Hi all! I was going to post this in Ask a Mustachian, but figured I might as well go ahead and put together a case study. I was just playing around with my job’s retirement calculator and am questioning my decision to focus on saving for a down payment on a future house, vs. directing extra money towards my Roth IRA. Buying a house is at least two years away for a variety of reasons so I’ve got some time to work with, but housing prices are crazy in the city where we want to live long-term. There is nothing on the market under $200k and realistically, we would be looking at a minimum of $250k for a starter home or townhouse. The rental market is equally tough: we’d be paying a $1,400/month for something similar to what we have in our current location, so I’m not seeing how renting makes sense if we have the option to buy.
Edited to add: I would be trying to save enough to get as to a 20% down payment as possible. BF would probably be adding around $5,000 and family would likely be giving us $5,000-7,000.
My boyfriend and I aren’t married yet, but live together and are in it for the long haul. He makes about the same amount of money I do, but has $20k in student loans and is also the comparative spendypants of the relationship—although he has no consumer debt and drives a hand-me-down car so he’s doing well in comparison with the average American. He is not interested in tracking expenses and I’m not interested in combining finances unless he will, so we keep things separate. I’ve told him that the student loans are his problem until we get married, and then they become our problem.
Numbers are averages from YNAB. I transitioned to new-YNAB in April so some big-ticket expenses are excluded; I've included estimates below.
Category Monthly Annual
Salary/Wages for earner #1 $3,695 $44,342
Pretax Health Ins. $0 $0 (Employer covers full freight.)
FICA base salary/wages $3,695.16 $44,342
401(k) / 403(b) / TSP / etc. $404 $4,842
Employer Match $483.96 $5,808
Subtotal 1 $3,292 $39,500
Federal tax $308.24 $3,699
State/City tax $143 $1,711
Soc. Sec. tax $222.32 $2,668
Medicare tax $53.58 $643
Total income taxes $727 $8,720.88
Income before other expenses $2,564.92 $30,779
Monthly Expenses
Rent $525 (Total is $1,050.)
Electricity $60 (I pay all of this in exchange for paying $0 for cable/internet.)
Groceries (incl. alcohol) $312 (My BF usually covers a few more six packs and maybe one grocery run. Total household expenses for 2 adults is probably more like $375.)
Cell Phone $0 (A relative has a hookup for her business and generously covers my cell phone costs.)
Fuel $95 (My car sucks on gas and we've been driving a lot (grandma in hospital, etc.).)
Restaurants/Coffee/Going Out $107 (Ugh. We live within walking distance of an amazing brewery.)
Entertainment $35
Cable/Internet $0 (BF covers this one.)
Workout/Running $60 (Have been paying $130/mo for fancy boutique studio. Contract just expired so this is a generous estimate moving forward.)
Pet upkeep (food, daycare, vet) $89 (BF contributes same amount. We recently adopted a new dog who's a basket case unless she goes to daycare 2x/week. I can't cut this and stay sane.)
Household Goods $50
Clothing/Makeup/Personal Upkeep $120 (Not reflective of what I spend every month. I've been super-frugal for the last three years and a lot of my staple clothing/shoe items had worn out. I did one big shop for the year in June that was around $1,000. I could have done it more cheaply but I love everything I bought, and am already using it all a ton.)
Misc $5
Recurring Expenses
Car: Insurance $50
Car: Registration/Taxes $7 (Still trying to nail down registration/taxes in my current city, so might have to bump up average.)
Charitable Giving $38
Travel/Weddings/Gifts Slush Fund $95 (Estimate since I don't have old YNAB numbers handy; no international travel planned for upcoming year.)
Monthly Income before other expenses $2,565
Monthly Expenses $1,648
Monthly Available to Save $917
Savings Goals
Emergency Fund $5,000
Down Payment $2,771
Investment Accounts
Retirement: Personal IRA $8,095
Retirement: Employee Contributions $5,333 (Contributing to max employer contributions.)
Retirement: Employer Contributions $8,556
Stocks $2,404 (I consider this part of my retirement fund.)
Vanguard Mutual Fund $12,004 (One-time windfall. Earmarked for down payment.)
Other Assets
2006 Jeep Liberty with 120k miles. I'll drive it until it falls apart.
Liabilities
None. No student loans, all credit cards paid in full each month to get points.
Where All the Extra Money Went (estimates without access to old YNAB numbers are starred)
Furniture $1,100 (Single investment piece. Plan to use until I die. Most of cost covered by one-time bonus.)
Dogs $1,055* (Handling old dog's end-of-life care, plus one-off costs for adopting moneypit dog.)
Domestic Travel $1,000* (One biggish trip and two smaller ones to visit friends.)
International Travel $650 (Paid for flight with points, very affordable all-inclusive.)
Maximizing Work Trip to Schmancy International Destination $650 (#YOnLygetaworktriptoeuropeOnce. Also where I spent $1,000 on clothes and shoes.)
Weddings and Gift-Giving Occasions $500* (We had All the Weddings. I was also in a bridal party: hello hideous dress and shoes.)
Dentist's Porsche Cayenne and 3-carat Diamond Earrings $450 (Needed two fillings.)
Just from running through the exercise of putting this together, I think it’s obvious that my problem areas are traveling and one-time larger expenses, like the piece of furniture and the shopping in Europe. I’m going to be more mindful of that going forward. 2016 was a very rough year financially, so a lot of my energy in 2017 has gone towards rebuilding my emergency fund.
So what should I be doing: keep throwing money in the down payment fund, or start contributing to my IRA again? Some combination of the two? I do anticipate traveling some in the next year (probably only domestically, sobs) and we have two weddings (might be a bridesmaid for one? Friends are waffling about whether they’re doing wedding parties), so I’ll need to save some money for those costs. Is there anything I’m missing?