Finally! Got my numbers together for my case study. Apologies in advance for length.
Life Situation:
I’m the divorced mom of a 21 year old (independent) and a 16 year old (dependent). I’m also over 59 1/2. USA taxpayer, Head of Household.
Before the divorce, my ex and I (married over 20 years) had built a hefty stash, and I was “retired” — but we had one of those mythical high conflict divorces that wiped almost everything out. Not only did I have to find paid employment after close to 20 years out of the job market, but I have to re-build my stash from almost nothing.
Fortunately I was able to self-train in web design/development, and after a few very lean years and a couple minimum wage jobs, I’m now earning a good income. I’m saving a lot, but need to do better.
I no longer talk about FIRE. For me, it’s FIROT — Financial Independence, Right On Time.
Income/Expenses
Items marked with * have notes below
Month Year % Gross Expenses
Gross Wages $5,833 $70,000 100.0%
Gov’t Deductions $1,118 $13,418 19.2%
Health Insurance* $1,033 $12,392 17.7%
Net Wages $3,596 $43,152 61.6%
Alimony/Support $1,151 $13,624 19.5%
Passives* $ 180 $ 2,160 3.1%
Total Net Income $4,927 $58,936 84.2%
Rent* $1,800 $21,600 30.9%
Groceries $ 300 $3,600 5.1%
Transit pass $ 84 $1,008 1.4%
Car Insurance $ 108 $1,300 1.9%
Car Expenses* $ 204 $2,444 3.5%
Heating Oil* $ 180 $2,160 3.1%
Other Utilities* $ 121 $1,452 2.1%
Medical* $ 215 $2,580 3.7%
Kid Activities $ 157 $1,884 2.7%
Clothing/Personal $ 118 $1,416 2.0%
Dining Out $ 87 $1,044 1.5%
Vacation* $ 103 $1,236 1.8%
Storage* $ 170 $2,040 2.9%
Legal* $ 541 $6,492 9.3%
Other $ 128 $1,536 2.2%
Total Expenses $4,316 $51,792 74.0%
Stash Increase $ 611 $ 7,144 10.2%
Numbers are averages for the last 12 months from YNAB.
* Income & Expenses Notes:
Deductions: Health insurance. I’m a contract employee with a choice of two plans: expensive high deductible and very expensive moderate deductible. I’m in the second with my son. There is no 401k or other retirement, and I really don’t like the FSA offered.
Passive Income: self published books, graphic design sales at Zazzle, a tiny bit of freelance web design. This will go up when I’m no longer a wage slave.
Rent: Ridiculously high, I know. I’m under a legal judgment to keep living in my expensive Boston suburb until my youngest graduates high school, and this is the best deal I could find. [2 bedroom 1 bath, no roommate potential.] I’ll be moving someplace much cheaper summer 2019, see Goals below.
Car: I own a 2007 Honda CRV, and drive about 3,000 miles a year. [I commute on public transit.] I had an unexpected drive shaft replacement last spring. I buy about a tank of gas a month. Insurance is about $100 a month ... I’ll be raising my deductible soon but will have to add a teen driver.
Other Utilities: Electricity, 2 cell phones, internet. Heating oil for a badly-insulated apartment in New England. I keep my thermostat 62F daytime, 58F at night.
Medical: Dental work my plan didn’t cover. I might have some more early 2018, hopefully not.
Vacation: trip to the other coast to see family I haven’t seen in person in 10 years, and a couple of 3 day weekend road trips (camping or couch surfing).
Storage: Stuff from my old house. I know I should deal with this; I probably need a face punch.
Legal: the last expenses from my divorce 6 years ago, last payment this past spring. There’s no ongoing litigation; no bills from my law firm. I’m very happy about that!
Stash Increase: For the last few months I’ve been saving a lot more, closer to $2,000 a month. I hope to continue at this rate, or higher if I can.
Balance Sheet as of <18 August, 2017, approx.>
Assets
Credit Union Checking $ 9,700
Credit Union Savings $ 1,500
Business bank account $ 165
“High interest” savings (1.15%) $39,750
Vanguard VFIAX $10,700
Wealthfront personal $ 5,800
Wealthfront IRA (traditional) $ 2,325
QDRO* $34,000
Total Assets $103,940
Liabilities zero, zip, nada
Net Worth $103,940
Notes:
All interest, dividends and other growth re-invested in same account.
Wealthfront is a bit of an experiment, to see how well it does. I go into periods of ignoring my finances, I’d love something that earns well without active management by me.
QDRO: This is my share of ex-husband’s pension. 60% stocks, 40% bonds. [QDRO stands for Qualified Domestic Relations Order, the legal term for this account.] I don’t know much about this money.
My Future Plans
Though I love the town I live in, I can’t afford to stay here, or in the Boston area. I’ll be moving out summer 2019. I’ve already chosen my new city, I have friends there and have visited several times.
I want to buy a duplex in a high-end city neighborhood, live in one unit and turn the other into a luxury rental. I’ve run the numbers, if I buy wisely and put in sweat equity (I love working on houses, and I’ve managed remodeling projects before) I’ll cover the entire mortgage with extra. This will eliminate my housing expenses.
As an older person, I have to think about the days when I can’t work full time. I want to delay getting Social Security as long as I can, to maximize benefits. I’m in pretty good health, but that won’t last forever either.
On the good side of being over 59 1/2, I can treat a traditional IRA as a tax-deferred account, pulling out money when my income taxes are lower.
Why the Case Study
I need to build my stash quickly, as I’ll be pulling out a lot to buy and fix that duplex. I don’t know how long I’ll be able to work full time, or how much income I’ll be able to get after I stop f/t work.
There may be waste in my spending that I don’t see. I welcome any/all ideas on improving my savings rate.
I also want suggestions on how to better allocate my stash. Remember, a good chunk of it will be turning into real estate in about 2 years. This is why Savings is high ... I don’t know where else to put this money.
While I’m asking ...
I need some ideas on improving my credit score, if it matters for getting a mortgage. According to Credit Karma, I’m in the mid 700s (depending on my credit card balance that day; it’s always paid in full).
I have 3 credit cards, Amex, an LLBean card, and a department store card. Total credit limit: $13k.
No recent black marks ... but in Spring 2014 I missed 3 payments on my Amex. I expect I’ll just have to wait this out.
Anyone know of legitimate things I can do to improve my score?