Author Topic: help me trim my mustache  (Read 2439 times)

solon

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help me trim my mustache
« on: September 29, 2017, 03:53:41 PM »
I’ve been a big believer in the MMM philosophy for a long time, but I seem to have trouble putting it into action. Other people with incomes less than ours have FIREed already. What do you see in here that makes you go “hmmm”? Our goal is for both of us to be retired in 10 years, so I want you to be aggressive.

Married filing jointly
Household is me (44 yo), my wife (44 yo), two teenagers at home, one kid in college. (We also have an adult son. We still consider him part of the family, but he’s on his own financially.)

Gross Salary:
Me: $3,500 per month. 24 paychecks a year.
DW: $5,732.80 per month. $2,866.40 per paycheck, every other week. Twice a year she has a 3-paycheck month. 26 paychecks per year.

Individual amounts of pre-tax deductions
Me: No deductions. My company pays 100% of my health care premiums. Discontinued 401k contribution to save for home down payment.
DW: (all per month) $253.84 health insurance, $17.08 dental insurance, $160 FSA. Discontinued 401k contribution to save for home down payment.

Other Ordinary Income:
~$12 per month – interest on bank accounts
~$5 per month – book sales on Amazon
~$30 per month – credit card rewards
~$125 per month – authorized user slot sales on credit card (thanks @areblespy!) Can’t increase this because this is the only card we have that is qualified.

Adjusted Gross Income: Includes everything above, but doesn’t include taxes.
Me: $3,500 per month
DW: $5,301.88 per month
Other: ~$172 per month
Combined household: $8,973.88 per month

Taxes:
Me: $471.74 per month
DW: $1,183.48 per month
Combined household: $1,655.22

Total available money per month, after all taxes and deductions: $7,318.66

Current expenses: All of these are monthly averages.

Category               monthly   
Auto:Gas               131.83
Auto:Insurance            49.93
Auto:Service            136.89
Auto:Other            3.62
Bicycles               23.73
Books               2.13
Charity               607.54
Clothing               88.61
Entertainment            43.65
Furniture               43.16
Gifts                  47.67
Groceries               773.63
Haircuts               5.00
Household               306.11
Insurance:Life            384.75   includes policies for all six of us
Insurance:Long-Term Care      90.81   policies for DW and me cancelled
Liquor               2.22
Medical:Doctor            5.59      medical expenses not covered by insurance
Medical:Drugs            2.00      drugs not covered by insurance
Misc.                  114.54
Mortgage: PI            1,082.56
Mortgage: TI            191.39
Nursing               18.44   license, uniforms for DW job
Recreation               12.28
Restaurant            220.17
School               122.96   field trips, uniforms, sports fees, etc
Utilities:Garbage & Recycling   18.25
Utilities:Gas & Electric      157.85
Utilities:Internet         88.79 reduced to $67/mo by dropping TV
Utilities:Telephone         46.60
Utilities:Water            62.59
Utilities:Other            15.56
Vacation               161.12
OVERALL TOTAL            5,061.94 4,949.37

Assets:
house               224,900   just bought, haven't made 1st payment yet
2004 Hyundai XG350L      1,837
2007 Hyundai Entourage GLS   3,294
checking #1            2,073
checking #2            2,822
savings account            10,176
DW 401k               54,751
my 401k               3,359
my IRA               25,043
taxable investment         5,386
OVERALL TOTAL            333,641

Liabilities: 
mortage $212,928
no other debt

Income minus expenses equals $2,256.72 per month. We're using this to pay off our moving expenses and build up some equity in the house, and then we will turn on the 401k contributions again.

If anyone knows a way to format this a little better, please tell me.
« Last Edit: October 02, 2017, 02:38:44 PM by solon »

Lulee

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Re: help me trim my mustache
« Reply #1 on: September 29, 2017, 04:21:06 PM »
I figure you're going to get challenged a lot on the high monthly figure for charity but I won't.  There's a whole discussion on some part of the forum where a number of people explained why they tithe or give large chunks of money as a moral obligation that feel must be discharged and I'm just assuming this is your case.  Else you'd have kept the 401K deductions going and cut this out until you had your house down payment.

Do you really need the long term care policies?  I heard they rarely pay out as well or for as long as folks think so it might be worth a reconsider.

You do a lot of money for bicycles/entertainment/recreation/restaurant/vacation type stuff.  Perhaps trimming most of this will help, at least until you get the PMI portion of your mortgage paid off.  Growing up, we literally ate out at a restaurant once a year for my parent's anniversary and took NO vacations until we were in my teens (I'm the baby) and those were just up to Maine to visit friends near the ocean for a few days.  That's atypical now for most everyone I know but as you've just bought a home and have 4 kids, it's the best place to tighten belts.

What the blazes is this large Household category?  You break the rest of the stuff out so well and there's this junk drawer of wallet sucking outlays that is like 4% of your total available monies.  Dig into this to see what can be cut.  Ditto on the redundant Misc. category.

Hope this helps and best of luck!


TrMama

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Re: help me trim my mustache
« Reply #2 on: September 29, 2017, 04:22:13 PM »
Category               monthly   

Charity               607.54

Insurance:Life            384.75   includes policies for all six of us

Insurance:Long-Term Care      90.81   policies for DW and me

These are the line items that stand out to me. That's a pretty hefty charity amount.

I also question the wisdom of carrying life insurance on your kids. You and your wife should certainly have term policies on each other, but policies on the kids is likely overkill.

What's the purpose of the LTC policies? Why not just stick the $90.81/mo in your stashe and self insure?

calimom

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Re: help me trim my mustache
« Reply #3 on: September 29, 2017, 04:26:04 PM »
Just at a glance wondering why you have life insurance policies on your kids? Is this whole or term life? Could you drop the kids and get quotes  for term life on DW and yourself? And questioning the charity of almost $7K per year…is this a church tithe? Or? Quite frankly at 44 each,  your savings needs a serious boost. Could you reduce or suspend that for awhile while you add to retirement and taxable accounts? It doesn't seem you put much down toward the purchase of your new house; is there PMI? Is phone for cell or landline? I'm sure groceries and restaurant could be tweaked, but seriously that's not horrible for a family with teens.

solon

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Re: help me trim my mustache
« Reply #4 on: September 29, 2017, 04:35:45 PM »
Everybody is bringing up the charity. Yes, this goes to our church. It's not even a tenth, though. Could we cut it and increase our savings? Yeah, I think we could without too big a hit in our conscience. The problem is we're really connected to our church, they are our friends and family. We get a lot from that community, and we feel like we need to contribute so others can benefit. It's a part of who we are.

ETA: Sorry, didn't mean to sound upset. It's a fair question. Hope I answered it well.

solon

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Re: help me trim my mustache
« Reply #5 on: September 29, 2017, 04:44:34 PM »
The long-term care policies are a hold-over from when I was an insurance salesman a long time ago. There are two policies for that price, one for me and one for my wife. They're both pretty small. I hold on to them for nostalgia, for various what-if scenarios that keep running through my mind, and because if I cancelled them and wanted new policies in the future, they would be a lot more expensive.

The life insurance is term only for my wife and I and our two older children, whole-life for the two teenagers. I'm using the whole-life for college savings. I looked at cancelling them, but I've had them so long that the return for the next two years will be greater in the policies than I expect from anywhere else. When they graduate high school, I'll convert them to term and use the cash value to help pay for college. Knowing what I know now, I wouldn't save this way again.

MrsWolfeRN

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Re: help me trim my mustache
« Reply #6 on: September 29, 2017, 06:33:18 PM »
Wow, first of all good job tracking these things. It might be helpful to separate out the recurring expenses from the one time things to get a better picture going forward. For example, your car maintenance sounds like one big repair spread out  over time rather than a monthly expense. I am assuming the same for furniture and bicycles.

You will need to increase your savings rate to about 50% in order to retire in ten years.

Are your utilities for the old house or the new one?

Agree with other posters about getting rid of the LTC and kid life insurance. Face punch for hanging onto it for sentimental reasons. You might also be carrying too much life insurance on yourself and DW. With some budget cuts you could easily live on one income. Do either of your employers offer term life as a benefit?

I assume you have been around here long enough that you are not missing out on employer matches in those 401ks. If so, then face punch.

I am sure you are also aware of the investment order and that paying down the house is probably not the best move.

Next up is your grocery/restaurant/household spending. Is some of it related to the move? If not there are many threads on here about how to cut this.

Clothing is high, can your teens get part time jobs and pay for their own clothes?

Auto gas is high. Is the new house closer to work and/or kids school?

ChpBstrd

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Re: help me trim my mustache
« Reply #7 on: September 29, 2017, 07:07:11 PM »
I agree with the others about reducing the life insurance costs for the kids. My wife and I are just slightly younger than you and we have $1M policies on each other for around $750/year. Some on this board would face punch me for that and point out what the compound interest could be. However, this way we get to FIRE even if we lose half our income due to an untimely death, so it's a hedge. I will probably drop that hedge after FIRE and after our preschooler is bigger.

Other ideas:

--I often find the "household" category, where you spend $10/day, is a catchall for small, unnecessary purchases that add up to thousands of dollars and unbearable clutter. Examine with your spouse what exactly you're getting for that money.

--If your house is worth 224,900 and your mortgage is 212,928, that seems to imply you put down less than 20% (about 6% actually). Are you paying for mortgage insurance? If so, it doesn't seem to be reflected in the expenses. If you are paying PMI, focusing on paying down your mortgage just to the point where you have 20% equity might be your highest-yielding investment.

--You have 10 and 13 year old SUVs that may soon need major drivetrain repairs. Analyze your costs / expected costs, and you might find that a late model small economy car could replace one of them for the same money or less. If they are low mileage or rarely driven, this may not be a practical tradeoff.

--An alternative to giving your church $7300/year would be to invest that money in a retirement account that your will says goes to the church upon you and your spouse's death. That way, you're still giving it to them, but also reaching FIRE a lot sooner. If everyone did this, the church would get more money (due to likely investment growth exceeding withdraws) and people would retire much earlier.

solon

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Re: help me trim my mustache
« Reply #8 on: September 29, 2017, 09:34:08 PM »
The household category, and all the categories, are a monthly average of the YTD amounts. Y'all are right, the household amount is a little ridiculous. The big items in there this year were: laptop, TV, phone, and SSD for a computer. Gulp.

solon

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Re: help me trim my mustache
« Reply #9 on: September 29, 2017, 09:45:19 PM »
I agree with the others about reducing the life insurance costs for the kids. My wife and I are just slightly younger than you and we have $1M policies on each other for around $750/year. Some on this board would face punch me for that and point out what the compound interest could be. However, this way we get to FIRE even if we lose half our income due to an untimely death, so it's a hedge. I will probably drop that hedge after FIRE and after our preschooler is bigger.

Other ideas:

--I often find the "household" category, where you spend $10/day, is a catchall for small, unnecessary purchases that add up to thousands of dollars and unbearable clutter. Examine with your spouse what exactly you're getting for that money.

--If your house is worth 224,900 and your mortgage is 212,928, that seems to imply you put down less than 20% (about 6% actually). Are you paying for mortgage insurance? If so, it doesn't seem to be reflected in the expenses. If you are paying PMI, focusing on paying down your mortgage just to the point where you have 20% equity might be your highest-yielding investment.

--You have 10 and 13 year old SUVs that may soon need major drivetrain repairs. Analyze your costs / expected costs, and you might find that a late model small economy car could replace one of them for the same money or less. If they are low mileage or rarely driven, this may not be a practical tradeoff.

--An alternative to giving your church $7300/year would be to invest that money in a retirement account that your will says goes to the church upon you and your spouse's death. That way, you're still giving it to them, but also reaching FIRE a lot sooner. If everyone did this, the church would get more money (due to likely investment growth exceeding withdraws) and people would retire much earlier.

We only put 6% down on the house, but we're not paying PMI. Our rate is 4.5%. That's right on the line where you could make an argument either way for paying down the mortgage or not. Part of me wants to pay it down to 20% equity, part of me wants to hurry up and get back to 401k investing.

We don't have any SUVs. The XG350 is a sport-y, sedan-y kind of thing. It feels like a poor man's nice car. The Entourage is a minivan. They are starting to have some bigger repairs. The cost of repairs is still less than the cost of a newer car, so we're keeping them a while longer. The minivan has power passenger doors, but they're not working right. Got an appointment to get them fixed next week. The estimate came in at $1677.

Laura33

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Re: help me trim my mustache
« Reply #10 on: September 30, 2017, 02:24:31 PM »
I'm concerned by the decision to cut retirement savings to save for the house downpayment.  That seems like the quintessential decision to prioritize consumption over saving for the future -- and it cost you more in taxes as well.  You have enough slack in the budget that you could have made cuts elsewhere (i.e., diverted some current "consumption" spending towards a better type of "consumption" spending).  If you want to FIRE in 10 years, you can't afford not to max out your retirement savings at all times.

I also think that decision continues to cost you.  With only 6% down, you are paying a higher interest rate and a higher monthly payment than if you had 20% down.  You have almost $400 a month in utility categories, and I am highly confident that a good chunk of the furniture and household and miscellaneous categories are related to the standard "oops, we need XX for the new house" -- blinds, paint, a new entry table, whatever; there's always stuff.

The thing is, all of those costs are completely reasonable in the standard American world given your salaries.  But you can't keep doing that AND paying for the insurance/college savings AND spend $1k/mo on food AND donate $7k/yr to your church AND still FIRE in 10 years.  Right now, you need $60k/yr; your current retirement stash will cover about a year and a half.  Looks like you're at around a 30% savings rate; you would need to double that to FIRE in a decade.  So what are you willing to give up to get there?  Or how many more years of work are you willing to commit to to fund your current lifestyle?

Personally, if I were you, I would resume the 401(k)s and IRAs ASAP -- because of the huge tax benefits, you can save a lot more without as big a hit to net income.  You have plenty of room in the food, household, furniture, and miscellaneous categories to cut back if you need to max this out.  Also, it looks like you have based your calculations on two paychecks a month for each of you.  This is good, because it means that your wife's extra checks can go right to savings.  And take a look at the insurance; I don't know enough about whole life, so it may be that it is growing faster than other options, but it's also true that you are still paying a buttload of money every month towards that.  Do the math on all of the options -- if your state gives a tax deduction for 529s, you could get additional money back in your pocket as well as tax-free growth (we get $10k/yr back, which at a 9% state tax rate is almost $1k back in our pockets every year, just for saving).
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Roots&Wings

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Re: help me trim my mustache
« Reply #11 on: October 01, 2017, 09:13:27 AM »
Car gas/service, groceries + "household", restaurants, and your utilities also stand out to me as being quite high. I don't even see a line item in your budget for home maintenance, unless that's what you mean by "household".

slappy

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Re: help me trim my mustache
« Reply #12 on: October 01, 2017, 10:36:14 AM »
I agree with the others about reducing the life insurance costs for the kids. My wife and I are just slightly younger than you and we have $1M policies on each other for around $750/year. Some on this board would face punch me for that and point out what the compound interest could be. However, this way we get to FIRE even if we lose half our income due to an untimely death, so it's a hedge. I will probably drop that hedge after FIRE and after our preschooler is bigger.

Other ideas:

--I often find the "household" category, where you spend $10/day, is a catchall for small, unnecessary purchases that add up to thousands of dollars and unbearable clutter. Examine with your spouse what exactly you're getting for that money.

--If your house is worth 224,900 and your mortgage is 212,928, that seems to imply you put down less than 20% (about 6% actually). Are you paying for mortgage insurance? If so, it doesn't seem to be reflected in the expenses. If you are paying PMI, focusing on paying down your mortgage just to the point where you have 20% equity might be your highest-yielding investment.

--You have 10 and 13 year old SUVs that may soon need major drivetrain repairs. Analyze your costs / expected costs, and you might find that a late model small economy car could replace one of them for the same money or less. If they are low mileage or rarely driven, this may not be a practical tradeoff.

--An alternative to giving your church $7300/year would be to invest that money in a retirement account that your will says goes to the church upon you and your spouse's death. That way, you're still giving it to them, but also reaching FIRE a lot sooner. If everyone did this, the church would get more money (due to likely investment growth exceeding withdraws) and people would retire much earlier.

We only put 6% down on the house, but we're not paying PMI. Our rate is 4.5%. That's right on the line where you could make an argument either way for paying down the mortgage or not. Part of me wants to pay it down to 20% equity, part of me wants to hurry up and get back to 401k investing.

We don't have any SUVs. The XG350 is a sport-y, sedan-y kind of thing. It feels like a poor man's nice car. The Entourage is a minivan. They are starting to have some bigger repairs. The cost of repairs is still less than the cost of a newer car, so we're keeping them a while longer. The minivan has power passenger doors, but they're not working right. Got an appointment to get them fixed next week. The estimate came in at $1677.

If you are not paying PMI, then what is the hurry to get to 20% PMI?

Maybe I’m a consumer sucka, but I don’t see anything too crazy  in your budget, except the charity as the insurance, which has already been discussed.

You words are saying you want to FIRE, but your actions are saying otherwise. (Restaurants, cutting out 401k, large charity amount, etc.)

solon

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Re: help me trim my mustache
« Reply #13 on: October 02, 2017, 09:43:33 AM »
I just called to reduce my cable/internet package. I dropped TV completely, and my bill went from $105 to $67 per month.

solon

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Re: help me trim my mustache
« Reply #14 on: October 02, 2017, 09:45:01 AM »
Also called to cancel my long term care policies. It's going to take a week for all the paperwork to go through, but when it's done I'll have an extra $820 per year.

affordablehousing

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Re: help me trim my mustache
« Reply #15 on: October 02, 2017, 12:28:31 PM »
It seems to me that your church donations are going to prevent you from retiring. If you have to pay them $7500 a year, can you accomplish that someway else, like through an in-kind donation you can get at a discount through work? Perhaps you can work for the church for a few hours a week in lieu of giving them cash if you have some skill that's useful to them, plus that gives you more time in the church community? Maybe that would be more practical when all kids are out of the house? I'm not religious so apologies if this suggestion sounds insensitive but just thinking of ways for you to still feel contributing to the church while being able to build your retirement account.

MrsTuxedocat

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Re: help me trim my mustache
« Reply #16 on: October 02, 2017, 01:11:55 PM »
I would take a long look at your food spending. In total, you spend $993.80 on groceries and restaurants per month. Go restaurant free for the rest of the year; make meatless meals; shop sales; don't buy packaged/processed food etc.

You can probably half this number with a little work.

solon

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Re: help me trim my mustache
« Reply #17 on: October 02, 2017, 03:39:57 PM »
I would take a long look at your food spending. In total, you spend $993.80 on groceries and restaurants per month. Go restaurant free for the rest of the year; make meatless meals; shop sales; don't buy packaged/processed food etc.

You can probably half this number with a little work.

Yeah, this is the next thing we're going to attack. DW and I held a meeting of the Finance Committee this weekend and we decided we could do much better with our food. We cut restaurants completely, and we committed to staying within our grocery budget.

Another result of the Finance Committee meeting is the slow-dawning that my record-keeping was all over the place. I'm recording all our expenses, but doing it very sloppily. I had tons of categories in Quicken that we weren't using, and tons that are functional duplicates (bicycles/entertainment/recreation, and misc/household). I deleted a bunch, merged a bunch, and generally just cleaned everything up. Now I have a much better view of the way things really are.

solon

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Re: help me trim my mustache
« Reply #18 on: October 04, 2017, 11:59:49 AM »
I let my Amazon Prime expire this week. I was on the student version, so I'm saving not spending $49 a year.

Raenia

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Re: help me trim my mustache
« Reply #19 on: October 04, 2017, 01:38:36 PM »
Agree that food is your next big bet for trimming, let us know how that goes in a month or so!  Your spending on clothing looks quite high, especially as it does not include school uniforms for the kids (included in 'School') or work clothes for your wife (in 'Nursing').  You also have two separate lines for 'Entertainment' vs 'Recreation,' why are those separated out?  I hope that your 'Furniture' and 'Household' categories drop now that you have furnished the house - be careful not to buy things just to fill the space!

I agree with others on re-establishing your 401k contributions as soon as possible, that should be goal #1

Tass

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Re: help me trim my mustache
« Reply #20 on: October 05, 2017, 06:38:58 PM »
Where is all that gas money going?

solon

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Re: help me trim my mustache
« Reply #21 on: October 09, 2017, 02:31:28 PM »
Since starting this thread I have cut:

cable TV: $456
newspaper (Wall Street Journal): $149
[myname].com: $15
long term care insurance: $820
Amazon Prime: $49

for a total of $1489 a year. Seems like a good start.
« Last Edit: October 09, 2017, 04:15:57 PM by solon »

MrsTuxedocat

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Re: help me trim my mustache
« Reply #22 on: October 09, 2017, 07:40:24 PM »
Excellent progress!