Author Topic: Fixie's Case Study - Noob Lurker - What could I change?  (Read 1508 times)

fixie

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Fixie's Case Study - Noob Lurker - What could I change?
« on: July 22, 2017, 01:35:39 PM »
Life Situation - 43 y.o. Mr. Fixie is filing head of household next tax season(was single), 1 baby girl on the way in 4 weeks, lady-friend lives with me.  Own a home in WA state.  Lady-friend unemployed but will re-enter workforce after about 3 months(we assume).  Paying out more than 1/2 of household expenses, currently.

Gross Salary/Wages - $84528 with opportunities for up to ~$9k/18k additional per annum(This means going to sea for 30/60 days so I'm reluctant to do this right now).

Pre-tax Deductions - Maxed out on 403b, 5% on IRA with employer match currently at ~7%.

Other Income - Negligible amount of farm business income so I can file a schedule F tax return this year("retirement" will be cider orchard business)!

AGI - $61619.28

Net - $45555.12

Taxes, Fees, Miscellaneous Gubment, Medical Insurance per year - $16064.16 - Usually get a fair bit of taxes back each year.  This year will be even more(kiddo) I would guess.

Fixie's Spending Per Month -
Interest Portion of $1386.04 mortgage payment:  $554.39  Paying Extra $200/month on principal.
Interest on Credit Card and Student Loans:  $0
Car Payment for 2011 Toyota Tacoma:  $0
Car Insurance:  $200(just paid off vehicle, re-working insurance or will sell truck for used Fiat 500e electric.  Hardly drive.
Car Registration/Licensing Fees:  $33.33
Gasoline:  $45.00
Property Taxes: $374
Utilities:  $175.00
Food:  $325
Travel:  $0
Dining Out:  $55
Clothes, Suits and Gentlemanly Accessories:  $33.33
3 Cell Phones:  $115 for me, the lady, and my mother.
Cable TV(No)/Internet:  $37
Miscellaneous Shopping, Gifts, Etc.:  $100
Total Spending per Month:  $2047.05
*Assumption - ~$200/month I have not calculated for home improvement materials.
Total:  $2247.05
Yearly Total:  $26964.60

MMM Take Home Pay Calculation: Month/Year:
Gross Pay:  $7045/$84540
Net Pay: $3796.22/$45554
IRA:  $352.26/$4227.12  Employer Match: $600/$7200 - total/year:$11427.12
403b:  Maxed out at $1500/month or $18k/year with Vanguard Index Fund
Vanguard Index Fund Additional:  $200/$2400
Federal Withholding Tax:  $796.54
Social Security:  $213.83
Medicare:  $50.01
MMM Take Home Pay Calculation(directly from the article on the website):  7045+600-796.54 = $6848.46
Total Yearly "Savings":  $31827.12

MMM Savings Rate Calculation:
   (6848.46-2247.05)/6848.46 x 100 = 67%

Assets:
Home: Zillow says $698k minus MTG left @ $173k with 23 years left @ 3.74%  Paying $200 extra on Principal each month.
Vehicle: 2011 Tacoma valued around $20k
403b:  $179500 maxed out at $18k per year
IRA(Like a mandatory, old-school pension):  $74500 maxed out at 5% at all ages, with employer contribution increasing as I age.  Currently ~7%
Vanguard Index Fund Additional:  $18k with $200 additional each month/$2400 per year
Bank: $5k
Full wood shop tools:  $12k
3 Sweet Bicycles:  $5k - Cargo, touring, fixed gear.
Miscellaneous salable items:  $3k
Total:  $842000

Questions for the Forum:
1.  Have I forgotten something, or am I calculating the MMM Savings Rate correctly?  In what way is the extra $200 month on mortgage principal factored in?
2.  How do my own additions for IRA($352/mo) and 403b(1500/mo) and Vanguard Index Addtional($200/mo) factor in to my savings rate?
3.  Any recommendations on setting up an account for the kiddo to sock money away for when she hits adulthood or needs things along the way?  529? 
4.  Not a very savvy investor... My 403b and "IRA" are locked up for "old guy" times, so how/what should I do so that I might retire early and live off those dividends or passive income?
I feel like there's something I'm missing in my calculations, but as far as I can tell this is everything...  don't feel like you have to answer all those questions.
Thanks Forum!
-fixie

RWD

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Re: Fixie's Case Study - Noob Lurker - What could I change?
« Reply #1 on: July 22, 2017, 03:24:46 PM »
Questions for the Forum:
1.  Have I forgotten something, or am I calculating the MMM Savings Rate correctly?  In what way is the extra $200 month on mortgage principal factored in?
2.  How do my own additions for IRA($352/mo) and 403b(1500/mo) and Vanguard Index Addtional($200/mo) factor in to my savings rate?
3.  Any recommendations on setting up an account for the kiddo to sock money away for when she hits adulthood or needs things along the way?  529? 
4.  Not a very savvy investor... My 403b and "IRA" are locked up for "old guy" times, so how/what should I do so that I might retire early and live off those dividends or passive income?
I feel like there's something I'm missing in my calculations, but as far as I can tell this is everything...  don't feel like you have to answer all those questions.
Thanks Forum!
-fixie

1. I find savings rate easier to calculate with expenses. Anywhere money goes that doesn't decrease your net worth is savings. Some people handle mortgage payments differently.

3796.22+352.26+600+1500=6248.48 total post tax pay
2247.05 expenses
savings rate=(6248.48-2247.05)/6248.48 = 64% savings rate

Otherwise I calculate the following with possibly incomplete data:

7045+600-796.54-213.83-50.01=6584.62 total post tax pay (might be missing health insurance or state income tax compared to above?)
352.26+600+1500+200+(1386.04−554.39−???)+200=3683.91 - <non-principal portion of mortgage payment> = total savings (might be missing savings you didn't mention)
3683.91/6584.62=3683.91/6584.62 = 56% savings rate

2. It all counts towards your savings

3. Teach your kid work ethics and how to be financially responsible and they won't need any help.

4. Your IRA and 403b can be accessed earlier than "old guy" ages. See the following links on roth conversion ladders and such:
http://www.madfientist.com/retire-even-earlier/
https://seattlecyclone.com/accessing-your-retirement-accounts-early-yes-you-can/
https://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/

fixie

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Re: Fixie's Case Study - Noob Lurker - What could I change?
« Reply #2 on: July 22, 2017, 05:44:34 PM »
Many thanks for the links, fact checking, and great information RWD...

-fixie

Sailor Sam

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Re: Fixie's Case Study - Noob Lurker - What could I change?
« Reply #3 on: July 22, 2017, 10:42:08 PM »
Please clarify this IRA, I don't understand how your employer can be contributing. Is it a SEP-IRA, or are you using 'IRA' to cover some sort of pension plan?

Are you in the evergreen, or everbrown part of this fine state? I grew up Eastern, but I'm currently living Western.

fixie

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Re: Fixie's Case Study - Noob Lurker - What could I change?
« Reply #4 on: July 22, 2017, 11:00:25 PM »
Yes, it is an old-school pension-type investment with the state.  Green side.
Thanks!
-fixie

Verdure

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Re: Fixie's Case Study - Noob Lurker - What could I change?
« Reply #5 on: July 23, 2017, 02:43:58 PM »
Another question about the "IRA". So this is actually a pension plan, not an IRA, to which you are contributing 5% of your income, and your employer contributes an amount equal to about 7% of your income?  Because that's a very different thing.  It's not a "match" if the amount contributed is not based on your contributions. When you say you're putting in 5, and the match is 7, it makes it sound like you're leaving 2% on the table, but you're putting in 5 and the employer is still contributing 7%, right?

fixie

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Re: Fixie's Case Study - Noob Lurker - What could I change?
« Reply #6 on: July 26, 2017, 10:37:23 AM »
That is correct.  I suppose it is a pension.  That's what I mean when I say I am an unsophisticated investor!  I contribute 5% at all ages and my employer's contribution increases with my age and service up to around 10% or so.
thanks!

-fixie