Author Topic: Case Study: Soon to be dad - Need to make some changes for financial security  (Read 4974 times)

Virtus3

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Life Situation:
Me Ė 29
DW Ė 27
Married filing jointly
No current dependents but 1 on the way September 5th!
State: NC (5.75% tax)

Gross Salary/Wages:
Me = $2180 bi-weekly ($57k/year)
DW = $2225 bi-weekly ($58k/year)

DW is hourly and often ends up with overtime but this is based off of a normal paycheck. I am eligible for up to 10% bonus per quarter; itís not hard to get but is completely dependent on project assignments which is out of my control; got full 10% in Q3 2017, 0% in Q4, and will most likely get full 10% in Q1 2018.

Individual amounts of Pre-tax deductions:
Me:
401k = $237 +$97 employer match (4.5%)
HSA = $50 +$250 from employer semi-annually
Health/Dental/Vision = $87

DW:
403b = $178
Health/Dental/Vision = $27

Adjusted Gross Income:
Me = $1806 ($47k/year)
DW = $2020 ($52k/year)

Taxes:
Me:
Federal - $162
SS - $126
Medicare - $30
State - $82.00

DW:
Federal - $319
SS - $136
Medicare - $32
State - $94

After-tax deductions:
Me:
ESPP = $43 (employee stock plan, purchase every 6 months at 15% of lowest price)
AD&D Ins = $6 ($750k coverage)
Supp Life Ins = $4 ($260k coverage)
Accident Ins - $4 (pays variable amounts for costs associated with acute injuries)

DW:
Supp Life Ins = $5 (not sure on exact amount but around $250k)
Emp Fitness Center = $5

Net Salary/Wages:
Me = $1349 bi-weekly
DW = $1429 bi-weekly

Current Expenses:
This is one area that needs some serious work. I took a fairly significant pay cut to switch industries in early 2016 to improve both work/life balance and long term career opportunities. I got a 20% raise this past summer which gave us some breathing room back but unfortunately fell into the trap of lifestyle inflation. I havenít been tracking expenses by category but overall they have averaged around $5.5-6k per month over the last 6 months of 2017. We scaled back in January and our total will be approximately $4k; I think going forward we can easily hit around $3.5k per month without feeling much of a hit and have the ability to go lower if needed. Good news is DW is on board with this and doesnít mind being frugal.

For January:
Mortgage: $1211 (P&I: $885, Taxes/Insurance Escrow: $326)
Vehicle Loans: $900
Vehicle Fuel, Insurance, Maintenance: $630 (This is high due to $563 semi-annual insurance payment)
Electricity: $223 (High in Jan and Feb due to sustained record low temps, usually averages about $150)
Water: $0 (pay $100-125 bi-monthly)
Cell phones: $107 (switched plans Ė will be $88/month going forward)
Cable/Internet: $120 (switched to internet only plan Ė will be $70/month going forward)
Misc Bills/Utilities: $46
Subscriptions: $37 (Netflix, Hulu, SlingTV)
Groceries/household items: $500 (was $800-1000 over the last 6 months)
Eating out: $52 (was $300+ over the last 6 months)
Pets: $47
Donations: $30
Hobbies: $25
Misc shopping/spending: $90

Assets:
Cash (Emergency fund): $5k
Roth IRA: $42k
401k: $40k
403b: $18k
Home: $230k (this is an approximation from my realtor based off of comps)
Jeep: $33k (per KBB)
Honda: $16k (per KBB)

Liabilities:
Mortgage: $163k @ 4.75% (original loan was $170k)
Jeep loan: $7.5k @ 2.1% (originally $28k)
Honda loan: $16k @ 4.14% (originally $28k)
Credit Card: $8k @ 0% until 8/18 (originally $13k)

Net Worth:
$188k

Additional Thoughts/Questions:
I know itís a lot of info and just wanted to say thank you if you made it this far. Been having a lot of thoughts going through my head since I found out the little one is on the way. We arenít in bad shape by any means but were sitting right on the borderline of sustainable with minimal safety net. Below are some specific thoughts/concerns.

We had a perfect storm of events last year when we had to replace our HVAC and refrigerator, and had some major water damage from a broken supply line to our kitchen sink within a few months. HVAC and refrigerator brought our emergency fund down from $10k to $5k. We had to replace a large portion of our kitchen and over 1000 sq ft of flooring due to the water damage. We used the opportunity to do some upgrades and paid the difference between the insurance which is where the $13k credit card debt came from. Insurance covered almost $25k and we definitely ended up with more than $13k in home equity so all-in-all it was a good deal especially given that I havenít paid any interest on that money. Having credit card debt is such a huge psychological hit to me though; itís definitely time for that to go.

Iíve been doing some serious thinking about trading in my Jeep; I really love it and for as little driving as I actually do the poor gas mileage isnít a huge deal but it looks like I could get a pre-owned Subaru Outback or mid-sized SUV and walk away from the deal with no more loan. That would free up $500+ per month to tackle other debt and build back the emergency fund pre-baby. Otherwise, it will be paid off in about a year. Thoughts/recommendations?

Looking for any criticism on current expenses; January was a good start and I think weíll have a few more months of continued trending downwards but I could definitely still benefit from some impartial 3rd party opinions. Especially since we will have approximately $3-3.5k in out-of-pocket expenses for the pregnancy and new expenses once the baby is born; plus want to be able to start saving for college.

DW is a nurse and works three 12-hour night shifts per week; she self-schedules so has some control over her schedule. Luckily, she has enough PTO to have a fully paid, 12 week maternity leave. Ideally she would only work two days per week once she goes back until the kids (we want 2-3) start school. With that arrangement we would have minimal child-care needs; most of which will probably be covered by her family who are moving to town this year. With the new tax changes I would have to do some math but estimate that this would reduce our monthly take home pay about $700-800; this includes adding the baby to her insurance. I will also most likely get another raise in this period too but donít want to rely on that.
 
Lastly, I just want some accountability which is the big reason for posting this. Itís not always easy and having a little support, even from strangers on the internet :), is huge. Thanks again!





nereo

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Congrats on the upcoming little-one, and congrats on seeing the light that it's time to get your financial house in order.

Your life is going to get turned upseide down soon; best to make changes now that will stick.

No surprises here, your biggest money suck is your two vehicles.  Both financed, both originally $28k loans.  The monthly cost of running that stable is considerable ( $900 in payments?? +>$100 insurance + ~$75 fuel?).  You are paying about as much for your cars than you are for your home.  It's time to be responsible and sell the jeep and replace it with something used and fuel efficient.  Drop comprehensive insurance on your cars and your insurance should go down considerably.

The other categories you say you are making progress on... meals from $300 to $50, getting better internet (though $70 is still high).  Groceries down from $1000 to $500 (could still drop that to $400 with proper planning).

that $8k in credit card debt is worrisome - what will the rate become after August?

tl/dr: now is the time to get your financial house in order.  Sell the jeep, continue cost cutting and eliminate that $8k CC debt before the rates spike.  Your Jeep and Honda are not truly assets unless you sell them.  Sell the Jeep for the $33k you say its worth, pay off the $7.5k note, buy a cheaper car for ~$8k and wind up with ~$13k you can use to eliminate the CC debt and boost your tax-advantaged contributions. This will improve both cash-flow and your net worth. If you are serious about becoming FI consider selling the Honda too.

Phoenix_Fire

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I would look hard at selling both vehicles, then using the left over money to pay off the credit card and then buy 2 cars with the remaining $17.5k.  You eliminate both payments, lower your insurance, and most likely lower your gas costs. 

Do you also have Amazon Prime?  I noticed that you listed January's expenses.  If you have any annual subscriptions that are paid in different months then you have some hidden costs you aren't accounting for.  I would recommend losing at least one of the streaming services. 

The $500 for groceries/household items seems high to me for two people.  You can probably make a little effort here to drop it by $100-$200 a month. 

You also have an ESPP.  Are you required to keep that stock for any set length of time?  If not, purchase the max that you can and immediately sell it off, and pocket the extra 15% plus anything it has grown.

You have to get rid of that credit card debt before the rates kick in. 

Lets say you get rid of the vehicles (900), drop groceries by only (100), save on insurance (~40), fuel let's go low and say (20), and whatever you were paying on the credit card.  There's an easy $1060 a month, potentially more. 

You might also want to look into Geico for auto/home insurance.  They partner with Liberty Mutual for the home.  If you don't already have that, it could save you some more money. 

Congratulations on the little one!

Virtus3

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No surprises here, your biggest money suck is your two vehicles.  Both financed, both originally $28k loans.  The monthly cost of running that stable is considerable ( $900 in payments?? +>$100 insurance + ~$75 fuel?).  You are paying about as much for your cars than you are for your home.  It's time to be responsible and sell the jeep and replace it with something used and fuel efficient.  Drop comprehensive insurance on your cars and your insurance should go down considerably.

The other categories you say you are making progress on... meals from $300 to $50, getting better internet (though $70 is still high).  Groceries down from $1000 to $500 (could still drop that to $400 with proper planning).

that $8k in credit card debt is worrisome - what will the rate become after August?

tl/dr: now is the time to get your financial house in order.  Sell the jeep, continue cost cutting and eliminate that $8k CC debt before the rates spike.  Your Jeep and Honda are not truly assets unless you sell them.  Sell the Jeep for the $33k you say its worth, pay off the $7.5k note, buy a cheaper car for ~$8k and wind up with ~$13k you can use to eliminate the CC debt and boost your tax-advantaged contributions. This will improve both cash-flow and your net worth. If you are serious about becoming FI consider selling the Honda too.

Thanks for your response! I have made some not so great decisions with vehicles. In reference to replacing the Jeep, where do people find sub $10k vehicles that aren't beaters? I plan to get out this weekend and look around some but looking online I don't see anything that isn't well over 100k miles and looking a little rough in that price range in my area.

The internet I'm sort of stuck with; I've negotiated that as far down as I can and we only have one provider that services our area so don't have the I'll cancel my service option. I work from home two days a week so require internet; unfortunately my company will not cover any of it since the work from home is an option and not a requirement.

Hopefully I can get the grocery bill down some more but honestly will be Ok to keep it around $500 once the baby comes; will take some changes/planning there because we were buying a lot of fresh produce and meat.

Yes, the credit card bill is very worrisome and is my number 1 priority now. Rate will go to 16% in August although I could most likely roll it over into another 0% offer. I will have it paid off prior to that though. Every spare dollar that we save in expenses is going towards that and will put our tax return towards it as well. We also will be receiving a settlement from a car accident my wife was involved in at the end of last year; at this point I don't know how much that will be but I don't have any concerns that it won't be paid off prior to the 0% offer expiring.

Virtus3

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I would look hard at selling both vehicles, then using the left over money to pay off the credit card and then buy 2 cars with the remaining $17.5k.  You eliminate both payments, lower your insurance, and most likely lower your gas costs. 

Do you also have Amazon Prime?  I noticed that you listed January's expenses.  If you have any annual subscriptions that are paid in different months then you have some hidden costs you aren't accounting for.  I would recommend losing at least one of the streaming services. 

The $500 for groceries/household items seems high to me for two people.  You can probably make a little effort here to drop it by $100-$200 a month. 

You also have an ESPP.  Are you required to keep that stock for any set length of time?  If not, purchase the max that you can and immediately sell it off, and pocket the extra 15% plus anything it has grown.

You have to get rid of that credit card debt before the rates kick in. 

Lets say you get rid of the vehicles (900), drop groceries by only (100), save on insurance (~40), fuel let's go low and say (20), and whatever you were paying on the credit card.  There's an easy $1060 a month, potentially more. 

You might also want to look into Geico for auto/home insurance.  They partner with Liberty Mutual for the home.  If you don't already have that, it could save you some more money. 

Congratulations on the little one!

Thanks for your response! Again where do you guys find reliable vehicles for these prices? Definitely working on selling the Jeep which will free up $500 per month and hopefully will have extra money to put towards debt.

We do have Amazon Prime as well, I think that is $100 annually. I can rationally look at it and say we need to cancel some of the streaming services. For the price though they all get a lot of use, especially being winter and my wife is now more home bound with the pregnancy. If I can find another option to stream hockey games I will cancel the Sling which is ~$25. I know, I know... do I at least get bonus points for recognizing I'm not being rational?

Will continue to work to cut groceries.

I am not required to hold onto any stock in the ESPP and that is exactly what I do. I've been using it as a makeshift savings account for upcoming extras. Used one buy to fund an inexpensive anniversary trip and the next covered Christmas presents and a trip to see family over New Years.

Yes, the CC will be paid off before the rate goes to 16%. See my last post for more details.

We already have Geico for the cars. We live on the coast so are required to have an additional wind & hail rider on our homeowners policy. Most of the big companies don't even offer that coverage in which case you would have to purchase through a state fund. My current homeowners policy through UPC which includes the wind & hail is cheaper than just the standalone wind & hail coverage from the state fund so I'm not sure I could get any savings there.




wawot1

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+1 on the advice to sell the cars and buy not-too-old used ones that are fuel efficient and reliable.   

That seems like the low-hanging fruit that I can see.

Good luck

nereo

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Thanks for your response! I have made some not so great decisions with vehicles. In reference to replacing the Jeep, where do people find sub $10k vehicles that aren't beaters? I plan to get out this weekend and look around some but looking online I don't see anything that isn't well over 100k miles and looking a little rough in that price range in my area.

It takes some looking, but you can find quality used cars in the $6k-8k with tons of life left on them. 
Craigslist is the platform I normally use, but you there are others (autotrader.com, for example).
One 'trick' is to search out older vehicles with lower mileage - ≥8 years old but with 60-90k miles on them. They are harder to find but they exist.  As I wrote in another thread, a 2012 car with 100k miles sells for about the same price as a 2006 with 50,000 miles.

Also - don't beat yourself up over past mistakes.  We've all made them.  You are here now looking to improve your financial life - that's what counts.  You have a HUGE advantage of being both young(ish) and with a very decent household income.  With the tweaks mentioned and some solid commitment by you and your spouse you could be FI by 40.

Civex

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Life Situation:
Me Ė 29
DW Ė 27
Married filing jointly
No current dependents but 1 on the way September 5th!
State: NC (5.75% tax)

Gross Salary/Wages:
Me = $2180 bi-weekly ($57k/year)
DW = $2225 bi-weekly ($58k/year)

DW is hourly and often ends up with overtime but this is based off of a normal paycheck. I am eligible for up to 10% bonus per quarter; itís not hard to get but is completely dependent on project assignments which is out of my control; got full 10% in Q3 2017, 0% in Q4, and will most likely get full 10% in Q1 2018.

Individual amounts of Pre-tax deductions:
Me:
401k = $237 +$97 employer match (4.5%)
HSA = $50 +$250 from employer semi-annually
Health/Dental/Vision = $87

DW:
403b = $178
Health/Dental/Vision = $27

Adjusted Gross Income:
Me = $1806 ($47k/year)
DW = $2020 ($52k/year)

Taxes:
Me:
Federal - $162
SS - $126
Medicare - $30
State - $82.00

DW:
Federal - $319
SS - $136
Medicare - $32
State - $94

After-tax deductions:
Me:
ESPP = $43 (employee stock plan, purchase every 6 months at 15% of lowest price)
AD&D Ins = $6 ($750k coverage)
Supp Life Ins = $4 ($260k coverage)
Accident Ins - $4 (pays variable amounts for costs associated with acute injuries)


DW:
Supp Life Ins = $5 (not sure on exact amount but around $250k)
Emp Fitness Center = $5

Net Salary/Wages:
Me = $1349 bi-weekly
DW = $1429 bi-weekly

Current Expenses:
This is one area that needs some serious work. I took a fairly significant pay cut to switch industries in early 2016 to improve both work/life balance and long term career opportunities. I got a 20% raise this past summer which gave us some breathing room back but unfortunately fell into the trap of lifestyle inflation. I havenít been tracking expenses by category but overall they have averaged around $5.5-6k per month over the last 6 months of 2017. We scaled back in January and our total will be approximately $4k; I think going forward we can easily hit around $3.5k per month without feeling much of a hit and have the ability to go lower if needed. Good news is DW is on board with this and doesnít mind being frugal.

For January:
Mortgage: $1211 (P&I: $885, Taxes/Insurance Escrow: $326)
Vehicle Loans: $900
Vehicle Fuel, Insurance, Maintenance: $630 (This is high due to $563 semi-annual insurance payment)
Electricity: $223 (High in Jan and Feb due to sustained record low temps, usually averages about $150)
Water: $0 (pay $100-125 bi-monthly)
Cell phones: $107 (switched plans Ė will be $88/month going forward)
Cable/Internet: $120 (switched to internet only plan Ė will be $70/month going forward)
Misc Bills/Utilities: $46
Subscriptions: $37 (Netflix, Hulu, SlingTV)
Groceries/household items: $500 (was $800-1000 over the last 6 months)
Eating out: $52 (was $300+ over the last 6 months)
Pets: $47
Donations: $30
Hobbies: $25
Misc shopping/spending: $90

Assets:
Cash (Emergency fund): $5k
Roth IRA: $42k
401k: $40k
403b: $18k
Home: $230k (this is an approximation from my realtor based off of comps)
Jeep: $33k (per KBB)
Honda: $16k (per KBB)

Liabilities:
Mortgage: $163k @ 4.75% (original loan was $170k)
Jeep loan: $7.5k @ 2.1% (originally $28k)
Honda loan: $16k @ 4.14% (originally $28k)
Credit Card: $8k @ 0% until 8/18 (originally $13k)


Net Worth:
$188k

Additional Thoughts/Questions:
I know itís a lot of info and just wanted to say thank you if you made it this far. Been having a lot of thoughts going through my head since I found out the little one is on the way. We arenít in bad shape by any means but were sitting right on the borderline of sustainable with minimal safety net. Below are some specific thoughts/concerns.

We had a perfect storm of events last year when we had to replace our HVAC and refrigerator, and had some major water damage from a broken supply line to our kitchen sink within a few months. HVAC and refrigerator brought our emergency fund down from $10k to $5k. We had to replace a large portion of our kitchen and over 1000 sq ft of flooring due to the water damage. We used the opportunity to do some upgrades and paid the difference between the insurance which is where the $13k credit card debt came from. Insurance covered almost $25k and we definitely ended up with more than $13k in home equity so all-in-all it was a good deal especially given that I havenít paid any interest on that money. Having credit card debt is such a huge psychological hit to me though; itís definitely time for that to go.

Iíve been doing some serious thinking about trading in my Jeep; I really love it and for as little driving as I actually do the poor gas mileage isnít a huge deal but it looks like I could get a pre-owned Subaru Outback or mid-sized SUV and walk away from the deal with no more loan. That would free up $500+ per month to tackle other debt and build back the emergency fund pre-baby. Otherwise, it will be paid off in about a year. Thoughts/recommendations?

Looking for any criticism on current expenses; January was a good start and I think weíll have a few more months of continued trending downwards but I could definitely still benefit from some impartial 3rd party opinions. Especially since we will have approximately $3-3.5k in out-of-pocket expenses for the pregnancy and new expenses once the baby is born; plus want to be able to start saving for college.

DW is a nurse and works three 12-hour night shifts per week; she self-schedules so has some control over her schedule. Luckily, she has enough PTO to have a fully paid, 12 week maternity leave. Ideally she would only work two days per week once she goes back until the kids (we want 2-3) start school. With that arrangement we would have minimal child-care needs; most of which will probably be covered by her family who are moving to town this year. With the new tax changes I would have to do some math but estimate that this would reduce our monthly take home pay about $700-800; this includes adding the baby to her insurance. I will also most likely get another raise in this period too but donít want to rely on that.
 
Lastly, I just want some accountability which is the big reason for posting this. Itís not always easy and having a little support, even from strangers on the internet :), is huge. Thanks again!

First of all, congratulations! My wife and I are in a similar situation, she is officially in the 3rd trimester with our first, so we are in the same boat. You are moving in the right direction; good work! Personally, we decided to back off on the budgeting a little bit because the need to be frugal was adding unnecessary stress to my wife's life- I'm trying to say pick your battles and remember why you are trying to optimize :)

1. You don't mention your current HSA balance, so I'm going to assume it is lower. I would contribute your expected deductible and out of pocket expenses to this. Every super pre-tax HSA dollar is basically a FICA, SALT, and Federal Tax deduction on your medical costs, likely saving you 15% or better versus paying after tax. Ideally, this would be out of the paycheck, but even if you need to contribute directly to your HSA and then get the tax deduction next year, that is better than post tax.

2. Are both of your life insurance policies tied to work? If yes, consider looking into term life insurance- I went with Banner. I would rank this higher than college savings.

3. I would discontinue contributing to the ESPP until your credit card debt is gone and emergency fund is sufficient. This is just a personal opinion- I am against investing outside tax incentivized accounts until your budget is in order.

4. Try to get your emergency fund up to 3-6 months of living expenses- this is pretty important with a baby on the way, and I would probably not contribute past the 401k match until this is done.

5. Sell the jeep, buy a $10-15k vehicle, and pay off your CC. Drive it for 5ish years, and when your mustache has grown, if you still want a Jeep or Outback, pick it up then. I would consider keeping the Honda if it is a good family vehicle-CRV, van, or Accord sedan. This goes against mustachian principles, but I'm willing to make a financially less than optimal decision for the peace of mind knowing mom/baby is in a safe, reliable vehicle.

Good work on the changes you have made!

Virtus3

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First of all, congratulations! My wife and I are in a similar situation, she is officially in the 3rd trimester with our first, so we are in the same boat. You are moving in the right direction; good work! Personally, we decided to back off on the budgeting a little bit because the need to be frugal was adding unnecessary stress to my wife's life- I'm trying to say pick your battles and remember why you are trying to optimize :)

1. You don't mention your current HSA balance, so I'm going to assume it is lower. I would contribute your expected deductible and out of pocket expenses to this. Every super pre-tax HSA dollar is basically a FICA, SALT, and Federal Tax deduction on your medical costs, likely saving you 15% or better versus paying after tax. Ideally, this would be out of the paycheck, but even if you need to contribute directly to your HSA and then get the tax deduction next year, that is better than post tax.

2. Are both of your life insurance policies tied to work? If yes, consider looking into term life insurance- I went with Banner. I would rank this higher than college savings.

3. I would discontinue contributing to the ESPP until your credit card debt is gone and emergency fund is sufficient. This is just a personal opinion- I am against investing outside tax incentivized accounts until your budget is in order.

4. Try to get your emergency fund up to 3-6 months of living expenses- this is pretty important with a baby on the way, and I would probably not contribute past the 401k match until this is done.

5. Sell the jeep, buy a $10-15k vehicle, and pay off your CC. Drive it for 5ish years, and when your mustache has grown, if you still want a Jeep or Outback, pick it up then. I would consider keeping the Honda if it is a good family vehicle-CRV, van, or Accord sedan. This goes against mustachian principles, but I'm willing to make a financially less than optimal decision for the peace of mind knowing mom/baby is in a safe, reliable vehicle.

Good work on the changes you have made!

Thanks and congrats to you and your wife as well! Very exciting and scary times for sure.

Very good advice on the budgeting and not creating any extra stress on the Mrs. Luckily, and also unfortunately, a lot of our extra spending over the last year can only be categorized as stupid so we have the ability to reduce expenses fairly significantly by just being mindful. Always important to keep the big picture in mind though.

I started a new health insurance plan in January so just opened the HSA; only $350 in there so far. Contributing $50 bi-weekly that is automatically deducted from my paychecks.

All life insurance is through work; will look into term. Thanks for the suggestion. Is there a specific amount that is recommended?

With the ESPP you contribute up to 10% of your pay (calculated pre-tax but deducted post-tax). Every 6 months a purchase goes through at a 15% discount from the lowest stock price. You are not required to hold the stock for any specific time so I can sell the next day and make a minimum 15% return on that money. You can't opt in or out until the next 6 month cycle ends. I plan to continue to participate in this plan but use the money towards debt and savings going forward.

After the CC debt the emergency fund is my next target. I would like to have a minimum of $10k in there but should probably have closer to $15k.

Got out today to look at some used vehicles and test the waters to see what sort of trade-in value I could get on the Jeep. Got a few low ball quotes on it; will probably sell it myself as there is a huge market for them locally. Ironically I found a Craigslist ad for someone selling a used 2013 Outback with less than 60k miles that looks to be in great shape who is in the market for my exact Jeep model. Per KBB valuations if we were to make a trade I should be able to eliminate the loan and CC debt. The Outback would be over the $10-15k mark but seems like that could be a really good scenario; almost too good to be true. Thoughts?

DWs vehicle is a Honda CR-V that she loves so we will be keeping that one. Once we eliminate my car payment, the CC debt, and rebuild the emergency fund I would aggressively move to paying it off before upping retirement savings in my Roth.

fuzzy math

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Do max your HSA for the year - you should be able to pay for your child's birth from it (check w accountant since you have diff insurance). After baby is born they are automatically covered on mom's insurance for 30 days, but this is a qualifying event so both of you are eligible to reevaluate what you want. Depending on the single vs family deductible on your HSA and whatever your wife has, it might be wise to have all the same insurance. Check out the costs and if there are any penalties for not taking your own insurance.

Please delete your jeep and Honda as assets. They are depreciating assets and do not count towards your net worth. Definitely sell your jeep. It's super easy to find a $10k used car if you aren't trying to buy vehicles that originally  cost $40k new. There are plenty of $20-25k brand new vehicles, that depreciate to about $10-15k before they become beaters.

Your tax burden will go down with the addition of a child into your family. It seems like your wife is currently paying a lot. If you up your deductions a bit it will give you the wiggle room to put that extra cash into your 401ks, which will further reduce your tax burden.

Why do you have sling, Netflix and Hulu? That's a shit ton of tv. If you absolutely must have sling for hockey season then quit the other 2 for a few months. Then just resubscribe to 1 of the other services, watch everything you've been waiting for, cancel it, then subscribe to the other. I don't know if sling has contracts or if it operates like Netflix and Hulu where there's no penalty to quit for a few months.

MrsWolfeRN

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Congratulations on the baby!!
Lots of good points here already about selling the Jeep, cutting down to one streaming service, etc.
Why are you looking at an Outback when you already have a CRV? Do you even have snow in NC? Can you get by with one vehicle? What are your commutes like? Can one or both of you bike to work? If your wife is keeping the CRV and you must have a second vehicle it should be something small and fuel efficient. Babies don't take up that much space.

On childcare, do you have a guarantee that you will have it when you need it? I worked the same schedule as your wife until my first child was 18months old, and I absolutely could not watch him all day and then work all night. What worked best was to group my shifts together so that on the day of my first night I could sleep a little in the afternoon (do not count on baby to nap when you want him to, it ain't gonna happen). Then between shifts I would sleep 9-5, and after the last shift I would sleep 9-1. My DH cut his work hours because there is no part-time childcare in our area (nurse salaries are much higher here though) and we have no nearby family. Finally, I will say that I physically felt a lot better after switching to a day job (still 3 12s), even though I don't like the workflow as much. Also at my hospital the self-scheduling is not always honored.

marty998

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Why do you have sling, Netflix and Hulu? That's a shit ton of tv. If you absolutely must have sling for hockey season then quit the other 2 for a few months. Then just resubscribe to 1 of the other services, watch everything you've been waiting for, cancel it, then subscribe to the other. I don't know if sling has contracts or if it operates like Netflix and Hulu where there's no penalty to quit for a few months.

I noticed this too and thought it odd. Go live your life instead of living vicariously through others....

GOFU

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Congratulations and good luck with the new baby. My two toddlers have changed my life profoundly, and I can't tell you how much it means for us to embark on the adventure of raising our kids as a financially independent family.

As I see it, your issue is definitely on the consumption side of the ledger. Why so much house? Why so much car? Those two things alone are killing you in terms of reaching financial independence.

You and your wife are both under 30 and your gross income totals $115k. That is a fantastic income but perhaps it doesn't feel that way because your nest egg is not growing all that fast, and that is because of all the consumption.

You have way more than enough income, and more importantly you have enough time, to achieve FI as young people. But you must take opportunity cost into account when making your consumption decisions.

Example, the Jeep. I like Jeeps too but I would never borrow money to own one. You mention that gas mileage isn't an issue because you drive so little. So that means.....down payment, 28k loan with interest, taxes, and mandatory comp & collision insurance just to have that thing parked in your driveway? Think of the opportunity cost:

Had you taken half the cost of the Jeep, say $15k, and put it in a mutual fund that pays 5%, and then contributed $100 per month to that fund for 25 years ($100 = savings in interest, tax on expensive vehicle, comp/collision insurance and better mileage from a different car), the total would be over $110,000. Would you pay $110k cash for that Jeep? Because that is the opportunity cost of owning new cars and replacing them with new cars.

Your vehicle loans total $900 a month. If you sell the expensive cars, buy cheaper but reliable ones with no loans, you could put that $900 per month in a mutual fund. Again assuming 5% return, in 25 years you would have over $541k saved. Are those cars (with new ones every few years) really worth $541,000 to you?

And that is just the cars. Take a similar approach to your housing consumption, and all the rest of your consumption decisions, and the amounts piling up will be so fun to watch you will find yourself wanting to be more disciplined not only in your finances but in your health and personal habits too. Discipline begets discipline. My financial discipline makes me want to do push-ups.

You can't live for free. But every dollar consumed is a dollar that you have given away to someone else instead of put to work for you and your growing family. People crunch numbers all day long in personal finance, but they often overlook two basic things that aren't readily apparent from the numbers on the page (1) philosophical understanding of what and why they consume, and (2) opportunity cost of consumption.

I wish you every success.

Virtus3

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  • Posts: 21
Do max your HSA for the year - you should be able to pay for your child's birth from it (check w accountant since you have diff insurance). After baby is born they are automatically covered on mom's insurance for 30 days, but this is a qualifying event so both of you are eligible to reevaluate what you want. Depending on the single vs family deductible on your HSA and whatever your wife has, it might be wise to have all the same insurance. Check out the costs and if there are any penalties for not taking your own insurance.

Please delete your jeep and Honda as assets. They are depreciating assets and do not count towards your net worth. Definitely sell your jeep. It's super easy to find a $10k used car if you aren't trying to buy vehicles that originally  cost $40k new. There are plenty of $20-25k brand new vehicles, that depreciate to about $10-15k before they become beaters.

Your tax burden will go down with the addition of a child into your family. It seems like your wife is currently paying a lot. If you up your deductions a bit it will give you the wiggle room to put that extra cash into your 401ks, which will further reduce your tax burden.

Why do you have sling, Netflix and Hulu? That's a shit ton of tv. If you absolutely must have sling for hockey season then quit the other 2 for a few months. Then just resubscribe to 1 of the other services, watch everything you've been waiting for, cancel it, then subscribe to the other. I don't know if sling has contracts or if it operates like Netflix and Hulu where there's no penalty to quit for a few months.

Thanks for your response. I didn't even think about the possibility of using the HSA toward the birth costs; will definitely be looking into that!

I started tracking my net worth after reading the Net Worth update posts on Budgets Are Sexy and based mine on his. He includes vehicle values on his updated based off of monthly KBB valuations. I understand that the vehicle values are not an asset in the same sense as cash savings or retirement accounts but it does balance out the liability portion of them. The vehicles certainly don't make us money and have high upkeep and use costs but they do have value.

I will definitely need to sit down and try to do some calculations on our tax situation; especially with the new changes and the addition of a dependent this year. I don't want to give Uncle Sam an interest free loan but I do err on the side of overpaying and getting a small refund.

I know we have a lot of subscriptions... Contrary to how it probably seems we don't just sit and watch TV all day; my wife and I just have a few shows that we enjoy that all happen to be on different services. Will most likely cancel Sling and keep the other two.

Virtus3

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  • Posts: 21
Congratulations on the baby!!
Lots of good points here already about selling the Jeep, cutting down to one streaming service, etc.
Why are you looking at an Outback when you already have a CRV? Do you even have snow in NC? Can you get by with one vehicle? What are your commutes like? Can one or both of you bike to work? If your wife is keeping the CRV and you must have a second vehicle it should be something small and fuel efficient. Babies don't take up that much space.

On childcare, do you have a guarantee that you will have it when you need it? I worked the same schedule as your wife until my first child was 18months old, and I absolutely could not watch him all day and then work all night. What worked best was to group my shifts together so that on the day of my first night I could sleep a little in the afternoon (do not count on baby to nap when you want him to, it ain't gonna happen). Then between shifts I would sleep 9-5, and after the last shift I would sleep 9-1. My DH cut his work hours because there is no part-time childcare in our area (nurse salaries are much higher here though) and we have no nearby family. Finally, I will say that I physically felt a lot better after switching to a day job (still 3 12s), even though I don't like the workflow as much. Also at my hospital the self-scheduling is not always honored.

Thanks for your response. Due to our schedule differences we couldn't get by on a single vehicle, and neither of our commutes could be safely done by bicycle. You are correct, we only get some snow and ice every few years so AWD isn't an absolute necessity. My wife was in a car accident and feels much safer in a slightly larger vehicle hence her driving a CR-V. I was leaning towards the Outback because it gets car-like fuel mileage, has a good track record for safety and reliability, and sits a little higher and has good storage capacity; my hobbies include hockey, paddleboarding, mountain biking, and camping.

You are absolutely correct about DW's work situation. The self scheduling isn't always guaranteed but will help some. I can't guarantee anything at this point and it will definitely be some trial and error once her maternity leave is over but having family close by will be a big help and I know that they will be willing to help. I work from home at least 2 days per week which may help some on days that I have some flexibility.

Virtus3

  • 5 O'Clock Shadow
  • *
  • Posts: 21
Congratulations and good luck with the new baby. My two toddlers have changed my life profoundly, and I can't tell you how much it means for us to embark on the adventure of raising our kids as a financially independent family.

As I see it, your issue is definitely on the consumption side of the ledger. Why so much house? Why so much car? Those two things alone are killing you in terms of reaching financial independence.

You and your wife are both under 30 and your gross income totals $115k. That is a fantastic income but perhaps it doesn't feel that way because your nest egg is not growing all that fast, and that is because of all the consumption.

You have way more than enough income, and more importantly you have enough time, to achieve FI as young people. But you must take opportunity cost into account when making your consumption decisions.

Example, the Jeep. I like Jeeps too but I would never borrow money to own one. You mention that gas mileage isn't an issue because you drive so little. So that means.....down payment, 28k loan with interest, taxes, and mandatory comp & collision insurance just to have that thing parked in your driveway? Think of the opportunity cost:

Had you taken half the cost of the Jeep, say $15k, and put it in a mutual fund that pays 5%, and then contributed $100 per month to that fund for 25 years ($100 = savings in interest, tax on expensive vehicle, comp/collision insurance and better mileage from a different car), the total would be over $110,000. Would you pay $110k cash for that Jeep? Because that is the opportunity cost of owning new cars and replacing them with new cars.

Your vehicle loans total $900 a month. If you sell the expensive cars, buy cheaper but reliable ones with no loans, you could put that $900 per month in a mutual fund. Again assuming 5% return, in 25 years you would have over $541k saved. Are those cars (with new ones every few years) really worth $541,000 to you?

And that is just the cars. Take a similar approach to your housing consumption, and all the rest of your consumption decisions, and the amounts piling up will be so fun to watch you will find yourself wanting to be more disciplined not only in your finances but in your health and personal habits too. Discipline begets discipline. My financial discipline makes me want to do push-ups.

You can't live for free. But every dollar consumed is a dollar that you have given away to someone else instead of put to work for you and your growing family. People crunch numbers all day long in personal finance, but they often overlook two basic things that aren't readily apparent from the numbers on the page (1) philosophical understanding of what and why they consume, and (2) opportunity cost of consumption.

I wish you every success.

Thank you and thanks for your response. You are absolutely correct about the vehicles; we definitely bought way more than necessary but it was with the idea of keeping them well beyond the time it took to get them paid off. Neither of us planned on changing or upgrading every few years. I'm working on trading the Jeep to eliminate that debt and we will aggressively pay down the Honda and keep it for a long time.

Why do you feel we have too much house? We bought a foreclosure shortly after getting married and paid considerably less than the average home price for our area; We've gained approximately $60k in equity in a little over two years and we have enough room that our family will be able to grow into the house without if being so big that utilities and maintenance are unreasonable. Home prices in our area are climbing rapidly so it wouldn't really be feasible to downsize and rental prices are more expensive than owning.

Consumption is absolutely our problem and once we make a few tweaks we will be in a much better place to grow our net worth.

GOFU

  • Stubble
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  • Posts: 170
Why do you feel we have too much house? We bought a foreclosure shortly after getting married and paid considerably less than the average home price for our area; We've gained approximately $60k in equity in a little over two years and we have enough room that our family will be able to grow into the house without if being so big that utilities and maintenance are unreasonable. Home prices in our area are climbing rapidly so it wouldn't really be feasible to downsize and rental prices are more expensive than owning.

I was really just looking at the size of the mortgage for a young couple. I don't know your area, and I don't know your house, but in my experience houses at that price level usually carry significant annual operating costs (taxes, utilities, association dues and assessments, tools and machinery you need to keep it looking nice, etc.) If you are not tracking every dollar it costs you to own and maintain the house (from the mortgage payment to the gas you put in your lawn mower) you may get a shock when you finally get around to adding it all up.

If you bought at the bottom of a bust and things are on the upswing for you that's great. Sounds like you got a bargain. But the equity gain from that recovery doesn't do you much good unless you sell or borrow against it.

I am cautious about considering a house as a main component of overall wealth building strategy. A primary residence is rarely if ever a generator of wealth, and it is a highly inefficient place to store wealth.

After the housing market in your area stabilizes and your equity gains from the bargain purchase are maximized, you are looking at investment returns that are generally no greater than the inflation rate, with a lot of illiquidity and risk. Look at this piece by Jim Collins: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

Yes, everyone must live somewhere. I own a house, and it's a nice house, but far more modest than the mortgage lenders tell me I could afford. That's because I view housing more as consumption expense than investment, and because of the high opportunity cost associated with home ownership in the enterprise of wealth building.

« Last Edit: January 28, 2018, 05:16:42 AM by GOFU »

MDM

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  • Posts: 8267
What do you think about each of you contributing
- $18,500 to 401k/403b
- $2500 to Roth IRAs?

See tables below for how that might fit with the numbers in the OP.

Might not have been what you had in mind, but...?  Good luck with the new baby!

Paycheck frequency:BiweeklyBiweekly
Paycheck ItemsEarner #1Earner #2Annual
Gross Salary/Wages
$2,180$2,225$114,530
Pretax Health/Dental/Vision Ins.$87$27$2,964
Employer-sponsored HSA$113$0$2,950
FICA base salary/wages
$1,980$2,198$108,616
401(k) / 403(b) / TSP / etc.$712$712$37,000
W-2 Box 1
$1,268$1,486$71,616
Employer Match$19$0$500
1040 AGI
$71,616
Other Specific Investment TypesAnnualAnnualAnnual
Roth IRA$2,500$2,500$5,000
Payroll TaxesBiweeklyBiweeklyAnnual
Social Security$123$136$6,734
Medicare$29$32$1,575
Income Taxes
Federal tax$1282018, MFJ, std., 1 dep$3,333
State+local tax$120NC state calc'n$3,112
Total income taxes$567$14,754
Monthly
Income before other expenses$4,322$51,862
Monthly Average ExpensesComments
Mortgage$885Input to Item. Ded.$10,623
Property Tax$276Input to Item. Ded.$3,312
Home/Rent Insurance$50$600
Car Insurance$100$1,200
Charitable contributions$30Input to Item. Ded.$360
Dining (Lunch/Dinner/Etc.)$50$600
Electricity$150$1,800
Emergency Fund$175$2,100
Entertainment$37$444
Fuel/Public Transport$70$840
Groceries$500$6,000
Household; Maintenance$46$552
Internet$70$840
Miscellaneous$90$1,080
Pets$47$564
Phone (cell)$88$1,056
Sports/Recreation$25$300
Water/Sewer$60$720
Non-mortgage total
$1,864$22,368
Loans
Jeep$285$3,416
Honda$622$7,460
CC$667$8,000
Total Expense
$4,322$51,866
Total to invest$0-$4
Summary:
"Gross" income$9,544$114,530
Income taxes$1,229$14,754
After-tax income$8,315$99,776
IRA+401k/403b/TSP/457$1,750$1,750$42,000
HSA$246$0$2,950
Living expenses$2,996$35,955
Non-mortgage loans$1,573$18,875
After-tax investable$0-$4


Filing Status21=S, 2=MFJ, 3=HOH
# Dependents1
# Children <171
# Children <131
# Children for EIC1
Adult #1Adult #2
Age2927
Full-time student?00
AGI$71,616
Std. Deduct.$24,000
Act. Deduct.$24,000
Exemption$0
Taxable$47,616
1040 Tax$5,333
Non-refund. CTC$2,000
Tax after n-r credit$3,333
Net Tax$3,333
Mtg. Int. (approx.)$7,6651000000
State tax$3,112NC
Prop tax$3,312
Charity$360
Item. Deduct.$14,449
VersionV10.07

Loans:Orig. Prin.Orig. LengthCurr. Prin.Yrs leftRate
Mortgage$169,70030$163,000284.75%
Jeep$7,5002.25$7,5002.252.1%
Honda$16,0002.25$16,0002.254.14%
CC$8,0001$8,00010.0%

ShoulderThingThatGoesUp

  • Magnum Stache
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  • Posts: 2976
  • Location: Emmaus, PA
Switch the Jeep commuter for an off-lease EV to eliminate gas cost, oil changes, and your car payment. The Honda is okay but better to switch it for a used hybrid. With no car payments you'll have a huge amount more breathing room.

Finances_With_Purpose

  • Bristles
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    • Finances With Purpose: deploying resources wisely to live vigorously
Current Expenses:
This is one area that needs some serious work. I took a fairly significant pay cut to switch industries in early 2016 to improve both work/life balance and long term career opportunities. I got a 20% raise this past summer which gave us some breathing room back but unfortunately fell into the trap of lifestyle inflation. I havenít been tracking expenses by category but overall they have averaged around $5.5-6k per month over the last 6 months of 2017. We scaled back in January and our total will be approximately $4k; I think going forward we can easily hit around $3.5k per month without feeling much of a hit and have the ability to go lower if needed. Good news is DW is on board with this and doesnít mind being frugal.

For January:
Mortgage: $1211 (P&I: $885, Taxes/Insurance Escrow: $326)
Vehicle Loans: $900
Vehicle Fuel, Insurance, Maintenance: $630 (This is high due to $563 semi-annual insurance payment)
Electricity: $223 (High in Jan and Feb due to sustained record low temps, usually averages about $150)
Water: $0 (pay $100-125 bi-monthly)
Cell phones: $107 (switched plans Ė will be $88/month going forward)
Cable/Internet: $120 (switched to internet only plan Ė will be $70/month going forward)
Misc Bills/Utilities: $46
Subscriptions: $37 (Netflix, Hulu, SlingTV)
Groceries/household items: $500 (was $800-1000 over the last 6 months)
Eating out: $52 (was $300+ over the last 6 months)
Pets: $47
Donations: $30
Hobbies: $25
Misc shopping/spending: $90

Assets:
Cash (Emergency fund): $5k
Roth IRA: $42k
401k: $40k
403b: $18k
Home: $230k (this is an approximation from my realtor based off of comps)
Jeep: $33k (per KBB)
Honda: $16k (per KBB)

Liabilities:
Mortgage: $163k @ 4.75% (original loan was $170k)
Jeep loan: $7.5k @ 2.1% (originally $28k)
Honda loan: $16k @ 4.14% (originally $28k)
Credit Card: $8k @ 0% until 8/18 (originally $13k)


Net Worth:
$188k

Additional Thoughts/Questions:
I know itís a lot of info and just wanted to say thank you if you made it this far. Been having a lot of thoughts going through my head since I found out the little one is on the way. We arenít in bad shape by any means but were sitting right on the borderline of sustainable with minimal safety net. Below are some specific thoughts/concerns.

We had a perfect storm of events last year when we had to replace our HVAC and refrigerator, and had some major water damage from a broken supply line to our kitchen sink within a few months. HVAC and refrigerator brought our emergency fund down from $10k to $5k. We had to replace a large portion of our kitchen and over 1000 sq ft of flooring due to the water damage. We used the opportunity to do some upgrades and paid the difference between the insurance which is where the $13k credit card debt came from. Insurance covered almost $25k and we definitely ended up with more than $13k in home equity so all-in-all it was a good deal especially given that I havenít paid any interest on that money. Having credit card debt is such a huge psychological hit to me though; itís definitely time for that to go.

Iíve been doing some serious thinking about trading in my Jeep; I really love it and for as little driving as I actually do the poor gas mileage isnít a huge deal but it looks like I could get a pre-owned Subaru Outback or mid-sized SUV and walk away from the deal with no more loan. That would free up $500+ per month to tackle other debt and build back the emergency fund pre-baby. Otherwise, it will be paid off in about a year. Thoughts/recommendations?

Looking for any criticism on current expenses; January was a good start and I think weíll have a few more months of continued trending downwards but I could definitely still benefit from some impartial 3rd party opinions. Especially since we will have approximately $3-3.5k in out-of-pocket expenses for the pregnancy and new expenses once the baby is born; plus want to be able to start saving for college.

DW is a nurse and works three 12-hour night shifts per week; she self-schedules so has some control over her schedule. Luckily, she has enough PTO to have a fully paid, 12 week maternity leave. Ideally she would only work two days per week once she goes back until the kids (we want 2-3) start school. With that arrangement we would have minimal child-care needs; most of which will probably be covered by her family who are moving to town this year. With the new tax changes I would have to do some math but estimate that this would reduce our monthly take home pay about $700-800; this includes adding the baby to her insurance. I will also most likely get another raise in this period too but donít want to rely on that.
 
Lastly, I just want some accountability which is the big reason for posting this. Itís not always easy and having a little support, even from strangers on the internet :), is huge. Thanks again!

Ok, you came, you asked, and we shall deliver. 

First, kudos to you for taking responsibility and seeing the need for some changes.  A kid has that impact - I feel you there.  So I'll start with that.  And, also: congratulations!  Children are a blessing. 

But these are the MMM forums, and it's face-punch time.  Wake up: your hair is on FIRE!!!

You sense this: you hate the credit card debt.  So points for that.  But not too many.  See that post. 

I am going to challenge you, since you asked for accountability:

Your debt payments total 75%+ of your total take-home pay!  That's my quick, back-of-the envelope figure.  I didn't even see the amount for your credit card payment, which I assume you must pay (and seem like you are paying quickly). 

I second the input above about cars: consolidate if at all possible, reduce your debt load however possible.  See Dave Ramsey re: cars - literally type in your situation (car debt + Dave Ramsey) and dozens of great calls will pop up with people in similar situations.  Dave is solid on that.  Of course you should get out of car debt if at all possible.  And get serious about your debts: that's a given.  You should be looking at ways to go even cheaper.  One car, no cars, cheap cars, and so on. 

Now I'm going to take on some of your statements, because you don't have a numbers issue - numbers don't lie - you have a need to shift your perspective about money. 

As for the statements above, let's start with the worst: you spent your entire emergency fund on your house and then spent another $13k even on things like "upgrades" and walk away from that thinking that is "all-in-all a good deal."  That's $13k that you didn't have

You're asking the wrong questions.  You should be asking: do I have this money?  If the answer is no, that's the end of the story.  Fin.  Find another way.  Wait.  Be patient.  It's cheaper when you don't have to pay interest.  Compound interest is a strong force. 

That's as basic as MMM gets, or finance gets.  Don't spend what you don't have.  Especially on consumer-y stuff, like upgraded appliances and countertops and so on. 

I could next take on the "traded into 13k of home equity" but it's the same story: you didn't have that cash to fritter away, even if you somehow think it was a good trade to spend somewhere between $43k-$48k (I'm a little fuzzy on whether you burned through the whole emergency fund) to end up with $13k of equity - but $13k into a liability that is losing value over time (fridges, etc. need to be replaced).  Home upgrades like that are usually not great equity returns if they are equity returns at all, especially the longer you sit on them, and especially if the only person purchasing/using the house is you.  It's just more consumption.

But rephrasing it, you decided to spend money that you didn't have and run out your family's only financial buffer while taking on more debt.  You've got to shake that - realize you made a bad decision (forgive yourself!) and then turn away from that.  And turn away from the bad thinking, influences, and whatever else helped you make that decision.

You might be right that someone with $1M in the bank could opt for the upgrades and think it's a good plan because they really wanted to anyway, and that saves the effort of doing it later, plus it's at a normal cost.  For that person, it might make sense to be OK spending that much.  But that person has the money.  Even if it's out of the nest egg - which still reduces all future consumption - it's something that person can actually afford.  You weren't there yet.  You need to learn that lesson and learn it now - or it will continue to bite you financially, and you will wonder why you don't make any progress. 

You justified spending $13k in debt and wiping out your emergency fund while something like 75% of your money goes to debt service and you have a kid on the way.  This path is not sustainable.  E.g., what if the kid needs $10-15k in medical?  Or has special needs early on?  Or simply drains your wife to the point where she can't work for much longer? 

I don't say that to scare you, but I say it because you are living closer to the edge than it seems.  You are floating, for now, but you have to break the debt and consumption habits. 

There's one more statement I'm going to take on, and that's the lie that this was "a perfect storm."  We see variations of that on this forum all the time - this was just a bad circumstance that happened to me.  (And sometimes it's true: cancer at 27 or loss of a spouse at 30 is a giant, unpredictable, godawful storm.  Buying too much house with too little savings is not.) 

You bought a house.  You knew (or at least you now know) that houses require substantial maintenance, especially older ones.  Around here, folks budget roughly 1%/year maintenance cost, and they go in knowing it may be far more in earlier years - because you need to start off with a solid sinking fund.  These costs are routine and predictable.  Sure, you might not predict that those three things would happen at once, or in year one, but you could expect some significant home maintenance costs, or the loss of a car, or other things that happen in life that will sap your sinking fund or emergency fund.  And there's a decent chance of it - better than usual even - right after you buy a house.  That's life.

(On the topic of storms coming, that reminds me of one of my favorite TED talks re: productivity, which makes that same point.) 

To put it another way, you should think of life as a series of storms.  There are beautiful sunrises and days too, but we know storms will come.  You have yet to master the plan and execution of it - but you're at least reaching out for the right direction.  You can either learn to command the waves and roll through the storms, or you can let these "storms" throw you around. 

You're living beyond your means, and it sounds like you have been for a while.  That's entirely typical, especially in your 20s(!!!), but you can do far better.  You clearly want to, because you're on this forum. 

The good news is that you're young.  You have a decent income - better than the vast majority of the working world.  You have some flexibility.  (As another mentioned, you can always downsize the house significantly.)  You may well have lots of time left on earth, and much more you can enjoy.  The more you right this ship and hold it, the better your financial future will be. 

Finally, one other note - to second some other comments: the kid is your responsibility.  It's pretty tough to ask what you're really asking of your family: will you please watch this kid because we bought cars we couldn't afford with money we didn't have, followed by luxury appliances we couldn't afford, and so on, so that we now need you to watch our kid for free?  Even when you ask that humbly, odds are it won't go well.  Regardless though, the kid is yours, and it is a bad plan to build in expectations of family as a way of bolstering your financial picture, especially when you're more than able to get by on what you actually make.  Toughen up now - as you say you want to - so you're ready when that day comes.  Consider this the kick in the pants (facepunch?) you asked us for. 

The more of these things you buy and consume, the less you can buy and consume in the future.  It's math - compound interest - and it is currently working against you. 

You have to change your mindset or you will never have enough saved.  In fact, you will be cashing out those 401ks somewhere down the line when that really big "perfect storm" hits and you are operating without good options.  When you're starving, all kinds of bad things start to look appetizing.  But you don't need to do that. 

You will, though, if you don't reign in those material desires and spending habits. 

So, since you asked us: yes, you need to work - work hard - to reduce your debt and make up for your overconsumption.  As important:  Stop.  The.  Consumption.  Find ways to deal with your desires.  Also, ditch all the subscriptions and cable; get rid of high-speed internet.  Visit the library - it's like free redbox.  Listen to more podcasts.  Etc.  The less you feed your material desires, the less you will have them.  Be mindful of what you're putting into your senses: garbage in, garbage out.  If you watch people buy fancy things on a fancy TV and talk with your friends about fancy things to buy...you are going to want fancy things, and that desire will be hard to shake.  If you live a fulfilling life and insulate yourself from those material pressures, you will find your path much easier - and more fulfilling.  Here's another trick I like: ask yourself whether this will be worth paying (amount of item)/0.04 for - for the rest of my life (or merely the next 20 years)?  For pretty much everything non-vital, the answer is no.  Find things like that that put your spending choices in perspective, and then use them as a discipline before you spend money.  Force yourself to use cash/envelopes if that works - it's harder for most people watching those hard-earned greenbacks leave.

One big takeaway: take the Dave Ramsey FPU course.  He excels at motivating you, providing community/accountability, and giving you a solid start.  His program is aimed right at where you are.  The best part is that it combines foundational things - like don't overspend - with the motivational pieces and practical tools.  I would really recommend you both run through it, especially where you are now.  It will be eye-opening when you see people twenty years older than you who made decisions just like you're making now - you get a very personal window into where your choices will lead.  You can listen to what people say who are really in hard places - and realize they've been listening to some of the same lies that you're buying into.  And then you hear people who do it well - and realize they're living a little differently, but not that differently - you, too, can do it.  So I would start with that. 

There's tons and tons around to help you on your way, both here and around the blog(s).  I wish you well - and hopefully this was the kick in the pants you wanted, or at least the one you needed.

Ben Kurtz

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Sell the Jeep. ASAP.

You know this, but you don't seem to have fully internalized that, now that you'd cleaned up a bunch of the small stuff (excessive eating out, cable TV, etc.) it's basically the one thing that makes the difference between barely treading water vs. making fast progress on financial stability and independence. And you don't have a lot of time to lose, with baby on the way.

Assuming you clear $30,000 on the sale (I'm discounting KBB a bit), you'll retire the associated car loan, set aside $16,000 for a new car, and pay the remaining $6,500 towards the credit card, which means it will be no sweat to have that gone by August.

Why $16,000 for a new car? That's the value of your wife's CR-V, which you both consider an excellent, safe, reliable car. So you ought to be able to get the same thing at the same value. In truth, you get get a perfectly good if slightly beater-ish car for less than $5,000 (I personally try to keep my car purchases in the three-figure range), but I'll meet you in the middle.

Which brings me to my short philosophical and psychological digression: By the tone of your posts, you don't seem to have too much "early retirement" gleam in your eye or fire in your belly. Which is fine. The tone I get is of someone who wants stability and comfort and to be more secure than the average consumer sucker, but also wants a fair portion of normal everyday comforts and conveniences and is willing to work long term at a paying job. At your superior (but not doctor/lawyer/hedge-fundian) family income level, it isn't that hard to split the difference in an effective manner and build reasonable wealth while enjoying some creature comforts, but you need to be concrete and realistic with your numbers. So you can have non-beater cars... just not a fleet of cars worth almost half your family's gross annual income.

With $500 a month freed up, I'd suggest you max out your HSA first. You already know you will be spending $3,000+ in out-of-pocket medical costs on the pregnancy and childbirth. Others have suggested this and I've checked: You can use your HSA to pay for medical expenses for your spouse and child, even if he or she is not on your health plan. If you built up your cash emergency savings it would have basically the same effect, but you'd lose out on all the tax benefits, which probably amount to around 28%.

Beyond the HSA, I'd suggest splitting excess cash flow between maxing out 401ks and building your cash savings to $10,000. I wouldn't bother pre-paying the loan on the Honda -- the interest rate is low and the loan will self-amortize quickly enough. It's not worth giving up the tax benefits you'd get with 401k contributions. You'll need to pull out a calculator, but once you've put enough into deductible HSAs and 401ks that your taxable income is back in the 12% bracket, you're probably better off then switching to Roth IRA contributions for further savings, but that's a fairly minor consideration in your circumstances. Your home loan interest rate also seems a bit high -- don't know if that can still be refinanced downward, or if it's just an excuse eventually to route extra cash into mortgage paydown once you are fully taking advantage of all your other tax-advantaged savings avenues.

When baby comes along there will inevitably be some major shifts in the household -- things you're thinking about and things that will take you by complete surprise. Spend the next six months laying up some savings and getting things ship-shape, because one the infant comes along the last thing you and your wife will want to be doing is juggling shaky finances or, on the flip side, stressing out due to some overly-ambitious savings goals.

Congratulations on the upcoming new addition to the family and good luck!

Virtus3

  • 5 O'Clock Shadow
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  • Posts: 21
What do you think about each of you contributing
- $18,500 to 401k/403b
- $2500 to Roth IRAs?

See tables below for how that might fit with the numbers in the OP.

Might not have been what you had in mind, but...?  Good luck with the new baby!

Paycheck frequency:BiweeklyBiweekly
Paycheck ItemsEarner #1Earner #2Annual
Gross Salary/Wages
$2,180$2,225$114,530
Pretax Health/Dental/Vision Ins.$87$27$2,964
Employer-sponsored HSA$113$0$2,950
FICA base salary/wages
$1,980$2,198$108,616
401(k) / 403(b) / TSP / etc.$712$712$37,000
W-2 Box 1
$1,268$1,486$71,616
Employer Match$19$0$500
1040 AGI
$71,616
Other Specific Investment TypesAnnualAnnualAnnual
Roth IRA$2,500$2,500$5,000
Payroll TaxesBiweeklyBiweeklyAnnual
Social Security$123$136$6,734
Medicare$29$32$1,575
Income Taxes
Federal tax$1282018, MFJ, std., 1 dep$3,333
State+local tax$120NC state calc'n$3,112
Total income taxes$567$14,754
Monthly
Income before other expenses$4,322$51,862
Monthly Average ExpensesComments
Mortgage$885Input to Item. Ded.$10,623
Property Tax$276Input to Item. Ded.$3,312
Home/Rent Insurance$50$600
Car Insurance$100$1,200
Charitable contributions$30Input to Item. Ded.$360
Dining (Lunch/Dinner/Etc.)$50$600
Electricity$150$1,800
Emergency Fund$175$2,100
Entertainment$37$444
Fuel/Public Transport$70$840
Groceries$500$6,000
Household; Maintenance$46$552
Internet$70$840
Miscellaneous$90$1,080
Pets$47$564
Phone (cell)$88$1,056
Sports/Recreation$25$300
Water/Sewer$60$720
Non-mortgage total
$1,864$22,368
Loans
Jeep$285$3,416
Honda$622$7,460
CC$667$8,000
Total Expense
$4,322$51,866
Total to invest$0-$4
Summary:
"Gross" income$9,544$114,530
Income taxes$1,229$14,754
After-tax income$8,315$99,776
IRA+401k/403b/TSP/457$1,750$1,750$42,000
HSA$246$0$2,950
Living expenses$2,996$35,955
Non-mortgage loans$1,573$18,875
After-tax investable$0-$4


Filing Status21=S, 2=MFJ, 3=HOH
# Dependents1
# Children <171
# Children <131
# Children for EIC1
Adult #1Adult #2
Age2927
Full-time student?00
AGI$71,616
Std. Deduct.$24,000
Act. Deduct.$24,000
Exemption$0
Taxable$47,616
1040 Tax$5,333
Non-refund. CTC$2,000
Tax after n-r credit$3,333
Net Tax$3,333
Mtg. Int. (approx.)$7,6651000000
State tax$3,112NC
Prop tax$3,312
Charity$360
Item. Deduct.$14,449
VersionV10.07

Loans:Orig. Prin.Orig. LengthCurr. Prin.Yrs leftRate
Mortgage$169,70030$163,000284.75%
Jeep$7,5002.25$7,5002.252.1%
Honda$16,0002.25$16,0002.254.14%
CC$8,0001$8,00010.0%

Wow! Thank you for taking the time to run this. I can't say I completely understand it all but it looks like we can significantly increase our 401k and 403b savings without having to alter things too much. Will definitely be something I look into once we've eliminated debt and built the emergency fund back up.

Virtus3

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Ok, you came, you asked, and we shall deliver. 

First, kudos to you for taking responsibility and seeing the need for some changes.  A kid has that impact - I feel you there.  So I'll start with that.  And, also: congratulations!  Children are a blessing. 

But these are the MMM forums, and it's face-punch time.  Wake up: your hair is on FIRE!!!

You sense this: you hate the credit card debt.  So points for that.  But not too many.  See that post. 

I am going to challenge you, since you asked for accountability:

Your debt payments total 75%+ of your total take-home pay!  That's my quick, back-of-the envelope figure.  I didn't even see the amount for your credit card payment, which I assume you must pay (and seem like you are paying quickly). 

I second the input above about cars: consolidate if at all possible, reduce your debt load however possible.  See Dave Ramsey re: cars - literally type in your situation (car debt + Dave Ramsey) and dozens of great calls will pop up with people in similar situations.  Dave is solid on that.  Of course you should get out of car debt if at all possible.  And get serious about your debts: that's a given.  You should be looking at ways to go even cheaper.  One car, no cars, cheap cars, and so on. 

Now I'm going to take on some of your statements, because you don't have a numbers issue - numbers don't lie - you have a need to shift your perspective about money. 

As for the statements above, let's start with the worst: you spent your entire emergency fund on your house and then spent another $13k even on things like "upgrades" and walk away from that thinking that is "all-in-all a good deal."  That's $13k that you didn't have

You're asking the wrong questions.  You should be asking: do I have this money?  If the answer is no, that's the end of the story.  Fin.  Find another way.  Wait.  Be patient.  It's cheaper when you don't have to pay interest.  Compound interest is a strong force. 

That's as basic as MMM gets, or finance gets.  Don't spend what you don't have.  Especially on consumer-y stuff, like upgraded appliances and countertops and so on. 

I could next take on the "traded into 13k of home equity" but it's the same story: you didn't have that cash to fritter away, even if you somehow think it was a good trade to spend somewhere between $43k-$48k (I'm a little fuzzy on whether you burned through the whole emergency fund) to end up with $13k of equity - but $13k into a liability that is losing value over time (fridges, etc. need to be replaced).  Home upgrades like that are usually not great equity returns if they are equity returns at all, especially the longer you sit on them, and especially if the only person purchasing/using the house is you.  It's just more consumption.

But rephrasing it, you decided to spend money that you didn't have and run out your family's only financial buffer while taking on more debt.  You've got to shake that - realize you made a bad decision (forgive yourself!) and then turn away from that.  And turn away from the bad thinking, influences, and whatever else helped you make that decision.

You might be right that someone with $1M in the bank could opt for the upgrades and think it's a good plan because they really wanted to anyway, and that saves the effort of doing it later, plus it's at a normal cost.  For that person, it might make sense to be OK spending that much.  But that person has the money.  Even if it's out of the nest egg - which still reduces all future consumption - it's something that person can actually afford.  You weren't there yet.  You need to learn that lesson and learn it now - or it will continue to bite you financially, and you will wonder why you don't make any progress. 

You justified spending $13k in debt and wiping out your emergency fund while something like 75% of your money goes to debt service and you have a kid on the way.  This path is not sustainable.  E.g., what if the kid needs $10-15k in medical?  Or has special needs early on?  Or simply drains your wife to the point where she can't work for much longer? 

I don't say that to scare you, but I say it because you are living closer to the edge than it seems.  You are floating, for now, but you have to break the debt and consumption habits. 

There's one more statement I'm going to take on, and that's the lie that this was "a perfect storm."  We see variations of that on this forum all the time - this was just a bad circumstance that happened to me.  (And sometimes it's true: cancer at 27 or loss of a spouse at 30 is a giant, unpredictable, godawful storm.  Buying too much house with too little savings is not.) 

You bought a house.  You knew (or at least you now know) that houses require substantial maintenance, especially older ones.  Around here, folks budget roughly 1%/year maintenance cost, and they go in knowing it may be far more in earlier years - because you need to start off with a solid sinking fund.  These costs are routine and predictable.  Sure, you might not predict that those three things would happen at once, or in year one, but you could expect some significant home maintenance costs, or the loss of a car, or other things that happen in life that will sap your sinking fund or emergency fund.  And there's a decent chance of it - better than usual even - right after you buy a house.  That's life.

(On the topic of storms coming, that reminds me of one of my favorite TED talks re: productivity, which makes that same point.) 

To put it another way, you should think of life as a series of storms.  There are beautiful sunrises and days too, but we know storms will come.  You have yet to master the plan and execution of it - but you're at least reaching out for the right direction.  You can either learn to command the waves and roll through the storms, or you can let these "storms" throw you around. 

You're living beyond your means, and it sounds like you have been for a while.  That's entirely typical, especially in your 20s(!!!), but you can do far better.  You clearly want to, because you're on this forum. 

The good news is that you're young.  You have a decent income - better than the vast majority of the working world.  You have some flexibility.  (As another mentioned, you can always downsize the house significantly.)  You may well have lots of time left on earth, and much more you can enjoy.  The more you right this ship and hold it, the better your financial future will be. 

Finally, one other note - to second some other comments: the kid is your responsibility.  It's pretty tough to ask what you're really asking of your family: will you please watch this kid because we bought cars we couldn't afford with money we didn't have, followed by luxury appliances we couldn't afford, and so on, so that we now need you to watch our kid for free?  Even when you ask that humbly, odds are it won't go well.  Regardless though, the kid is yours, and it is a bad plan to build in expectations of family as a way of bolstering your financial picture, especially when you're more than able to get by on what you actually make.  Toughen up now - as you say you want to - so you're ready when that day comes.  Consider this the kick in the pants (facepunch?) you asked us for. 

The more of these things you buy and consume, the less you can buy and consume in the future.  It's math - compound interest - and it is currently working against you. 

You have to change your mindset or you will never have enough saved.  In fact, you will be cashing out those 401ks somewhere down the line when that really big "perfect storm" hits and you are operating without good options.  When you're starving, all kinds of bad things start to look appetizing.  But you don't need to do that. 

You will, though, if you don't reign in those material desires and spending habits. 

So, since you asked us: yes, you need to work - work hard - to reduce your debt and make up for your overconsumption.  As important:  Stop.  The.  Consumption.  Find ways to deal with your desires.  Also, ditch all the subscriptions and cable; get rid of high-speed internet.  Visit the library - it's like free redbox.  Listen to more podcasts.  Etc.  The less you feed your material desires, the less you will have them.  Be mindful of what you're putting into your senses: garbage in, garbage out.  If you watch people buy fancy things on a fancy TV and talk with your friends about fancy things to buy...you are going to want fancy things, and that desire will be hard to shake.  If you live a fulfilling life and insulate yourself from those material pressures, you will find your path much easier - and more fulfilling.  Here's another trick I like: ask yourself whether this will be worth paying (amount of item)/0.04 for - for the rest of my life (or merely the next 20 years)?  For pretty much everything non-vital, the answer is no.  Find things like that that put your spending choices in perspective, and then use them as a discipline before you spend money.  Force yourself to use cash/envelopes if that works - it's harder for most people watching those hard-earned greenbacks leave.

One big takeaway: take the Dave Ramsey FPU course.  He excels at motivating you, providing community/accountability, and giving you a solid start.  His program is aimed right at where you are.  The best part is that it combines foundational things - like don't overspend - with the motivational pieces and practical tools.  I would really recommend you both run through it, especially where you are now.  It will be eye-opening when you see people twenty years older than you who made decisions just like you're making now - you get a very personal window into where your choices will lead.  You can listen to what people say who are really in hard places - and realize they've been listening to some of the same lies that you're buying into.  And then you hear people who do it well - and realize they're living a little differently, but not that differently - you, too, can do it.  So I would start with that. 

There's tons and tons around to help you on your way, both here and around the blog(s).  I wish you well - and hopefully this was the kick in the pants you wanted, or at least the one you needed.

These are always the posts that are the hardest to read but want to thank you for your honesty; this is why I posted. You make a ton of very good points and I just want to say that although past behavior certainly doesn't show it but I am now taking my debt situation very seriously.

Right now our debt payments (mortgage, auto loans, and CC) are approximately 50% of our monthly take home pay; though this can fluctuate up as I am paying as much towards it as I can as we reduce expenses.

You are absolutely right that saying our house situation was a perfect storm was being dramatic, and although it was unfortunate it wasn't anything completely out of the norm. Just want to further clarify our housing situation and the chain of events.

We had extensive water damage from a broken supply line to our kitchen sink. Our lower kitchen cabinets, counter tops, a lot of trim and dry wall, and over 1,000 sqft of flooring had to be replaced, as well as repaint our kitchen, dining room, laundry room, and living room. Our insurance ended up covering just shy of $24k; we paid the $13k over to slightly upgrade the counter tops and the flooring, most of it went to flooring, to bring the house up to par with other homes in the area. I was able to get 0% financing on a CC so put the entire balance there where it still sits at 0% so we haven't paid a cent of interest on it. Between buying the home in foreclosure and the repairs/upgrades we have gained approximately $60k in equity in 2.5 years of ownership; which I know isn't useful or realized until we sell but I'm not disappointed in that outcome. Our house is less than 15 years old for reference.

After this occurred our HVAC and refrigerator quit working over the summer. We had approximately $10k in our emergency fund of which I used half to replace both. Our emergency fund currently sits at $5k; after eliminating debts my first priority will be to rebuild this quickly to $10k and then up to at least $15k.

Due to the housing market right now it's not really feasible to downsize at the moment and I would pay more in rent than I currently pay in mortgage; which is why we bought when we did. My mortgage including taxes and insurance is $100 more per month than my rent was on a house less than half of the size with no garage. Most two bedroom apartments would only save us about $250-300 per month plus the reduced cost of utilities.

I don't say any of this to make excuses but to just explain my thought process a little better. I have made a ton of mistakes and 100% own that. My biggest mistakes are in the vehicle department and I am actively working to rectify that but I don't want to live like this anymore and have decided to change; I'm here to get that little extra kick in the pants to really motivate me. We just found out about the pregnancy a little over a month ago which was my main catalyst for deciding to change. Thanks again for your post.
« Last Edit: February 01, 2018, 09:01:44 AM by Virtus3 »

Virtus3

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  • Posts: 21
Sell the Jeep. ASAP.

You know this, but you don't seem to have fully internalized that, now that you'd cleaned up a bunch of the small stuff (excessive eating out, cable TV, etc.) it's basically the one thing that makes the difference between barely treading water vs. making fast progress on financial stability and independence. And you don't have a lot of time to lose, with baby on the way.

Assuming you clear $30,000 on the sale (I'm discounting KBB a bit), you'll retire the associated car loan, set aside $16,000 for a new car, and pay the remaining $6,500 towards the credit card, which means it will be no sweat to have that gone by August.

Why $16,000 for a new car? That's the value of your wife's CR-V, which you both consider an excellent, safe, reliable car. So you ought to be able to get the same thing at the same value. In truth, you get get a perfectly good if slightly beater-ish car for less than $5,000 (I personally try to keep my car purchases in the three-figure range), but I'll meet you in the middle.

Which brings me to my short philosophical and psychological digression: By the tone of your posts, you don't seem to have too much "early retirement" gleam in your eye or fire in your belly. Which is fine. The tone I get is of someone who wants stability and comfort and to be more secure than the average consumer sucker, but also wants a fair portion of normal everyday comforts and conveniences and is willing to work long term at a paying job. At your superior (but not doctor/lawyer/hedge-fundian) family income level, it isn't that hard to split the difference in an effective manner and build reasonable wealth while enjoying some creature comforts, but you need to be concrete and realistic with your numbers. So you can have non-beater cars... just not a fleet of cars worth almost half your family's gross annual income.

With $500 a month freed up, I'd suggest you max out your HSA first. You already know you will be spending $3,000+ in out-of-pocket medical costs on the pregnancy and childbirth. Others have suggested this and I've checked: You can use your HSA to pay for medical expenses for your spouse and child, even if he or she is not on your health plan. If you built up your cash emergency savings it would have basically the same effect, but you'd lose out on all the tax benefits, which probably amount to around 28%.

Beyond the HSA, I'd suggest splitting excess cash flow between maxing out 401ks and building your cash savings to $10,000. I wouldn't bother pre-paying the loan on the Honda -- the interest rate is low and the loan will self-amortize quickly enough. It's not worth giving up the tax benefits you'd get with 401k contributions. You'll need to pull out a calculator, but once you've put enough into deductible HSAs and 401ks that your taxable income is back in the 12% bracket, you're probably better off then switching to Roth IRA contributions for further savings, but that's a fairly minor consideration in your circumstances. Your home loan interest rate also seems a bit high -- don't know if that can still be refinanced downward, or if it's just an excuse eventually to route extra cash into mortgage paydown once you are fully taking advantage of all your other tax-advantaged savings avenues.

When baby comes along there will inevitably be some major shifts in the household -- things you're thinking about and things that will take you by complete surprise. Spend the next six months laying up some savings and getting things ship-shape, because one the infant comes along the last thing you and your wife will want to be doing is juggling shaky finances or, on the flip side, stressing out due to some overly-ambitious savings goals.

Congratulations on the upcoming new addition to the family and good luck!

Thank you for your response. During my first post you are correct that I wasn't 100% on board with selling the Jeep but I have now fully internalized the need to sell. It is currently listed on Craigslist and Car Guru; I'm pretty sure that I could get $30k as a trade-in at the dealer, I was quoted just shy of that already with no negotiation. I have no doubt the dealership would list it for at least $35k, I'm hoping I can find someone interested and get $3-4k more selling it privately. I'm keeping my eye on the local used market to find a good deal; if I find the right deal and haven't had any interest on the Jeep in a couple of weeks/the next month I will probably go the trade-in route. I will also get a little over $1k back from a non-transferable warranty (I know, I know but at least I'll be getting a little more back from my mistake).

With that out of the way I am going to eliminate debt, by the time it is all sorted out the CC debt will be less than $5k, and boost cash savings as much as possible before the baby arrives then will reevaluate our strategy and start funneling more money into retirement savings. I am going to increase my HSA contributions now as we have a near-term need to cover baby expenses and that will essentially give us a 25% discount.

You are correct; my main goal is not to retire as early as possible although I won't argue that earlier is better. Right now both my wife and I enjoy our jobs and while I don't have as much passion for mine as she does hers my work-life balance is really good. I know things can change but I have room for advancement and increased earnings without sacrificing too much of that balance. The long term plan is to use the savings from reduced expenses to increase our savings so that may still be an option down the road. We also don't mind working longer to have a larger family (plan right now is 2-3 kids) and have the money to do some hobbies.

GOFU

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Notwithstanding the helpful and generous people on this forum, when it comes to your problems the great vast majority of people couldn't care less, the rest are glad you have them.

waltworks

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Just for reference, unless you are doing a fix/flip, you aren't really gaining significant home equity by doing most "upgrades". By the time you go to sell the house, the floor and kitchen will be dated again (or the people who look at buying it don't like your taste, or whatever).

In the *most* optimistic scenarios, you might get 40-50% of your input back in equity. But even that is rare.

You chose to have a nicer (at least subjectively) kitchen counters/floor in exchange for $13k you didn't have. You did not gain anything financially here, you spent money on a very rapidly depreciating lifestyle item. Period.

-W

Virtus3

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  • Posts: 21
Notwithstanding the helpful and generous people on this forum, when it comes to your problems the great vast majority of people couldn't care less, the rest are glad you have them.

Not quite sure what the purpose of this statement is.... Your username seems apt though.

Just for reference, unless you are doing a fix/flip, you aren't really gaining significant home equity by doing most "upgrades". By the time you go to sell the house, the floor and kitchen will be dated again (or the people who look at buying it don't like your taste, or whatever).

In the *most* optimistic scenarios, you might get 40-50% of your input back in equity. But even that is rare.

You chose to have a nicer (at least subjectively) kitchen counters/floor in exchange for $13k you didn't have. You did not gain anything financially here, you spent money on a very rapidly depreciating lifestyle item. Period.

-W

You're absolutely right! No argument here; I was just clarifying the sequence of events and cash flow as there seemed to be some confusion there. At least I haven't paid any stupid tax (interest) on top of my stupid spending...

New motto - No excuses, just improvement.

Finances_With_Purpose

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@Virtus3, you responded in just the way that I had hoped, and confirmed my suspicion that it was worth the extra time I spent writing the longest post I have in a while about your particular situation. 

You also did a great job articulating your thoughts to me - even where we disagree some - without being defensive.  So you've got the desire + emotional maturity to pull things off and really turn yourself around. 

So, you may be right that downsizing may not be feasible for you, especially with interest rates rising.  That's something I'm unsure about, but wanted to urge you to at least consider. 

With all that said, I want to hit a couple of things - though not tough this time (like last time) - because I think there's some fundamental stuff here that I didn't explain well above that may help you. 

As for debt, you also have carrying costs for your debt.  For instance, your car loans come with requirements that you have to buy full coverage insurance, I assume, which means a healthy chunk of that insurance payment is effectively debt service (i.e. what we call carrying costs - costs to carry the debt).  You may derive some value from it (the insurance), but you have no choice whether or not to get it or whether to buy it if costs go way up; you're locked in.  And it may well provide you less value than it's worth.  You may be required to have certain deductibles or buy more insurance than you would ever buy on your own.  It's one of the many hidden costs of debt: someone else makes your financial decisions for you in that realm. 

You've seen the light on cars.  I'm just pointing that out because it's something to keep in mind for all debts - including your house...

Thinking of the house, you compared rent to mortgage, but again, you omitted this carrying cost of your debt/mortgage/house.  (You did get the utilities - you're moving the right direction.)  You are hopefully budgeting for maintenance though.  Around here, the rule of thumb for that is 1% of value annually.  That would put you at $2,300/year or about $200/month to save for maintenance.  Houses also come with other incidental carrying costs: for instance, someone has to pay the HOA and haul himself out of bed on a Saturday morning to mow.  (Home improvements can fall into that too: they don't give you much actual value since you consume it, but it's much easier to justify consumption since you *plan* to stay in the place even though, statistically, people move pretty often due to job/life/family whatever.)  When you rent, though, all of those costs are $0/month. 

These areas are both tough because America loves to sell people cars and houses and talk about them as though they are investments and assets.  They are not.  They are liabilities.  You use them up: the only question is how soon.  But virtually everywhere, save these boards and a few other spots, that is how people think and/or are expected to think because those messages are constantly being pumped across airwaves, sales ads, and so on. 

That gets at what I really wanted to communicate - and what Dave Ramsey and others are great at - which is that you're still (unwittingly) looking at liabilities as though they are assets.  And it's leading you into decisions that may be net positive: sure, you'll end up with a slightly higher net worth someday.  But financially, they are net negative: you're giving up a lot of cash flow for a really really minimal gain in something that is only on paper, and much of it is going to debt or consumption.  So you're never really getting ahead. 

Thus you come here and post that you feel like you have a minimal safety net and aren't really getting ahead.  What I'm trying to say is, if you learn this one fundamental well you *will* get ahead.  You will not feel as trapped.  And you can get *far* ahead financially.  It's all up to you. 

The "everything's an asset" mentality is how poor people think, which I can say as someone who has been poor and remains close to people who are truly poor.  I have many people close to me who still think exactly that way.  And it's part of what keeps poor folks locked into poverty.  (Though I am not saying all poverty is due to this - dear heavens, it's far more complicated than that, and I wouldn't want anyone to misinterpret what I actually am saying, and who I'm saying it to: someone who *isn't* in poverty and can climb well ahead and even very far ahead if he makes wise choices, and who is doing so more and more.)  This is a hard mindset to break. 

But I think it's hard to understand *exactly* what I mean when I put it that way.  I'll illustrate it with an example or two.

Say you own a shovel.  You use it sometimes.  Eventually, it will be worthless, but who knows, it may well outlive you.  Eventually you may replace it: you can put this one in a yard sell and buy another one.  And maybe your shovel will even increase a little in value over the years: it's classic and built of quality materials.  But primarily, you use it.  You dig your garden, run a sprinkler line, whatever.  That's its purpose.  It's a good.  One you use. 

So how does a shovel fit into your net worth?  Do you count it?  I don't.  Why?  I plan to *use* it.  That's its intended purpose.  I would only sell the shovel if I were making some other drastic life change, like not owning property at all.  I'm not doing that. 

So instead, the shovel is part of what I currently consume.  It will even need replacing someday: more money poured into another shovel.  So in all, it is a liability.  Maybe I consume it slowly - so slow that I may never need another one.  But its value is only on paper.  That shovel will only return value to me if I completely quit using shovels, or I die.  Unless I dig ditches as a side gig, that shovel *brings me* no money.  Nothing.  And even then, my labor would be what really brings me money; the shovel is just capital required, and it could be obtained in many ways.  Its primary function is for my use, i.e., my consumption.

Now consider your home.  What cash does it bring you?  Will you ever quit living somewhere?  Unless you think of some really far-off eventuality, the only value that house has is on paper.  It is a liability.  You are slowly consuming it.  You will need to replace it.  It's basically just a really fancy shovel.  It even requires more cash inputs to keep going: taxes, insurance, repairs, time/TLC, and maintenance.  It drags your net worth down over time versus actual productive investments. 

(Granted, some people make a huge, speculative bet that their one house will increase far rapidly than normal housing, and if so, OK - I wouldn't recommend it.  But even then, it's only worth all that when you sell it, and you'll still want to live somewhere.  You just have a built-in downgrade plan which makes the equity actually usable sooner, once you sell and find another place to live.) 

This is the one thing that Rich Dad really nails.  I was blessed to read that at an early age, and it forever changed my perspective on homeownership, even though I prize homeownership.  Houses are things you consume, so having a fancier house (more "equity") is just like having a fancier car.  The house will last longer, but it's not getting you ahead much.  It's also a worthless paper number until you actually cash it in and sell.  At best, in most cases, a house is just slowing you from getting more behind.  It's not a forward move to increase your home value.  It's more like a shovel - a used shovel now is worth about what a used shovel (i.e. comparable house) will be worth in the future.  As long as you're living in houses, you're not gaining much.  Especially not until you're talking staying in houses a really long time - long enough that you own it outright and can soak up an advantage like a lower-than-market tax valuation.

That's the point I'm trying to make, and I think some others are (implying it) too.  You say you gained home equity.  None of us thinks that's a "bad" thing at all.  But it isn't a move towards investing or gaining real assets.  It's just ultimately more consumption.  It doesn't help you save more of your income and it doesn't bring you income.  If anything, you just got fancier stuff that will cost more to replace in the future when, like all stuff, it becomes old and decrepit. 

Plus, by then, you're used to having it.  So it's more likely you'll want to maintain that standard of living.  (It's more fun living high on the hog than becoming frugal, right?) 

So that's why I look at the house equity increase as a way to justify consumption (even though I *know* that's not what you mean/meant to do), since you're pouring more good money (income) into goods of diminishing value. 

With houses, it's not *perfectly*, 100%, in every single instance black and white.  That's why it's so easy to view it as an investment or an asset rather than what it is: a liability.  It's a form of consumption that, at best, substitutes for another form of consumption you would have naturally (rent v. buy).  It may even hold its value pretty well - and in select areas, it'll go up some over the short term.  But over the long term, while the land may hold its value, houses head to zero value eventually or require massive cash inputs to revamp.  There's no third way - nobody has built an everlasting house that I'm aware of. 

In short, you gave up something of value - future income - which also obligates you now to make it and potentially stresses you out.  You did so in order to buy something that is, in essence, more consumption.  Its only "asset" value is on paper. 

That will likely remain true.  Now, there *are* or *could be* exceptions, such as if you planned to flip the house right now and grab some of that value.  Or if you planned to downsize immediately.  But you've just told us that neither are in the cards.  So this looks like consumption. 

Personally, by default, I treat all home upgrade things (and even home purchases) as consumption.  It's pretty easy now to see when the opposite is true: someone is treating it as a rental or flipping it short-term.  Moreover, you have locked in *more* consumption than you had before - fancier stuff in your home - than you were doing before.  So it'll be harder to give that up later on (perhaps especially for your wife).  And it will cost more to maintain it. 

Now, I say none of this to judge you or to berate what you've done; what's done is done.  Personally, I really wish I had not bought a new car one time, even though it drove and drove and ended up being relatively cheap as far as consumption per year (even for a car), as I would have made oodles more investing.  But, c'est la vie.

To the contrary (of judging), my sole focus here is to help you with future decisions.  I'm using the lens of that past decision because it's what you gave us to use, even though it's harder (human nature) to retroactively acknowledge our mistakes/criticize our own past decisions and learn in fruitful ways.  (You've shown an unusual willingness to do so though.) 

But if you nail the asset v. liability thing, you'll really feel motivated I think.  That was true for me anyway.  Once you accumulate assets, and cash flows, you will really climb out.  Until you distinguish the two, you will find yourself very tempted to make decisions that are actually cleverly disguised forms of consumption, and it may keep you locked into "the borderline of sustainable." 

These days, I find myself excited by more cash flows and income, and unexcited by more consumption when I am doing just fine already, even if I can afford it.  Ultimately, freedom is found in the assets (income producers) and income.

By the way, I recommended Dave Ramsey and the Rich Dad book not because you need the info, you aren't more than intelligent enough to get it here, or you aren't capable of finding it here.  To the contrary.  It's because we humans often make decisions emotionally, and both those guys powerfully illustrate - with stories, talks, motivation, and so on - the truth behind the things we're all saying here.  They make you *want* to believe this stuff (assets v. liabilities, consumer debt = evil), and once you do, you'll find it a much better and more rewarding way to live.  They're like MMM in that way. 

You intuit that, ergo you are here asking us to bash you.  But they do it more gently and in much more fun ways.  They may not do everything amazing, but that I think is their single best value - getting you pumped about the fundamentals upon which you can build a secure financial future. 

You want more out of life.  You're capable of more.  You're doing more than you did before.  You definitely showed you're able to take some hits and improve, too.  So I am confident you will keep at it, and I am glad to have been some small part of (gently) kicking you in that general direction, or at least trying to. 

Seriously, in good-natured humor, I'm glad you're a *great* sport and hope to see you do really well with your finances and your life.

Ben Kurtz

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Virtus3,

Now that you've seen sense on the automobile issue, I'm going to weigh in for a moment on the house issue. I'm inspired by FWPs long and impassioned post which generally points in the right direction -- even if I think she doesn't give financial and accounting terms their proper technical meanings, and paints with too broad a brush.

An owner-occupied house is an "asset" (an item of property that has value and utility to its owner), and generally is a pretty good asset to own, but is it often not a terribly great "investment" (an asset that you own with the expectation that it will provide future returns -- periodic rents / dividends, a high resale price, etc.). By contrast, stocks, bonds and rental properties can all be good investments.

A "liability" is basically a monetary amount which you owe, like a car loan, a student loan, a credit card balance or a home mortgage loan. A wealthy and very prudent family can have plenty of assets (houses, cars, stocks, etc.) and basically no liabilities, because they save up and pay cash for everything. But most of us tend to want to use assets that we can't afford to buy outright, so we'll assume a matching liability: we put down 20% cash to buy a house, and assume a mortgage which covers the rest of the purchase price -- so we have an asset worth, say, $200,000, a liability worth -$160,000 and a net worth of $40,000.

It should be clear from the above that an owner-occupied house is not a "liability." It truly is an asset. The same is true of a car, boat, computer or stereo system. The credit card debt arising from when you put the stereo on your Visa card -- that's a liability.

The thing about tangible assets, though, is that they tend to depreciate. They get physically worn out, or broken, or become outmoded and not very useful for their original purpose. What good is a VCR these days -- even if it still works fine -- if all the new movies now are published on DVD or accessed on streaming services? You may have paid $100 for the VCR years ago. You'd be lucky to get $10 for it today at a yard sale. That's why most consumer goods, even though they are assets, tend to be bad investments. And that's why most personal finance writers will tell you to exclude your car, wardrobe and consumer electronics from a list of assets you draw up to determine your degree of financial independence -- their value melts away quickly and it can be hard to sell them for a good price if you really need the cash. Consider how long it is taking you to sell your Jeep; whereas one can sell $30,000 of stock using an online brokerage with about five minutes of effort for a mere $7 commission. And you will get the best price on offer at the time you choose to sell, as submitted by bidders and market-makers from across the country, without fretting over lowball dealership offers.

An owner-occupied house is a bit of an edge case. A typical single family residential property generally consists of land and the improvements thereon (i.e. the structure of the house). Land doesn't depreciate. It may become more or less desirable (and fluctuate in price) based on market factors, but it doesn't wear out as such. So buying a house in Washington DC in the 1970s would have worked out well financially, mainly because land values have gone up, while buying the same house in Detroit in the 1970s would not have worked out as well, again mainly because of land value movements. That is one reason why owner-occupied housing has some "investment" like features -- the land ownership aspect -- while a new car assuredly does not.

The structure, by contrast, is more like a car and does depreciate over time. But here, too, there is a bit of nuance -- walls and foundations might last 100+ years and be nearly as permanent as land; a roof might only last 20-odd years; kitchen cabinets perhaps 15 years; a refrigerator 10 years. So if you renovate your kitchen, you might boost your home value the moment the project is done, but over the next 15 years of living in the house you'll depreciate that away and you'll lose whatever price premium was associated with saying "new kitchen" on the for-sale ad. It's an item of consumption, just like buying a new car and driving it for 15 years until the wheels fall off is consumption of a consumer good, not an investment. If you built an extension with added foundations and walls, though, it might lead to a more permanent increase in the house's value. Meanwhile, the underlying value of the land will have fluctuated, so it will be hard to tease apart the influence of each factor at play when you finally sell the house.

And, as FWP points out, tangible assets also have out-of-pocket maintenance requirements, which can be above and beyond the "silent" depreciation that goes on. Not only does that Jeep become worth less every day it sits in your driveway, but you have to pay to change the oil and keep the battery fresh. Not only does your once-new kitchen slowly depreciate over time, but you need to mop the floors, paint the walls, clean the gutters, pay your property taxes, insurance and everything else. Which adds to the overall cost of your lifestyle.

The next point to consider is summed up in the technical term "imputed rent." You have to live somewhere. You'd strongly prefer to live in a decent house or apartment, and not in a cardboard box under a bridge. If you own a house free and clear, you can avoid having to pay rent every month on an apartment. The rent you otherwise would have paid had you not owned the house is "imputed rent." Of course, you do have to pay the maintenance costs and suffer the depreciation outlined above, so you don't have a *free* place to stay. The buy-vs.-rent calculation is far beyond the scope of this post, but suffice it to say that there are many scenarios where buying is a better deal than renting. It might not be a great investment, but it's a more efficient way to consume housing.

The final point is this: One of the key insights of the MMM blog and forum is that there are many opportunities in the consumer world to obtain near-substitute products and services -- often times, better for us even if not obviously popular -- at a fraction of the usual consumer expenditure rate. You can cut your food budget, and improve the health of your diet, buy cooking sensibly at home after shopping intelligently at the grocery store, avoiding a lot of the mindless eating out that is now so common. You can get from home to work to social outings at a fraction of the usual cost by some combination of: a. Buying a sensible used car instead of an oversized fancy new car; b. Walking or biking more frequently; c. Being more thoughtful about where you choose to live, work and play to reduce total mileage; etc. You can entertain yourself by joining the library and maybe a streaming services, and cutting a pricey cable subscription. There are a lot of easy wins when trying to optimize the typical American lifestyle.

But housing can get a bit knotty: Once you avoid the obvious waste of getting a 2500+ sq. ft. home that is far too big for your family's needs, it becomes a very location- and person-specific question of what region you want to live in, where your job opportunities are, where your family and friends live, where your essential services are located. There is plenty of scope for cost optimization and efficiency even in some of the most expensive metro areas, but that will often require much more soul searching and trade-off making.

The house value and housing-related costs you report are quite reasonable relative to national averages and your family income level. Given that, given your attitude that does not scream "FIRE ASAP no matter what it takes" -- and, most importantly, given your new baby on the way -- I wouldn't put an emphasis on tweaking your housing situation. The hassle and transaction costs are very non-trivial there. Unless you've omitted some key fact (e.g. 100 mile daily commute because of insane location choice -- but based on other things you said I don't see how that's the case), I wouldn't recommend any changes.

But FWP has a point -- when thinking about housing (and really about most things) don't trick yourself into thinking that an item of consumption is actually an item of investment. Once you've saved up a bit it will be a non-issue to sink $20,000 into a kitchen upgrade which you will enjoy for the next 10+ years. Your family probably get more enjoyment out of that than sinking it into a fancier car. But it's really not equivalent to sinking $20,000 into your Vanguard retirement account.

MDM

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Wow! Thank you for taking the time to run this. I can't say I completely understand it all but it looks like we can significantly increase our 401k and 403b savings without having to alter things too much. Will definitely be something I look into once we've eliminated debt and built the emergency fund back up.
It might be worth the time to reach a complete understanding.  That's up to you, but if you have any questions just ask.

Finances_With_Purpose

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So, I agree completely with @Ben Kurtz .  And thanks for posting, Ben.  The only thing I disagree with him about is my gender - I'm a "he." :) 

I'm chiming in largely to agree here. 

Ben's right about technical accounting terms.  I use the terms asset and liability the way I do (and some others around here do) because I think using them that way more honestly captures the reality of purchasing v. saving choices the average American makes.  Not the lawyers, accountants, and so on, who recognize all of these nuances.  (And I agree with @Ben Kurtz about those nuances, too - every one he mentions.) 

Ben is dead on about the specifics.  From an independence perspective, you want to value assets that produce for you better than assets that depreciate - and may need input costs, replacement, and so on.  Those are merely forms of consumption in almost all cases. 

Long as my post was, I skimmed by all these specifics only because it's easy for some readers to get confused/lost/find yourself believing something that isn't quite accurate (in financially unhelpful ways) with all the details.  But on the details, he's right.

In fact, as I wrote, I almost paused to talk about land separately - that's the biggest caveat to my comments - because land itself is closer to what I think of as a productive asset.  But structures (especially in urban and suburban American) tend to dominate land when it comes to home purchases - though he's right on that point. 

He's also right that houses are closer than other things because you have to live somewhere.  You face imputed rent costs.  And your housing costs alone aren't crazy.  You say you don't want to move, too, and, like Ben, I think that's a fine choice.  Given that, though, I would caution against extensive home upgrades.  Though, once again, Ben nails it - an add-on or something might actually add value because it increases the structure (which has more value), versus flooring or appliance upgrades and so on. 

Finally, @Ben Kurtz is once again dead on that housing is trickier than other things.  That's why, for instance, it's a much tougher call for you to *change* housing now than it would be to go more modest at the outset, or to do other things.  Transaction costs are high for housing.  (Especially if you hate moving!) 

Anyway, just stopping by to say I agree since Ben spent so much time on that.  The bigger point is to watch out for spending on consumption, whether they're assets (on paper, albeit assets in an accounting sense) or not; it's not investment, and investment is the best way to move forward financially.  (No matter *what* asset class you invest in: stocks, bonds, real property, etc.) 

a1pharm

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Congrats on your little upcoming baby!  My wife and I had our first last year - it has been such a fulfilling experience, we are so glad we have the little dude.  We got our financial house in order over the 1-2 years prior to his birth, because having money concerns and a new baby is a recipe for future divorce.

I have 3 relatively easy things for you to do that will improve your situation dramatically:

1. Sell both your cars and get used Priuses (Prii?) - they can be had for $3-$8k.  Here's a GREAT article on how to buy a used car:  https://www.manlyfather.com/how-to-buy-a-used-car-like-a-man/

2. Shop around for different car and home insurance.  I know you said you need special coverages on the coast, but you didn't say you actually investigated Geico.  Do this.  My wife and I saved about $800/yr by switching to them for car and home.  If you are unsure of how much coverage to get, and what deductibles, find out what the minimums are for an umbrella policy and just pick those.

3. Get rid of Hulu and SlingTV.  You have Netflix and Amazon Prime, so you have more TV at your disposal than you could watch in your lifetime.  Get an antenna if you want broadcast TV.  Hook up your laptop to your TV to stream live TV you can find on reddit if you want to go the free route.

When your baby shows up, you won't have time to dink around with a lot of this stuff.  Your first priority is the car situation, get that resolved immediately, then the insurance.  A quick win would be getting rid of your face-punch worthy streaming bills.

Good luck on your new baby and your finance optimization journey!  You're going to like fatherhood!

Virtus3

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Thanks for the continued responses, they really are helpful. I think of our house as an asset but understand it shouldnít be treated as an investment; and I completely own that our upgrades would be better labeled as consumption. You live and you learn.

On the good news front the Jeep has been sold. I found a really good deal on a 2014 Subaru Forester with low miles and was given good trade in value. Spent more than a true mustachian wouldíve but I will clear enough after the Jeep loan is retired to knock out the CC debt when combined with our tax refund. So for all intents and purposes we are down to the Mortgage and one car loan now.

Next step is to get the emergency fund back to $10k then will work on paying the other car loan down. I know some will still say that we have too much car but Iím ok with it. We both have safe, reliable vehicles that will serve us well for a long time to come and that is worth the peace of mind it gives with a kid on the way.

ShoulderThingThatGoesUp

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Yeah! Not what I would have bought but you're crushing that debt. I bet you feel like a badass, right?

GOFU

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ďSuccess is the progressive realization of a worthy ideal.Ē

     - Earl Nightingale

Congratulations on your success dude.

Virtus3

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Thanks! It feels good, it will feel really good when I get the check and can click submit to officially knock out the CC debt.

Still have much work to do but forward progress is being made.

Ben Kurtz

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@FWP

"The only thing I disagree with him about is my gender - I'm a "he." :)" -- Ah! Live and learn!

@Virtus3

Good job putting that Jeep to work for you financially!

Once the check clears and you've retired both the Jeep loan and the credit card balance, why not post another normalized monthly cash flow and personal balance sheet to show us (and yourself) how much more progress you've made? Maybe a before and after? I was banking on your cashflow improving by at least $500 per month, but I'm hoping that's a wild underestimate!

Finances_With_Purpose

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Awesome - that's some very fast progress.  A credit to you - you're well on your way to success!

Virtus3

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Just wanted to say thank you again to everyone who took the time to respond to this thread and give a quick 2 month update:

Liabilities:
Mortgage: $163k to $162k
Jeep loan: $7.5k to ZERO
Honda loan: $16k to $14.5k
Credit Card: $8k to NADA
Difference = $18k less!

Not too shabby for 2 months work; I will boast a little and say most of it was paid off in less than 1.5 months though. Spending is still a work in progress but has remained stable around $4k average per month January through March; much improved over the $5.5-6k/month we were averaging in 2017.

Current goal is to continue to reduce expenses and get the emergency fund to $15k then will revisit retirement contributions; I did increase HSA contributions to max this year though. I have a small bonus coming and just got a promotion and 10% raise last week which is awesome and will help jump start those savings.

DW is feeling much better in the second trimester and the pregnancy is tracking right along. We found out that we're having a little girl and now we're just trying to find a name we both agree on!

Again thank you all; it's not always easy but your tough love is much appreciated and my family is in a much better position today because of it!

Kwill

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I just found the case study now and was happy to see how much progress was made over a couple months. Congratulations on both the baby and the progress!

Most of what I would've said has been said. I would second those suggesting to pare down the number of streaming services and get an antenna to supplement. Maybe since your wife may be spending more time at home she could pick the streaming service(s) to keep based on her favourite shows. You might also be able to get even better cell phone deals, though it's good to see you've adjusted that already.

Do you do much of the cooking? Have you looked for ways to be more efficient about meals at home, lunches, coffees, etc? *edit: Never mind. I see from the notes in the first post that you've already made big changes in those areas. Good work!

ScreamingHeadGuy

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Just wanted to say thank you again to everyone who took the time to respond to this thread and give a quick 2 month update:

Liabilities:
Mortgage: $163k to $162k
Jeep loan: $7.5k to ZERO
Honda loan: $16k to $14.5k
Credit Card: $8k to NADA
Difference = $18k less!

Not too shabby for 2 months work; I will boast a little and say most of it was paid off in less than 1.5 months though. Spending is still a work in progress but has remained stable around $4k average per month January through March; much improved over the $5.5-6k/month we were averaging in 2017.

Current goal is to continue to reduce expenses and get the emergency fund to $15k then will revisit retirement contributions; I did increase HSA contributions to max this year though. I have a small bonus coming and just got a promotion and 10% raise last week which is awesome and will help jump start those savings.

DW is feeling much better in the second trimester and the pregnancy is tracking right along. We found out that we're having a little girl and now we're just trying to find a name we both agree on!

Again thank you all; it's not always easy but your tough love is much appreciated and my family is in a much better position today because of it!

Thank you for the update.  I am glad you have made progress on paying down your debts and reducing monthly spending.  As you have said, once you get your EF stockpiled, it's on to tax-advantaged investing!