Hi all. My wife and I have been long time budgeters and we decided it was time for some outside eyes on our situation. There were some changes in employment situations recently and we re-did our budget to reflect that. I think we have room for improvement but I'm having trouble seeing things that need to be changed.
Life Situation: Married filing jointly. Two kids under 13. Living in Denver area in a purchased home.
Gross Salary/Wages:
Earner #1: $9416 per month (paid monthly)
Earner #2: $1549 per month (paid bi-weekly)
Individual amounts of each Pre-tax deductions: None - neither of our employers offers benefits or retirement plan options.
Adjusted Gross Income: $10,965 per month
Taxes: Payroll Taxes (all on a per month basis)
SS
Earner #1:$588 Earner #2: $96
Medicare
E#1: $138 E#2: $23
Federal tax
$1,130
State+local tax
$460
Total monthly income taxes: $2,435
Current Monthly expenses:
Mortgage: $1,149 ($599 interest $550 principal)
Property Tax: $168
Home insurance: $88
Car Insurance: $103
Car Maintenance and Registration: $97
Fuel: $85
Car Replacement: $150 (This is money we set aside every month to eventually replace one of the cars. We treat this as our car payment.)
Groceries: $500
Dining Out: $50
*Kid Activities and School supplies: $120
Preschool Tuition: $795 (preschool at a local elementary school)
529 plans: $200
*Kid Clothes: $10
*Haircuts: $10
Utilities: $156 -includes water, electric, gas, and trash
Internet: $35
Phone: $43
*Home Maintenance: $100
*Household Goods: $50
*Date Night: $75
Netflix: $11
*Vacation: $400 (all of this is set aside for future travel)
Booze: $40
*Discretionary: $300 (split between the two of us. This is what we can spend on ourselves. This funds clothing, charitable causes, hobbies, etc)
Taxable Account Contribution: $150
IRA Contribution: $458
HSA Contribution: $575
Medical Premium: $1,090
Emergency Fund Contribution: $100
Xmas Fund: $100
Other Random Stuff: $75 (AAA membership, birthday fund, museum membership, Costco membership)
HELOC Payment: $100
Total Monthly Outflow: $7,383
*This is how much we set aside monthly for these categories. If we don't spend the full amount we set aside what is left so we are able to fund months when there higher than expected amounts. (ie. We sign up for swim lessons and youth sports tomorrow at a cost of $300 for January through May. We have set aside money from the kid activities money the past several months so that full amount is covered without breaking our budget.)
Assets:
IRA:$240,000
Taxable Accounts: $4,700
Home: Estimated Value in Current Condition $375,000 - $192,00 remaining loan balance = $183,000
Liabilities:
$192,000 mortgage @ 3.75% We had been sending a lot of extra to this to try and kill it.
$500 HELOC balance@ 5.75%
The HELOC serves 2 purposes. First, it serves as an emergency fund in case of job loss or massive unplanned expense. Second, it is used to fund work that we can't do ourselves on our basement refinish. The current balance is from hiring a electrician to get the basement up to code. More details on the basement project below.
Specific Question(s) and Comments:
Earner #1 is actively seeking a job with benefits. If the salary is comparable then the addition of any employer paid benefits would likely be a huge help in offsetting some of our monthly expenses and benefit our retirement savings.
Earner #2 just started paid part time work again after being home with the kids full time for 6 years.
The HELOC...
Our basement flooded right after we bought the house 2.5 years ago. We depleted our emergency fund to have the problem fixed. It ruined our entire basement and now we are re-doing it. The HELOC allowed us to have access to emergency money at reasonably low rates should we need it. As we got in to the re-finishing work, we found that there were certain things that it was more practical to hire professionals for. Thus a portion of the HELOC was used to fund those requirements, so long as it didn't compromise the emergency fund.
The question is, what are we missing? Is there something we could be doing to improve our savings, reduce our tax burden, or otherwise push ourselves more toward financial independence?
When earner #1 had a job with benefits we threw a lot of cash towards paying down the mortgage. We significantly reduced what we owe and that continues to be one of our priorities. What do others think about investing any additional cash versus paying down the mortgage debt?
Are they any things we need to be punched in the face about? We both feel like we missed something when we re-did the budget with her new job but haven't been able to spot it.