The Money Mustache Community
Learning, Sharing, and Teaching => Case Studies => Topic started by: mistymoney on April 20, 2019, 11:03:15 AM
-
I think it is a bit too late to RE but I still have FI ambitions, and not sure where to focus. I will give you a quick snapshot of where I am.
Assets
401k 675k
Roth 70k
HSA 6k
company stock 12k
Debts
Mortgage 260k (redfin value 500k)
student loans 115k
CC 16k
pers loan 2k
income/outgo
Income 128k
Monthly bills ~5k
I am 52. My job is demanding, but usually in a good way and for the most part I enjoy it. I was looking for a new job when I finally received a promotion and 30k raise so I may stay with current employer until retirement. I borrowed for my children's educations. My son finished his BA and daughter has 2 more years to go. Hopefully with this raise, I won't need anymore parent plus loans for those final two years. I know you all will tell me not to, but I paid for one child and must do the same for the other if I am able. Of course if I got laid off that would be a different story.
However, I am getting to a point where I would like to feel more secure. I had 25k in savings before the college years but that dwindled and is now gone. Now I hope to start building again. On my current plan, I will clear all the nonmortgage and nonSL debt by end of 2019, and I am planning on addressing FI in 2020.
Too late? I would like to focus on income generating assets outside of retirement accounts.
Rental real estate? commercial RE? I live in a HCOL area, and that seems to be a high entry fee possibility. Property taxes very high.
Dividend stocks? I feel that I already have a lot in the stock market and worry about what too much exposure there may mean if it takes a big and prolonged dip.
2019 I will focus on the repayments and trying to reduce monthly expenses.
Come 2020 and my bid to focus on FI, what do recommend as first steps?
adding this in here to consolidate information:
Based on last year averages and rounded to nearest $5 increment:
2290 mort
310 gas/heat
95 electric
150 cell
105 internet
550 healthcare
190 car ins
100 other transport
545 SLs
650 food
4985
So the 5k includes the student loan payments (but not for all of the loans, only about 65k. the rest are deferred until other child graduates), but not the cc debt - which only started accruing in 2018
Mortgage is at 4.375%, student loan rates vary from 4.15% to 7.56%.
cc debt is across several cards from 12.24% to 20.99%. Most (10k) is on the 12.24% and I pay only the minimum. I have 4k at 17.99 and 2k at 20.99. That one will be paid off in May. Extra paycheck month!
personal loan is at 10%.
-
What jumps out at me is the large amount of debt. What are the rates and terms for your student loans and credit card debt?
Are debt payments part of your ~$5k in monthly bills?
You have a lot of assets and a good income but a lot of debt and above-average monthly bills. Certainly you have the potential to hit FI before age 60, but a lot depends on the particulars.
can you give a better accounting of your expenses and debts? Where do you fall on the 'investment order'?
-
2019 I will focus on the repayments and trying to reduce monthly expenses.
Come 2020 and my bid to focus on FI, what do recommend as first steps?
Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153) is applicable to many, at least for those looking to investments for FI. Whether to pursue that or real estate or something else is up to you.
-
Thanks Nereo. Your balanced reply encourages me to dig a little deeper! Prior to the raise I was dogpaddling, but now I am trying to tackle things a little more head on. The raise came through in Feb, and I have started paying down the ccs since last month.
Based on last year averages and rounded to nearest $5 increment:
2290 mort
310 gas/heat
95 electric
150 cell
105 internet
550 healthcare
190 car ins
100 other transport
545 SLs
650 food
4985
So the 5k includes the student loan payments (but not for all of the loans, only about 65k. the rest are deferred until other child graduates), but not the cc debt - which only started accruing in 2018
Mortgage is at 4.375%, student loan rates vary from 4.15% to 7.56%.
cc debt is across several cards from 12.24% to 20.99%. Most (10k) is on the 12.24% and I pay only the minimum. I have 4k at 17.99 and 2k at 20.99. That one will be paid off in May. Extra paycheck month!
personal loan is at 10%.
I stopped my 401k contributions in about July last year when the cc balance started climbing. I'm not sure if I should start that up again, or when I should. I have approximately 1500 month that I am putting towards the cc.
I had always prioritized my retirement savings, and feel a bit off to not be contributing, and for almost a year now.
On the other hand, my past diligence in that regard has served me well, and there is enough there that is can continue to grow without additional funds. And that is one reason I wonder if I should look elsewhere for investing in 2020? My market based funds will increase on their own, so perhaps I should diversify? so maybe only do the minimum for 401k match?
this is investment order?
WHAT
0. Establish an emergency fund to your satisfaction
- no, spent it all.
1. Contribute to your 401k up to any company match
- not currently
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.
- that would include cc but not SL debt - maybe higher intest loans? I have 8! so - yes in process of paying cc down
3. Max Health Savings Account (HSA) if eligible.
- no, have ppo currently but may switch back
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
- not currently
5. Max 401k (if
- 401k fees are lower than available in an IRA, or
- you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
- your earn too much for an IRA deduction and prefer traditional to Roth, then
swap #4 and #5)
- no, and guess no need to answer 6-8!
6. Fund a mega backdoor Roth if applicable.
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.
8. Invest in a taxable account and/or fund a 529 with any extra.
so - according to this, I am a long way from making non 401k investing?
I was hoping to have some non-work based income, that that would give me more security, diversify income streams. But - again, maybe I am too old to try for that kind of thing?
-
Oh - one thing I should note about the cc debt!
About 4k of that was work-related travel and I am waiting for reimbursement checks! I was just online checking current balances when putting this post together, and didn't take account of that.
It takes my company a while to pay these expenses, unfortunately, and I do end up eating a bit of interest on the travel sometimes.
so by end of May, I will have that 4k back, about 1500 left over from 2 checks - expenses, and my extra check of 3,250 which will all go to the ccs.
Then it will be quite a bit under 10k, and only on the lower interest rate card, and much more doable for paying off by year's end.
-
WHAT
0. Establish an emergency fund to your satisfaction
- no, spent it all.
1. Contribute to your 401k up to any company match
- not currently
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.
- that would include cc but not SL debt - maybe higher intest loans? I have 8! so - yes in process of paying cc down
0. You might consider that your Roth IRA is an emergency fund (https://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund).
1. If the company match percentage is >20.99% (your highest debt rate) then it is to your advantage to take the company match.
2. Yes, paying the high interest rate debt ASAP is likely going to be the best thing for you.
After #2 becomes "not applicable" you can consider 3-8. One step at a time - good luck!
-
Your company should not be expecting you to put work-related expenses on a personal card. You should either get a company card or they should give you a cash advance.
You cell phone and internet bills are way too high. Plenty of unlimited cell plans for $50-60/month, and internet shouldn't be more than $50ish.
Is food just for you? $650 is way too much for one person.
Can you downsize your house once the kids launch? Both your mortgage and your utilities seems very high for one person. If you are determined to keep the house look into getting an energy audit to bring utilities down. We have an old 2400 sq ft house without great insulation and in the coldest weather our gas bill was only $150ish.
food and phone is for 3 people. I garden in summer and have rice and beans at least twice a week for dinner. And I do all my beans from dried, no canned. But always with a lot of veggies. I do try to have a lot of fruit and veggies and those can be pricey, especially in winter. I try to do salads mostly for lunch, and fruit and nuts for breakfast. Eggs or meat are minimized and always bought with animal welfare in mind - those are more expensive. two of us are lactose intolerant so no dairy. We do a lot of cream sauces with cashews - more expensive than diary I think. I do try for organic when I can and the price difference is not so steep.
Selling the house is certainly an option once both are out, the mortgage and utilities are due to HCOL area, they aren't that out of line. Mortgage listed is PITI, property tax is about 8k/year, insurance 1500. HCOL is usually high all across the board - mortgage or rent - both includes the property tax and insurance one way or another, HCOL affects utilities, and food. My PITI is about 2300 but a 3 bedroom apartment in same area is 15-1600 - 1200 for an apt above a store front on a busy street.
-
2019 I will focus on the repayments and trying to reduce monthly expenses.
Come 2020 and my bid to focus on FI, what do recommend as first steps?
Are you saying that by the end of 2019, you will have paid off all the CC debt, personal loan, AND the 115k student loan? If not, then in 2020, you should focus on knocking out ALL loans except the mortgage. Once all loans are gone, if you’re interested in real estate, consider a REIT. In HCOL areas, getting into rentals usually does not make much financial sense, plus then you also have to deal with tenants and things breaking down, etc.
-
Get rid of that credit card debt pronto.
You spoke of that debt going up as if you didn't really have anything to do with it. You know, like bad weather or something. That's not an attitude that keeps the CC debt from coming back!
Own it. You spent it on something. What? Can you just sell it back?
You could sell your expensive house in a couple of years, clear out the student loan debt, and move into someplace cheaper.
-
Three people--besides you, are the others adults? Or at least teens?
-
I suggest signing up for a balance transfer credit card like the chase slate which has a 0% intro APR for 15 months and no balance transfer fees. Most other cards beware have a 3% fee to transfer balances. Hopefully your credit is still decent and you can get a decent line of credit enough to transfer all your CC debts or you may need to open more than one card, this will eliminate the high interest for the next 15 months and hopefully you managed to pay it all off by then. I think maybe if you opened a HELOC in the beginning you might have saved a bunch of money on interest. It's still an option now to be able to pay off some of your higher interest rate debts.
-
Are you sure about your spending? If you are spending under $60,000 a year and making $128,000, how do you have credit card and personal loan debt? Even if you get the current debt under control, if you aren't sure where the rest is going, then the debt might come back.
I use my personal credit card for work travel sometimes, but I pay it myself before the bill is due so that there isn't any interest to pay. Then when the reimbursement comes in, it goes to my savings.
As someone mentioned, the Roth IRA can double as an emergency fund. Contributions can be withdrawn at any time without a penalty, so that is the part that is safe to use. Do you know how much of it you contributed?
Assuming half of the Roth is contributions, then you would have $35,000 to use now. I would use $18,000 to knock out the credit card and personal loan debt right away. That still leaves you a $17,000 emergency fund, which should be more than 3 months expenses if your estimate is right.
Then I'd work on reducing expenses and paying off the student loans.
-
I am with Kwill - there is money leaking out somewhere and you need to find out where. Are you tracking your spending at all? Are you taking out cash and not paying attention to where it's going?
And yes, stop floating your company money, especially if you are paying interest on it!
-
1500 a year on house insurance seems high - how long ago did you last shop around for this? Add that to shopping around for cell, internet and car insurance.
I hope you are putting your company expense claims in as soon as possible, to get them paid as soon as possible. Do the company rules allow you to add in an amount for interest paid by you in relation to those expenses? If so, add it. If not, you need to get to the point that you are paying the expenses off before interest is charged.
What do you have sitting around in your house/garage/storage that you can sell online for cash to help pay off the high interest debts sooner? Maybe put your kids onto doing this for you?
If you can leave your retirement account alone for the next 10 years it should have reached $1m even without further contributions. That's an income of $25k a year. How is that retirement account invested - have you checked what funds it is in? Should be mostly low cost index funds, plus some bonds given that you are getting close to retirement age, so this is something else to check up on and action if you haven't already.
Once you have paid off your high interest debts (credit cards, personal loan and perhaps the highest interest student loans) you should start contributions to this retirement fund again, especially if you get a match from your employer.
Where are you on a social security entitlement? Any rights to an ex's social security?
You've got a more than decent basis to work from, both in assets and income. Once you've gone through actioning the recommendations in this thread for reducing expenses and paying off debt you will find that your financial trajectory really takes off in a great direction.
-
Get rid of your high interest debt asap.
Have some easy of avoiding cc interest rates...if your work insists on you paying in advance, save up a fund in advance so you don't pay that ridiculous interest.
Track your expenses...there are lots of categories missing eg clothes, gifts etc
-
I know you want to provide college for your children but could the kids help repay some of that? Paying for your kids school is an incredibly generous thing to do but it happens to be a really inconvenient time for you to make large debt payments being in the tail end of your career and having under saved for retirement. Your kid would have their entire career ahead of themselves to earn and pay off the loans where you only have a handful of years left and other priorities.
I would also suggest you sign up for Mint.com or similar budget tracking software. The budget outline you posted looks simplistic and while it’s a good first step I bet there is a bit more spending going on. Mint makes tracking actual spending easy and it’s free.
You can do this! With a high salary and some enhanced budget tracking you will be able to snowball some of this debt pretty quickly.
-
Before the raise you were making +/- 98k/year with what you say were about 60k expenses. Yet your CC card debt was climbing. The numbers don't add up. I think your expenses are WAY higher than you think they are and you should start by getting them down into detail before you can do anything else.
-
2019 I will focus on the repayments and trying to reduce monthly expenses.
Come 2020 and my bid to focus on FI, what do recommend as first steps?
Are you saying that by the end of 2019, you will have paid off all the CC debt, personal loan, AND the 115k student loan? If not, then in 2020, you should focus on knocking out ALL loans except the mortgage. Once all loans are gone, if you’re interested in real estate, consider a REIT. In HCOL areas, getting into rentals usually does not make much financial sense, plus then you also have to deal with tenants and things breaking down, etc.
I had noted in the OP that that was not including the sl which will take a while to pay down.
-
Get rid of that credit card debt pronto.
You spoke of that debt going up as if you didn't really have anything to do with it. You know, like bad weather or something. That's not an attitude that keeps the CC debt from coming back!
Own it. You spent it on something. What? Can you just sell it back?
You could sell your expensive house in a couple of years, clear out the student loan debt, and move into someplace cheaper.
LOL! IDK, it kind of felt that way!
I was just trying to emphasize that it was a new wrinkle, I have historically paid off the balance monthly, once or twice I needed to carry something over an extra month or two, and then a few things cropped up, the balance wasn't paid and of course it starts accruing interest.
More details as I work through the postings.
-
I see several things. I’m of the Dave Ramsey persuasion on debt, so I think you need to get super intense on getting this debt knocked out. I also believe in the debt snowball vice the debt avalanche. If you’re committed to getting this debt knocked out ASAP, and you should be, the relative interest rates aren’t all that relevant. You need some victories. To me, the investments are secondary to getting rid of all non-mortgage debt.
On your budget, a few things leap out. The internet and cell look high to me. You can get visible cell phone, which is Verizon network, all you can eat data, phone, and text for $40 mo including tax. And if you aren’t a data glutton like me, you can find significantly cheaper services. The internet is probably high speed. Basic service is usually sufficient. The auto insurance looks steep as well, but that could be young drivers. I hope you have a cheap, older car that you can just get liability insurance on. Also, be sure to shop it.
I strongly suggest that you take the credit cards and toss them in the shredder and close the accounts. I realize that some mustachians like to play with travel miles and rewards. I think it’s playing with vipers. You’re carrying a balance and with all kindness and respect, you need to shake that habit. I respectfully suggest cold turkey. Once you’re out of the debt and are drinking lustily from the fountain of wealth and plenty, you might have them again but for now, they’re going to be a temptation.
Nothing else jumped out, but most everything could use a trim. Be smart about and combine trips. Shop aldi and lidl. Ask your company for a credit card so you stop floating their cash flow. It all adds up.
Lots of good suggestions.
Car is older and paid off, insurance is higher due to young drivers on it. I haven't gone to liability only but I think it is time to do that.
Cell is 50/person but I can look into trimming that - we do have unlimited everything and really use it!
Internet is so we can have a lot streaming going on, am not happy with rate or provider, but it seems that is always out of the frying pan and into the fire when changing. But - I think time to shop around and see what is currently available. Have been with this company/plan several years. They are always upping it.
Getting rid of the cards isn't something I'm interested in doing. Things were going well for years on that account until last year.
-
Three people--besides you, are the others adults? Or at least teens?
yes, 23 and 21.
-
Are you sure about your spending? If you are spending under $60,000 a year and making $128,000, how do you have credit card and personal loan debt? Even if you get the current debt under control, if you aren't sure where the rest is going, then the debt might come back.
I use my personal credit card for work travel sometimes, but I pay it myself before the bill is due so that there isn't any interest to pay. Then when the reimbursement comes in, it goes to my savings.
As someone mentioned, the Roth IRA can double as an emergency fund. Contributions can be withdrawn at any time without a penalty, so that is the part that is safe to use. Do you know how much of it you contributed?
Assuming half of the Roth is contributions, then you would have $35,000 to use now. I would use $18,000 to knock out the credit card and personal loan debt right away. That still leaves you a $17,000 emergency fund, which should be more than 3 months expenses if your estimate is right.
Then I'd work on reducing expenses and paying off the student loans.
The roth contributions are all from 10+ years ago so I think my contributions are only about 20k, and I do not want to touch those unless a real emergency such as job loss/losing the house or something like to give me time to sell.
But - yes - I have the option in case.
-
1500 a year on house insurance seems high - how long ago did you last shop around for this? Add that to shopping around for cell, internet and car insurance.
I hope you are putting your company expense claims in as soon as possible, to get them paid as soon as possible. Do the company rules allow you to add in an amount for interest paid by you in relation to those expenses? If so, add it. If not, you need to get to the point that you are paying the expenses off before interest is charged.
What do you have sitting around in your house/garage/storage that you can sell online for cash to help pay off the high interest debts sooner? Maybe put your kids onto doing this for you?
If you can leave your retirement account alone for the next 10 years it should have reached $1m even without further contributions. That's an income of $25k a year. How is that retirement account invested - have you checked what funds it is in? Should be mostly low cost index funds, plus some bonds given that you are getting close to retirement age, so this is something else to check up on and action if you haven't already.
Once you have paid off your high interest debts (credit cards, personal loan and perhaps the highest interest student loans) you should start contributions to this retirement fund again, especially if you get a match from your employer.
Where are you on a social security entitlement? Any rights to an ex's social security?
You've got a more than decent basis to work from, both in assets and income. Once you've gone through actioning the recommendations in this thread for reducing expenses and paying off debt you will find that your financial trajectory really takes off in a great direction.
thanks - adding the home owners to shopping around list.
I have been trying to get those expenses in asap, and after this latest bunch (and the promotion) I can at least hand that off to someone else to submit, that should help a little bit time-wise.
I am going to ask about options here. I asked about a company cc before and that is a no, but there may be an option for advancement or something - I will at least ask. The promotion came with a lot more travel, and prior to last summer, I was always able to handle the expenses without interest.
There is really nothing salable. Nothing beyond pocket change, and I just donate and take a tax deduction, and I will try to that more for 2019 taxes.
I need to look into the match and maybe sign back up just the minimum, I can't recall what that is, but I think 6%. When I stopped the 401k, I thought it would just be a few months, I don't want to leave that money on the table. Especially this long.
X has no SS.
After finishing all the posts, will put together an action plan.
-
I know you want to provide college for your children but could the kids help repay some of that? Paying for your kids school is an incredibly generous thing to do but it happens to be a really inconvenient time for you to make large debt payments being in the tail end of your career and having under saved for retirement. Your kid would have their entire career ahead of themselves to earn and pay off the loans where you only have a handful of years left and other priorities.
I would also suggest you sign up for Mint.com or similar budget tracking software. The budget outline you posted looks simplistic and while it’s a good first step I bet there is a bit more spending going on. Mint makes tracking actual spending easy and it’s free.
You can do this! With a high salary and some enhanced budget tracking you will be able to snowball some of this debt pretty quickly.
Both are taking out the max government loans in their own names and paying off that portion.
First-Year Undergraduate Annual Loan Limit
$5,500—No more than $3,500 of this amount may be in subsidized loans.
Second-Year Undergraduate Annual Loan Limit
$6,500—No more than $4,500 of this amount may be in subsidized loans.
Third-Year and Beyond Undergraduate Annual Loan Limit
$7,500—No more than $5,500 of this amount may be in subsidized loans.
Son has about 37k (took 5 years to graduate), daughter has 12k so far and will have about 28k at end hopefully graduating in 4 years! Only part of loans are subsidized, so interest starts ticking.
They both went to state school, and I had 40k saved in 529s, but wow - it goes fast! 35k/year including room and board. For state school.
Aside from the fairness angle to do for the younger what I did for the older - This is the greatest joy of my life to do this and have them both educated and into the world. I would have paid it all if I could, but I think 30-40k of student loans is about the max an entry level person should and can handle while building their lives and to also give them that ownership of the process.
Unfortunately - at about 80-95k salary through these past 10 years, I didn't make enough money to save alot/pay alot for their tuitions but also made "too much" and got no need-based aid. so right in the middle of getting help and being able to handle it comfortably. Oh well!
I do certainly need more help conceptualizing and using a budget. Had tried mint previously and wasn't too good with it. Will try to get something going somewhere about better tracking.
-
Have you considered sharing your financial situation with your kids? My parents took out Parent Plus Loans, and I assisted in paying them back. I am also still working on my own loans for graduate school. I would have been sick if my parents were being hurt by my college choices. Perhaps they can assist in paying those back, or at the very least pay their own cellphone bill.
-
Before the raise you were making +/- 98k/year with what you say were about 60k expenses. Yet your CC card debt was climbing. The numbers don't add up. I think your expenses are WAY higher than you think they are and you should start by getting them down into detail before you can do anything else.
ok - so about numbers not adding up. Many comments on this. The 5k does not include irregular expenses such as home maintenance, car maintenance and repairs, gifts, healthcare deductible and copays, eye exams and glasses, clothing, haircuts and the like - so yes in that way it is missing something - not intentional but not unknown. I had previously counted on those 2 months of 3 paychecks for this area, didn't really account for it budget-wise. That had worked for many years until it didn't in 2018.
The promotion happened just this Feb. Prior to that I was making 95/year. So - 10k to the 401k, Fica, fed and state income taxes and I would be able to pay all the bills and absorb a few incidentals most months. A haircut, a drs. appt and an Rx, an item of clothing. If I saved a few hundred one month, it'd get spent the next, polar vortex or other would crop up.
I made a big mistake because I was getting nervous about the student loan balances as they neared the 6 figure mark, I didn't take enough out for the 2017-18 academic year thinking I could force myself to pay more OOP and it blew up at me. Ended up putting some of those expenses on the CC. Then - had a significant plumbing issue, needing a lot of dry wall repair on the ceiling below, painting, that was nearly 3k. But the extra check had already been spent, and then you are in dept.
So - the 5k/month is pretty accurate I think - but it depended on having the 2 extra checks free to take on any irregular expenses.
So that bases the yearly budget on about 68k from a gross pay of 95, based on having about 150 extra/paycheck and the 2 extra checks. Minus FICA, state and fed taxes, 401k, that seems to be congruent to me. Is there something I'm not seeing?
-
Action plan
Immediately investigate lower rates for:
Car insurance – look into liability only
Homeowner insurance
Cell
Internet
Review options for:
Financing work travel
Offspring pay own phone/car insurance
Son’s health insurance (make sure part of job search)
Steps
Pay off CCs and personal loans/ Be judicious (strategic) about further student loans
Add 401k to get match
Determine new budget/cash flow for 2020 and consider options for FI
-
Have you considered sharing your financial situation with your kids? My parents took out Parent Plus Loans, and I assisted in paying them back. I am also still working on my own loans for graduate school. I would have been sick if my parents were being hurt by my college choices. Perhaps they can assist in paying those back, or at the very least pay their own cellphone bill.
This is a good point that I will broach with each one as they settle into their career jobs post graduation. Son is looking but is currently working pt low wage job looking for entry level position. I have been standing back but will talk to him more about this.
I think I must keep this debt on me for now, but their financial situations will hopefully change rapidly over the next decade and they could take on more of this. So - maybe more of a temporary situation for me than I am envisioning now.
daughter is a fixer - I worry too much talk on this will make her think dropping out would be helping. So keeping it light is important.
But will broach the cell phone issue/car insurance with both of them.
-
This still isn't adding up -- if you are paying for room and board for the kids then why is your food cost $650/month? Why are you carrying higher cost insurance so that they can have access to your car, especially if they are not living at home?
I appreciate that you don't want your kids to be crushed by SL debt, but you are doing them a disservice by continuing to pay for most other stuff for them. They need to learn that these things cost money. They should be paying for things like cell phone, clothes, streaming services, etc from money they earn.
This question doesn't make any sense to me. I reported a number based of 2018 average expenditure. What is supposed to add with what for this?
son is living home - looking for career entry and is willing to move to a couple different states, daughter is home at least one weekend/month spring and winter break, thx, summer, and uses car.
have the phone and car insurance on the plan to discuss with them.
-
Just wanted to chime in and say I totally understand why you financed your kids’ college costs. It will be my joy in life to pay for my son’s college, as it was for my parents to do so (so they say). And the fact that you’ve done this on one income is pretty badass.
Of course, now it’s time to think about your own future. Once the kids are done, it will be critical for you to pull the focus back on yourself. Your gift to them was a good start in their professional lives. Other things will come up for them (weddings, grad school, home purchases, etc.). You may feel the desire to help with those. At that point, you’ll want to remind yourself and your kids that you focused on getting them where they are so that they could “take it from here.” Starting the conversations now about them starting to assume responsibilities like auto insurance, etc. will set the stage nicely.
-
Just wanted to chime in and say I totally understand why you financed your kids’ college costs. It will be my joy in life to pay for my son’s college, as it was for my parents to do so (so they say). And the fact that you’ve done this on one income is pretty badass.
Of course, now it’s time to think about your own future. Once the kids are done, it will be critical for you to pull the focus back on yourself. Your gift to them was a good start in their professional lives. Other things will come up for them (weddings, grad school, home purchases, etc.). You may feel the desire to help with those. At that point, you’ll want to remind yourself and your kids that you focused on getting them where they are so that they could “take it from here.” Starting the conversations now about them starting to assume responsibilities like auto insurance, etc. will set the stage nicely.
Thank you! Yes it is a source of pride and joy - pride for them for all their hard work, of course, and pride in myself that I am able to make it happen financially! The promotion reaffirmed my purpose and that I was on the right path. Providence gave me the means to complete this task I had assigned myself.
I know that on this message space paying for education of one's children is not really embraced, but it is a very important thing for me to do.
I am looking forward and planning for myself, even if I can't quite put much into action in the next year or two - I will be soon. I appreciate all the advise here on areas to try to trim and the emphasis on being more diligent. A small savings every month will eventually be a large amount at the end of a few years so I need to push myself on that front and make those changes.
My goal is to pay these credit cards and personal loan off as quick as I can and not get caught in that trap again.
-
This still isn't adding up -- if you are paying for room and board for the kids then why is your food cost $650/month? Why are you carrying higher cost insurance so that they can have access to your car, especially if they are not living at home?
I appreciate that you don't want your kids to be crushed by SL debt, but you are doing them a disservice by continuing to pay for most other stuff for them. They need to learn that these things cost money. They should be paying for things like cell phone, clothes, streaming services, etc from money they earn.
This question doesn't make any sense to me. I reported a number based of 2018 average expenditure. What is supposed to add with what for this?
son is living home - looking for career entry and is willing to move to a couple different states, daughter is home at least one weekend/month spring and winter break, thx, summer, and uses car.
have the phone and car insurance on the plan to discuss with them.
I was confused because you mentioned the high cost of room and board as part of their college costs -- so I assumed they were both living away at school.
I was confused as to what was supposed to add up, but perhaps I am looking at it too literally.
It is what was spent at grocery stores and restaurants either on debit or credit card in 2018 and divided by 12.
-
Action plan
Immediately investigate lower rates for:
Car insurance – look into liability only
Homeowner insurance
Cell
Internet
Review options for:
Financing work travel
Offspring pay own phone/car insurance
Son’s health insurance (make sure part of job search)
Steps 2019
Pay off CCs and personal loans/ Be judicious (strategic) about further student loans
Add 401k to get match
Reestablish EF (goal 25k, begin 100/month)
Steps 2020
Determine new budget/cash flow for 2020 and consider options for FI
Revising a bit to add some savings to prevent credit card debt from recurring
-
Steps
Determine new budget/cash flow for 2020 and consider options for FI
The Case Study Spreadsheet (https://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/) can be helpful for this. Its "Time to FI" calculations and chart are somewhat simplified, but can serve as a "gateway drug" to more sophisticated tools such as those mentioned in Best and/or Recommended Retirement Calculator - Bogleheads.org (https://www.bogleheads.org/forum/viewtopic.php?f=10&t=115839&p=1686175#p1686175).
-
Thank you for taking the time to reply and think about advice.
I think Mint could be helpful if you put all your accounts into it and then look at it over time. After 3 months, you will be able to tell a lot from the charts of trends and spending.
Every month is going to have something from the expenses you mention: "irregular expenses such as home maintenance, car maintenance and repairs, gifts, healthcare deductible and copays, eye exams and glasses, clothing, haircuts." It shouldn't be a surprise that those things happen and cost money. It's worth tracking spending, at least in an automatic way with Mint or your credit card website, to see how much you average with those kinds of expenses.
Things like gifts, clothing, and haircuts can really vary a lot depending on your choices. Do you have low maintenance hair that you get trimmed twice a year at a no-frills unisex salon, or do you get your hair professionally coloured and permed on a regular basis? Are you the kind of person who averages $200 a month on clothes or $10 a month? Even eyeglasses can vary depending on where you go and what you choose--name brand frames or slightly less expensive ones, coupons or not, etc.
-
Thank you for taking the time to reply and think about advice.
I think Mint could be helpful if you put all your accounts into it and then look at it over time. After 3 months, you will be able to tell a lot from the charts of trends and spending.
Every month is going to have something from the expenses you mention: "irregular expenses such as home maintenance, car maintenance and repairs, gifts, healthcare deductible and copays, eye exams and glasses, clothing, haircuts." It shouldn't be a surprise that those things happen and cost money. It's worth tracking spending, at least in an automatic way with Mint or your credit card website, to see how much you average with those kinds of expenses.
Things like gifts, clothing, and haircuts can really vary a lot depending on your choices. Do you have low maintenance hair that you get trimmed twice a year at a no-frills unisex salon, or do you get your hair professionally coloured and permed on a regular basis? Are you the kind of person who averages $200 a month on clothes or $10 a month? Even eyeglasses can vary depending on where you go and what you choose--name brand frames or slightly less expensive ones, coupons or not, etc.
I am pretty deficient in terms of clothing, but putting off those purchases until the credit is paid off. I get a hair cut and color for about $65-75 every 3 months/4 times per year, I don't think that is way out there but not sure how "extravagant" that is. Would prefer the color every 6-7 weeks, but have been stretching it the past 3 years.
I haven't gotten it done for about 8 months now due to the debt, and looking pretty rough! I think I need to take care of that at least before it gets too embarrassing!
It's grown out enough I could go quite short and cut out the colored hair altogether - but frankly that just really depresses me. A lot grey - I feel I'd be giving in to old age for sure.
-
I'm still not quite understanding the financial impact of the kids on your current spending. I'm not sure you do, either.
If you aren't going to ask the kids for much more money (beyond cell phones and insurance) then frankly, your only other option is to cut your expense and live a pretty tight existence for a while. You are paying some obscene interest rates. In your shoes, I'd be walking dogs on weekends and banishing all restaurants from my life, and committing to do that for at least 6 months. And of course the other cuts mentioned, as well as whatever else you can find. Meatless Mondays, rice and been Tuesdays and Thursdays, etc.
The great news is that your income is wonderful. You can turn this around quickly. But the best way to do that is to make deep cuts initially. You can ease off somewhat over time if you must but progress at the very beginning counts for far more, since you are dealing with compounding interest.
-
You just got promoted so I assume you're in good standing with your employer so you
Take out a 401K loan and pay off the stupid high interest rate debt immediately. Then focus on paying that 401k loan back as quickly as possible.
I don't get why you'd pay credit card and personal loan rates when you have substantial home equity and a 401k. does your 401k not offer this? Most offer something like 4% five year term where interest either goes to you or sometimes the administrator.
Likewise, shouldn't it be easy to set up a HELOC?
Obviously you need to get better idea of your inflows and outflows, but all high interest debt can be gone within a few business days of processing either of those options. There are many drawback to 401k loans, but credit card rates are far worse than those drawbacks.
Also, Can you sell your company stock without penalty?
-
First, track everything. Those "irregular" expenses actually account for a huge percentage of your discretionary spending. If you have been running up CC debt, you are by definition living a lifestyle that you can't afford -- but you don't even see it, because when you look at your finances, you see $5K/mo. spending, and it looks like you are doing fine. Every penny that leaves your pocket needs to get written down somewhere -- I guarantee you will be shocked by how much that all adds up to that you can't even recall now! That is your low-hanging fruit. You have to know where you actually are before you can find a path to where you need to be.
Second, I agree with you that if you have made a commitment to your kids, you need to follow through on that -- and certainly don't burden them with your problems while they are in school or looking for jobs. Frankly, your choice to subsidize them was your choice, not theirs, so it would not be fair to ask them to assume your loans, which they never agreed to. It's entirely possible that if they'd realized they needed to bear the entire burden, they'd have made different choices, like living at home and going to CC for a few years before transferring; you can't pull a bait-and-switch on them now, after they are already committed. If things change in a few years and they can help you out, that's great -- but you need to make your plans assuming that you will be paying them all off.
But choices have consequences. And when you choose to give your kids six figures in college funding, the consequence is that you need to make very hard lifestyle decisions if you want to be financially independent and retire at a reasonable age. And that means whacking at your expenses mercilessly. Get the kids off the parental dime -- if you are going to cover college, you cannot also provide them the cushy lifestyle they have become accustomed to. That's the tradeoff that comes with your choice. As soon as your oldest gets a job, he covers his own food/cellphone/car insurance -- and if he wants to continue living at home, he can pay rent. In the meantime, he gets to live with the cheapest possible phone plan and internet; unlimited data is a luxury no one is entitled to while you're six figures in the hole. And giving your employer a free loan of thousands of dollars a month, at the cost of 20% interest? Oh hell no. You need to hold yourself to a higher standard -- if there is no possible way to make them pay up front, then until you get the CCs paid off, your #1 job is to get your expense reports in the day you return from a trip. And there is no eating out, no movies, no other extras.
I know this seems harsh, but your debt is more than you make in a full year -- and you're not even done borrowing yet. If you add in the taxes and future loans, that means that you need to work for a minimum of two full years just to pay for what you've already spent (probably three). If that's not an emergency, I don't know what is -- especially if you want to be able to retire within the next 20 years. I mean, that's a sell-the-house level of emergency. You need to re-examine all of your expectations and assumptions to decide what is most important to you.* You can fund your kids' education or live a nice lifestyle or be FI in a few years -- heck, you can probably do two of those at your income level -- but you can't do all three.
In terms of a specific plan, the investment order listed already is the best approach. But your success or failure is going to depend on how seriously you manage to cut back your expenses and work those "irregular" expenses into your plan, so you're not taken by surprise and have to rely on more debt to get you through.
*And by this I mean why are you focusing on 3Br apartments when you have one kid in college and one who's graduated? One bedroom and a sleeper sofa is sufficient, at least until you are back on track.
-
EXTREMELY EASY Fix:
1) Immediately I would take out a 401k loan from your account (16k credit cards + 2k personal loans). The interest you pay goes back into your account. Make it as short of a term as you can handle. Be aware that your checks will be smaller.
2) You need to do at least the company match for your 401k. Max it out if you can because you need all the tax advantages.
3) Pay off or remove any student loans above 5%. In the future do not accept a loan from the bank above 5%.
4) DO NOT USE THE CREDIT CARDS. Put something small on them that occurs each month but pay them off in full. That way you have better debt-to-credit ratio and can borrow for student loans in the future if needed at a lower rate.
-
First of all, you have options to get money loaned a better terms than your existing loans. I'd be looking at that pretty hard. But, if you use up those options and don't change your spending behavior you will just dig a bigger hole. The good news is you have pretty decent chunk invested and a good income.
401K loans have some pretty nasty penalties if you don't pay them back and they are due in full if you leave your job, get fired, company shuts down, etc.
A better option would be to look at a mortgage refinance to pay off any loans that are higher interest than you can get on a mortgage. Looks like you have enough equity to cover all your loans. Get down to one payment and cash flow the rest of kids college while letting your investments grow. (invest as much as possible and definitely enough in 401K to get any match)
The best option might be to sell the house and rent. Use the cash to pay off loans and help with college. You could probably even keep investing a decent amount (at a minimum enough to get any match). Seems like in MOST HCOL areas it's cheaper to rent than buy when you consider opportunity cost. Also, with kids getting older and moving out you might be able to down size.
-
Just a mini update on my status and planning.
Looking at this listing I made a few changes:
0. Establish an emergency fund to your satisfaction
1. Contribute to your 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
5. Max 401k (if
- 401k fees are lower than available in an IRA, or
- you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
- your earn too much for an IRA deduction and prefer traditional to Roth, then
swap #4 and #5)
- no, and guess no need to answer 6-8!
6. Fund a mega backdoor Roth if applicable.
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.
8. Invest in a taxable account and/or fund a 529 with any extra.
I've opened a vanguard account as an emergency fund with 100/month auto funding and started up my 401k again with 10% to address 0 and 1 and to put some positivity into my current circumstances. I can save a little for the EF and I must save something towards retirement. And it will work out.
Not investing anything at all was a real downer and I couldn't go any farther on that route. It made me feel very stagnant and hopeless, to be honest.
Finally got my work expenses reimbursed and tax refund and adding that to my usual payments the higher interest cc are paid off, still have the personal loan and the 12% credit card. Total debt combined is 7500 that I will soon put my extra paycheck on that. After that, it will be slow going.
I think posting my balances as of the 20th in the OP were a little inflated as it included a lot of the usual bills that are autopayed and monthly food shopping etc. that is paid off.
So at least a little bit progress there.
I have been combing through my expenses and I think there are some things not being accounted for and I have a lot more work to do on that and trimming the bills. Pulling everything out of the pantry to try to work with the stockpile and try to buy as few groceries as possible in the near term.
-
Some suggestions...first: where is the other parent, and why isn't that person contributing to college costs? I expect the answer to this is "forget it" but it's worth at least considering. If that person won't split the costs at least contribute SOMETHING.
An item to add to the action plan: Review your health plan options at your next opportunity. Switching to a high deductible plan and using an HSA to pay medical costs is almost certainly going to be much better than your current PPO once you count in the value of the tax deduction (which probably doesn't appear on the helpful calculator your employer may provide - so don't use that).
Also, I second suggestions to refinance all existing debt into lower interest rate options - including the student loans. A mortgage refinance, HELOC, or 401K loan are all good options. So is a new credit card with an introductory 0% interest rate for at least a year, as long as you repay what you put on it by the end of the 0% period.
I completely agree that your overall strategy for the next two years is to forget about retirement savings, tighten spending, and aim to pay that $35K/year college bill for your daughter in cash - no more loans for you. With your salary and expenses it should be doable. The only retirement savings you might consider in the next few years are fully funding an HSA, and contributing to the 401K up to the company match.
Last suggestion: you may be someone who could greatly benefit from YNAB (budgeting software that forces you into a mindful spending mode). I know they charge for it but it may be worth it if it helps you avoid credit card interest. Mint gives you good info on past spending trends and it's free, but it doesn't help much with prospective spending.
-
Finally got my work expenses reimbursed and tax refund and adding that to my usual payments the higher interest cc are paid off, still have the personal loan and the 12% credit card. Total debt combined is 7500 that I will soon put my extra paycheck on that. After that, it will be slow going.
. . .
Pulling everything out of the pantry to try to work with the stockpile and try to buy as few groceries as possible in the near term.
That is a great step. I hope you can put a little more toward the other credit card and personal loan from your usual paychecks now that the higher rate ones are gone. That will help the total go down faster, and the emergency fund should help it stay down.
Can you destroy or close the high rate credit cards now? You could ask for an increase in the limit on your lower rate card if you feel like that wouldn't give you enough wiggle room, but given that you can potentially use part of your Roth IRA or borrow from the 401k, you shouldn't be so desperate as to borrow with credit cards at such high rates.
Good luck with your stockpile cooking. I stocked up a bit for Brexit, and now I'm trying to use up the supplies a bit because of the delay in it. Now that I've gotten used to cooking from the pantry, I'm enjoying going to the store less and being able to throw something together quickly after work.
-
I agree about avoiding using credit cards, or at least set them on full balance autopay. But don't close old accounts!!! It will ding your credit rating. Also if you're going to go the mortage refi route, do that before applying for any new credit lines. More than 2 hard inquiries in the last two years on your record may increase your interest rate.
Also yes...congrats on paying off the high interest cards!
-
There is a lot of great advice in this thread.
You've made some progress already.
I'm really, really concerned about your idea that an extra paycheck month is going to solve a lot of your problems.
I'd like to see something like this:
2290 mort REFINANCED, LOWERED MONTHLY PAYMENT BY $XYZ
310 gas/heat DID ENERGY AUDIT, LOWERED MONTHLY PAYMENT BY $XYZ
95 electric STARTED KEEPING UNUSED ITEMS OFF, LOWERED MONTHLY PAYMENT BY $XYZ
150 cell CHANGED TO CHEAPER PLAN, LOWERED MONTHLY PAYMENT BY $XYZ
105 internet CHANGED PLAN, LOWERED MONTHLY PAYMENT BY $XYZ
550 healthcare
190 car ins ALTERED PLAN, LOWERED MONTHLY PAYMENT BY $XYZ
100 other transport WHAT EVEN IS THIS??? LOWERED MONTHLY PAYMENT BY $XYZ
545 SLs
650 food CHANGED HABITS, LOWERED MONTHLY PAYMENT BY $XYZ
Total cut each month: $XYZ
-
1) Never close your credit card accounts. I have a FICO of 841 now, still climbing, and I use my credit cards very little, usually only at the gas station.
2) Wasted $142 per month on DirecTV, for about 10+ years. That's $20K with compound interest. Bought a couple of Roku boxes (and Roku stock), and now my TV bill is $0. Sooooo much to watch!
3) Wasted about $200 per month on 3 AT&T cell phone lines, so about $67 each. Switched to T-Mobile's 50+ plan . . . 2 lines, unlimited, all taxes, etc. included, for $60 per month. A couple months later they offered a 3rd line for $30 extra, so now we 3 are paying $30 each for this, and that rate is locked in for good. Fantastic deal.
4) You have $675K in your 401K. Let that simmer 'til you are eligible for retirement benefits, and you'll be able to enjoy a safe retirement. I would actually live off that and delay benefits 'til you are 67. Combined with SS, you'll be fine. Thus, your focus has to be to eliminate debt now, one after the other.
-
Hi,
I had been using mint previously, but I started using YNAB last month and wow, now I can really see where my money is going every day. It has been shocking to me to see the vast difference between what I "thought" was spending in certain categories and what I actually am spending. I found a two month free trial to try it out because it does cost something like $8/month. I have already saved waaaay more money than that just be using the program. Just google "YNAB 2 month trial" and you'll see a link.
Right now it is so critical with your huge raise to ensure that it doesn't evaporate. I really think that YNAB will be able to help you. It seemed a little complicated at first, but I did the free webinars and jumped in. I am also reading the book You Need a Budget, which might seem like overkill, but it's helping to reinforce my enthusiasm for budgeting!
Definitely get a 0% balance transfer. It will save you money.
Good luck!
-
There is a lot of great advice in this thread.
You've made some progress already.
I'm really, really concerned about your idea that an extra paycheck month is going to solve a lot of your problems.
I'd like to see something like this:
2290 mort REFINANCED, LOWERED MONTHLY PAYMENT BY $XYZ
310 gas/heat DID ENERGY AUDIT, LOWERED MONTHLY PAYMENT BY $XYZ
95 electric STARTED KEEPING UNUSED ITEMS OFF, LOWERED MONTHLY PAYMENT BY $XYZ
150 cell CHANGED TO CHEAPER PLAN, LOWERED MONTHLY PAYMENT BY $XYZ
105 internet CHANGED PLAN, LOWERED MONTHLY PAYMENT BY $XYZ
550 healthcare
190 car ins ALTERED PLAN, LOWERED MONTHLY PAYMENT BY $XYZ
100 other transport WHAT EVEN IS THIS??? LOWERED MONTHLY PAYMENT BY $XYZ
545 SLs
650 food CHANGED HABITS, LOWERED MONTHLY PAYMENT BY $XYZ
Total cut each month: $XYZ
No - I didn't think it would solve everything, just that it would help a little! And it did, a little!
One thing I realized that Ihamo will be glad to hear regarding food budget. So for food I added up all grocery and restaurant for the year/12. On a work trip this month I realized that that was including many restaurant meals during work trips that are ultimately reimbursed, I am estimating 100-200/month on average, so maybe 150 month.
that leaves the actual food budget at about 500/month.
I'm not able to go back and forensically see that actual amounts for 2018 (I could! but a lot of work for relatively little additional information!) - So I will try to keep track of that better going forward.
So I made a few steps forward (signed up for 401k, started baby EF), but have not done a whole lot on my action plan.
I'm struggling to really address things one by one. I look at list or think about the situation and get overwhelmed and a week or two drift by and I've done nothing. I see it is almost 2 months since I posted - with interest and enthusiasm to get better I may add - but feel like things are difficult to take hold of and make changes. Work is busy, behind on household tasks, all the things about life that take time and thought and effort.
Am I the only who struggles to focus on this? Seems I can only really keep on this when there may be a struggle to pay the bills. A few extra $$$ in the checking and then other issues are more pressing.
Working on my 2 month trial in YNAB.
Visited bank about a refi - no banker available and took them a week or longer to get back to me. Have not returned message.
also looking at car insurance and internet prices.
So I guess my update on my case study is......not much, but still trying?
-
Mistymoney, instead of beating yourself up about this how about congratulating yourself on what you've done so far? Here's what I see you having accomplished:
1. Started up 401K contributions <== In your situation, only contribute to get matching funds.
2. Started saving an emergency fund <== This is good for your mental health. Go for 3 months expenses.
3. Started using YNAB. <== Hooray!! This one step will bring down your spending more than you might realize.
4. Taken steps to getting a mortgage refinance. <== Excellent. Call again tomorrow.
5. Investigated car and home insurance prices. <== So what did you find out? Can you reduce your insurance costs?
I would definitely check mortgage rates with your bank AND either a second bank OR look at current mortgage rates on bankrate.com. If your bank is giving you a decent rate, then just go for it. This is a fantastic time to refi. The loan application form is one page. Fill it out at home or bring your paycheck stub and copy of your 2018 1040 form to the bank.
Be sure to let them know you want a cash-out refi for as much as you can get (80% of whatever the appraiser says your home is worth). And you want a 30 year fixed with 0 points. Once that's done, the whole thing will be on autopilot. You'll need to be at home when the appraiser comes, and a few weeks later you'll need to go to the bank to sign a bunch of forms. That's all there is to it!
So that's Monday and maybe Tuesday. On Wednesday you can start looking at alternative insurance plans. OR, if you aren't stuck on a cell phone contract, you might try tackling that first as it's simpler and may be higher yield.
Sound like a plan?
-
Thank you Freya!!
For the helpfulness and also the kindness of your words. Yes - I will try to organize my thoughts/documentation a bit today and start tackling things again on Monday.
The most important thing to do is to keep moving forward, no matter how small each step may be.
-
It is really hard to keep up the enthusiasm.
Chip away at it.
It took me a long time to work through the list of suggestions ppl gave me when I posted my case study.
I'm probably due for another round of feedback.
It's never going to be done...there will always be something else to do. Knowing that helped me get started since I didn't have to do everything all at once.
P.s. if possible use a separate credit card for work so you 1) know your own budget is accurate and 2) submit for all reimbursements. I can't tell you how many taxis, parking costs, etc I ate before I did that.
-
I just saw this thread resurfacing. How did the last few months go?
+1 regarding all the comments suggesting budgeting and/or YNAB. After buying our house we had some serious cash-flow issues, and I tracked expenses meticulously in spreadsheets for three years before I finally went from backwards-looking tracking to actual forward-looking budgeting (using YNAB). Everyone is different in this, but before, I was only able to do some rough adjustments (like changing contracts), but for other spending I was just beating myself up all the time for "not staying in the budget" or "that's one of the things you can't do anything about" without really changing something. After, I gained a lot more actual control over where each <currency unit> goes and was able to reduce expenses by another 20% even.
The "rainy day" categories are particularly relevant in your case. If you just average out what expenses for unexpected house repairs etc. cost you in the past, divide them by 12 (or 24 if you expect them to happen every 2 years) and - boom, they're suddenly in control. I have separate categories for house repairs, car repairs, car replacement, etc. and when something happens, the cost is usually covered by the budget category, and if it isn't, it triggers me to either find different solutions that ARE in the budget (e.g. DIY for house stuff, find a cheaper auto shop), and/or trigger me to think of other solutions "hmm, the second car used to be much cheaper to maintain; actually we're using it much less then before. Maybe time to bike/replace it/...". Of course, there's no guarantee that your house doesn't spontaneously collapse, blowing the house repair budget category, but it's a statistical thing: things that happen more often most likely keep happening, and freak catastrophes is what we have insurance for.
That way (by having no out-of-budget expenses any more, and not lumping everything into "savings/emergency"), you gain control over expenses that you earlier thought were uncontrollable. This was a big change for me, as I knew that, even when something breaks, I know immediately if it has the potential to derail my financial planning -- and most of the time, it didn't.
-
Just saw the thread...
I would have sold the company stock and wiped out that Credit Card debt today. Submit your receipts and get that $4k of company reimbursement and then wipe out the personal loan - also ask for a tad more back for the interest charges 20% as you are floating them.
Then refinance the mortgage to a 30 year recast at today's lower rates - use that to create a tad more cash flow to max out the 401k at contribution of $25k per year (this will reduce your fed/state tax liability.
Make sure your W4 withholding is up to date to not give the govt a free loan (aka getting a refund in April).
Expenses:
Utilities: When you're not using your electronics like TV - put it on a power strip and turn off (it sucks alot of power when you're not aware). Turn off the heat or set your thermostat to 58 in the winter and 90 in the summer. This saves alot of utility cost.
Internet - since you're on unlimited plan with your cell phone- get rid of internet hook up.
Cell Phones- there are cheaper unlimited plans out there - look for the one that works for you. You use internet on your phone and internet at home - its the same internet - decide which one is more important to have.
Food: shop and prepare items that are on sale on the weekly ad instead of just getting what you're used to getting. Eggs are pricey? then don't buy them until they're on sale...
Mortgage: If you're good at establishing an emergency fund - try to take the property taxes off escrow and pay only when its due. Usually you get what a couple of months notice before the Property tax bill is due? You should be able to prepare for that through the year to better manage for cash flow.
Also evaluate your insurance and risk tolerance.
-
I was hesitating to post any updates as I felt everything was unchanged, but I noticed today that the thread has received a few more posts so putting what updates I have here for the curious.
And - putting together the updates did make me feel that I have had made more progress than I realized!
Negatives:
Virtually no investment contributions, and no growth either!
Took out more student loans
Property tax increase increased mortgage by 98/month
Positives
Have made good progress on the credit card and personal loan balance
Established a baby EF fund
I have been on and off contributing to the 401k as I grapple with debt paydown and tuition for this year.
I did need to take out some additional student loans, but not as much as previously and I have been focusing on clearing the CC and personal loan debt. I should be set to clear these out by year's end. Feels good to have some EF! Won't be enough for a lot of true emergencies, but will help prevent some unexpected expenses from going on the credit card.
I think it is a bit too late to RE but I still have FI ambitions, and not sure where to focus. I will give you a quick snapshot of where I am.
Assets negligible changes since April
401k 675k
Roth 70k
HSA 6k
company stock 12k
NEW:
EF was 0 now 1k
Debts updated 10/11/2019
Mortgage 260k (redfin value 500k) mortgage 257, value 505
student loans 115k 127
CC 16k 3
pers loan 2k 1
income/outgo
Income 128k
Monthly bills ~5k
Based on last year averages and rounded to nearest $5 increment:
2290 mort now 2388
310 gas/heat
95 electric
150 cell
105 internet
550 healthcare
190 car ins now 179
100 other transport
545 SLs
650 food now 500
4985 now ~4922
-
I have been tracking expenses very rigorously - but it is time consuming (!), and I haven't gotten to a lot of my financial tasks as yet. I am still looking to refinance the house and to call providers to negotiate or change providers, etc. to whittle down the monthly outgo. But so far only got the car insurance done.
Overall debt is down by 5k, so I am going to take that as a positive.
Plan is to clear all consumer-type debt by 2019, try to take out as low an amount of student loans as I can for the winter 2020 semester (hoping to cap that at 5k), and I am hopeful that I can avoid student loans for the final year for DD.
After all credit card and personal loans are paid off, I will rejoin the 401k club.
-
Nice work! It takes a lot of effort to stem the tide.
Every bit helps.
-
It is really hard to keep up the enthusiasm.
Chip away at it.
It took me a long time to work through the list of suggestions ppl gave me when I posted my case study.
I'm probably due for another round of feedback.
It's never going to be done...there will always be something else to do. Knowing that helped me get started since I didn't have to do everything all at once.
P.s. if possible use a separate credit card for work so you 1) know your own budget is accurate and 2) submit for all reimbursements. I can't tell you how many taxis, parking costs, etc I ate before I did that.
Thank you! This is really helpful! I need to focus on each step and be good with the progress made and not beat myself up on those things as yet undone! Will keep them on the radar though!
Work expenses have been ok and not carried since I got things cleared and I have been submitting as immediately as I can.
My main focus has been on paying down the credit cards, and that has been really going well. Thankfully! Nothing has cropped up to derail that effort, which almost makes me think another gotcha! could be just around the corner.....but at any rate, am in a much better position to handle that whenever that may arise.
-
Just saw the thread...
I would have sold the company stock and wiped out that Credit Card debt today. can only be sold end of the year, will check into that for this year Submit your receipts and get that $4k of company reimbursement and then wipe out the personal loan - also ask for a tad more back for the interest charges 20% as you are floating them. this is done, did not ask for extra, but have not had issues since
Then refinance the mortgage to a 30 year recast at today's lower rates - use that to create a tad more cash flow to max out the 401k at contribution of $25k per year (this will reduce your fed/state tax liability. still looking into this!
Make sure your W4 withholding is up to date to not give the govt a free loan (aka getting a refund in April). I did adjust with an extra exemption to get a little more cash each paycheck, will reevaluate after filing taxes for 2020
Expenses:
Utilities: When you're not using your electronics like TV - put it on a power strip and turn off will give this a whirl! (it sucks alot of power when you're not aware). Turn off the heat or set your #4 thermostat to 58 in the winter and 90 in the summer. this is too spartan for me! This saves alot of utility cost.
Internet - since you're on unlimited plan with your cell phone- get rid of internet hook up.
Cell Phones- there are cheaper unlimited plans out there - look for the one that works for you. You use internet on your phone and internet at home - its the same internet - decide which one is more important to have.
Food: shop and prepare items that are on sale on the weekly ad instead of just getting what you're used to getting. Eggs are pricey? then don't buy them until they're on sale...
Mortgage: If you're good at establishing an emergency fund i'm a fail here, feel more secure keeping this with the bank for now - try to take the property taxes off escrow and pay only when its due. Usually you get what a couple of months notice before the Property tax bill is due? You should be able to prepare for that through the year to better manage for cash flow.
Also evaluate your insurance and risk tolerance.
-
I just saw this thread resurfacing. How did the last few months go?
+1 regarding all the comments suggesting budgeting and/or YNAB. After buying our house we had some serious cash-flow issues, and I tracked expenses meticulously in spreadsheets for three years before I finally went from backwards-looking tracking to actual forward-looking budgeting (using YNAB). Everyone is different in this, but before, I was only able to do some rough adjustments (like changing contracts), but for other spending I was just beating myself up all the time for "not staying in the budget" or "that's one of the things you can't do anything about" without really changing something. After, I gained a lot more actual control over where each <currency unit> goes and was able to reduce expenses by another 20% even. this is interesting...I have been kind of feeling like I'm not doing or learning anything new with my obsessive tracking. Like I'm spending hours a week recording and monitoring for no reason than to just see it. Hopefully, I will get to a position of greater power as you describe.
The "rainy day" categories are particularly relevant in your case. If you just average out what expenses for unexpected house repairs etc. cost you in the past, divide them by 12 (or 24 if you expect them to happen every 2 years) and - boom, they're suddenly in control. this is good, and I'm going to strive to get to this point. I built up my mini EF, and then I have been putting nearly everything I can towards the credit cards. I feel those and the personal loan need to be paid off (so the interest stops!), and then I can start with this kind of advance planning for the budget. Well - I do need to spend a few dollars on myself after it's all paid off, then back to buckling down I have separate categories for house repairs, car repairs, car replacement, etc. and when something happens, the cost is usually covered by the budget category, and if it isn't, it triggers me to either find different solutions that ARE in the budget (e.g. DIY for house stuff, find a cheaper auto shop), and/or trigger me to think of other solutions "hmm, the second car used to be much cheaper to maintain; actually we're using it much less then before. Maybe time to bike/replace it/...". Of course, there's no guarantee that your house doesn't spontaneously collapse, ooo very sobering thought! blowing the house repair budget category, but it's a statistical thing: things that happen more often most likely keep happening, and freak catastrophes is what we have insurance for.
That way (by having no out-of-budget expenses any more, and not lumping everything into "savings/emergency"), you gain control over expenses that you earlier thought were uncontrollable. This was a big change for me, as I knew that, even when something breaks, I know immediately if it has the potential to derail my financial planning -- and most of the time, it didn't.
Thanks - starting to see a new level to the budget monitoring as I go forward.....
-
Nice work! It takes a lot of effort to stem the tide.
Every bit helps.
Thanks!
I can start to see the light at the end of the tunnel. I'm feeling confident about moving forward.
-
Hi mistymoney, you're doing great, seems you've dug and are still digging your way out of a bleak hole. It's very inspirational to see someone do it and take bumpy path while doing it. Reality and spreadsheets don't align 100%, but you seem to be making it work.
Well done & keep going!
-
Congrats mistymoney, looks like you're making progress! Paying down your overall debt $5K in < 4 months while absorbing a big property tax increase? Good for you! And, are there ongoing college costs?
Sounds like you're not using YNAB in the most efficient way. The website interface is clunky and you only want to use it for tasks that you can't do on the phone app: monthly budgeting, reconciling accounts, and viewing spending reports. Do everything else on the phone app, which is very well designed and efficient to use. The other important usage tip:
don't just track spending, enter transactions as you go. Prospectively recording transactions is YNAB's secret sauce, and it's why you paid for it instead of just using Mint.
Every time you buy anything at a store or online, record it immediately on the phone app. For recurring expenses like your mortgage, you enter as a recurring transaction. I pull up the app while I'm waiting on line at the register, and enter the amount the moment the cashier rings it up, before I pull out the credit card or fire up Apple Pay. The app autofills most things, and the geotracking feature is especially awesome. Then, when the transaction imports it matches with the one you entered, and you approve it on the phone app in seconds - I do this when I'm waiting for elevators or on line for something. Total additional time spent for YNAB tracking: ZERO, except for monthly budgeting and expense review, which takes just a few minutes.
This is very important!!! It puts you into a mindful spending mode, so you have to think about every transaction. If you see that less than half of your grocery budget is left and it's mid-month, you might put back that expensive treat; or conversely, you'll be ok with it because you stocked up on something that was on sale. That alone will work to cut your spending.
With the time you have now freed up by using YNAB correctly, definitely prioritize the mortgage refinance. The rates are low right now, don't put it off any longer! After that...start chipping away at these expenses. The heating bill looks like a good place to start. How about weatherstripping/caulking your windows and doors? It's easy work that you can definitely do on weekends. Next up would be cell phone/internet...you can shave $100 off those costs easily.
-
Hi mistymoney, you're doing great, seems you've dug and are still digging your way out of a bleak hole. It's very inspirational to see someone do it and take bumpy path while doing it. Reality and spreadsheets don't align 100%, but you seem to be making it work.
Well done & keep going!
Thank you! I'm very excited to get back to building up instead of digging!
-
Congrats mistymoney, looks like you're making progress! Paying down your overall debt $5K in < 4 months while absorbing a big property tax increase? Good for you! And, are there ongoing college costs? Yes, one more student, just started her Jr. year
Sounds like you're not using YNAB in the most efficient way. The website interface is clunky and you only want to use it for tasks that you can't do on the phone app: monthly budgeting, reconciling accounts, and viewing spending reports. Do everything else on the phone app, which is very well designed and efficient to use. The other important usage tip:
don't just track spending, enter transactions as you go. Prospectively recording transactions is YNAB's secret sauce, and it's why you paid for it instead of just using Mint.
Every time you buy anything at a store or online, record it immediately on the phone app. For recurring expenses like your mortgage, you enter as a recurring transaction. I pull up the app while I'm waiting on line at the register, and enter the amount the moment the cashier rings it up, before I pull out the credit card or fire up Apple Pay. The app autofills most things, and the geotracking feature is especially awesome. Then, when the transaction imports it matches with the one you entered, and you approve it on the phone app in seconds - I do this when I'm waiting for elevators or on line for something. Total additional time spent for YNAB tracking: ZERO, except for monthly budgeting and expense review, which takes just a few minutes.
This is very important!!! It puts you into a mindful spending mode, so you have to think about every transaction. If you see that less than half of your grocery budget is left and it's mid-month, you might put back that expensive treat; or conversely, you'll be ok with it because you stocked up on something that was on sale. That alone will work to cut your spending.
With the time you have now freed up by using YNAB correctly, definitely prioritize the mortgage refinance. I did abandon YNAB, it just wasn't working for me......
The rates are low right now, don't put it off any longer! After that...start chipping away at these expenses. The heating bill looks like a good place to start. How about weatherstripping/caulking your windows and doors? Yes, I have some needed tasks in this direction that I want to do before winter... It's easy work that you can definitely do on weekends. Next up would be cell phone/internet...you can shave $100 off those costs easily.
Thanks, I can put a lot of this on the docket! Heating is high, winter is coming, will focus on that next.
-
One of the most important questions that I was ever asked was by my financial advisor, and it was simply what do you envision your retirement looking like? Something simple but profound and inherently complex. This could lead to a bunch of questions about your current situation, but what are your true goals? Are you looking at retiring to a lcol area once retired? Do you plan on traveling, or do you plan on keeping your house or renting? I know these don’t solve your immediate situation, but they are obviously impacted by your current decisions on how to handle your situation.
For the immediate situation, there are some unanswered questions or I may have simply missed the data
What are your kids contributing to their monthly expenses, phone bills, insurance, etc.
Have you talked to your kids about finances, I know you mentioned your daughter is a “fixer” and you have concerns, but a simple fix may be just helping contribute a few more bucks a month to her expenses and not immediately assuming she will want to drop out.
How long til your mortgage is paid off?
With that said, I’d be doing a few immediate things.
1. Cash out the company stock and pay off any remaining high interest debt. It is likely you are not getting a return on that stock that is greater than your current cc interest.
2. Refinance the house if you plan on staying for any length time, do a refinance analysis to see if it pays. Interest rates are lower than your current. I’m assuming, your credit is ok to do this.
3. Start building an emergency fund with the funds you were using to pay of cc debt and any expense cuts that you make..
4. Focus on talking to kids about there contributions and set some expectations.
5. I hate to say don’t take advantage of your companies match in your 401, but right now you are using high interest debt to take care of emergencies and will continue to be forced to do so until you build a emergency fund. Emergency fund takes precedence imo.
I see you are making progress but the reality is that there seems to be a missing component, I have a sneaking suspicion that lifestyle expenses are higher than reported. I believe you mentioned you’d like to retire early, but it is unlikely to happen given your current trends and long term debt obligations.
I don’t know the specifics about your house, but it is a much bigger liability than you think, given that you lack the proper emergency funds for any contingencies that pop up. Furthermore, you mentioned selling was a reality in retirement or when the kids move, well it sounds like that situation is fast approaching. I think I would be seriously considering unloading the house now, if it is inevitable anyway when they move out, and go into rent. The appreciation on the house isn’t nearly what it is costing you in terms of interest, taxes, maintenance, higher utilities, and opportunity cost to extinguish your debt. You could literally wipe all of your debt just by selling and take advantage of then ccontributing to your investments, which are what you will truly need in your retirement vs a house.
I don’t mean to sound pessimistic, but if your goal is to pay for your children’s education and retire at a fairly early age, you need to eliminate all debt by whatever means possible and adjust lifestyle. Like the poster above mentioned, I don’t see how you can retire early, maintain current lifestyle, and pay for education all at the same time. Cutting minuscule costs like cable, insurance, etc. will help, but ultimately you have a lot of debt at a high carrying cost.
I don’t mean to take the wind out of any sails, but I see the house as your biggest burden/opportunity. Mostly in terms of foregone opportunity costs on the equity. Selling and using the equity to extinguish all debt would reduce liabilities and create new found cash flow to fund retirement. If the house is super important, then possibly refinancing to a 30 yr at a lower rate might get you some extra cash flow, which you can use to fund emergency account then 401k.
What would your life look like paying off all your debt and using the cash flow to take advantage of 401k, etc. Would that fulfill the two biggest priorities you have, which you mentioned was retirement and helping your kids? Or is adjusting your life style, going into rent, etc, not worth that? Only you can answer that question.
-
Mistymoney, please give YNAB another try using the tips I listed above. By "it didn't work for me" I wonder if you're really saying that you got discouraged when you saw what your spending habits truly are.
Several posts back I'd suggested a cash-out refinance which would wipe out the majority of the debt and improve cashflow. If you want to stay put, this is absolutely the right move to make - but ONLY in tandem with measures to get control of future spending. If you intend to move, then doing it now could make sense.
Either way, I agree that some serious action is called for. There's a little not-seeing-the-forest-for-the-trees thing going on. We can help by doing a little handholding, but you've still got to be the one to take the steps.
-
One of the most important questions that I was ever asked was by my financial advisor, and it was simply what do you envision your retirement looking like? Something simple but profound and inherently complex. This could lead to a bunch of questions about your current situation, but what are your true goals? Are you looking at retiring to a lcol area once retired? Do you plan on traveling, or do you plan on keeping your house or renting? I know these don’t solve your immediate situation, but they are obviously impacted by your current decisions on how to handle your situation.
For the immediate situation, there are some unanswered questions or I may have simply missed the data
What are your kids contributing to their monthly expenses, phone bills, insurance, etc. I do pay phone and insurance but older pays everyday expenses themselves, younger is looking for on-campus job this year to do same. Older has recently gotten a career-adjacent position for what they plan to do professionally for the near future and is planning to move out in spring, and I am encouraging them to save, contribute to Roth, etc. I'm willing to continue to pay these bills for 6 more months as they do that and prepare for independence.
Have you talked to your kids about finances, I know you mentioned your daughter is a “fixer” and you have concerns, but a simple fix may be just helping contribute a few more bucks a month to her expenses and not immediately assuming she will want to drop out.I have talked a bit about this since originally posting, likely more conversations are in order. But - I'm not overly concerned about this with the older planning to move out and younger looking to pay for incidentals with a job soon. That will help and all I am expecting from them currently
How long til your mortgage is paid off? a little less than 21 years
With that said, I’d be doing a few immediate things.
1. Cash out the company stock and pay off any remaining high interest debt. It is likely you are not getting a return on that stock that is greater than your current cc interest. there is only 1 window per year to do this, and will do when that opens. But it is likely I will have paid off those debts by then, I think the window is in Dec.
2. Refinance the house if you plan on staying for any length time, do a refinance analysis to see if it pays. Interest rates are lower than your current. I’m assuming, your credit is ok to do this. on my list of more immediate tasks
3. Start building an emergency fund with the funds you were using to pay of cc debt and any expense cuts that you make..in progress, and will ramp up when high interest debt is gone
4. Focus on talking to kids about there contributions and set some expectations. Think this is in a good spot right now, as above explanation - but I do think it is a good idea to clarify with older about what moving out means in terms of independence and bills I am currently paying and expect not to after they move
5. I hate to say don’t take advantage of your companies match in your 401, but right now you are using high interest debt to take care of emergencies and will continue to be forced to do so until you build a emergency fund. Emergency fund takes precedence imo.I'm inclined to agree with you about the importance of an EF for me being a huge priority, see below for comments and questions about that.
I see you are making progress but the reality is that there seems to be a missing component, I have a sneaking suspicion that lifestyle expenses are higher than reported. I believe you mentioned you’d like to retire early, but it is unlikely to happen given your current trends and long term debt obligations. I did get a promotion and large raise in Feb, prior to that my salary was more than 30k less than it is now
I don’t know the specifics about your house, but it is a much bigger liability than you think, given that you lack the proper emergency funds for any contingencies that pop up. Furthermore, you mentioned selling was a reality in retirement or when the kids move, well it sounds like that situation is fast approaching. I think I would be seriously considering unloading the house now, if it is inevitable anyway when they move out, and go into rent. The appreciation on the house isn’t nearly what it is costing you in terms of interest, taxes, maintenance, higher utilities, and opportunity cost to extinguish your debt. You could literally wipe all of your debt just by selling and take advantage of then ccontributing to your investments, which are what you will truly need in your retirement vs a house.
I don’t mean to sound pessimistic, but if your goal is to pay for your children’s education and retire at a fairly early age, you need to eliminate all debt by whatever means possible and adjust lifestyle. Like the poster above mentioned, I don’t see how you can retire early, maintain current lifestyle, and pay for education all at the same time. Cutting minuscule costs like cable, insurance, etc. will help, but ultimately you have a lot of debt at a high carrying cost.I can't disagree, and it is important to me to consider this. Definitely, setting up my kids is the most important to me. They will each have their own student loans of about 30-40k, and I think that is enough for them starting out. So that is priority #1 for me. Once that is done, which is soon!!!, then I can focus on other priorities, and if I don't retire early - so be it! By early - I was just hoping for maybe 58-62, and not 65-70. So - pretty modest on the RE part!
I don’t mean to take the wind out of any sails, but I see the house as your biggest burden/opportunity. Mostly in terms of foregone opportunity costs on the equity. Selling and using the equity to extinguish all debt would reduce liabilities and create new found cash flow to fund retirement. If the house is super important, then possibly refinancing to a 30 yr at a lower rate might get you some extra cash flow, which you can use to fund emergency account then 401k. I agree with this! Winds in sails are up and down, so don't worry about that. I think I am pretty realistic about potential for a capsize! Although I am continuing with the journey and hoping the weather continues my way for a bit while I shore up the vessel!
I will continue to look into a refi, and selling is always a possibility. Current plan is to keep the house at least for the next few years although I recognize that things outside of my immediate control could force my hand - sudden job loss, etc. I don't want to sell impulsively, but I'm ready to do so if need be.
What would your life look like paying off all your debt and using the cash flow to take advantage of 401k, etc. Would that fulfill the two biggest priorities you have, which you mentioned was retirement and helping your kids? Or is adjusting your life style, going into rent, etc, not worth that? Only you can answer that question.Good points, and things for me to think about. I don't want to do anything too impulsively, and want to see where things fall out at about 2 years into my new salary
thanks - and very thought provoking!
I am hampered by a big "i don't know" for most of these big-picture questions! I had thought I had a good handle on what I wanted mu life to look like post-retirement - but somehow that picture has faded over the past 5 years but I don't have anything that has taken it's place. At least - nothing that is practical and within my price points!
So - that is important for me to suss out for sure - but in the meantime I do want to take solid steps month by month.
some specific questions answered above in bold. Extended EF vs 401k discussion below:
I am planning to address EF and 401k in 2020. According to my current projections - I will pay off the high interest debt by December, in 2020 my plan is to set the 401k up to the match (6% from me plus 3% employer match). I should be able to put about 1k/month into the EF.
Additional questions to you all would be:
How long should I do 1k/month into the EF before lowering, or curtailing that altogether in favor of 401k?
What I am thinking is to do 1k/month to the EF until I have 2 months worth of expenses in EF. Perhaps August - October of 2020, and maybe later if any emergencies do crop up.
Once I hit 2 months worth (10k): lower EF contributions to 250/month and up my 401k contribution to 15%. That would be upping my 401k contribution by 960/month vs the 750 not going into EF - but I think that should be doable with the tax savings. Then I would stay at that until the EF hits 6 month worth of expenses (30k). That should take several years.
My plan is 1 month worth of expenses in money market, and the rest into an ETF, either sp500 or total stock market, or something along those lines.
This all assumes things continue on at current salary and expenditures. The current expenses for DS will be eliminated, but then I will pick up an additional student loan payment for the loans I take out on DD. Hoping that payment won't be more than 600/month, if I can pay out of pocket for final year.
-
Mistymoney, please give YNAB another try using the tips I listed above. By "it didn't work for me" I wonder if you're really saying that you got discouraged when you saw what your spending habits truly are.
Several posts back I'd suggested a cash-out refinance which would wipe out the majority of the debt and improve cashflow. If you want to stay put, this is absolutely the right move to make - but ONLY in tandem with measures to get control of future spending. If you intend to move, then doing it now could make sense.
Either way, I agree that some serious action is called for. There's a little not-seeing-the-forest-for-the-trees thing going on. We can help by doing a little handholding, but you've still got to be the one to take the steps.
LOL, no, that wasn't my issue with YNAB. Perhaps it was user error on my part, but I was on a 2 month free trial and I just didn't find it flexible enough for me - I couldn't see long term tracking and while I liked the category spend/remaining feature, I couldn't imagine paying monthly for that service, so I deleted my account. I set it up very enthusiastically, linked everything, but maybe that wasn't the way to go with it? Somethings were never balancing out, I may have made an input error, but there was no way to correct it that I could find. I couldn't program my income to just record automatically every other week, or bills to be automatic on the same day every month. If they were withholding some functionality for the 2 month trial, then they didn't give me enough to see the value of continuing.
I am still tracking everything, but there haven't been any real surprises. I usually reconcile all expenditures on a weekly or every other week basis and check the overall categories that are variable.
I do frequently over-spend in the food category - but fairly modestly over the budget. Maybe just 25-50 and never more than 100 at most. Usually that is occasion-related. Birthdays, etc. so splurging or eating out. Getting drinks or coffee with friends or coworkers to celebrate any milestones. I don't have any line items for clothing or other personal expenditure, gifts, home maintenance, etc. And I do realize that is a problem - but I have been living in this manner for well over a year so it is somewhat accurate. Haven't bought clothes, growing out hair, etc. Although - I know that it can't continue on that level. And I will need to add those back in at some point, particularly home maintenance. I do need to think about the 1% rule for that, so estimating 5k/yr on average per year.
My usual monthly take home is 6800, my usual budget is about 5k, and I've been paying at least 1500/month to the debts and putting 1-200 towards the EF. I budget on 2 paychecks/month. I guess I'm just confused about this ongoing sense that I'm missing something? I pay 25% of gross in total taxes, and 5% for benefits. There may be 1-200 month I'm not careful about maybe sometimes 300!, but I'm not seeing any larger issues. At least not with current month to month cashflow.
I get that keeping my house and taking on significant debt for my children's education isn't the most mustachian approach, is that perhaps what you are referring to? I am trying to pull this off, and I might fail! But I feel I have sufficient assets and should have some decent choices to choose from if I do fail.
Now - if the housing market and the stock market both take significant dives at the same time, and I lose my job, and I can't find another, yeah, could get kind of gloomy for me! But I'm not sure of the efficacy of trying to prep for all of that when the likelihood is that only 1-2 of those 3 will occur, and I can deal with that.
-
I think the sense of missing something comes from the fact that you aren’t accounting for some of the expenses that most do. This would include clothing, home maintenance, entertainment, etc. You mentioned that some of your free cash flow 100-300 a month isn’t accounted for, so I think that is probably where these categories come into play. As a dollar amount it isn’t much, but as a percentage it is rather large, $300 a month represents 17% of your free cash flow.
I tend to be a pessimist (something I’m working on) but I think it helps in terms of risk, planning, etc on my personal situations. So most of what I write will probably have a negative tone, I apologize in advance.
I’m fairly new to this board, so I may be off on a few things that may be “mustachian style”.
I understand your kids are everything. The harsh reality is that it is coming at a tremendous cost to your financial outlook, so much so that you admit that you lost track of what you expect your life to look like in retirement. I’m sure this isn’t something your kids would like to hear, but given your situation need to imo. It will provide a sense of urgency, relief, and also be a learning lesson for them. My parenting style is directly opposite of yours, so again my thoughts come from that perspective. I truly believe you need to push your kids into being independent of you starting tomorrow. Urgency on your end, will create urgency on their end. Most kids are resourceful, and once they are pushed they figure it out rather quick. This may be an unpopular statement, but I think the last thing your kids need to worry about is contributing to Roths, savings, etc as it is just being subsidized by you and your financial future. The harder you push them to be self sufficient, the more they will figure out their situation. Every expense that you pick up for them has a compounding negative impact on your ability to achieve your goals and right your ship.
In terms of the company stock, I still say sell it when possible, even if cc debt is paid off. Allocate it to your EF and this will lessen future likelihood of having to use high interest debt to pay for emergencies.
The more I think about your situation, the more I think I would sell the house. You seem to be ok with the fact that you would sell if you had to in an emergency. This makes me feel there is no real emotional attachment to it. I’d also say you already are in somewhat of an emergency situation already (my pessimism shining through). This thought comes from the fact that your time frame is relatively short, and the risk you face (market down turn, real estate price decline, etc) could have a huge impact with little time to allow for recovery..
My main concern about the house, even in a cash out refi, is your ability to reign in spending (kids, etc) and also future cash flow issues. You will be shifting debt (albeit at a lower rate) and pushing the obligation further into retirement. Will your nest egg be able to support that payment in combination with your desired lifestyle and other obligations? That is where the big picture thinking comes into play. More numbers are needed on the refi option and anticipated length of keeping the house. I still say if likelihood of selling the house is pretty good within 2-3 years, I’d sell now while the market is still strong and eliminate the risk of a downturn in the market. I’m not familiar with the market in your area, so I am generalizing here.
I get the feeling that a lot of the hard discussions and decisions for the future have yet to occur. Those conversations and decisions are probably more important than anything else at this point. Having a long-term goal will help guide your short-term strategy.
Again, I hope that none of this feels like an attack, you’ve done some tremendous things and what you’ve done for your children goes above and beyond your duty in my opinion. It’s time to focus on what is best for you at this point and start developing your plan on what you want your future to look like.
-
I think the sense of missing something comes from the fact that you aren’t accounting for some of the expenses that most do. This would include clothing, home maintenance, entertainment, etc. You mentioned that some of your free cash flow 100-300 a month isn’t accounted for, so I think that is probably where these categories come into play. As a dollar amount it isn’t much, but as a percentage it is rather large, $300 a month represents 17% of your free cash flow.
I tend to be a pessimist (something I’m working on) but I think it helps in terms of risk, planning, etc on my personal situations. So most of what I write will probably have a negative tone, I apologize in advance.
I’m fairly new to this board, so I may be off on a few things that may be “mustachian style”.
I understand your kids are everything. The harsh reality is that it is coming at a tremendous cost to your financial outlook, so much so that you admit that you lost track of what you expect your life to look like in retirement. I’m sure this isn’t something your kids would like to hear. My parenting style is directly opposite of yours, so again my thoughts come from that perspective. I truly believe you need to push your kids into being independent of you starting tomorrow. Urgency on your end, will create urgency on their end. Most kids are resourceful, and once they are pushed they figure it out rather quick. This may be an unpopular statement, but I think the last thing your kids need to worry about is contributing to Roths, savings, etc as it is just being subsidized by you and your financial future. The harder you push them to be self sufficient, the more they will figure out their situation. Every expense that you pick up for them has a compounding negative impact on your ability to achieve your goals and right your ship.
In terms of the company stock, I still say sell it when possible, even if cc debt is paid off. Allocate it to your EF and this will lessen future likelihood of having to use high interest debt to pay for emergencies.
The more I think about your situation, the more I think I would sell the house. You seem to be ok with the fact that you would sell if you had to in an emergency. This makes me feel there is no real emotional attachment to it. I’d also say you already are in somewhat of an emergency situation already (my pessimism shining through). This thought comes from the fact that your time frame is relatively short, and the risk you face (market down turn, real estate price decline, etc) could have a huge impact with little time to allow for recovery..
My main concern about the house, even in a cash out refi, is your ability to reign in spending (kids, etc) and also future cash flow issues. You will be shifting debt (albeit at a lower rate) and pushing the obligation further into retirement. Will your nest egg be able to support that payment in combination with your desired lifestyle and other obligations? That is where the big picture thinking comes into play. More numbers are needed on the refi option and anticipated length of keeping the house. I still say if likelihood of selling the house is pretty good within 2-3 years, I’d sell now while the market is still strong and eliminate the risk of a downturn in the market. I’m not familiar with the market in your area, so I am generalizing here.
I get the feeling that a lot of the hard discussions and decisions for the future have yet to occur. Those conversations and decisions are probably more important than anything else at this point as they will direct what you need to do now to help your situation.
Again, I hope that none of this feels like an attack, you’ve done some tremendous things and what you’ve done for your children goes above and beyond your duty in my opinion. It’s time to focus on what is best for you at this point and start developing your plan on what you want your future to look like.
I think your post is very kind! No worries on it sounding like an attack. :)
I am a rounder and estimator by nature, big picture, general trends, not too focused on details, just a sufficient idea of the error terms. To me, +/- $300 is an error term I'm comfortable with.
I have been tracking very closely - and as I said, no big surprises. It is not the case that $1-300 was spent and I don't know on what, just that I accept that level of variability/wiggle room. The past few months have not been paying for heat, so that is kind of what I was thinking of by not being careful with it. I guess I should have banked it for when the heating is more than 300/month, but I didn't! A lot of it went towards the credit cards, so it wasn't a big party. There were 2 months that over 2k went toward the debts and EF savings.
I do question if the time and effort spent doing all this tracking is worth it, honestly! Without selling the house, there isn't a whole that is variable right now. I am looking into things that are. But I wonder if tracking something really makes a difference? maybe. so I am trying it. It has been very time consuming, to my mind anyway.
As a clarification, the retirement outlook isn't all due to money. I was hugely into gardening for many years, and then, I just stopped. Other interests changed too. Maybe that just happens around 50? I'm going to try to rekindle some interests, explore new ones, etc. But as for having a plan, and a direction - I just don't right now. So - it makes sense not to make big decisions right now to me. Like selling the house. I don't want to make a decision like that and regret it.
I want to give the current situation a couple of years and see where I'm at. Housing could drop and I'd be out. Could appreciate and I'd come out much better selling in a few years than selling now. I just feel that there are too many unknowns right now, and that I need more clarity. I don't want to try to time the market.
If DS is independent in 6 months, then I think no further action from me required! DD I think will likely do a quicker transition so I am not too concerned at the moment. But point taken, I may have been too protective not letting my worsening financial situation impact them. I do think this is largely resolved with the promotion (optimist here I suppose!), but definitely if anything else comes up I will be more forthcoming and set more limitations.
I like the idea of the company stock becoming a more accessible EF, and I think refinancing the house for better cash flow is also a good idea. So those are things I will pursue in the very near term.
I agree that decision need to be made, but these aren't decision I can make quickly. So - you all will be stuck with me planning on not making any big decisions/changes for at least a few years.
I think I addressed everything! Let me know if I missed something!
-
In 2012 when I committed to the way of the mustachio, I had a lot of changes to make, and to me it felt like trying to turn the Queen Mary. Some folks do a quick mustachian 180, but I needed slow but consistent change: I was a bit overwhelmed with life and good at procrastinating. So I plugged away at it, and a bit of 6 years later I retired.
Just keep picking away at things you can do right now, and if something seems too hard or you're not sure about, put that to one side and do something else.
I hear you on YNAB and tracking, but if you can get a years worth of data, you will find it ever so useful. Like you I'm not a details person, and when I tracked I didn't find huge amounts of money going places I wasn't aware of.
I confess, I didn't use YNAB properly, I used it like a tracking tool and projected out expected incoming expenses for the year. Once you build up a picture, you can see months you might be behind, and times you can catch up. You can play with ideas like : if I spend $20 a week less in that category ( eg food), that will give me an extra $1000 over the year. Frequent ( daily or weekly) repeating expenses really add up and you can make a ton of difference here.
I tracked for over a year in the first instance...but then only intermittently every few years after that.
The other thing about tracking is that if you spend less, you'll have fewer entries to make, another positive incentive.
-
With all due respect, you are killing your personal finances by coddling and sheltering your kids.
You may think you are protecting them, but unfortunately you are doing the opposite.
And my comments have nothing to do with you paying for their college.
For your son, he is still mooching off of you and you frankly can't afford it. If he can't find a high paying job, he can work two jobs. You mentioned a while back that he was working part time after graduating college... You are basically teaching him to NOT grow up and take responsibility for his life.
For your daughter, she could be working at least 15-20 hrs a week. Whether they are ready or not, they are into adulthood and need to fly the nest. You can't afford to support them any longer.
I can promise you that your kids would rather you tell them now in their early 20s "hey my finances have taken a huge hit trying to help you pay for college. I have been happy to do so, but I can no longer afford to support your lifestyles" rather than coming to them in 20 years for financial help because you haven't properly saved for your own retirement.
Each of the other commenters on this thread have tried to gently tell you that your kids are a huge financial drain that you can't afford.
You've made excuses for why that is.
I'm encouraging you to look at this with a fresh eye. You are NOT helping them by coddling them. Even if you were worth $50M you should stop teaching them to be irresponsible and rely on you into adulthood for things they should be responsible for.
-
With all due respect, you are killing your personal finances by coddling and sheltering your kids.
You may think you are protecting them, but unfortunately you are doing the opposite.
And my comments have nothing to do with you paying for their college.
For your son, he is still mooching off of you and you frankly can't afford it. If he can't find a high paying job, he can work two jobs. You mentioned a while back that he was working part time after graduating college... You are basically teaching him to NOT grow up and take responsibility for his life.
For your daughter, she could be working at least 15-20 hrs a week. Whether they are ready or not, they are into adulthood and need to fly the nest. You can't afford to support them any longer.
I can promise you that your kids would rather you tell them now in their early 20s "hey my finances have taken a huge hit trying to help you pay for college. I have been happy to do so, but I can no longer afford to support your lifestyles" rather than coming to them in 20 years for financial help because you haven't properly saved for your own retirement.
Each of the other commenters on this thread have tried to gently tell you that your kids are a huge financial drain that you can't afford.
You've made excuses for why that is.
I'm encouraging you to look at this with a fresh eye. You are NOT helping them by coddling them. Even if you were worth $50M you should stop teaching them to be irresponsible and rely on you into adulthood for things they should be responsible for.
Well - you've kind of boxed me in here as anything I say is an excuse.
But I'm honestly not sure if these comments have missed a few details in my recent posts or not. I did have some conversations with them. Likely gentler and vaguer than this commentariate would like! I'm sure of that!
DS did get his career-starter job and is saving up to move out. It isn't exactly where he wanted to start - both type of job and pay level - but after looking for a while he broadened the search and has a start. And he's happy about it. And DD is looking for part time work.
And - excuses aside - I will not be a financial burden later in life to them! I'm not sure where that idea is coming from. I have a net worth of about 850k (assets-liabilities) an estimated 20k/year from social security at 62. I could sell the house, pay all debts, and have over 100k to work with on establishing myself somewhere somehow and stretch that out until needing to tap the investments, hopefully without penalties! By most of the metrics on this board - I could retire right now to something very modest with a budget of 25-30k a year until SS kicks in. Since posting, I've joined the 53 club - so only 9 years away from early social security. So I do find that comment confusing!
So - at 850k NW, I'm still currently gainfully employed, paying down debts, and adding at least a little bit into savings currently. So - to my mind every paycheck takes me just a little bit closer to FIRE. Right now, a very very little! Maybe 1-2 grains of sand every other week to build my beach. But it is not a negative, and it is not 0 either! Having nearly all of my investments in retirement protected funds might be a bit of liability for an instant liquidation scenario, so I am planning to build some funds outside of that.
I get that this tiny bit of positive is very very low for this community. But - I am just at the very cusp of turning this tide, and I'm feeling very positive! I'm excited to see where I am at my 1-year update, and particularly the 2-year update.
But aside from those projections - I do have some FIRE-worthy numbers here, no? Aside from liquidating and doing a leanFIRE, I could coast without any more accumulation until social security early retirement age at 62 and my stache would be nearly 2 million. At 65 to get to medicare age, the stache would about 2.5 million, and at full retirement age of 67 - it would be about 3 million. So - I feel like my retirement is very secure. Social security payments would also grow over those years, especially as my income has jumped the last year. And I'm more than willing to work until I have a vision of what I want to do and my numbers make sense to do that.
I'm sorry - I just can't see this as the disaster you see. I don't see myself killing my finances or becoming a burden to anyone. I don't see my son as mooching - I see a hard working young man who is about to fly solo at 23, he has his own student loans he's been paying out of his PT income, buying whatever else he may want, conducting a rigorous job search, and is now saving up for security deposits, rent and getting his ducks in a row to move out.
-
I guess I have one additional comment to make!
In mulling this over, I really haven't made any excuses at all!
I've tried to be very clear and explicit about my constraints. What my goals are, what my nonnegotiables are. I am very grateful for everyone's time and attention in responding to my case study, and so in return I have taken pains to try to address every point and offer clarifications or comments where I thought they were helpful for mutual understanding.
There have been a lot of useful posts, suggestions, and topics for me to think more deeply on. And I'm very happy to work on the things I find useful, prioritize, and tackle them one by one. And to clarify what I will and won't undertake, and timeframes for doing so, or considering alternatives.
But excuses? I don't need no stinking excuses! This is my life! You all may not like my life nor my choices, but I'm very content with what I've accomplished and where I am at right now. So many goals are on the cusp of being realized! I'm happy, excited, proud of myself (and my children!). If you can't see the positives here, that's ok! I'm good with it!
-
You're handling all the comments well, mistymoney!
Everyone is coming at this from difference perspectives. Example: I'm shocked a 23yo is having any bills paid by a parent. But that's more about me than you!
Keep on with your to-do list. :)
-
Hi @mistymoney - I first just want to say that I am happy that you have such a positive outlook on your life and financial situation. If I were in your shoes, I would not be seeing things so rosy, but that isn't a knock on you. I could use a dose of your positive outlook on life. So good job on that!
I'm not commenting to knock you down or give you a face punch, I'm commenting to try to help you see things from a different perspective. Maybe I can help you see how things aren't all roses and sunshine and you can help me see the future more positively :)
As @zee dot said, if you see your 23 year old as a responsible, young adult while you are still paying most of his bills while he works part time, there may be just too large of a difference in perspective to overcome.
I think you have a hair on fire debt emergency between the CCs (which I know you are working on), the personal loan, and the student loans. Because my perspective is that of hair on fire emergency, I can't understand why you wouldn't be FORCING your son to work at MINIMUM 40 hours/week, pay for all his own bills (including food), and pay a small amount of rent/utilities to pitch in and help. He doesn't need to be buying anything he WANTS, he needs to learn to buy only that what he needs and is responsible for in life (like food, shelter, student loans, etc).
In my first reply to your thread above, I used the word "coddling" and a perfect example of that is your phrases/replies quoted below:
DS did get his career-starter job and is saving up to move out. It isn't exactly where he wanted to start - both type of job and pay level - but after looking for a while he broadened the search and has a start. And he's happy about it.
I don't see my son as mooching - I see a hard working young man who is about to fly solo at 23, he has his own student loans he's been paying out of his PT income, buying whatever else he may want, conducting a rigorous job search, and is now saving up for security deposits, rent and getting his ducks in a row to move out.
Regarding your daughter looking for a job, unless she has a criminal record, getting a job at a fast food restaurant should be about a 2 hour expedition. Walk into every restaurant within walking distance of her dorm (I think I read she lives on campus), apply, get hired. We all understand that isn't glamorous work, but that is the difference in perspective between a financial emergency and "life is good, no worries" attitude. Once she has a job and some income, she can then look for more glamorous opportunities.
And DD is looking for part time work.
When I look at your financial picture, I do not see you being anywhere close to FIRE worthy numbers. You are now 53. Unfortunately, that means expendable in most non government and/or union jobs. You could walk into work tomorrow and be terminated. You could have a health crisis that prevents you from working.
From everything you've written, I still don't think you have a good handle on how much money you're spending. With your numbers, many on this forum could FIRE (or lean FIRE), but that is because most of us know exactly what is going out each month, we budget monthly for big, reoccurring expenses like HVAC, roof, etc. From everything you've written, you're probably spending between $70,000 - $80,000 per year. With a liquid net worth of much less than $850k, that may not last you until 62 when you could draw SS early if you were to lose your job or be unable to work.
As someone who is used to spending roughly $70,000 per year, to think you could just magically flip a switch and start spending $25-30k a year is a pipe dream IMHO. Especially since you seem so averse to actually tracking your spending!
And - excuses aside - I will not be a financial burden later in life to them! I'm not sure where that idea is coming from. I have a net worth of about 850k (assets-liabilities) an estimated 20k/year from social security at 62. I could sell the house, pay all debts, and have over 100k to work with on establishing myself somewhere somehow and stretch that out until needing to tap the investments, hopefully without penalties! By most of the metrics on this board - I could retire right now to something very modest with a budget of 25-30k a year until SS kicks in. Since posting, I've joined the 53 club - so only 9 years away from early social security. So I do find that comment confusing!
So - at 850k NW, I'm still currently gainfully employed, paying down debts, and adding at least a little bit into savings currently. So - to my mind every paycheck takes me just a little bit closer to FIRE. Right now, a very very little! Maybe 1-2 grains of sand every other week to build my beach. But it is not a negative, and it is not 0 either! Having nearly all of my investments in retirement protected funds might be a bit of liability for an instant liquidation scenario, so I am planning to build some funds outside of that.
But aside from those projections - I do have some FIRE-worthy numbers here, no? Aside from liquidating and doing a leanFIRE, I could coast without any more accumulation until social security early retirement age at 62 and my stache would be nearly 2 million. At 65 to get to medicare age, the stache would about 2.5 million, and at full retirement age of 67 - it would be about 3 million. So - I feel like my retirement is very secure. Social security payments would also grow over those years, especially as my income has jumped the last year. And I'm more than willing to work until I have a vision of what I want to do and my numbers make sense to do that.
As I stated above, I really do admire your positive attitude. I am not suggesting you completely flip the switch to "the sky is falling" type of thinking, but I think you need a little more perspective on your actual financial scenario without thinking everything is going to work out just perfectly until you hit 62 (or whatever age you plan on pulling the plug on work).
For someone who spends as much as you do, who has the non-mortgage debt amounts that you do, and who has two adult children who show signs of not being able to spread their wings and fly, I think there is reason for concern, which is why I spent my time trying to point out a few of the glaring issues I see. I wish you the best as you move forward!
-
I like the fact that you are receptive to comments and not taking offense to them, that is the only way to learn. There is no doubt that your kids have in a sense derailed you to some extent in your FIRE goals, but that is trumped by your satisfaction in providing them with a head start, which is particular to your situation.
I am a bit confused by your numbers, however.
You have mentioned that you could coast to fire without any additional accumulation. Unless I'm completely missing something (super huge returns for example, which would be indicative of very high risk investments, not wise for your age), I fail to see how you get to $2 million "without contributing more".
Right now, you are sitting on $745,000 in investments. If nothing further is contributed assuming an 8% return, you'd be sitting on $1,489,258, not $2 million as indicated at age 62. Again this is assuming a pretty healthy return of 8%, going into what is looking like market correction in the near future (not trying to time, but it is a very much a reality). You have to also remember that little thing called inflation of course.
Your NW is not really $850,000 - You have $745,000 in investments, and about $245,000 in home equity- When you pay your credit cards off, you will have the student loan and mortgage debt of $387,000 (if nothing is added), therefore your NW is more to the tune of $603,000 not $850,000 at this point in time.
I do think FIRE is possible at some point if everything goes in your favor, but not even close to age 58-62. Health care will eat away at your monthly budget in particular. I think is some potential to FIRE at 65, but you will have to be hoping for a few things, which are no downturn in the housing market, a healthy return on your investments, and no more added expenses/student loans/major housing expenses, etc. You may also have to readjust your life style to a lcol area. Which, if you want to stay around the kids, might be hard.
I don't think anyone is attacking you, or trying to "box" you in, I just think most are seeing that you are walking a very tight rope that hinges on a whole lot going right in terms of markets, real estate, etc. I think there is also some confusion as to how you will continue to fund 401k and pay tuition up front in cash from here on out (there is only so much income coming in). Which means you are going to either add to your debt obligations or short change your retirement.
Your original question on this post was to ascertain whether you could retire at an earlier age than 65. I think that has lead into a good conversation about your options and what you'd need to do. Unfortunately at your age, FIRE will not come early without some major adjustments and incredibly good luck.
I think a lot of the answers given here are not an attack, but rather a brutally honest way to get you to make the adjustments to hit your goal. I'll say it again, the other missing component here is that you don't know exactly what you want to do in retirement and the associated expenses. It's hard to know exactly how to align your short-term strategy without a long-term vision on the income needed during FIRE.
I feel the need to agree with Kronsey on his last post. We are here to help, but it requires one to be brutally honest with themselves. From the outside looking in, I see a very steep uphill battle based on what is being portrayed and the sense of urgency that is being portrayed. I don't say this to get you down, but for you to realize the severity of the situation that you are actually in when it comes to not only FIRE but any other major expense that may pop up in the near future.
-
Perhaps it would help to see some actual numbers. Based on my quick reading of the original + recent posts, here's where mistymoney stands:
Monthly savings: $1800/month BUT let's set aside some $$ for unforeseen expenses such as home repairs. Call it $1500/month.
Non-mortgage debts: $129K (estimated)
Mortgage $260K
Home value $500.
Current retirement savings $763K
We don't know the interest on your various debts, but let's assume the average is 6%. If you put $1500/month consistently toward the debts, you will pay them off in a little over 9 years.
At that point, you can resume saving for your own retirement. If you are spending $5000/month now, adding on $300/month for stuff you haven't budgeted for, adding in 10% to cover taxes and otherwise completely ignoring health insurance, you need to compile a nest egg of a little over $1.7 million. Assuming 7% real market return, this will grow to $1.4 million during the 9 years you are paying off debt.
At that point you start contributing $1500/month. You will reach $1.7 million in another 3 years.
So, this says that provided these assumptions aren't wildly off base, you can retire in about 12 years.
Does that time horizon work for you?
-
Hi @mistymoney - I first just want to say that I am happy that you have such a positive outlook on your life and financial situation. If I were in your shoes, I would not be seeing things so rosy, but that isn't a knock on you. I could use a dose of your positive outlook on life. So good job on that!
I'm not commenting to knock you down or give you a face punch, I thought face punches were part of the process? ;)I'm commenting to try to help you see things from a different perspective. Maybe I can help you see how things aren't all roses and sunshine and you can help me see the future more positively :)
As @zee dot said, if you see your 23 year old as a responsible, young adult while you are still paying most of his bills while he works part time, there may be just too large of a difference in perspective to overcome.
Maybe I'm just not being clear? but this is where I start to get confused by the comments and unsure if the situation is understood. So I try to clarify and then maybe that is "excuses"? I thought I mentioned he got a new job a couple of times. The PT is over and he's made a start in a career type position. I said career-adjacent, maybe that was where it went wrong? it is a career, office, 9-5 type job, but adjacent to the field he wanted. The PT was old job, new job is FT with benefits that kick in at about 90 days - 90 days, and then wait for the next 1st of the month to be enrolled (weird!). Except 401k which is after more time - maybe a year - not really sure about that. I didn't want to get in his business, but wanted to be sure I knew when the health insurance kicked in so he could be taken off mine. He is moving out in April getting a shared apt with a friend and then that's it. I guess we will see if the extra months of coddling does permanent damage. :) But even if he was still part time, he's moving out and that's it so it really doesn't affect my situation at all if he is PT or FT.
The other side of being responsible is that he is always doing stuff around the house - the lawn, the snow, the dishes, the garbage, food shopping, the pets, he takes an elderly relative to dr. appts, does some lawn care for them too, takes them shopping, that kind of thing.
I think you have a hair on fire debt emergency between the CCs (which I know you are working on), the personal loan, and the student loans. Because my perspective is that of hair on fire emergency, I can't understand why you wouldn't be FORCING your son to work at MINIMUM 40 hours/week, pay for all his own bills (including food), and pay a small amount of rent/utilities to pitch in and help. He doesn't need to be buying anything he WANTS, he needs to learn to buy only that what he needs and is responsible for in life (like food, shelter, student loans, etc).
In my first reply to your thread above, I used the word "coddling" and a perfect example of that is your phrases/replies quoted below:
DS did get his career-starter job and is saving up to move out. It isn't exactly where he wanted to start - both type of job and pay level - but after looking for a while he broadened the search and has a start. And he's happy about it.
I don't see my son as mooching - I see a hard working young man who is about to fly solo at 23, he has his own student loans he's been paying out of his PT income, buying whatever else he may want, conducting a rigorous job search, and is now saving up for security deposits, rent and getting his ducks in a row to move out.
Regarding your daughter looking for a job, unless she has a criminal record, getting a job at a fast food restaurant should be about a 2 hour expedition. Walk into every restaurant within walking distance of her dorm (I think I read she lives on campus), apply, get hired. We all understand that isn't glamorous work, but that is the difference in perspective between a financial emergency and "life is good, no worries" attitude. Once she has a job and some income, she can then look for more glamorous opportunities.
And DD is looking for part time work.
When I look at your financial picture, I do not see you being anywhere close to FIRE worthy numbers. You are now 53. Unfortunately, that means expendable in most non government and/or union jobs. You could walk into work tomorrow and be terminated. You could have a health crisis that prevents you from working.
From everything you've written, I still don't think you have a good handle on how much money you're spending. With your numbers, many on this forum could FIRE (or lean FIRE), but that is because most of us know exactly what is going out each month, we budget monthly for big, reoccurring expenses like HVAC, roof, etc. From everything you've written, you're probably spending between $70,000 - $80,000 per year. With a liquid net worth of much less than $850k, that may not last you until 62 when you could draw SS early if you were to lose your job or be unable to work.
As someone who is used to spending roughly $70,000 per year, to think you could just magically flip a switch and start spending $25-30k a year is a pipe dream IMHO. Especially since you seem so averse to actually tracking your spending!
I'm not sure where I'm being unclear, but I have been tracking. I backtracked and have every penny tracked since January 1st. I haven't found a lot of value in it because it hasn't told me anything I didn't already know, but I have continued tracking it with some poster's encouragement that it does get more useful over time.
On another note, I have lived on a lot less. I don't choose to currently, but I certainly could again! Living on 30k-ish presupposes that I sell the house, pay off the student loans, and start over. Not that I would stay in the current house, that is dependent on my current salary, no doubt about that.
And - excuses aside - I will not be a financial burden later in life to them! I'm not sure where that idea is coming from. I have a net worth of about 850k (assets-liabilities) an estimated 20k/year from social security at 62. I could sell the house, pay all debts, and have over 100k to work with on establishing myself somewhere somehow and stretch that out until needing to tap the investments, hopefully without penalties! By most of the metrics on this board - I could retire right now to something very modest with a budget of 25-30k a year until SS kicks in. Since posting, I've joined the 53 club - so only 9 years away from early social security. So I do find that comment confusing!
So - at 850k NW, I'm still currently gainfully employed, paying down debts, and adding at least a little bit into savings currently. So - to my mind every paycheck takes me just a little bit closer to FIRE. Right now, a very very little! Maybe 1-2 grains of sand every other week to build my beach. But it is not a negative, and it is not 0 either! Having nearly all of my investments in retirement protected funds might be a bit of liability for an instant liquidation scenario, so I am planning to build some funds outside of that.
But aside from those projections - I do have some FIRE-worthy numbers here, no? Aside from liquidating and doing a leanFIRE, I could coast without any more accumulation until social security early retirement age at 62 and my stache would be nearly 2 million. At 65 to get to medicare age, the stache would about 2.5 million, and at full retirement age of 67 - it would be about 3 million. So - I feel like my retirement is very secure. Social security payments would also grow over those years, especially as my income has jumped the last year. And I'm more than willing to work until I have a vision of what I want to do and my numbers make sense to do that.
As I stated above, I really do admire your positive attitude. I am not suggesting you completely flip the switch to "the sky is falling" type of thinking, but I think you need a little more perspective on your actual financial scenario without thinking everything is going to work out just perfectly until you hit 62 (or whatever age you plan on pulling the plug on work).
I'm not oblivious to the potential dangers here, I do see that there are dangers. But my perspective is that I am right at the start of an upswing after hitting the gradient of 0, but I see the issues and am trying to shore up. I might add that I have lived through some times of great hardship. I'm on easy street comparatively
For someone who spends as much as you do, who has the non-mortgage debt amounts that you do, and who has two adult children who show signs of not being able to spread their wings and fly, I think there is reason for concern, which is why I spent my time trying to point out a few of the glaring issues I see. I wish you the best as you move forward!
-
I like the fact that you are receptive to comments and not taking offense to them, that is the only way to learn. There is no doubt that your kids have in a sense derailed you to some extent in your FIRE goals, but that is trumped by your satisfaction in providing them with a head start, which is particular to your situation.
I am a bit confused by your numbers, however.
You have mentioned that you could coast to fire without any additional accumulation. Unless I'm completely missing something (super huge returns for example, which would be indicative of very high risk investments, not wise for your age), I fail to see how you get to $2 million "without contributing more".
Right now, you are sitting on $745,000 in investments. If nothing further is contributed assuming an 8% return, you'd be sitting on $1,489,258, not $2 million as indicated at age 62. Again this is assuming a pretty healthy return of 8%, going into what is looking like market correction in the near future (not trying to time, but it is a very much a reality). You have to also remember that little thing called inflation of course.
ok - my numbers were unadjusted
Your NW is not really $850,000 - You have $745,000 in investments, and about $245,000 in home equity- When you pay your credit cards off, you will have the student loan and mortgage debt of $387,000 (if nothing is added), therefore your NW is more to the tune of $603,000 not $850,000 at this point in time.
that was in the sell the house scenario
I do think FIRE is possible at some point if everything goes in your favor, but not even close to age 58-62. Health care will eat away at your monthly budget in particular. I think is some potential to FIRE at 65, but you will have to be hoping for a few things, which are no downturn in the housing market, a healthy return on your investments, and no more added expenses/student loans/major housing expenses, etc. You may also have to readjust your life style to a lcol area. Which, if you want to stay around the kids, might be hard.
I don't think anyone is attacking you, or trying to "box" you in, I just think most are seeing that you are walking a very tight rope that hinges on a whole lot going right in terms of markets, real estate, etc. I think there is also some confusion as to how you will continue to fund 401k and pay tuition up front in cash from here on out (there is only so much income coming in). Which means you are going to either add to your debt obligations or short change your retirement.
Your original question on this post was to ascertain whether you could retire at an earlier age than 65. I think that has lead into a good conversation about your options and what you'd need to do. Unfortunately at your age, FIRE will not come early without some major adjustments and incredibly good luck.
I think a lot of the answers given here are not an attack, but rather a brutally honest way to get you to make the adjustments to hit your goal. I'll say it again, the other missing component here is that you don't know exactly what you want to do in retirement and the associated expenses. It's hard to know exactly how to align your short-term strategy without a long-term vision on the income needed during FIRE.
I feel the need to agree with Kronsey on his last post. We are here to help, but it requires one to be brutally honest with themselves. From the outside looking in, I see a very steep uphill battle based on what is being portrayed and the sense of urgency that is being portrayed. I don't say this to get you down, but for you to realize the severity of the situation that you are actually in when it comes to not only FIRE but any other major expense that may pop up in the near future.
Well, as I said, I'm looking to make no big decisions/changes for about 2 years, and if I haven't convinced you lot of my solvency by then, I'll consider more drastic alternatives.
-
Perhaps it would help to see some actual numbers. Based on my quick reading of the original + recent posts, here's where mistymoney stands:
Monthly savings: $1800/month BUT let's set aside some $$ for unforeseen expenses such as home repairs. Call it $1500/month.
Non-mortgage debts: $129K (estimated)
Mortgage $260K
Home value $500.
Current retirement savings $763K
We don't know the interest on your various debts, but let's assume the average is 6%. If you put $1500/month consistently toward the debts, you will pay them off in a little over 9 years.
At that point, you can resume saving for your own retirement. If you are spending $5000/month now, adding on $300/month for stuff you haven't budgeted for, adding in 10% to cover taxes and otherwise completely ignoring health insurance, you need to compile a nest egg of a little over $1.7 million. Assuming 7% real market return, this will grow to $1.4 million during the 9 years you are paying off debt.
At that point you start contributing $1500/month. You will reach $1.7 million in another 3 years.
So, this says that provided these assumptions aren't wildly off base, you can retire in about 12 years.
Does that time horizon work for you?
yes - I can deal with that!
Although I will try to up my game a little bit as I go on, and shave that number down a wee bit. :P
-
Great! It's helpful to have a concrete goal.
If you change nothing, you get to retire at 64.
The measures you can take while staying in your current house could shave maybe 2-3 years off this number. Many tips provided above, but the main three areas for improvement are: using home equity and/or 0% credit cards to effectively reduce the interest you're paying over time, cutting expenses like the heating & cell phone bills, and getting your kids to stop depending on Bank of Mom.
To shorten your working career further, you will need to downsize into a smaller/cheaper home or apartment. Are you interested in doing that? If so, what time frame are you considering?
Side note - I'm not in favor of diluting an expensive college education by getting a hefty job. The 23 year old, on the other hand, should be paying for all his own personal expenses - including cell phone - and launching his own retirement & emergency savings fund.
-
Right now, you are sitting on $745,000 in investments. If nothing further is contributed assuming an 8% return, you'd be sitting on $1,489,258, not $2 million as indicated at age 62. Again this is assuming a pretty healthy return of 8%, going into what is looking like market correction in the near future (not trying to time, but it is a very much a reality). You have to also remember that little thing called inflation of course.
ok - my numbers were unadjusted
I didn't adjust any numbers for inflation in my above calculation. Just a simple FV calculation on where you'd be if you contributed nothing further and returned 8% for 9 more years.
Your NW is not really $850,000 - You have $745,000 in investments, and about $245,000 in home equity- When you pay your credit cards off, you will have the student loan and mortgage debt of $387,000 (if nothing is added), therefore your NW is more to the tune of $603,000 not $850,000 at this point in time.
that was in the sell the house scenario
The NW above assumes the equity in the house and the liability for the house. The above is accurate on your NW regardless if you sell the house or keep it.
-
Because I'm a bit bored at work today, I'd figure I'd also run some alternate math, to see what your numbers would look like making a major adjustment (selling the house). I know this isn't a decision you want to make today, but figured I'd throw it out there just to see how it skews the numbers, more out of curiosity than anything.
If you sold the house - you'd wind up with about $240k, of which $127,000 would go to pay off student loans (I'm going to assume cc debt and personal loan will be paid off by the time the house sold) I'm also assuming that you will have minimal closing costs and won't use a realtor. This would leave $113,000k left in the coffer, $30,000 of which I'd use as a EF, and $83,000 which would go into a taxable brokerage account.
So the new outlook would look something like this.
$1600 rent
$100 gas/heat (assuming you would be responsible for them)
75 electric (assuming you would be responsible for them)
150 cell
105 internet
550 healthcare
140 car ins (one child off adjustment)
100 other transport
0 SLs (would be paid for by home equity)
500 food
$3320 + 300 extra for "incidentals" - new expense outlay = $3620
Take home pay is about $6800 as mentioned in prior post - $3620 new expenses = $3180 budget surplus.
In addition, you would have $113,000 left from house sale after paying student loans.
Allocate $30,000 for emergency expense of that $113,000 so EF is taken care of. You would have $83,000 to go into an taxable brokerage account.
You investment outlook would be the following
$745,000 investments (current)
$83,000 taxable brokerage (left over house equity after student loans and ef is funded)
New Investment Total is $828,000
If nothing was further contributed, assuming a 7% return - it would give you the following:
Age 63 - $1,522,256 safe withdrawal rate of $5074 a month 4%
Age 58 - $1,161,318 safe withdrawal rate of $3871 a month 4%
Since you have a budget surplus of $3180 (probably would actually be more once kids are out), you could also allocate $2,500 to your 401k/investments a month. Again your EF would be funded already.
If you contributed $2,500 a month again assuming the investments would be $828,000 after selling and returning 7%, your numbers would look like this. Remember you'd have an approximate budget surplus of $3180.
Age 62 $1,881,583 withdrawal rate 4% - $6271 monthly
Age 58 $1,333,835 withdrawal rate 4% - $4446 monthly
I think these numbers will actually be a bit higher of course as you have 401k match, tax benefits, and would probably reduce expenses further than what I'm thinking.
The other benefit of the budget surplus that would be created is that even after $2500 a month gets thrown into a 401k/investments, you still have about $680 a month for discretionary spending in addition to the $300 a month for "incidentals". This would give some breathing room in the budget for sure. Even if you needed to purchase a new vehicle, healthcare costs go up, etc.
Overall, this plan would potentially get you to fire at 58, depending on anticipated healthcare costs/deductibles, etc. It would also prevent the potential for downside in the real estate market, emergency home expenses that could force borrowing at a higher rate again, monthly payments to student loans, etc, etc. The budget would potentially also realize considerably more surplus when the kids are completely out of the picture, and will also begin getting better once your son is on his own. In addition, you'd have $30,000 in a fully funded EF!
Again, I know you don't want to pursue this option quite yet, which is fine, its obviously your life and choices. I see the above plan as a way to seriously mitigate some of the downside risk that you face given your situation. I know that things like home value appreciation, inflation, etc isn't factored in, however, in regards to home appreciation, the elimination of the high interest debt (student loans, I'm considering at high interest), more than makes up for it. I'm also ignoring SS at 62 at this point as the intent was to see what FIRE would look like at 58, if you go to 62, the numbers look way better of course.
I know you didn't necessary ask for these calculations, I did feel curious to play with the numbers and figure out a way that you could potentially get to FIRE at 58. Just some food for thought. Also, I will put the disclaimer out, I know about regret selling houses, I sold my home 6 months ago, I'd pay 20% more for it today as I didn't realize the lifestyle change would have that much of an impact on me. So not judging, not advocating for any major moves, just putting some additional math out there. 8^)
-
Because I'm a bit bored at work today, I'd figure I'd also run some alternate math, to see what your numbers would look like making a major adjustment (selling the house). I know this isn't a decision you want to make today, but figured I'd throw it out there just to see how it skews the numbers, more out of curiosity than anything.
If you sold the house - you'd wind up with about $240k, of which $127,000 would go to pay off student loans (I'm going to assume cc debt and personal loan will be paid off by the time the house sold) I'm also assuming that you will have minimal closing costs and won't use a realtor. This would leave $113,000k left in the coffer, $30,000 of which I'd use as a EF, and $83,000 which would go into a taxable brokerage account.
So the new outlook would look something like this.
$1600 rent
$100 gas/heat (assuming you would be responsible for them)
75 electric (assuming you would be responsible for them)
150 cell
105 internet
550 healthcare
140 car ins (one child off adjustment)
100 other transport
0 SLs (would be paid for by home equity)
500 food
$3320 + 300 extra for "incidentals" - new expense outlay = $3620
Take home pay is about $6800 as mentioned in prior post - $3620 new expenses = $3180 budget surplus.
In addition, you would have $113,000 left from house sale after paying student loans.
Allocate $30,000 for emergency expense of that $113,000 so EF is taken care of. You would have $83,000 to go into an taxable brokerage account.
You investment outlook would be the following
$745,000 investments (current)
$83,000 taxable brokerage (left over house equity after student loans and ef is funded)
New Investment Total is $828,000
If nothing was further contributed, assuming a 7% return - it would give you the following:
Age 63 - $1,522,256 safe withdrawal rate of $5074 a month 4%
Age 58 - $1,161,318 safe withdrawal rate of $3871 a month 4%
Since you have a budget surplus of $3180 (probably would actually be more once kids are out), you could also allocate $2,500 to your 401k/investments a month. Again your EF would be funded already.
If you contributed $2,500 a month again assuming the investments would be $828,000 after selling and returning 7%, your numbers would look like this. Remember you'd have an approximate budget surplus of $3180.
Age 62 $1,881,583 withdrawal rate 4% - $6271 monthly
Age 58 $1,333,835 withdrawal rate 4% - $4446 monthly
I think these numbers will actually be a bit higher of course as you have 401k match, tax benefits, and would probably reduce expenses further than what I'm thinking.
The other benefit of the budget surplus that would be created is that even after $2500 a month gets thrown into a 401k/investments, you still have about $680 a month for discretionary spending in addition to the $300 a month for "incidentals". This would give some breathing room in the budget for sure. Even if you needed to purchase a new vehicle, healthcare costs go up, etc.
Overall, this plan would potentially get you to fire at 58, depending on anticipated healthcare costs/deductibles, etc. It would also prevent the potential for downside in the real estate market, emergency home expenses that could force borrowing at a higher rate again, monthly payments to student loans, etc, etc. The budget would potentially also realize considerably more surplus when the kids are completely out of the picture, and will also begin getting better once your son is on his own. In addition, you'd have $30,000 in a fully funded EF!
Again, I know you don't want to pursue this option quite yet, which is fine, its obviously your life and choices. I see the above plan as a way to seriously mitigate some of the downside risk that you face given your situation. I know that things like home value appreciation, inflation, etc isn't factored in, however, in regards to home appreciation, the elimination of the high interest debt (student loans, I'm considering at high interest), more than makes up for it. I'm also ignoring SS at 62 at this point as the intent was to see what FIRE would look like at 58, if you go to 62, the numbers look way better of course.
I know you didn't necessary ask for these calculations, I did feel curious to play with the numbers and figure out a way that you could potentially get to FIRE at 58. Just some food for thought. Also, I will put the disclaimer out, I know about regret selling houses, I sold my home 6 months ago, I'd pay 20% more for it today as I didn't realize the lifestyle change would have that much of an impact on me. So not judging, not advocating for any major moves, just putting some additional math out there. 8^)
Thank you! I appreciate this perspective, and it certainly gives me a lot to think about!
-
Interesting analysis, big.
Some problems with it: in a market where house prices are in the half million range and property taxes are $9000 a year, I doubt very much that renting for $1600 a month is realistic. I would guess more likely in the $2000-2500 range. Also, FSBO sales are not necessarily the right move plus there are always costs involved in fixing up a house to show & sell, not to mention moving. There may also be taxes involved if she has a lot of capital gains on the sale.
Finally, you'd have to do a rent vs buy analysis in her local market to determine whether she is better off renting, or trading for a smaller/cheaper house or perhaps a townhouse/condo. Over time periods of 5-7 years or longer, it's almost always better to buy than rent, especially with low mortgage rates. There are also nonmonetary downsides of renting: you can be booted out if the landlord decides to sell or simply not renew your lease, you can't modify anything or even paint without permission from the landlord, the landlord will buy the cheapest possible appliances and only when absolutely necessary so you're going to be dealing with junk in that department, your neighbors will likely be transient dwellers with little interest in maintaining or contributing to communal quality of life, and you have almost no recourse except to move out if there are noisy neighbors keeping you up at night. This is why I bought into a coop that strictly limits renting and is vigilant about enforcing house rules.
Both of our figuring also discounted future college costs for the daughter.
However: the take-home for your calculation is that downsizing her home will shorten her working career by a maximum of around 6 years. More realistically I'd guess maybe 4 years. That could be significant enough to the OP that it's worth going to the trouble of selling and moving, but on the other hand she says she enjoys her job and is in no hurry to quit. So, her call.
-
freya,
I used the number that Misty posted for rent somewhere on this post, so I used that number.
I did ignore some cap gains, she has owned the house 10 years, so I assumed it hasn't been refinanced prior, which means she payed over $260,000 for it. I believe cap gains for 2019 filing single is $250k.
I also made the disclaimer in another post that I'm not fluent in her market of course. FSBO, could or couldn't be the right move. She either way would be able to fund an EF and negate some serious downside risk by making this major move. I'm not advocating one way or another, just looking at options to take risk off the table and get into a more "breathable" situation. This of course hinges on her numbers being correct about rent, etc.
-
Update time!
I intended to update at the year mark exactly but feared checking balances. Just a few weeks late
I didn’t make any *big* changes – but wow – life is changing like quicksand under me – and all of us! While there have definitely been a lot of negatives going on, I’m thankful to report I am relatively stable to date.
Highlights – good and bad:
Sold my company stock, netted only about 8k
10k end of year bonus. Wouldn’t have sold stock if I knew!
DS lost job, luckily before signing a lease. Unemployment application hasn’t gone through as yet.
DD lost new job on campus, all students went home. Semester is finished this week. Not eligible unemployment, had only been working about 6 weeks.
Moved back to HDHP with HSA* worst possible timing, ugh! Hopefully we don’t need extensive health care. Contributing to max HSA* this year
Parent plus loans at 0%! No payments! Overall balance is down.
Credit cards and personal loans paid off
EF at 1.5 months
Used bonus and stock sale proceeds for tuition, debt payoff, and then the rest to EF.
Assets
401k 618k
Roth 62k
HSA 8k
EF 7.5k
Total 695.5
Debts
Mortgage 253k (redfin value 500k)
student loans 123k
Same on the income/outgo
Income base 128k (bonus 10k, but not counting on it for 2020! Likely no COL/merit this year either)
Monthly bills ~5k some went down, some went up (stockpiling, higher food costs, etc.)
Currently:
10% to 401k since the student loans went into deferment
Paying 500/month to student loans
Putting 100-250/paycheck towards EF
Writing it all out – seem like a lot better than before. I kind of felt things were going in a good direction for me, but the update solidified that. Surprisingly, given world events. But who knows what tomorrow may bring. Will just have to wait and see.
-
Thanks for the update
Yes, it’s challenging times for us all, and you have my sympathies for DS and DD. I’m furloughed, and watching most of my students unable to work their normal jobs (many of whom are entering the workplace for the first time).
With the focus on FI/RE there hasn’t been as much emphasis on how living a mustachian lifestyle gives a great deal of flexibility and security when bad things in life happens. You’ve got an EFund and a lot of assets. Puts you in a much better position than most who can’t cover even a $2k unexpected expense.
Keep it up and best of luck to you
-
Thanks for the update
Yes, it’s challenging times for us all, and you have my sympathies for DS and DD. I’m furloughed, and watching most of my students unable to work their normal jobs (many of whom are entering the workplace for the first time).
With the focus on FI/RE there hasn’t been as much emphasis on how living a mustachian lifestyle gives a great deal of flexibility and security when bad things in life happens. You’ve got an EFund and a lot of assets. Puts you in a much better position than most who can’t cover even a $2k unexpected expense.
Keep it up and best of luck to you
Thanks Nereo! Lately, I've been really looking forward to each paycheck to see what I can do with the leftovers. :)
What with the lock down, I've also been thankful to be able to focus on my career and professional development. I have a career that is kind of in between a job and an avocation. I've been digging a little deeper because frankly, there are not a lot of activities currently available that I enjoy as much.
This is certainly tough times for those just starting and especially those yet-to-start their working/professional lives. In terms of the global situation, I don't even know what to expect or what to hope for in the near term.
Can you share any words of wisdom or advice you've given to your students on how to navigate the current situation - anything on how to position themselves more strongly when things begin to normalize - or even if they don't? What income opportunities are available to younger, somewhat educated, hoping for professional engagement graduates/near graduates?
-
Congratulations on paying off the credit cards and personal loan, on getting the student loans down a little and on establishing an emergency fund. Good work!
I'm sorry to hear that both your kids are unemployed and I guess living with you for the forseable? Down to the current situation, of course, rather than ng an individual issue. Have you had any discussions with them about your and their financial positions? Having getting on for $200k in student loans outstanding between the 3 of you can't be a comfortable position, and putting three heads together to go through the possibilities and options is better than each of you dealing with it alone.
-
Congratulations on paying off the credit cards and personal loan, on getting the student loans down a little and on establishing an emergency fund. Good work!
+1 on this!
Getting rid of CC debt is a tremendous burden removed. Between 16k CC, 2k personal loans, and 7.5K EF, you've made a ton of progress! Keep up the good work!
If you haven't done so already, you might examine refi of student loans. Rates these days are around 3.9%. I'm in the process of doing mine now. This could be a big win for you. I remember that you gave a range of 4.15% to 7.56%. Dropping those to to something in the 3% range will save you a ton of money.
-
Congratulations on paying off the credit cards and personal loan, on getting the student loans down a little and on establishing an emergency fund. Good work!
+1 on this!
Getting rid of CC debt is a tremendous burden removed. Between 16k CC, 2k personal loans, and 7.5K EF, you've made a ton of progress! Keep up the good work!
If you haven't done so already, you might examine refi of student loans. Rates these days are around 3.9%. I'm in the process of doing mine now. This could be a big win for you. I remember that you gave a range of 4.15% to 7.56%. Dropping those to to something in the 3% range will save you a ton of money.
They are at 0% currently until September I think. I won't consider refinancing until I see if that is extended.
-
Mistymoney, this is fantastic progress!
In the original post, I saw you have a mortgage of $260K on a $500K value home. What's your current rate? And, are you in the US?
This is a fabulous time to refi. You might look into both mortgage refis as well as student loans. If you can refi the mortgage and get a better rate (you might score as low as 3%) you could make it cash-out and use the money to pay off higher interest, non-mortgage debt.
The only thing to watch for: if you do a cash-out mortgage refinance and spend the money on something other than home improvements, you can't deduct the interest.
-
Mistymoney, this is fantastic progress!
In the original post, I saw you have a mortgage of $260K on a $500K value home. What's your current rate? And, are you in the US?
This is a fabulous time to refi. You might look into both mortgage refis as well as student loans. If you can refi the mortgage and get a better rate (you might score as low as 3%) you could make it cash-out and use the money to pay off higher interest, non-mortgage debt.
The only thing to watch for: if you do a cash-out mortgage refinance and spend the money on something other than home improvements, you can't deduct the interest.
Thank you, yes I am looking into a refi on the house. Not sure about doing the cash out, but will think about it.
-
Hey all y'all!
I was finally getting around to crunching my numbers for 2022 to find out my new yearly spend and thought I would update my case study with some pretty good news (imo!) and also....things that will be frowned upon in this crowd.....
Highlights:
Things you all will approve of:
have not had any cc balances I didn't pay off monthly since clearing that debt.
refied the mortgage when rates were still really good (thank goodness!) My rate is 2.75% and payment down about 200/month.....
Had a few raises, started a side hustle so income is up. Epected side biz income is 13k this year with 4k to be billed in the fall, day job is at 141k
Have maxed out 401k (including catch up) last 2 years - while stock market has been a seesaw, overall gains since last update have been nice!
maxed out HSA since switching to HDHP, and have not draw from it for any medical expenses thus far.
the offspring are both employed, and enrolled in their own 401ks
side hustle money mainly used to treat myself and to buy ibonds
Things you all will not approve of:
bought a car, have a car payment, and....it's a lot.....got a tesla, slightly used.....but unfortunately got it before the big prices drops
discontinued prepaying on student loans once I got the car
continue to pay for offspring cell phones, bought some new phones....seems a small gift to keep paying for them now that they are working
acquired numerous cats found on the streets <insert tracy chapman "someone's got to take care of them.....">
where I started in the OP....
Assets
401k 675k
Roth 70k
HSA 6k
company stock 12k
Debts
Mortgage 260k (redfin value 500k)
student loans 115k
CC 16k
pers loan 2k
income/outgo
Income 128k
Monthly bills ~5k
Now....
Assets
401k 1193k
Roth 89k
HSA 21k
EF 15k
Ibonds 20
total 1,338k
Debts
Mortgage 248k (redfin value 521k)
student loans 98k
car loan 44k
income/outgo
Income 141k + side gig income of 10-15k/year
Monthly bills ~6k
Where I started
Based on yearly average and rounded to nearest $5 increment:
2290 mort
310 gas/heat
95 electric
150 cell
105 internet
550 healthcare
190 car ins
100 other transport
545 SLs
650 food
4985
Now
Based on last year averages:
2015 mort
825 car
287 gas/heat***
185 electric
200 cell
84 internet
300 healthcare
250 misty money - clothes, extras, discretionary, etc.
75 car ins
100 other transport
750 food
62 water*
700 pets**
5833 (rounding to 6k in my head)
* forgot this bill last time?
** aquired several more, so breaking this into a separate category, shipments from chewy.com easy to slit out
about 500 food and litter, estimating 200/month towards vet bills
*** no idea how this is lower?? Maybe all these cats keeping the house warm in winter....><
net pay from day job is 2984 so bills all covered on that, plus I have some extra taxes taken out of day job check to cover the taxes I need to pay on the side hustle income (extra for both fed and state).
So there are 2 extra paychecks and the side gig money for other things....has been going into Ibonds and fun stuff but those pesky student loans are going to come into payment again, so that will change things a bit and I'll need to rethink.
Just giving an update, not looking for any advise. I know I'm not a poster child for these here parts. I'm here to provide...contrast
My path forward
*get EF from 15 to 18k to cover 3 months now that I see my monthly is 6 rather than 5k - which I kind of knew but now I've gone through a more thorough investigation.
*Start a slush fund for student loan payments as I plan to pay those from more irregular income. Not sure what my payment will be when they restart, but I think about 1k/month. Might be hard to do both at at once.....
*continue to max my 401k (I'm relatively optimistic that I can, but if for some reason I need to dial back on that I can do it and still keep a pretty high contribution).
I'm 56 this year - so getting closer to things like early social security and medicare. If I call my monthly spend 7k, round up to yearly of 90k to include health insurance, I think I will keep my goal at 1500k to retire. This would be an initial WR of about 6%. Currently have ~1,255k in the market, so with ongoing contributions and a little bullish action, should get there in a year or two. Of course! if a big bear/recession/hyperinflation comes along, will rethink that!
I think I can go with 6% as car loan and mortage are going to get paid off at some point, social security income will come into play (current benefit at 62 if I have 0 earnings between now and then is 1928 month) and if my current side projects keep coming to me I will keep that up until social security kicks in, and maybe after(?). Whenever I decide to retire from the day job, will go to income based repayment on the student loans and that should lower the monthly payment. Maybe they will be like luggage and I just keep them forever? Will see how it goes
As I said, just an update from me, not looking for any face punches, although I know you want to!
This is about the most precision I can come up with around this stuff, and think that whatever I do at this point, I'm ok. I've done a really good job of deescalating the day job situation, so I can keep plugging away for a bit longer. If pressed I could make retirement work tomorrow, would just need to make some changes and some choices.
So I am far from perfect, got a late start, and not a good accountant.
but I'm still doing it.
-
Congrats on the raises and side biz! I would enjoy hearing what you like and don't like about your Tesla, especially since MMM himself went the same route. You took all of the comments admirably so things could be kept logical and helpful. I admire how much effort you put into tracking your numbers from 2019 to now, and I'm happy to hear your kids bounced back nicely as well.
Your thread title was pretty irresistible for me to click on!
-
Congrats on the raises and side biz! I would enjoy hearing what you like and don't like about your Tesla, especially since MMM himself went the same route. You took all of the comments admirably so things could be kept logical and helpful. I admire how much effort you put into tracking your numbers from 2019 to now, and I'm happy to hear your kids bounced back nicely as well.
Your thread title was pretty irresistible for me to click on!
Thank you! I think this was my first post here those years ago, i had been reading around the site for about a year before joining, and then another half year before posting. I was hesitate to join here for sure. But now I guess I am ok with being a bit of an odd duck.
I really like the tesla. My major complaint would visibility out the back windshield. Of course there are the cameras that show everything. But I have the old habits of looking directly so it seems less than I'd like to see.
-
Agreed! Sometimes I tap the screen to open the gigantic hatch on mine for perfect viewing while backing up my trailer, then tap it again to close it... too easy lol. I get red and embarrassed when people watch me try to back up, so with this cheat I can always get it right the first time.
But all vehicles are going this trend on visibility, eh? Hopefully it's about increasing aerodynamics for better efficiency.
-
https://engaging-data.com/will-money-last-retire-early/?spend=64170&initsav=1500000&age=57&yrs=33&stockpct=90&bondpct=0&cashpct=10&sex=1&infl=1&taxrate=10&fees=0.1&income=10000;23136&incstart=57;62&incend=61;90&expense=15930;9900&expstart=57;57&expend=85;62&showdeath=0&showlow=1&show2x=1&show5x=1&flexpct=10&spendthreshold=100&mort=ss
looks like my crazy plan has a 89% chance of success!
Assuming I hit 1,500k sometime next year, I modeled my side biz income at 10k until social security at 62.
Also modeled the car payment ending and the P&I on mortage ending.
Kind of decent, I think. Will just keep focused on the 1,500k goal and reevaluate at that point.
-
https://engaging-data.com/will-money-last-retire-early/?spend=64170&initsav=1500000&age=57&yrs=33&stockpct=90&bondpct=0&cashpct=10&sex=1&infl=1&taxrate=10&fees=0.1&income=10000;23136&incstart=57;62&incend=61;90&expense=15930;9900&expstart=57;57&expend=85;62&showdeath=0&showlow=1&show2x=1&show5x=1&flexpct=10&spendthreshold=100&mort=ss
looks like my crazy plan has a 89% chance of success!
Assuming I hit 1,500k sometime next year, I modeled my side biz income at 10k until social security at 62.
Also modeled the car payment ending and the P&I on mortage ending.
Kind of decent, I think. Will just keep focused on the 1,500k goal and reevaluate at that point.
That’s awesome, looks like you’ll be in good shape
-
. . .
Have maxed out 401k (including catch up) last 2 years - while stock market has been a seesaw, overall gains since last update have been nice!
. . .where I started in the OP....
Assets
401k 675k
Roth 70k
HSA 6k
company stock 12k
Debts
Mortgage 260k (redfin value 500k)
student loans 115k
CC 16k
pers loan 2k
income/outgo
Income 128k
Monthly bills ~5k
Now....
Assets
401k 1193k
Roth 89k
HSA 21k
EF 15k
Ibonds 20
total 1,338k
Debts
Mortgage 248k (redfin value 521k)
student loans 98k
car loan 44k
income/outgo
Income 141k + side gig income of 10-15k/year
Monthly bills ~6k
So in 4 years your 401(k) grew from $675,000 to $1,193,000 contributing merely 6% of your pay in 2020 and 2021 and then maxing it out the last two years ($20,500 in 2022 and $30,000 in 2023)?
-
. . .
Have maxed out 401k (including catch up) last 2 years - while stock market has been a seesaw, overall gains since last update have been nice!
. . .where I started in the OP....
Assets
401k 675k
Roth 70k
HSA 6k
company stock 12k
Debts
Mortgage 260k (redfin value 500k)
student loans 115k
CC 16k
pers loan 2k
income/outgo
Income 128k
Monthly bills ~5k
Now....
Assets
401k 1193k
Roth 89k
HSA 21k
EF 15k
Ibonds 20
total 1,338k
Debts
Mortgage 248k (redfin value 521k)
student loans 98k
car loan 44k
income/outgo
Income 141k + side gig income of 10-15k/year
Monthly bills ~6k
So in 4 years your 401(k) grew from $675,000 to $1,193,000 contributing merely 6% of your pay in 2020 and 2021 and then maxing it out the last two years ($20,500 in 2022 and $30,000 in 2023)?
The S&P 500 was about 3000 4 years ago and a bit over 4500 now. 50% growth is spot on for the numbers provided. Not sure how she was invested but the numbers seem spot on.
Does something not add up on your end?
-
The S&P 500 was about 3000 4 years ago and a bit over 4500 now. 50% growth is spot on for the numbers provided. Not sure how she was invested but the numbers seem spot on.
Does something not add up on your end?
It seemed like a lot to me at first glance, but I guess 2019 was a long time ago. You forced me to go back and look at my own, and it has grown a lot. My 401(k) was only $120k four years ago and is $291k today, but I have recently been throwing a lot of money at it ($62,640 scheduled for calendar year 2023 - self employed). Her larger numbers and not thinking about how much things have changed in 4 years threw me off.
I guess my smaller numbers over the same period of time were also throwing me off (her growth in four years is more than all of my investments added together right now, lol).
Compound interest throws off much larger numbers when your savings amount is larger.
Thanks for pointing out what should have been obvious to me before I asked the question.
EDIT: I just looked at all of my accounts, $120k four years ago, and $346k today. I guess I should not complaint too much about that for four years. I just wish I had started earlier and stayed at it consistently like so many others here (mistymoney included)