Case Study (Again)
Me, wife, 2 kids (3.5 and 6 months). 29 years old. Living in a low cost of living area. I’ve done a case study before, but we feel like we’re at an inflection point. We just bought a new house (now own two) and spent $9800 on a renos after buying. Paid cash, but now feel like all the hard work we’ve done is gone (or rather in the kitchen). We’re tired of having debt (student and now car) hanging over us and we feel like the dream of me retiring early is slipping. Need to turn things around. Wife stays at home with the kids (high school teacher before kids). I've always been more of a "wannabe" mustachian than the real thing (25% savings rate ocasionally, but normally more like 10...feel like it's lower now). We want to turn this ship around. Facepunch and recommend away.
Income:
$63k gross (expected raises of 2-5% annually)
Currently, 3% to 401k, 1.6% to a ESPP*, 0.5% to an FSA. Leaves us with a biweekly take home pay of $1,750
*ESPP allows me to contribute up to $184/pay period to buy company stock. The company will match 25% of what I put in. E.g. if I put in $184/pay period, the company will put in $46 for a total of $230. Also for reference, said company stock has averaged a return of 15% over the last 15 years.
Rental Revenue
*Current tenants have signed a 2-year lease, of which we have 21 months remaining. House is 5 years old, we are the original owner, 30-year architectural shingles on roof, HVAC 5 years old obviously.
Monthly Revenue: $1195
Management Fee: $119.50
PITI + PMI: $865 + $109 = $974
Cashflow = $101/month
Not the best cashflow obviously, but was better than selling (would’ve had to bring money to the table most likely after realtor fees, closing, etc). We’re content w/this property basically breaking even for at least the length of the 2-year lease the current tenants have, then re-evaluating. If we could get rid of the PMI obviously cash flow would be a little better. But we basically don’t treat this as income. It’s all in a separate account solely for the rental. If needed, I can give more details on why we rented vs. selling.
Assets
House 1 (Primary Res): $140-145k
House 2 (Rental): $160k
401k: $6,100 ($5,146 vested)
403b: $13,266 (vested)
TSP: $3,288
Roth IRA: $800
Cash on hand: Basically none right now….we just bought House 2 and spent about $9k on a kitchen reno. That blew all of our spare cash. Cashflow isn’t necessarily an issue (e.g. we’re not about to slip into not being able to pay our CCs), but we are basically spending on our CC, then paying off each month w/little cash left over.
Cars
2010 Toyota Prius (50k miles)
1996 Nissan Maxima (190k miles)
Debts:
2010 Toyota Prius (50k miles) - $13.8k @ 2.5% ($352/month)
House 1 (Primary Res): $130k @ 4.75% ($837/month...PITI)
House 2 (Rental...used to be primary res): $147k @ 4.0% ($974/month...PITI + PMI)
Student Loans: $9,960 @ 2.6% ($106/month)
Expenses
*********** Big note about expenses. Not included in any of these categories is $9800 we spent on a kitchen renovation. Completely tore out the kitchen in the house we bought in May and re-did it. This was a condition of buying the house...kitchen was in bad shape. New cabinets, appliances, counters, etc. A one-time expense for sure. Also included in that is the cost of a DIY refinishing of wood floors throughout the house*******************
Charity: $169
Food
Groceries: $544
Restaurants: $172
Coffee: $63
Alcohol: $14
Housing
Mortgage: $837
Utilities (Elec, Water, Trash): $214
Phone (wife + me): $65 + $20 to pay off her iPhone 5c
Housing Maint & Repairs: $85
Cable & Int: $115 (I know...ends at the end of the year...no gain by canceling now)
Netflix: $8 (cancelling right now)
Personal
Doctor + Dentist: $287 (had a baby earlier this year)
Gifts: $12
Misc: $168 (diapers, pull-ups, cleaning supplies, etc...need to keep better track)
Clothing: $11
Haircuts: $21
Pets: $51
Fitness + Coaching + Gym: $103
Kids Stuff (stroller, kids clothes, etc): $52
Hygiene + Household Items (toilet paper, etc): $28
His/Hers/Entertainment (dates, golf, fun stuff...includes a road trip to a football game): $88
Auto
Car Payment: $352
Gas: $218
Insurance: $75
Repairs: $35
License & Fees: $24
Student Loans: $106
