Late Bloomers Try and Catch Up

[LateBloomers]

Life Situation: Married; Filing Jointly; LB1 30 and LB2 36; 3 dependents (9,7,6)

I have been lurking here silently for a couple of years, fascinated but feeling totally inadequate, but I feel ready for the face punching. I feel woefully undereducated and unaware in trying to just get this case study out, but I’ll try. I’m excluding the tax/insurance stuff because frankly I’m confused by the self employed taxes and how to represent them and I’m more concerned with our expenses. I feel like we do okay with the pre tax savings/contributions, but then our monthly income pretty much gets spent. Not so mustachio.

It is worth noting: we recently transitioned from a single income standard office job family (where honestly, we scraped by) to dual income and have made some progress in the last year. We are new (what I consider to be) higher (for us) income earners. We both have jobs that facilitate a “work to live” attitude versus “live to work”: one of us is self-employed and one of us works part-time nine months a year (and provides insurance + tuition reimbursement) while taking university courses. LB2 is not exactly totally sold on the entire MMM movement, but has been happy to go along with my suggestions.

Current Assets
LB1 457            $11,731.77
LB1 401k            $5,650.42
LB2 SK               $141,298.14
LB1 Roth            $30,303.97
LB2 Roth            $13,081.73
Vanguard            $14,774.81
TOTAL               $216,840.84

The Good (Enough?) PreTax Retirement Savings

LB1 457 $1287.05  (9mo/year)    $11,583.45 annually
LB2 401k $356.23  (9mo/year)   $3,206.07 annually
SingleK             $36,000 annually
(This account is funded end of year based on the years’ numbers, I anticipate future contributions will be similar or more)
TOTAL               $50,789.52         

The Eh: Post Tax Savings

LB1 Roth (annually)         $5,500
LB2 Roth (annually)         $5,500
Vanguard $125/week         $6,500
TOTAL               $17,500
TOTAL PROJECTED ANNUAL SAVINGS         $68,289.52

The Bad(ish): Debt
Mortgage 3.625%         -$325,459.61      (Value:$475,000)
LB2’s Vehicle 2.9%         -$9,036.11      (Value:$18,000)

I generally exclude these from assets/liabilities. Of course, LB2 is quite attached to both. The mortgage is brand spanking new (five payments in) and quite… vomit inducing on my end.

Adjusted Gross Monthly Income:
LB1                $26.76 (after deductions)
LB2               $6500.00
TOTAL               $6526.76

TOTAL (post Roth/Vanguard)*   $5520.26
*only LB1’s Roth is paid monthly


Current expenses (using data from the past four months):
Fixed
Mortgage (+Taxes/Insurance/HOA)*   $1958.60
*I will separate this out; yes, it is a lot
Hulu/Netflix            $19.98
Internet            $39.99   (this will be absorbed by the business)
Life Insurance            $122.94
Car Insurance            $115.33
Car Payment            $500   (actual payment is $361.09; ~$35 is interest)
Medical               $100
SUBTOTAL            $2856.84         ($2663.42 remaining)

Utilities (gas/elec/water/trash)   $289.13   (we’re coming off cold season, should level)
Groceries            $851.49
Restaurants            $407.66   (shame shame shame)
Fuel               $127.40
Gym               $65.44
Pet Care             $47.56
Personal*            $141.03
*This includes adult individual spending/haircuts(when we get them?)/clothes/hobby
Small Humans            $681.98   (yes it is outrageous, two in comp sports)
Subtotal            $2611.69         

TOTAL  SPENDING              $5468.58          (YEP, $51.73 remaining)

Expected ER expenses: Unestablished, but unlikely to exceed current spending

Specific Question(s):
-OBVIOUSLY we are not doing much (ahem, any) saving from our adjusted take home income. From a place of pure delusion I’m sort of hoping someone will tell me that because we’re doing okay in the pre-tax savings that it’s tolerable that we seem to blow through most of our gross income. Realistically, I feel bad about it and am ready to accept the flogging.   
-I think I know the weak points (mortgage, vehicle, dining out, dependent activity burden), but I am sure the all seeing eyes of the MMM community will have more to flog.
-LB2 is unlikely to early retire, but would appreciate the FU money to be super picky on accepted projects/clients. Ideally, I’d like to bug out in no more than ten years. My income is not super pertinent to the equation, but the benefits aspect is pretty keen.
-In the last two years we've also had an additional 20-40k in distribution income. Previously it's been used to pay off student loans/debt, going forward it could be used to propel savings, but as it's unknown I don't try to account for it.

Go ahead, have at it. Face punch my face off. I can take it. Thanks in advance. There are many that I really respect on the boards and I appreciate the thoughtfulness that goes into evaluating these case studies.

[Laura33]

Geez Louise, you're pretty hard on yourself for someone who seems to be saving more than half of your income!  I don't understand the concerns/complaints about the post-tax savings -- based on the figures you posted, you're saving about $1500/mo post-tax, yes (2 Roths + Vanguard)?  So why doesn't that "feel" like making progress?  [Note: I think you are doing what I do:  I basically have money taken out of my paycheck/bank account so that I never "see" much of what I make.  And then I look at the bank account and budget and wonder why I always feel tight and like I am not making progress -- well, duh, it's because every time we get a raise, I up the Vanguard withdrawals!  I've learned to use this as an intentional plan, because DH is more spendy, so I prefer things to "feel" tighter and for the growing accounts to be out of sight, out of mind.]

Are there things you can improve?  Of course!  But you are starting from a pretty solid foundation -- maybe not the "FIRE in 10 years" foundation, but you're saving a little more than what you spend every year, which doesn't suck (and that's without including the end-of-year extra savings).  And you are in the expensive years -- paying down mortgage, three kids in the house (and in spendy sports), etc.  If you remove the mortgage and kid sports, your basic lifestyle expenses are under $3K/mo, which isn't bad for a post-kids-out-of-the-house-and-house-paid-off FIRE.

But are you sure this is all of your expenses?  What about saving for vacations, home repairs, car maintenance, phones, college savings, other kid expenses (clothes -- I find it hard to believe that clothing for 3 kids fits within that $140/mo "personal" category with everything else)?

In terms of cutbacks, the obvious place is food.  I suspect it is hard largely because you have two jobs + 3 kids + competitive sports, which means you spend many weeknights and weekends out and about at practices and games and tournaments.  And that gives you the double-whammy of being tempted to grab something on the go + less time at home to plan/shop/cook.  So my recommendation would be to spend the next month focusing in on this one thing -- think about easy/quick meals, think about how you can schedule in planning/shopping/cooking [I do this every Sunday, for ex., so I have the week's meals generally prepped and ready to go], foods you can bring with to the games, etc.  I don't know what your specific solution is, but this is the low-hanging fruit in your budget, so it is worth a little focused attention.

[LateBloomers]

Geez Louise, you're pretty hard on yourself for someone who seems to be saving more than half of your income!  I don't understand the concerns/complaints about the post-tax savings -- based on the figures you posted, you're saving about $1500/mo post-tax, yes (2 Roths + Vanguard)?  So why doesn't that "feel" like making progress?  [Note: I think you are doing what I do:  I basically have money taken out of my paycheck/bank account so that I never "see" much of what I make.  And then I look at the bank account and budget and wonder why I always feel tight and like I am not making progress -- well, duh, it's because every time we get a raise, I up the Vanguard withdrawals!  I've learned to use this as an intentional plan, because DH is more spendy, so I prefer things to "feel" tighter and for the growing accounts to be out of sight, out of mind.].

I appreciate the generosity/good cheer (I am prone to be selfcritical). I think that years of watching those that are super hard core sky rocket to ER has taken it's toll on my ability to attaboy myself. I *feel* like we should be saving more out of the take home pay, but I also don't want my family to think I am a total buzzkill. And honestly, I'm also proud of the $150k progress we've made in the last two years, but yes, I still feel like a total slacker.

We definitely employ a similar method to you. LB2 is prone to spending if we have it, so by [seemingly] not having it it keeps the random expenditures down. However, it does create a certain level of scarcity mentality on my end.

But are you sure this is all of your expenses?  What about saving for vacations, home repairs, car maintenance, phones, college savings, other kid expenses (clothes -- I find it hard to believe that clothing for 3 kids fits within that $140/mo "personal" category with everything else)?

-This includes all of our expenses for the January-April. The "small humans" category lumps in clothing/random school stuff/activity fees.
-We are [gasp] not currently saving for college; mostly because we (okay, I) feel behind and wanted to catch up to feel more secure. I'm not actually sure what that magical number is though.
-Phones are covered by our small business.
-Car maintenance has thus far been rolled into the fuel category. One vehicle is quite new; the other is not, but will not be replaced when it kicks the bucket.
-In the past extraordinary expenses (major repairs, for instance) we've just sort of shifted the monthly to cover.
-Vacations? well, we haven't been on many (any?) family vacations beyond summer camping/roadtrips to family. But, as I mentioned sort of halfheartedly we're likely to generate 20-40k of additional income that I don't account for in our month to month that could be available for bucket funding something like that if we were so inclined (in years past we've used it to pay things off/supplement a downpayment/similar not that exciting things

[Morning Glory]

You don't have a lot here that can be easily trimmed, but I hope this helps a little:

Your life and car insurance both seem high, do you have more coverage than you really need?

Do you have to have both Netflix and Hulu? They let you suspend your membership easily so you can alternate between the two.

You might do better by just paying the minimum on the car, and investing the difference, since your rate is only 2.9%.

Groceries and pet care might be trimmed by switching to generic brands or using​ coupons.

Try batch cooking on weekends to avoid the restaurants on busy nights.

[zolotiyeruki]

I understand the "I don't feel like we're doing enough/getting ahead" feeling--DW brought up just that point a few weeks ago, and I reminded her of 1) our rapidly(ish)-diminishing mortgage balance, and 2) our steadily-increasing retirement savings.

Yes, your restaurant habit and competitive sports are very expensive.  Personally, I'm pretty down on competitive sports for kids.  It's a significant commitment of both time and money, and I guess I just don't understand what the desired/expected long-term benefit is.  Unless you're hoping that your kid will be able to parley that into a college scholarship or professional career, I feel like there are cheaper ways of getting all the benefits that competitive sports can provide.

That said, if that's a priority for you, then that's fine--just recognize that this is a choice you're making for your family, and it costs $x/month.

All that said, don't sweat the $51/mo remaining.  That means you're accounting for almost all the money.  That's a Good Thing.

-In the past extraordinary expenses (major repairs, for instance) we've just sort of shifted the monthly to cover.

This sounds to me like there's more flexibility in your monthly budget, and therefore room to save more.  FWIW, we have a line item in our budget called "short term savings," which covers larger, infrequent expenses:  HOA dues, car insurance (paid 2x/year), Christmas, vacation, saving up to replace a car in 5 years, etc.  Doing so makes it easier to see how our spending changes from month to month, without the confusion caused by those kinds of expenses.

WRT to whether you should be investing more post-tax, it comes down to how much you expect to spend in retirement and your potential for a Roth Ladder.   For my part, we're not planning to use the Roth Ladder.  Rather, we're planning on using a SEPP on our tax-deferred accounts, and make up the remainder using Roth contributions and taxable investments.  You need to make sure that you'll have enough funds accessible without penalty in order to cover your spending until you hit 59.5, when you can access the rest of your tax-advantaged accounts without penalty.  So if you're spending $75k/year (including taxes), and you want to retire at ages 30/36, you'll need to make sure your accessible funds can supply you with that income.