Starting out Behind the 8-Ball

[overdrive23]

Life Situation: MY wife & I have one child (another one sooner or later) and live in Florida. She works fulltime as a Physician Assistant. I work part time as an Engineer (3x a week)

Gross Salary/Wages: Just north of 200k.

Individual amounts of each Pre-tax deductions: Her (3+3% employee match) and I have a Roth IRA that I put $150/mo into and have since 2010.

Other Ordinary Income: Two Side Hustles (Me) are an Online Coffee (ecommerce) Company & FB Advertising Help for local fitness companies (just starting this as we I type) - Both of which have yet to provide any substantial income. I plan to give it till the end of the summer to get more stable.

Qualified Dividends & Long Term Capital Gains: 2018 we will have a 10-12k tax coming for the sale of my Gym this past year.

Adjusted Gross Income: 120-125 (went off an older number I had put together.

Taxes: Just moved to FL within the year so we're not 100% what to expect.

Current expenses: Car Loans (2 cars): 655/mo, CC Payments (2 cards and 1 line of credit) $1200/mo, CC Debt: 23k, Mortgage: 2500/mo (400k house, just bought 12mo ago), Daycare $640/mo, Student Loans $550/mo (35-38k left combined)


Assets:

• Our House: Current Value: 360-370
  Savings: 3k
  Roth IRA: 12k
  Car 1 Value - 18k
  Car 2 Value - 8k

Liabilities:

• Mortgage: 350k at 4.5%
  Car 1: 19k owed at 3.24%
  Car 2: 14k owed at 4%
  CC#1: 19,000 remain, 0%
  CC#2: 4,400 remain, 0%
  CC#3: 2500 remain, 12% (is a CC payoff account...a personal loan to condense and pay off faster)
  LOC: 6800 remain, 12,75%
  Wife Student Loans: Under 6k (wow!!) at 3-4%
  My Student Loans: 35k at 3% (should have stayed in state!)

Specific Question(s):

I sold my business this year, paid off 2 high interest loans & we restructured our remaining liabilities to go after the higher interest ones more. Do you all see anything glaring that I need to do/fix or some info that is MIA?

[diapasoun]

Why are you putting money into a Roth IRA and not a tIRA? I can't imagine you assume that you'll be grossing 200k in retirement -- the tax difference would be substantial for putting that money into a tIRA.

Agreed that paying off debt with over 12% interest is a high priority. However, what else are you doing re: your savings? You're asking if anything's glaringly missing, but you also don't tell us what your spending is -- just your income/assets/liabilities. You net a TON of income; what are you doing with it, and what do you *want* to be doing with it?

[overdrive23]

I am going with a Roth IRA because when I started, my company didn't offer anything for IRA's. Plus, I can take it out before I'm 70 in a Roth.

Spending? We don't spend too much but will be examining things MUCH closer now. At the end the month we have about $1,500-$2,000 "left over"

I used to buy too much shit on Amazon so I deleted the app for a month. But we buy stuff (household items) on it also so it's back on my phone but I don't spend stupidly anymore (I think)

We don't go out to dinner (we cook/eat at home), we don't drink much (I may have 3-4 drinks a week at home), we don't need vacations b/c we live in Florida and it's amazing here.

What we want to do with our money is buy a boat & I want my wife to not have to work full time. She loves helping people (hence in the medical field) but wants to work 2-4 days a week.

Thanks for prodding me for more @diapasoun

[diapasoun]

You are a good candidate to look into Roth conversions from a tIRA. Check out MadFIentist on this, and I know there are other good links out there too.

Do you track your spending? If you have about $2k leftover each month, that means you're saving $24k/year. That's 20% of your net, and means you're spending almost $100k a year. $100k is a ton of money to not track! If you want to make spending changes, I'd really, really suggest tracking for a while; that gives you an idea of where that money is going.

The best part, though: If you're currently netting $120k or more a year, that means that you have SO MUCH LEEWAY, because that really is a ton of money. The cost of real basic necessities (housing that keeps you dry and won't kill you, basic healthcare, basic food) is actually pretty low. Everything else is gravy. There is absolutely no reason you couldn't move to a 50% savings rate or more, because it's just changing where you spend your gravy money (now, or later?). That starts to free you up -- to give you time for your kid(s), and enough money that both of you can be working part-time.

[2Birds1Stone]

You are in a really good spot, debt can be gone in less than 12 months and if you toss that repayment $$ at savings/investments when you get to $0 then it will grow, and grow fast.

Tackle the spending, saving an additional $20-30k should not be too difficult in a LCOL state like FL, with no state income tax and low property tax.

You could literally cut a decade off of your timeline to FI.

There are MANY ways to access retirement funds in 401k and Roth IRA before you are retirement age. I would max out your 401ks, IRA's (Roth if you want to spread tax risk), HSA (if applicable) and start investing a couple hundred bucks in a taxable brokerage account......but first pay off any debt that's over 5% interest asap.

[Trifle]

Second the recommendation to track your spending -- it is the key to all that follows.  Then you can fill out the full case study spreadsheet and really get some targeted advice.  You have a good income, and you can do this! 

[overdrive23]

You are a good candidate to look into Roth conversions from a tIRA. Check out MadFIentist on this, and I know there are other good links out there too.

Do you track your spending? If you have about $2k leftover each month, that means you're saving $24k/year. That's 20% of your net, and means you're spending almost $100k a year. $100k is a ton of money to not track! If you want to make spending changes, I'd really, really suggest tracking for a while; that gives you an idea of where that money is going.

The best part, though: If you're currently netting $120k or more a year, that means that you have SO MUCH LEEWAY, because that really is a ton of money. The cost of real basic necessities (housing that keeps you dry and won't kill you, basic healthcare, basic food) is actually pretty low. Everything else is gravy. There is absolutely no reason you couldn't move to a 50% savings rate or more, because it's just changing where you spend your gravy money (now, or later?). That starts to free you up -- to give you time for your kid(s), and enough money that both of you can be working part-time.

Thanks @diapasoun ! I'm going to sign up for Mint.com and see what I can do about tracking. Might just be me being 'green' to this but I really don't think we spend much. We do put most all money into paying bills.

I may have mis-typed; we aren't netting 120k a year. We might net that 24k after things are all said and done; but things tend to come up (house problems up the ass right now...never buy a flipped home!)

[overdrive23]

You are in a really good spot, debt can be gone in less than 12 months and if you toss that repayment $$ at savings/investments when you get to $0 then it will grow, and grow fast.

Tackle the spending, saving an additional $20-30k should not be too difficult in a LCOL state like FL, with no state income tax and low property tax.

You could literally cut a decade off of your timeline to FI.

There are MANY ways to access retirement funds in 401k and Roth IRA before you are retirement age. I would max out your 401ks, IRA's (Roth if you want to spread tax risk), HSA (if applicable) and start investing a couple hundred bucks in a taxable brokerage account......but first pay off any debt that's over 5% interest asap.

Thanks for the help @2Birds1Stone

We moved from upstate NY and were told that all of FL is a LCOL state; false lol. The land is still very pricey. We have 1/2 acre and a 2000sf house that we paid just shy of 400k for. Our house in NY was on 1/3 arce and about 1300 sf and we paid 135k for it. The taxes are better but they make up for it by charging more for many things. Food is WAY more expensive. To the point that I've made the choice to lose weight to save money; and that sucks for me b/c I love fitness and lifting heavy :(

Would you suggest that we put less into our savings account (have less cash on hand) and direct that $$ towards debt? Mind you; we are doing a good bit of that right now. My wife is very 'scared' if we don't have money in our savings account.

[CalBal]

Third the recommendation to track spending. You make a lot and should be able to save a ton. I have always been frugal but didn't start tracking until 6 months ago. I just use an excel spreadsheet with some embedded pivot tables. Super simple. I went back 1 year and entered as much as I could from CC statements (which I primarily use - rarely use cash), so although the categories might be a bit wonky (can't necessarily separate food from health & beauty this way, for example, if you buy both at the grocery store), but the totals were pretty close I think. Then I started tracking real time (and have for 6 months). It was incredibly eye opening. I have found multiple ways to save money and have made conscious decisions about what I truly want to spend money on.

Also, what is your EF? Is it in a high interest savings account, for example? I know Capital One 360 (which I use, I have a Money Market, so 1.6%) and Ally, are among the highest rates around. Won't keep up with inflation but 100% liquid and safe. If your EF is pretty robust I would throw as much $ as possible at the LOC and the 12% CC (ouch) and then make sure you have enough for the tax bill, and then start trying to maximize retirement savings. Make sure you will be able to pay off or transfer the other CCs before they are due, as interest on the full original transferred balance will be due if you don't pay attention.

If you do a full case study there are some really smart people here who can help optimize.

[robartsd]

Definitely track spending. Many households live on less than 1/2 of your income quite happily - you'll find plenty of fat to cut.

Would you suggest that we put less into our savings account (have less cash on hand) and direct that $$ towards debt? Mind you; we are doing a good bit of that right now. My wife is very 'scared' if we don't have money in our savings account.

You should read the investment order thread.

MMM would say your debt is a "hair on fire" emergency, so why carry money in the emergency fund (savings account) until the emergency is gone. I always want next month's expenses in my savings account as that makes handling bills much easier - never need to worry about timing between paying bills and paychecks arriving - so I recommend something between 1 and 2 months expenses until you've finished off any debt that falls under item 2 of the recommended investment order. I might expand to cover more months of expenses in the savings account when moving further down the list.

[slappy]

You say you don't spend much, but the debt indicates otherwise.

Also, what prompted the increase in house size? If you were happy with 1300 sq ft in NY, why did you need 2000 sq ft in FL? It may be a moot point now, since you likely aren't going to move after just moving a year ago, but still something to consider.

[overdrive23]

You say you don't spend much, but the debt indicates otherwise.

Also, what prompted the increase in house size? If you were happy with 1300 sq ft in NY, why did you need 2000 sq ft in FL? It may be a moot point now, since you likely aren't going to move after just moving a year ago, but still something to consider.

The area we settled on was purely out of school selection for our kid(s). From there, anything smaller was in too rough of shape to start a family in. I wanted to live in an RV on an acre in the woods....that option got Veto'd :(

[formerlydivorcedmom]

What caused all of the debt?  Out-of-control spending?  Medical emergency?  Business expenses? Time out of work?  Remodeling?

Is whatever caused it under control yet so that the debt isn't growing/going to come back?

[marty998]

You still here @overdrive23? How much is left on those car loans?

Your statement of assets and liabilities in your first post wasn't quite right. Post up all your assets and all your debts (gross values and interest rates) and then we can help you figure out next steps.

[overdrive23]

@marty998 , yep I'm still here. been a rough few weeks sleep training our 16mo old so i've been MIA haha

I'll update things up to top in a jiffy!

[2Birds1Stone]

I love your RV on an acre idea =D

FL, just like NY is all about location.

We have family north of Tampa where $250k get's you a mansion with $1200/yr property taxes.

Tampa has Aldi/BJ's/Costco etc. I did notice gasoline a bit pricier, and some groceries, but not enough to where you would need to give up "fitness and lifting heavy" to save money. I eat a high protein diet, powerlift, and do triathlon (lots of calories).

Just an example.....1 x 3lb rotisserie chicken from BJ's = $5, 2 dozen eggs from Aldi = $2-3, Chicken breast = $2/lb most stores, greek yogurt = $4-5/16oz tub. That's like 500-700g of almost pure protein for $20/week.

If you add in "normal" food, with all of the trace protein (indirect sources like WW bread, legumes, pasta, etc) there is no reason not to be able to get enough calories/protein.