680
• Rental Mortgage $1,223
• Rental Assoc Dues $56
• Rental Home Warranty $80
• Rental Pool Service $89
• Groceries/Entertainment $1,250 ($1,000 Groc & $250 Entertainment)
• Clothes $100 (for the whole family. covers worn out clothes etc.)
• Kids Activities $100
• Wife Spending $100
• My Spending $100
• Daughter's Swim Club $85 (select swim)
• Son's baseball club $150 (select baseball)
• Kids allowance $52
• Wife haircut $35
• Natural Gas $85
• Electricity $60
• Garbage $43
• Water/Sewer $81
• TV/Internet/Phone $120
• Cell Phones $216 (wife and daughter both have phones as well as me. Mine required for my work)
• Car Ins $108 (1999 Honda Civic and CRV)
• Fuel $215
• Gym Membership $95
• Disability Ins $52
• Med Ins (Me) $254
• Life Ins $97 (me)
• Life Ins $33 (wife)
• Netflix $9
• Google Music $9
• Below are savings that we put away for various pockets. So we don't charge anything. Only Cash.
• Gifts $35 (friends birthdays)
• Rental Reserve $150 (covers painting, roof replacement, unexpected repairs)
• Emergency Fund $145
• Christmas Gifts $125
• Vacation $210
• Car Tabs/Oil Changes $20
• Wa DC Trip 2015 $200
• Dr Copays $100
• Amazon Prime $7 ($80/yr)
• Evernote $4 ($45/yr)
• Lic Renewal $8 ($100/yr)
• TOTAL $7,571

[Travis]

One of the first things that jumps out is your rental property brings in $1600, but the property costs you $1598 with mortgage, dues, fees, and repairs.  Assuming your tenants are paying all the utilities and you have a tenant every month of every year, you're breaking even on it.  Your rental property is not income!

You're paying twice what you should be in groceries.  You shouldn't be paying more than $500/month for food with two children. Establish a solid food budget and track what you're buying. What "entertainment" is costing you $250 a month?  You're paying for swimming, baseball, "activities," and "entertainment." What's the difference? 

What clothes are you buying that costs you $100/month? 

How old is your CRV?  You can probably cheaper auto insurance especially with a 1999 car.

You're also budgeting $125/month for Christmas.  I'm not going to suggest how you take care of your family, but be aware that you're currently budgeted to spend a mortgage payment on Christmas gifts this year and saving for two vacations.  A large portion of your monthly expenses are towards your children's activities and vacations, but also be sure you're addressing your own future as well.

As far as retirement savings, if you or your wife receive an employer-matching program you want to max that out, then a tax-advantaged account like a Roth.  Remember that the basic math for retirement is your current spending times 25.

[mattixc]

Travis,

Thank you for the reply. You're right the rental actually only cashflows a few bucks. I probably shouldn't have put it in there. As for car insurance, I just checked with my insurer, Amica and I got rid of Comprehensive and Collision and increased my deductible to $2,500 which was the max and lowered it to this new amount.

As for groceries, I guess you're right that is a lot of money. We don't go crazy and purchase unneeded food. With the kids doing sports and practices several times a week we do purchase easy to make meals that we can just through in the oven (frozen pizza, chicken patties, etc) from Costco. The entertainment is really to cover if we have two kids with practices that conflict and we don't have time to cooks something.

Our kids do a sport a season which can cost as much as $350 plus new equipment if needed. The activities budget covers these seasonal sports. The baseball and swimming are year long sports. I know that's a lot of money. We'll have to look at that.

For Christmas, that budget amount is for buying gifts for the two kids, wife, myself and extended family. I think we need to as a family (the whole family) need to come together a talk about what is reasonable and maybe stop buying gifts for the adults.

As for retirement. That is our intention. I thought that MM said it was also a good idea to put money in just an index fund that paid dividends to build the early retirement amount that could be used before we were eligible to use the Roth and wife's retirement.

[Mori]

Travis,

Thank you for the reply. You're right the rental actually only cashflows a few bucks. I probably shouldn't have put it in there. As for car insurance, I just checked with my insurer, Amica and I got rid of Comprehensive and Collision and increased my deductible to $2,500 which was the max and lowered it to this new amount.

I did car insurance shopping back in December and Amica was by FAR the most expensive (I'm talking over $400/year more). Have you shopped around for car insurance lately? Even with the home insurance discount it didn't make sense for me to use them.

[chicagomeg]

To me, a $291,000 mortgage on your income seems rather large. Have you considered downsizing? My husband and I make just a bit more than you and have no kids but I can't fathom having a mortgage that high.