Case Study - jump in salary in the new year!

[bee1286]

I just got a new job, starting in February, and I want to be prepared! Let me know what we could be doing better.

Life Situation:
IRS filing status - Married, filing jointly
Number & ages of dependents - N/A
Anything else - I am 31, husband is 33. No plans for kids for another 2-5 years (possibly never - still figuring it out!)

Gross Salary/Wages:
My previous annual salary was $59,000 and is jumping to $93,000 in February.
Husband's annual salary is $36,000 with an additional $10,000-$30,000 in freelance income depending on the year. We used freelance funds to pay off debts and now as "bonus" to put in savings towards a house in our area ($350K is standard for a house.)

Adjusted Gross Income & Taxes are TBD with new income. Generally, it was roughly $5432/month take home pay for us on old salary.

Current monthly expenses:
Rent - $1350
Car - paid off, but we want to trade it in.
Fixed expenses (internet, insurance, utilities, etc.) - $374
Monthly spending (groceries, shopping, travel, entertainment, etc.) - $1600
Gas - usually $100/month, but it varies. We only really use the car to visit distant family and for grocery runs.

Assets:
Car: $16,000 when purchased 8 years ago. Worth $4k-$7k now.
Husband's Roth IRA: $17,029
TIAA 403(b): $7,783
TIAA Roth including employer 5% match: $45,732
TIAA Roth: $8,107
Betterment: $3,545
Savings: $56,630 (roughly 40K of which is earmarked for house downpayment)

Debts:
None - all recently paid off! :-)

Specific Question(s):
What could we be doing better? And given my jump in salary, other than retirement maxing, should surplus funds go towards my downpayment or into Betterment?

Notes:

• We plan to max out our retirement accounts for the first time ever in 2018.
  
• Would like to sell our only car, a 2010 Nissan Versa with 60K miles, to get a used Prius for both the gas savings and environmental reasons.
• My commuting costs are taken out of my paycheck pretax and will be the same for the new job, $85/month for my train pass.
• I am anxious to put money earmarked for a house into an investment fund. Our accounts with Ally are at 1.25% interest. Thoughts welcome.
• We are not going full FI, but would like something closer to "early" retirement in our late 50s or early 60s.

I can update this post with any info I missed... this is my first go around and things are in flux for another month or two until I am set up at the new job!

[Blackeagle]

Congratulations on the new job.  Getting a big salary increase all at one time like that is a great oppurtunity to direct the extra money to savings rather than lifestyle inflation.

• I am anxious to put money earmarked for a house into an investment fund. Our accounts with Ally are at 1.25% interest. Thoughts welcome.

Betterment has some account options intended for shorter term savings rather than retirement.

[nurseart]

It depends on your goals but since you asked what you could be doing better..

Monthly spending (groceries, shopping, travel, entertainment, etc.) - $1600

I'd break this down and take a closer look and evaluate what if any cutting back here you might want to do.

Congrats on the new job!

[marty998]

How much are you expecting to pay for the Prius? Unless it is due for expensive repairs soon, your Nissan isn't the worst car to own. I got a good 13 years out of mine.

[Wintergreen78]

Hi, overall, it seems like you are in a pretty good place. What is your goal for savings for a down payment? For a $350,000 house, i’d guess you want $70k for the down payment, plus more for closing costs/moving expenses. I’d second the earlier comment about being conservative with any investments of your down payment funds.

What is your marginal tax bracket? If you are in a high enough bracket, it might make sense to use a traditional IRA, rather than a Roth. That would help you save more now toward the down payment.

Also, if your car is well maintained, and you use it as little as possible, it is an entirely reasonable decision to keep using it, both from an environmental point of view and a financial point of view. I’m in a similar place to you, I have an 11 year old car that averages less than 10,000 miles per year. I’m planning to keep it for a few more years until there are more all-electric options with 200+ miles of range.